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Is the long run of US oil and gas growth almost over?

Julian Darley 0 Comments , , , , , ,

Every month the US EIA (Energy Information Administration) publishes production estimates for shale gas and LTO (light tight oil AKA shale oil). Despite industry and media hype that US oil prodcution will soon reach 15 million barrels per day, some contrarian analysts, including this one, think that US LTO is close to or possibly even past peak and shale gas is not far behind. LTO is arguably the most important oil production in the world at the moment because it both powers the American economy and has been, by far, the largest source of global oil production growth in the last decade. Thus, keeping a watch on these monthly numbers is quite important.  

Using the new data released last week, here are some charts which lend support to the idea that LTO is topping out and that shale gas is getting very close. The usual caveat: in five years’ time we’ll know a lot better, but arguably we don’t have that luxury.
LTO (light tight oil or shale oil)

All these plays have all stalled – and these are the best shale plays in the US. All the rest are small or declining or both. For reference, LTO makes up the bulk of US production and conventional oil production in the US, which peaked in 1970, continues its broad decline.
Shale Gas

The three plays shown here are the most important and the only ones still growing, but now, Permian is flat and while there is a tiny bit of lift in Marcellus, the largest gas play in the US, and a little bit more in Haynesville, everything else is like LTO –  either in plateau or declining or now so shrunk they don’t matter. Flat Permian reflects the state of LTO in Wolf Camp, Bonespring, and Spraberry seen above, since the EIA lumps the gas that comes from the Permian basin into one category rather than breaking it out into separate plays as for oil (those plays being Wolf Camp, Bonespring, and Spraberry)

With energy, as with any other critical resource, it is vital to add things up and keep the larger picture in mind, so as a reminder of how fast the US is consuming all this non-renewable energy – it is after all ancient sunlight, a form of capital deposited a long time ago which we are burning through globally at an astonishing rate – here are two ‘energy balance’ charts showing US production and consumption (data are only available up to 2022).

First oil:
Then gas:
The two most important points to take from these charts are that though US production has risen dramatically in the last 15 years, consumption of oil has remained at extraordinary – and highly wasteful – levels, and natural gas consumption has continued rising relentlessly. If gas production, in particular, should falter, then the US’s new position as the world’s biggest supplier of LNG will come under great pressure, unless Americans are willing to start reducing quite dramatically their use of gas instead of increasing it – which is most unlikely.
In future articles, I will offer data-backed analysis that supports the idea that the long run of US oil and gas growth is almost over.
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