As Energy Industry Observers Debate Impact of Shale Boom, Some See Additional Opportunities for Growth

After the recent release of a new drilling productivity report, some energy industry observers are calling on the U.S. to learn from the missteps of other oil-dependent economies, while other analysts have expressed doubts about the shale boom’s ability to solve U.S. energy problems. The most recent Drilling Productivity Report from the U.S. Energy Information Administration was released on October 22, 2013. The report points to increases in drilling efficiency and new-well productivity as the main sources of increased production, as opposed to an increase in the number of rigs currently operating in the field. The report also indicated that new-well production is currently sufficient to offset declines in production from existing wells. The EIA report focuses on six main regions that made up 90 percent of oil production growth and nearly all of natural gas growth in 2011-12, the Bakken, Niobrara, Permian, Eagle Ford, Haynesville and Marcellus Shale formations.

Some observers have reacted to the EIA report less enthusiastically and questioned whether production from horizontal wells is sustainable over the long haul. Steve Austin of expressed his doubts in the shale gas boom as a panacea for U.S. energy issues by comparing exploration efforts to wringing water from a towel. “The first time oil companies twist the towel, a stream of oil comes dripping out. Success! The second time around, surprise: just a few drops, and the third time and subsequent times…nothing. This is what high depletion rates mean and this is what is happening,” Austin wrote in an article published last month. Other industry analysts such as Cody Bannister of the Oklahoma Independent Petroleum Association believe claims such as Austin’s about the long-term utility of horizontal wells are premature. “The combination of horizontal drilling and hydraulic fracturing is still relatively new, and to say that it’s not sustainable is premature,” Bannister said. “We have over 100 years of history of vertical wells and sort of understand the lifespan of a vertical well. That’s not the case with a horizontal well.”

Loren Steffy of Forbes believes that the shale boom offers the U.S. an opportunity to diversify its energy portfolio in a way that some Gulf States have not. Citing to conversations with officials from Saudi Arabia and the United Arab Emirates regarding their nations’ recent efforts to reduce oil consumption through financing of solar and nuclear projects, Steffy calls on the U.S. to view the recent shale boom as a provision of additional time to develop alternative energy sources. “Our system of innovation and entrepreneurship enables us to explore more options and evaluate their viability simultaneously. As we pump more oil and gas from our own fields, we need to think more like a producer and less like the consumer that we have been for the past 40 years. The shale boom doesn’t just give us access to an abundant source of cheap fossil fuel; it gives us flexibility in diversifying our energy portfolio.”

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