American Oil and Gas Reporter - March 2022 - 74

SpecialReport: Resource Science
$100 Oil May Add 2.2 MMbbl/d By 2023
OSLO, NORWAY-As many as 2.2
million barrels a day of U.S. tight oil
may be unleashed in the event of a supercycle-with
oil prices remaining around
or above $100 a barrel-driven by growing
demand and continued supply tightness,
Rystad Energy predicts.
According to Rystad, tight oil output in
the core U.S. producing regions-the Permian,
Eagle Ford, Niobrara, Bakken and
Anadarko-in the fourth quarter of 2021
was around 7.7 MMbbl/d, continuing an
upward trend but short of the pre-pandemic
levels. Production in these regions is expected
to surpass the 2019 high of 8.1
MMbbl/d by the second quarter and expand
further if a supercycle materializes.
If oil prices remain around $100 a
barrel, total production from these core
regions will hit 9.9 MMbbl/d by the
fourth quarter of 2023, Rystad estimates,
marking a 2.2 MMbbl/d surge from the
same quarter in 2021.
High oil prices are encouraging operators
to increase production as supply
from sources outside the United States
remains tight, the firm states. Global
Covid-19 concerns are waning and countries
are removing or relaxing restrictions,
causing a surge in demand for oil that
the current supply will struggle to meet.
In addition, geopolitical uncertainty in
major exporting countries is worsening,
threatening to disrupt trade flows amid
thousand barrels per day
History
$40
$70
$100
10,500
10,000
9,500
9,000
8,500
8,000
7,500
7,000
6,500
6,000
2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23
*Includes the Permian, Eagle Ford, Bakken, Niobrara, and Anadarko basins.
Source: Rystad Energy ShaleWellCube, Rystad Energy research and analysis
74 THE AMERICAN OIL & GAS REPORTER
already limited availability.
Total unconventional output-including
oil, gas and natural gas liquids-from
these core U.S. oil regions already has
returned to pre-Covid-19 levels, totaling
around 15.6 million barrels of oil equivalent
a day in the fourth quarter of 2021.
Total output is expected to keep climbing
and reach an all-time high of more than
16 MMboe by the end of March, Rystad
indicates.
" Although high prices would in theory
trigger a burst in tight oil production,
acute supply chain bottlenecks, a lag between
price signals and its impact on
production, and winter-weather-related
disruptions will slow growth, " acknowledges
Artem Abramov, Rystad Energy's
head of shale research. " Added to this
are expectations that spot sand prices
will rise to a $50-$70 per ton range, a
level unheard of in the industry's modern
history, which will hit operators' wallets. "
As it considers different scenarios, Rystad
says a price range between $70 and $100 a
barrel will lead to a significant upsurge in
output in the fourth quarter, while a prolonged
run of prices at $90-$100 a barrel will
result in a further increase to the already
recovering rig activity from the second
quarter of 2022. In a $40 scenario, production
will return to 2021 levels by 2024.
Looking beyond 2023, the firm says
$100 WTI will allow the industry to avU.S.
Tight Oil Production Forecasts For Core Regions by Price Scenario
erage at an annual growth of about 960,000
bbl/d, from the fourth quarter of 2021
through to the fourth quarter of 2025. A
$70 world still will allow for a sustainable
growth cycle, but the average annual pace
will be limited to about 560,000 bbl/d.
According to Rystad, in a $100 a
barrel scenario, a gradual deployment
of additional rigs will materialize from
the second quarter, driven by both private
operators and public independent producers.
A fundamental shift in the operational
philosophy of public exploration,
drilling and production companies
is emerging, with many responding to a
global call on tight oil growth. Recent
communications from ExxonMobil and
Chevron on their ambitious Permian
growth plans reaffirms this trend, the
firm notes.
It goes on to indicate it detects a
marked change happening in the Permian
and some other basins, with industry sentiment
becoming buoyant again. Various
supply chain bottlenecks may delay the
activity uptick, the firm allows, but they
will not act as a complete showstopper
because the industry repeatedly has
demonstrated an ability to resolve all
such bottlenecks with time.
According to Rystad, these projections
cover unconventional activity in core tight
oil regions of all the Lower 48 states, excluding
the Gulf of Mexico. For the rest
of the Lower 48 conventional production
and condensate in shale gas regions, excluding
the Gulf of Mexico, oil output
has stabilized in the 1.7 MMbbl/d-1.8
MMbbl/d range and even can recover toward
1.9 MMbbl/d during the next four
years in a favorable price environment
amid an increase in infill drilling in mature
fields and a robust condensate production
outlook in wet and liquids-rich parts of
select gas basins. Against this backdrop,
the pre-Covid-19 Lower 48 oil production
peak of 10.4 MMbbl/d will be within
reach already by late-2022 or early-2023.
In a $70 scenario, supply from the
lower 48 states is expected to trend toward
12 MMbbl/d by late-2025, Rystad calculates,
while a sustained $100 environment
will allow U.S. onshore oil volumes to
grow to 13.5 MMbbl/d during the next
four years.
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American Oil and Gas Reporter - March 2022

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