10-02-2015, 09:03 AM
(09-02-2015, 05:15 PM)tanjm Wrote: [ -> ]North American shale oil production is up to about 8m barrels a day (bpd) versus a 2m bpd gap in supply over demand
tanjm san
According to EIA, tight oil (aka shale oil) production in North America (including Canada) is only about 4 million + barrels per day.
(09-02-2015, 05:15 PM)tanjm Wrote: [ -> ]with $65 per barrel production being economical at about 6m bpd production. This assumes no fresh supply at a lower cost of production.
The common mistake is to treat oil production like production of normal consumer goods such as iphones but some of the key points I can think of are:
Oil wells suffer from production declines
Conventional oil production declines without additional capex. The average annual decline rate in approximately 8%-10%. Tight oil wells' annual production decline rate is approx 40%-60%.
Oil price is above cash costs
At the present moment, I have not heard of any oil company who has stopped production from existing oil wells as the oil price is still above cash costs. The more immediate response is to cut capex which affects future production. Therefore, we will see a lagged effect between cut in capex and a decline in oil production.