With the price of West Texas Intermediate (WTI) crude hovering between the $43 to $50 for the better part of this month, analysis by Wood Mackenzie has found that the majority of U.S. shale plays would need a 30 percent cost reduction to be economically viable.
With that being the case, only a select few “sweet spots” exist where drillers focus their limited capital expenditure dollars. Those “sweet spots” include the Springer, a newer shale play located in southwest Oklahoma, the Karnes Trough portion of the Eagle Ford Shale and the Nesson Anticline portion of the Bakken Shale. Two sub-plays that require minor cost reductions are The Parshall Sanish portion of the Bakken and the SCOOP Woodford in Oklahoma.
According to the Dallas Business Journal, Wood Mackenzie, a global energy, metals and mining research and consultancy firm, believes even the 30 percent cost reductions can be achieved and many companies have already announced it. That’s mainly due to oil service companies slashing costs as demand for work has gone down.
Further research from Wood Mackenzie says that oil and condensate production from shale will grow by about 673,000 barrels per day this year, or half as much as 2014. Research also indicates that by 2020, shale plays will be producing 7.5 million barrels of crude oil per day, down drastically from last year’s projection.