US oil production: cost, volume growth, dynamics

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:46

If you look at the world oil market globally, we can safely say that the United States is the only state in the world that is actively involved in the extraction of shale raw materials. Other countries have long abandoned this idea, as they consider it unprofitable and materially costly.

Active oil production in the United States began only in 2014 in the middle of summer. Earlier attempts were made to develop fuel deposits in Poland and Hungary, but they all ended in failure. Great prospects were assigned to Ukraine, but all this is only in the project for 2018.

Shale projects in the US

Shale oil production in the US intensified in 2014. To date, American projects cover about 10% of the world's fuel production. Back in 2005, about 7.5 million barrels of oil were developed on the territory of the state, and in 2014 this figure reached 9 million barrels. Against the backdrop of 90 million barrels that all countries produce together, the value is very significant. It was this ratio that became the lever that pushed for a sharp reduction in the price of "black gold".

What fuel price in the oil market makes US energy development profitable?

The cost of oil production in the US varies significantly by region. The cost of developing a source is affected by the depth of the fuel and the availability of fresh water. By early 2005, the average shale oil company was able to break even at $75/bbl on the market. A year ago, for US oil production to be profitable, it had to be below $57 on the international market. There are regions, such as North Dokota, where fuel production remains profitable at a price of $42 or less. US shale oil production in Mackenzie County costs just $24. If we bring all the indicators together, it becomes obvious that the oil segment of America is able to withstand not such drawdowns in the international market. Whatever the situation, oil developers have their 10% of the cost of each barrel. The fact that the prime cost of "black gold" does not include taxes and excises, which in other countries form about 60% of the base price, gives confidence. Why exactly? Quite simply, there are no taxes in the energy industry in the US.

What accompanies the "shale revolution"?

The shale revolution in America has good prospects. This is primarily due to the fact that oil production in the United States is constantly getting cheaper. Accompanying this is not only the development of new deposits, but also the introduction of new technologies into the process of producing fuel. According to preliminary estimates, in the near future, the cost of servicing one well will be reduced by about 40%. The growing dynamics of oil production in the United States is due to the specifics of the legislation. Companies operating in this direction are not taxed, since until recently the industry was not considered promising. The market is dominated by small companies that are focused on increasing their income and looking for ways to rationalize production. They independently invest in the development of the direction.

Forecasts for the future

The volume of oil production in the US in 2015-2016, according to analysts, will only increase. Even a 60% drop in world market prices will not affect the situation and prospects. Energy short-term forecast of one of the largest agencies in the country Short-Term Energy Outlook is very optimistic. He speaks of the state's intention to break its own records. The maximum volume of oil production in the United States was recorded in 1970 at 9.6 million barrels. EIA confidently states that it is worth waiting for an increase in fuel production by 600,000 tons by mid-2015, and by early 2016 - by 200,000 barrels per day.

What are the oil magnates counting on?

Despite the fact that oil production in the US is in full swing, opinions about the future prospects are divided among the owners of oil companies. Alonefirms have temporarily stopped the development of new fields and suspended research, others are optimistic and confident about the future, counting on the restoration of the cost of fuel on the market to no less than $100.

A bright future is drawn by the fact that America intends to get out of the world's oil dependence. If in 2005 the country was 60% dependent on oil suppliers, by 2011 this figure had dropped to 42%. The trend has not changed today, but on the contrary, it has intensified. Producers can safely count on the demand for oil within the state. Even if it fails to sell fuel on the international market, it will go under the hammer on the country's domestic market.

What are analysts saying?

According to analysts, in 2015 the price of Brent oil will stop at $58 per barrel. The outlook for 2016 is even more optimistic. When the cost of oil production in the US falls by a third, its market price will reach $75. The energy carrier of the WTI brand will cost $55 and $72, respectively. Oil market experts agree that the cost of "black gold" by now is greatly underestimated. In the next few years, the price will not be able to reach $100. Such a scenario can be considered with a delay of a decade. Growing US oil production will not be able to cover demand. The number of technologies that require fuel is systematically increasing. Temporary price reduction due to stagnation in developmenteconomies of most countries. As soon as the situation returns to normal, the $100 limit will not only be reached, but probably broken.

US in the oil market

USA feels confident in the global market and even attempts by OPEC member states to oust a competitor from a niche have failed. As demand decreases, which was previously formed in most of America, supply is growing. As a result, the price of fuel falls. The situation can be called attempts to knock out weak players from trading. Here it is worth noting not only the growth of oil production in the United States, but also the geopolitical position. On the territory of the state, there are more favorable and free conditions for doing business in the energy segment. Small players, and they are the majority, have a free hand. It is the loy alty of the government that allows the state to stand on its own feet even in such difficult times. The influence of the United States on the situation is also growing thanks to the systematically increasing stock of "black gold".

Against the background of world states, oil production in the United States has made a significant breakthrough. The price chart visually shows that the state has completely redesigned the international oil market. For the first time in many years, OPEC member countries and Russia have a worthy competitor. If earlier states acted in their own interests and made decisions taking into account only their own benefits, today the policy will have to be completely revised. This is the only way to balance and stabilize the oil segment.

Confident rears

America has not just burst into the oil market, it is confidently building up its rear. Thus, commercial oil reserves correspond to the volume of net imports to the territory of the state for 164 days. In December 2013, this figure was 171 days, and in 2007, on the eve of the crisis, it was 80 days. Imports for Canada and Mexico are not included in this value. Consequently, the indicator increases to a value of 279 days. And if we take into account not only commercial, but also strategic reserves, the figure will automatically be equal to 450 days. This is a luxurious protective buffer that will keep the country's economy even if there are interruptions in supply. It can also become an impetus for a drop in the cost of oil on the world market, much lower than the actual figure of $47 in the next few months. The fall is expected to slow down in mid-spring 2015.