Shale oil investments to fall 11% in 2020

Oil&Gas Materials 5 December 2019 16:12 (UTC +04:00)
Shale oil investments to fall 11% in 2020

BAKU, Azerbaijan, Dec.5

By Leman Zeynalova – Trend:

Shale oil production investments are expected to fall by 11 percent in 2020, as compared to 2019, Trend reports citing Rystad Energy, the independent energy research and consulting firm headquartered in Norway.

“Despite the continued decline in the number of horizontal rigs since the beginning of 2019, we have not observed a significant fall in the number of spudded wells. At the same time, shale investments have declined by 6 percent to around $129 billion in 2019, and are expected to fall another 11 percent in 2020 due to the industry’s focus on cash flow discipline and free cash flow generation. This means the industry will lower its total investments for two subsequent years –a development we haven’t seen since the oil price crash in 2014,” the firm said in its report.

Rystad Energy expects that North American shale supply will continue growing even in an environment with lower oil prices, Rystad Energy forecasts.

“Without deeper cuts, Rystad Energy forecasts a substantial build of global crude stocks and a corresponding drop in oil prices. However, even with potentially lower prices, the production outlook for North American shale appears robust in the years ahead,” said the firm.

In Rystad Energy’s base-case price scenario, the North American light tight oil (NA LTO) supply will reach 11.6 million barrels per day (bpd) by 2022. This implies an annual growth rate (CAGR) of 10 percent from 2019 to 2022.

In a price scenario with the West Texas Intermediate (WTI) oil price remaining flat at $45 per barrel, the NA LTO supply would plateau at 10.1 million bpd towards 2022.

The Light Tight Oil (LTO) supply from North American shale is set to reach 8.6 million bpd in 2019. Nearly 93 percent of this supply is driven by the US; only slightly more than 600,000 bpd of LTO is produced in Canada.

In 2019, the industry remains on track to spud around 17,000 horizontal wells targeting shale formations in the US and Canada.

Going forward, Rystad Energy expects drilling activity to remain relatively flat at around 17,000 spudded wells per year, on average, according to our base-case price scenario.

However, in a low price scenario with the WTI price remaining flat at $45 per barrel, activity in North American shale may begin sharply decreasing, falling by 26 percent in 2020 y/y.


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