Oil and gas producing giants like Saudi Arabia, Russia, and others had expected the U.S oil and gas industry to face a major slow down amidst the global price slump. The domestic experts had also estimated a huge drop in North American shale and tight oil and gas production. Also, it was expected that the investments in this sector would dry up completely. But this industry in the U. S. has proved all of them wrong.
No. of drilling rigs have reduced, some are forced to lay off workers for short durations at regular intervals, but the industry has survived. Against all the speculations from all over the world and after “experts” advice, the production of natural gas from the Marcellus and Utica shales of the U.S. Northeast is averaging @ 22.63 billion cubic feet per day in August 2016, which is more than 2% that of July average and second-highest average in the year 2016, February was all-time high @ 22.78 billion cu-ft/day.
The U.S. government had actually forecasted that combined gas output from the shale areas lying beneath Ohio, Pennsylvania, and West Virginia would decline this year. But the producers managed to maintain volumes by tapping inventories of earlier drilled wells which were uncompleted by burrowing deeper and longer wells that yield more gas. Despite the reduction in the number of rigs, producers managed to maintain the outpour with upgraded technology. Average production per rig has gone up, e.g. in Marcellus shale today, production per rig averages about 11.4 million cubic feet of gas which is more than 18% compared to last year. It is interesting to note here all this is happening despite the falling gas prices.
Gas producers have achieved cost reduction after prolonged rigorous and concentrated efforts. Hence exports are viable for the U.S. tight gas producers, with Cheniere Energy‘s Sabine Pass plant shipping seven cargoes this year to Argentina, Chile, Brazil, India, Portugal and Dubai and Kuwait too! Though the Middle East has some of the world’s largest gas reserves, a lack of investment in extraction, liquefaction makes U.S. LNG more competitive than local production.
This success story is limited to natural gas, but tight oil production has remained strong despite the pundits predicting its demise. The drilling practices and technology improvements have helped the U.S. tight oil producers to lower the costs and remain competitive to an extent to where U.S. tight oil investments in the country are now more attractive than deep-water oil projects in countries like Africa.