Fracking Breakthrough Substantiates A Once Questionable Forecast

frackingIt was not so long ago that a petroleum industry forecaster famously said that the U.S. will pass Saudi Arabia as the largest producer of crude oil. Now, this projection may in the not so distant future become reality as the Permian Basin in West Texas is now considered to have crude oil reserves large enough to produce oil at a rate which, together with other U.S. oil production, could easily exceed the amount that the Saudis will be pumping as their own reserves decline. And much of the new U.S. oil will be produced by hydraulic fracturing,  more-permiansince continuously improving fracking technology can yield oil profitably in the $ 45-50 per barrel range. (OPEC recently agreed to reduce its members’ production so as to bring supply and demand in balance, with oil prices now stabilizing in this price range and oil from fracking provides an ever growing amount of crude oil for the world market.)

permian-basin

Getting a bit more granular, here are some of the reasons why fracking in the Permian basin and to some extent in other shale-rich areas is becoming more productive and less expensive: (1)  The lateral length of wells over the last three years has increases from 4000 to 7300 feet(with as many as three wells all from one rig), (2) The amount of proppand (sand) has doubled and (3) the well decline rate, which at start of shale fracking was 90 percent after the first four months, is now 18 percent(!).

Now another development: Trump’s presidency assures that fracking will increase rather than declining due to local opposition – particularly since there is very little antipathy to this technology in Texas. And Federal lands with rich shale deposits are likely to be auctioned off over the next several years.

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