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Alexander Khurshudov: Another forecast predicting explosive growth of shale oil production is designed for the OPEC conference participants

May 23, 2017/ 07:30

Moscow. The US Energy Ministry amended its forecast on shale oil production making it bigger. By June 2017 it is supposed to reach 5.4 million barrels per day. For the second month of the year alone the oil production grew by 150 thousand barrels per day.

The share of the Permian oilfield in the total production continues to increase and is to reach 45.9% by the end of May. Next month the production is predicted to grow by another 71.4 thousand barrels and to come close to 2.5 mln barrels.

Alexander Khurshudov, the Oil and Gas Information Agency expert, comments on the news item.

Pay attention here: the quote is anonymous, it has neither the author nor the link to the source. Besides, the US Energy Ministry doesn’t deal with forecasts, it’s EIA which does. And indeed, EIA is predicting extensive production growth in the Permian Basin, up to 2.5 mln bpd (picture 1).

The picture shows that the production in February amounted to 2.2 mln bpd. Such explosive growth looks quite strange. Even though half of the oil rigs (361) are working in the area, the output  here is twice as low as in the nearby Eagle Ford. Besides, 25-30% of the drilled holes have not been completed for the last six months; 1995 wells are non-completed at the moment (picture 2).

I’m checking the data against the Railroad Commission of Texas website . Don’t be surprised for this is the organization which controls the drilling, production and transportation of oil in Texas; it just happened so in the course of history. And look at that! It turns out that the Permian oil production in January-February (pic.3) DECREASED by 52 thousand barrels/day (3.4%) and amounted to as little as 1.475 mln barrels/day. Moreover, half of it is accounted for by conventional formations, because oil has been produced here since 1926.

It must be said that a part of the Permian is located in the bordering state of New Mexico. Did the shale wells break all the records there, perhaps? No, they didn’t either. The total production in the state was 439 thousand barrels/day, 160 thousand of which were due to mature fields. All in all, the Permian Basin produced 1.914 mln barrels/day in February, which is 13% less than what EIA claims it did. Besides, shale formations account for just over a half of it. So, pardon me, who shall I believe?

I think it’s the state government that should be trusted. Since they control royalty payment for the oil produced and collect taxes. They have to use precise data. While the information agency uses  estimates. They don’t hesitate to quote production for May, which is not over yet, and even for June, which is yet to come. The error in such estimates is enormous, specialists figure it can be as big as 300-350 thousand barrels/day (pic.4). Obviously, you can make ANY KIND of forecast on this doubtful basis.   

EIA has been caught correcting its failed forecasts post factum before. I think this forecast of explosive growth in tight oil production is designed for the participants of the OPEC conference, which is to take place on May 25. The whole western media is now trying to convince the world that it is impossible and useless to control the oil market. What derisive efforts! This nailed-up lie won’t last long. I expect the American oil production to decline in August.

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