Since October 2014, plummeting crude oil prices have resulted in a 46% drop in the number of US rigs drilling for oil, job cuts, and drops in profits and investment in the US shale industry. Nonetheless, output of shale oil remains steady, with potential for growth over the next two years. Although a decline in production is expected if crude oil remains at $45 per barrel, Wood Mackenzie predicts increased production if prices rise to $60. Trimming costs will be key to the industry’s growth. Last summer, the research group HIS found the break-even price for shale oil to be $57 per barrel on average, and this price will fall as production costs drop. Strategies to cut costs include standardizing equipment and designs for wells, improving production methods, concentrating funding on the most productive rigs and crews, and placing pressure on suppliers of rigs and services. Data from the government’s Energy Information Administration show gains in production per rig from new wells of 24%–30% over the last year in the US’s three main shale regions.

Source: Financial Times

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