"Peak Oil Supply" coming soon to the USA

[dan_s]

This supports the G&R report I mentioned in my last podcast that we may be just a year or two away from "Peak Oil" in the U.S. If so, demand for oil-based products will push crude oil prices a lot high. We may want to complete that Keystone XL pipeline. If you want to read the G&R Report send an email to Sabrina and ask her for it: energyprospectus@gmail.com
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Wall Street Journal

HOUSTON-The boom in oil production that over the last decade made the U.S. the world's largest producer is waning, suggesting the era of shale growth is nearing its peak.
Frackers are hitting fewer big gushers in the Permian Basin, America's busiest oil patch, the latest sign they have drained their catalog of good wells. Shale companies' biggest and best wells are producing less oil, according to data reviewed by The Wall Street Journal.

The Journal reported last year companies would exhaust their best U.S. inventory in a handful of years if they resumed the breakneck drilling pace of pre-pandemic times.

Now, recent results out of the Permian, spread across West Texas and New Mexico, are mimicking the onset of a production plateau that has taken place at other, more mature U.S. shale plays. ConocoPhillips CEO Ryan Lance warned that OPEC would soon supply more of the world's oil.

At a major industry conference here this week, executives cited the stagnation in shale, saying it signaled a return to more dependence on foreign energy sources and more challenging times ahead for major U.S. companies, after most of them posted record earnings last year.

"The world is going back to a world that we had in the '70s and the '80s," said ConocoPhillips Chief Executive Ryan Lance, during a panel at the conference called CERAWeek by S&P Global. He warned that OPEC would soon supply more of the world's oil.
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Oil production from the best 10% of wells drilled in the Delaware portion of the Permian was 15% lower last year, on average, than top 2017 wells, according to data from analytics firm FLOW Partners LLC. Meanwhile, the average well put out 6% less oil than the prior year, according to an analysis of data from analytics firm Novi Labs.

The atrophy of once-booming sweet spots has big implications for the global oil market, which years ago could count on rapidly growing U.S. oil production to blunt the effects of supply disruptions and rising demand. Without successful exploration or technological advances, the industry's inventory constraints are expected eventually to push companies to tap lower quality wells that would require higher oil prices to attract investment, industry executives say. < MY TAKE: Demand for oil-based transportation fuels will exceed supply within a few months, driving up prices. Basically, the market will soon need to "ration supply by price".

Oil production in the U.S. rose from about 7.2 million barrels a day a decade ago to a high of about 13 million barrels a day before the pandemic (peak U.S. oil production was 12,860,000 bpd in November, 2019). But domestic output last year grew at one-third of the annual average pace seen in shale's heyday from 2017 to 2019, and hasn't yet caught up with prepandemic levels.

Oil output from the best 10% of wells in the Permian Basin's Delaware portion was 15% lower last year on average than 2017's top wells. The slowdown was mostly because of investor pressure on companies to curtail spending and limit growth in favor of generating higher returns. At the same time, weaker well results in the Delaware basin contributed to flattening output.

U.S. output grew about half as fast as many forecasters initially expected last year, and is projected to increase by about the same amount this year, according to the Energy Information Administration.

The recent degradation in well performance has stoked executives and investors' concerns about the industry's runway for growth, and has led companies to consider mergers this year.

Companies such as Chevron Corp., Devon Energy Corp. and others that have held the Permian up as a central pillar of their future plans saw top wells yield less crude last year than the previous year. Chevron, one of the largest landholders in the Permian, drilled some of the region's most prolific wells in Culberson County, Texas, but some of its newer wells there have seen productivity decline.

The wells Chevron brought online in Culberson County last year are ultimately expected to produce 42% less oil, on average, than wells that began producing in 2018, according to FLOW's estimates. The top 10% of wells Chevron brought online across the Delaware last year were about 25% less productive on average than its wells the year before, according to Novi Labs data.

Chevron executives said last week the company missed its oil-production target in the Delaware, citing higher-than-expected depletion rates. The company plans to revise its approach in the Permian, they said, shifting some drilling into New Mexico, and targeting areas that are likely more productive-moves that will reduce its pace of activity somewhat.

Chevron Chief Executive Mike Wirth said last week the rate of production growth and drilling activity the U.S. shale industry saw a decade ago "is unlikely to be repeated," though the Permian still has areas that haven't been developed. Chevron plans to boost production in the Permian to 1 million barrels a day by 2025, eventually plateauing at 1.2 million later this decade.

Devon has drilled some of the most productive wells the Delaware had ever seen, in an area the company dubbed Boundary Raider. In 2020, its average well pumped more than 342,000 barrels over a nine-month period, but the following year, its average fell to more than 167,000 barrels, according to FLOW President Tom Loughrey. Companies' midlevel wells are still producing steadily, but gushers are harder to come by, Mr. Loughrey said. "The big well is coming down hard right now," he said.

Rick Muncrief, Devon's chief executive, attributed the productivity decline to maturing U.S. oil-and-gas fields. "I'm not terribly surprised, and I'm not terribly alarmed," he said, saying that wells drilled in the Boundary Raider area still generated excellent returns for the company. Mr. Muncrief said that tight crude supplies pushing oil prices higher would make tapping into less productive formations economically viable for operators.

Investment bank Raymond James Financial Inc. estimated in a September report that public producers and private operators in the Delaware hold about 7.2 years of sweet spots, and less than eight years in the Midland basin, the other major portion of the Permian.

Shale's sluggishness means global oil markets will have to rely on Middle Eastern crude over the next decades, said Scott Sheffield, CEO of Pioneer Natural Resources Co. "We're just not gonna have that big growth pump like we used to," he said of U.S. crude production.

[dan_s]

From OilPrice.com
Oil Prices Are Set To Rise Throughout 2023
By Irina Slav - Mar 07, 2023, 7:00 PM CST

Rising Chinese demand will be the main driver of higher crude prices this year.
A 500,000 bpd drop in Russian crude output could tip the balance in global oil markets.
IEA: global oil demand will hit a record high in 2023.

Read this: https://oilprice.com/Energy/Oil-Prices/Oil-Prices-Are-Set-To-Rise-Throughout-2023.html