The Silent technological revolution transforming the Oil & Gas sector
Is the oil production from Shale formations a temporary phenomenon or does it have the capability to shape the US dominance of the energy market in the long run?
The recent dominance of North America on the supply side in the Oil & Gas sector has sent shock waves through the energy markets. According to energy experts, nobody could visualize even 10 years back, a scenario in which, oil production spiked upwards concurrently in The US, Canada and Mexico. This has resulted in a paradigm shift in the way energy stakeholders view North America.
The catalyst for this transformation is the path breaking advancements in a new technology - The Shale revolution, which facilitates the tapping of oil and gas reserves existing in underground shale rock formations.
Now, coming to the specific question: Is the oil production from Shale formations a temporary phenomenon or does it have the capability to shape the US dominance of the energy market in the long run?
The evidence lies in a research done on more than 4,000 shale wells, with specific analysis on nearly 2,000 wells, along with the study on the operations of nearly one hundred oil firms practicing shale oil extraction. The results provide a conflicting scenario.
On one hand, the massive resource availability combined with the competency of the industry to constantly upgrade technology while reducing cost, suggests, the US could play a dominant role in the years to come. On the flip side, the specific nature of shale oil – the drilling intensity to be specific, exposes it to shocks (price falls and environmental barriers). Thereby, drilling intensity is the critical factor in measuring the real evolution of shale oil.
Going by available evidence, the drilling intensity in U.S. shale grew exponentially – from few hundred wells becoming active before 2011 to over 4000 wells becoming active in 2012 (more than the total no oil and gas wells - both conventional and unconventional made active globally, except Canada). Thus, the conclusion is in the medium term, the correspondence between drilling intensity and shale oil production will have a significant impact on the US oil production.
This silent technological evolution has a crucial role in repeating the American success story across the globe.