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Shale Boom Tested as Sub-$90 Oil Threatens U.S. Drillers

Discussion in 'Energy, Environment, and Policy' started by RobStark, Oct 8, 2014.

  1. RobStark

    RobStark Active Member

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    The U.S. shale boom is producing record amounts of new oil as demand weakens, pushing prices down toward levels that threaten to reduce future drilling.


    Domestic fields will add an unprecedented 1.1 million barrels a day of output this year and another 963,000 in 2015, raising production to the most since 1970, according to the U.S. Energy Information Administration. The Energy Department’s statistical arm forecasts consumption will shrink 0.2 percent to 18.9 million barrels a day this year, the lowest since 2012.

    If prices go to $80 or lower, which I think is possible, then we are going to see a reduction in drilling activity,” Ralph Eads, vice chairman and global head of energy investment banking at Jefferies LLC, which advised 38 percent of U.S. energy mergers and acquisitions this year, said in an Oct. 1 interview. “It will be uncharted territory.”


    Shale oil is expensive to extract by historical standards and only viable at high-enough prices, Ed Morse, Citigroup Inc.’s head of global commodities research in New York, said by phone Sept. 23. Oil from shale formations costs $50 to $100 a barrel to produce, compared with $10 to $25 a barrel for conventional supplies from the Middle East and North Africa, the Paris-based International Energy Agency estimates.


    Saudi Arabia, the world’s largest exporter, reduced selling prices on Oct. 1, signaling it is prepared to let prices fall rather than cede market share, according to Commerzbank. OPEC accounts for about 42 percent of world supply, according to London-based BP Plc, Europe
    ’s third-largest oil company.


    http://www.bloomberg.com/news/2014-10-07/shale-boom-tested-as-sub-90-oil-threatens-u-s-drillers.html
     
  2. CHGolferJim

    CHGolferJim Member

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    The shale boom has had an enormous positive impact on numerous state economies, and our national economy, by moderating oil prices and balances of payments. I'm confident technologies and regulation will be developed that minimize the environmental challenges. Maybe Elon has some ideas?
     
  3. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Don't confuse fracking for gas with shale oil; it's the latter that is the topic of the article that @RobStark posted. Shale oil is of much less importance.

    The softening of oil prices does have an implication for fracking, though: most fracking is in areas with "wet gas" that has a relatively high proportion of natural gas liquids (ethane (C[SUB]2[/SUB]H[SUB]6[/SUB]), propane (C[SUB]3[/SUB]H[SUB]8[/SUB]), normal butane (n-C[SUB]4[/SUB]H[SUB]10[/SUB]), isobutane (i-C[SUB]4[/SUB]H[SUB]10[/SUB]), pentanes and even higher molecular weight hydrocarbons.) Those liquids are valuable and allow the dry gas to be priced low while still turning a good profit at the well. With oil prices falling, NGL prices are softer too, making fracking less profitable. So, I would expect to see some impact on fracking, too, though not as pronounced as on shale oil.
     
  4. RobStark

    RobStark Active Member

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    #4 RobStark, Oct 9, 2014
    Last edited: Oct 9, 2014
    Falling energy prices has an even better impact on our national economy.

    Bad for Alaska or North Dakota perhaps but good for our national economy.
     

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