US can maintain oil growth – Credit Suisse
London, 7 September (Argus) — The US can maintain oil production growth at around 600,000 b/d because of shale development, the Gulf of Mexico and, potentially, the Arctic, but requires a near-term oil price of $95/bl for Brent, according to Switzerland-based bank Credit Suisse.
The required price could drop to $80/bl over time. US growth is seen accounting for 80pc of the global net gain in production capacity but, under the bank's model, that still leaves global spare capacity at just 2-3pc in 2015.
But a key uncertainty in Credit Suisse's models is decline rates for shale oil fields, the bank said. The recovery rate for shale oil is lower than for shale gas, indicating that many more wells will have to be drilled for oil relative to gas. Early rates of decline on Bakken and Eagle Ford wells can reach 50-70pc.
Accommodating a forecast 600,000 b/d a year of US oil growth, plus 300,000 b/d a year of Canadian growth by 2017 will require new trunk lines. The bank sees the WTI-LLS spread staying wide through the first half of 2013. It sees a discount for Bakken and Canadian heavy crude remaining through the second half of 2014.
In theory, the oil price requirement for shale wells in the US is $50-75/bl, according to Credit Suisse. But funding upfront capital costs pushes this higher.
The bank's model would require $80bn/yr for shale oil. Adding in the spend on conventional oil, the industry would need to spend $160bn/yr to meet growth forecasts. That is equivalent to 30pc of the global upstream capital expenditure forecast for under 15pc of global production.
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