Production costs at US shale explorers to drop significantly in 2015

17th Mar 2015 14:42

Recent outlook statements from US exploration and production companies reveal that while activity is being sharply curtailed none is expecting a fall in output as a result.In fact, consultancy Wood Mackenzie expects oil production will grow this year and the next if the price of crude recovers to approximately $60 a barrel.In the past the sector has at times surprised with the speed of its improvements in productivity, the Financial Times wrote on Tuesday.Since the summer of 2008 the number of gas rigs declined from 1,606 to 268 last week, yet American gas production has continued to rise.To take note of, it is many of the same companies which saw out those low prices in gas who are now present in the oil market.Traders expect those same outfits to cut their supplier costs by 20-30%, focus on their most productive assets and teams and increase productivity, including through the adoption of new technologies.For example, a technique known as "pad drilling" allows more wells to be drilled with fewer rigs.That minimises the downtime while rigs are dismantled and then re-assembled at a different site.In 2014 global consultancy IHS estimated the median break-even price of oil for shale projects at $57 per barrel. That is expected to fall significantly this year as costs decline.In the past year production per rig, or productivity, from new wells rose by 24% in the Eagle Ford basin, 29% in the Bakken and 30% in the Permian.Unsurprisingly, the latest data from the Energy Information Administration, the US Department of Energy's statistical arm, revealed the Permian is the only basin at which output is still on the rise.Production at Eagle Ford and from the Bakken basin is expected to decrease marginally next month, the FT says.