Daily Blog

Say You'll Be There - How Much Longer Can Shale Support U.S. Oil and Gas Production?

Back in the early 2000s, the outlook for energy security in the U.S. was bleak. Domestic oil production had been on a steady decline since 1985 and gas production was also well off its apex in the 1970s. M. King Hubbert’s concept of peak oil ignited fears of eventual energy scarcity. Given fossil fuels’ ubiquity underlying our entire Western economic and industrial structure, it’s no wonder that folks were concerned. But then the Shale Revolution changed everything. It’s often been said that necessity is the mother of invention and, after many trials and with considerable ingenuity, U.S. producers learned to wring massive volumes of previously trapped hydrocarbons from shale and gave the U.S. energy industry a new lease on life. But there are still limits on how much crude oil, natural gas and NGLs can be economically produced — and concerns lately that the best of the U.S.’s shale resources may have already been exploited. In today’s RBN blog, we examine crude oil and gas reserves: how they are estimated and what they tell us about the longevity of U.S. production.

One of the most pressing questions in the energy space lately is how long the major producing regions in the U.S. onshore will hold out. A lot of producers have talked in their recent investor presentations about the fact that the opportunities for prolific new wells are dwindling in some regions — what’s commonly known as acreage degradation. That should be concerning to everybody, from consumers to policy-makers. Upstream investors want to be sure that producers have adequate acreage inventory to maintain production while midstreamers and downstream companies want to know that their assets won't be starved of supply.

One way to assess acreage longevity is to calculate a producer’s reserve life in terms of years remaining. And we can make the same calculation at the basin level. In Figure 1 below, we show, for major basins, reported proved crude and condensate reserves (blue bars and left axis in left graph) and gas reserves (blue bars and left axis in right graph) from the EIA’s U.S. Crude Oil and Natural Gas Proved Reserves report, published in December 2022. If we divide those numbers by 2021 production (orange bars), we see that crude and condensate reserves for the selected basins are generally around 10x production (green dots and right axis in left graph), implying about 10 years of remaining reserves, while gas reserves are implied to be between 10x and 17x — that is, 10 to 17 years of remaining reserves, depending on the basin (green dots and right axis in right graph).

Join Backstage Pass to Read Full Article

Learn More