“Shale producers are justifiably proud of their ability to survive the perfect storm that has hit their industry since the middle of 2014,” comments John Kemp of Reuters.
The hardship that has come along with the collapse in oil prices has forced shale producers to cut costs, sustain their output, and ultimately become more efficient in their operations.
With a pause in the shale revolution, the shift has gone from growth to survival.
“Some analysts question whether the Organization of the Petroleum Exporting Countries (OPEC) is winning its price war against high-cost producers. They point to resilience in shale production in North Dakota and Texas as evidence that OPEC’s strategy has had only limited success.”
Even though this shift has forced an improvement in operations, it does not negate the fact that shale growth is struggling causing a pause in the shale revolution. Prior to June 2014, North Dakota’s oil output was increasing at a compound rate of 2.37 percent per month. Since then, the state’s oil output has shrunk to a .38 percent increase each month.
Some say OPEC’s strategy has had only limited success. “By allowing prices to tumble, OPEC has shut in 300,000 to 500,000 bpd of probable shale production growth in North Dakota.”
OPEC’s strategy, keeping output steady and forcing countries to adjust production, has been reasonably successful. However, it doesn’t eliminate the readiness of shale producers to increase output again when prices rise from $50 to $60 or $70 per barrel, which would actually worsen oversupply in the long run.
“The revolution cannot be reversed. Techniques once mastered will not be unlearned.” Oil prices and production will eventually rise again, and due to the current situation, producers will have learned to operate at a lower cost base than before.
Source: John Kemp, Reuters: http://www.reuters.com/article/2015/10/20/usa-oil-kemp-idUSL8N12K2PG20151020