Since March 2020, U.S. oil production has fallen by more than 2 million barrels per day. Many believe that DUCs wells can solve the problem of declining U.S. oil production.
The term DUCs refers to wells that have been drilled but not completed. There are approximately 5,800 DUCs wells in major tight oil reservoirs in the United States. Tight oil refers to oil resources that are sandwiched in or immediately adjacent to dense reservoirs in high-quality oil-bearing systems that have not been transported over large, long distances. These DUCs wells have been drilled and are ready to be converted to producing wells, and its conversion cost is about half of the total completion cost.
Will the problem of declining U.S. Crude Oil production be solved?
Analysts believe that DUCs will not solve the problem of declining U.S. crude oil production.
First, the reason these DUCs are not being converted to producing wells is because their owners do not believe they are performing well enough and therefore they are not being selected for completion.
Second, even if these DUCs wells performed as well as those completions, and a large number of DUCs were converted to production, the U.S. Energy Information Administration reports that U.S. oil production would still be below 10.5 million barrels per day.
Why?
Is it because the number of DUCs wells is too small?
Currently, the number of DUCs wells represents 35% of the number of new production wells in the Bakken. The number of DUCs wells has been increasing since last March.
During the 2015-2016 oil price and production crash, DUCs completions in the Bakken were also only 40%, which has been the highest level. Therefore, analysts believe that the current level of DUCs wells may be close to the peak and that the issue of too few DUCs wells can be ruled out, although the applicability of the Bakken data to other fields needs to be pushed.
Analysts point out straight away that, in fact, the biggest problem is that the number of new wells in the US is still too small.
What is the impact of the five major U.S. oil fields on oil production?
Let’s take a look at the five major U.S. oil fields. The five major U.S. oil fields are those in Texas, North Dakota, New Mexico, Oklahoma and the Gulf of Mexico, which account for 80% of total production.
The data show a precipitous decline in the number of new oil wells, which bottomed out in May of last year. This is the reason why monthly oil production in the U.S. has been declining.
So analysts believe that to maintain current production levels, the problem is not whether the wells are completions or DUCs, but that the number of new wells is too low.
Analysts believe that at least 400 new wells must be added to these fields each month to offset the impact of declining production and keep the U.S. oil industry at 11 million barrels per day.
How much longer will U.S. oil production decline?
The one piece of good news is that the number of completions and the number of DUCs have both improved and are now moving in a positive direction. Although it will take at least a few more months for the number of completions to balance out with oil production. So, how much longer will U.S. oil production decline?
No one can make an accurate prediction. This is because oil production is a complex system. The interdependence and cyclical feedback of each part of the system makes it constantly adjusting and adapting, so it is subject to a great deal of uncertainty.
The best way to make forecasts is to evaluate several key indicators, although they can only be used as theoretical forecasts: for example, the number of wells drilled, decline rates, lag levels, lead levels, completions and production increases.
At the base level, U.S. oil production would begin to decline in April 2021, with production dropping to 9.1 million bpd by September.
At the low level, minimum production is projected at 7.8 million barrels per day.
while at high levels, minimum production is expected to be 9.9 million barrels per day.
Analysts believe that it is more important to recognize what is coming than to predict how much production will fall, and when it will fall.
Keeping production at a lower level for an extended period of Time was something that did work in 2014 when oil prices were plummeting. But what’s happening now is different; oil prices have recovered rapidly. If we don’t take advantage of this opportunity, I’m afraid the shale oil industry will struggle to recover.
Recent Comments