US oil and gas will surge for years, firm projects

Eagle Ford Shale production will jump 50 percent this year, hitting an average 844,000 barrels per day,  according to an analysis by research and consulting firm Wood Mackenzie.

And despite slumping natural gas prices, the northeast United States will double gas production by 2020, the researchers forecast.

In the  report on North America energy production released Friday, Wood Mackenzie projects a healthy future for United States energy, with rapid growth led by tight oil, including oil from the Eagle Ford and other shale rock formations.

Even U.S. natural gas has a promising future, the researchers determined, finding that all current gas drilling in the United States is economic at prices above $4 per million British thermal units.  U.S. gas closed Monday at $3.46.

“The Northeast shales have not experienced sharp gas drilling reductions due to low cost of development,” the report noted.

Wood Mackenzie estimates that $150 billion will be spent this year on developing onshore North American oil and natural gas. Tight oil will account for more than 40 percent of that spending, the firm found.

That heavy investment will push tight oil production to more than 5 million barrels per day by 2019, with more than half of those barrels coming from the Eagle Ford Shale in South Texas and the Bakken Shale in North Dakota and Montana.

The Wolfcamp and Cline Shale in West Texas is an up and comer, the researchers said, with its oil production forecasted to jump 76 percent by 2018. The Wolfcamp and Cline play, currently the source up 7 percent of production from the Permian Basin, will double its share over the next 5 years, Wood Mackenzie projects.

Pioneer, Devon, EOG Resources and Approach are the leading operators in the Wolfcamp/Cline Shale, the report notes.

That growth in domestic crude will cut imports from overseas to just 15 percent of U.S. crude supply by 2020, from about 44 percent now.

Growth in oil sands crude from Canada could displace imports on the Gulf Coast, the report notes. But that will require new pipelines and other infrastructure to carry the crude south.

“We expect supply growth will continue to outpace infrastructure build-out, resulting in increased use of alternative transportation modes and continued price volatility,” the report stated, noting that more than half of the crude  volume leaving North Dakota’s Bakken Shale is carried by rail.

Rail transportation in the Bakken costs about 60 percent more than pipeline tariffs, according to Wood Mackenzie.

“Rail will have a role, but is not the ideal solution for long-life, plateau production assets like the oil sands,” the report stated. “For those focused on a long-term horizon,  pipelines remain the safest and lowest-cost mode of transport.”

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