North American oil production is showing no signs of slowing down and will likely continue growing unless prices fall to around $60 a barrel, more than $40 below today’s price, an analyst said at a Houston conference Tuesday.
Tony Scott, manager of oil and gas analysis for Bentek Energy, said the $100-plus price means high returns for oil companies. With companies cutting their costs and improving their production methods, their work probably will remain lucrative at far lower prices, he said.
U.S. benchmark light, sweet crude ended up 46 cents at $103.49 a barrel Tuesday on the New York Mercantile Exchange.
“We’ll see a slowdown at $80, but it’s not going to be a dramatic slowdown,” Scott said at the Platts Commodity Week conference held at the Hilton Americas in downtown Houston.
Scott said that production is likely to continue growing unless prices fall to as low as $60 a barrel.
“It takes really low prices to really slow this engine down,” he said.
North American oil production will jump 4 million barrels a day by 2018, likely cutting out imports of crude, Scott said.
The U.S. now imports 500,000 barrels a day of light, sweet crude, Scott said, and growth in the Eagle Ford Shale of South Texas alone may eliminate those imports.
Oil companies working in the Eagle Ford will boost production there to more than 1 million barrels per day by the end of 2013, and to more than 1.5 million barrels per day in 2018, Scott projected.
New drilling technology also has revived the Permian Basin region of West Texas, long an oil producer for the state, and it’s becoming a mammoth source of fossil fuels, he said.
The resurgence could make the Permian the most productive basin in the U.S., Scott said.
Scott predicted that production will grow throughout North America, regardless of delays surrounding parts of the Keystone XL and other pipeline projects.
He said rail transportation of oil produced throughout the continent, even from oil sands plays in Canada, remains convenient for oil companies. That’s because prices for rail transportation will not substantially affect returns, he said.
“At $100 crude, everything is economic,” he said. “At $20 pipeline costs, $20 rail costs, you’re still getting $80 at the wellhead.”
Growing North American oil production means that ships full of oil that previously headed to the United States are being redirected to Asia, he said. But with oil demand in China and India not growing as fast as expected, the result will be more available crude in the market, he said.
“It’s going to dramatically change how the world prices crude,” he said.
If world demand for oil does not grow, “it’s going to put a lot of downward pressure on prices,” Scott said.
John Kingston, global editorial director for Platts’ news division, opened the conference by noting that six years ago he attended a peak oil conference at the Hilton Americas, where experts warned that the global supply of crude was running short.
“Back then, their numbers looked like maybe they were really onto something,” Kingston said.
The Association for the Study of Peak Oil & Gas USA had canceled this year’s peak oil meeting, he said.
“That was six years ago in this hotel and now look where we are,” Kingston said.
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