Report: U.S. shale production to reach 9 million bpd by 2025

By Staff | July 05, 2017

A new report from McKinsey Energy Insights examining the outlook for North American shale oil forecasts that U.S. production could reach 9 million barrels per day by 2025—depending on oil price scenarios.

Assuming a WTI price between $60 and $70 per barrel from 2019 on, MEI expects annual shale drilling and completions to grow at 20 percent and production to increase by 12 percent. However, the report cautions that under other oil price scenarios, production in 2025 would be only 5.4 million bpd.

MEI expects the Permian to be the primary shale oil basin to watch over the next 10 years because of its resource quality and size, proximity to markets and existing infrastructure. Even if well costs increased 30 percent, MEI believes large parts of the Permian should remain economic under its price recovery scenario. From 2016 to 2021, MEI projects that 47 percent of growth in rig activity will come from the region with remaining activity similarly spread across the other major basins.

According to MEI’s report, although North American shale oil margins have struggled to bounce back after the market plummeted in 2014, drilling activity since the second quarter of 2016 has more than doubled. Recent key operational improvements—such as increased drilling efficiency, better completion designs and high-grading—are expected to help margins widen and enable drilling to become profitable beyond the most resource-rich shale basins.

MEI found that operators have reduced drilling time by an average of five days while improving initial production (IP) by 33 percent from 2014 to 2016. Wells with better completion designs—including high-proppant-volume wells—have experienced 35 percent higher IP than average, but these gains are subject to the added cost of water and sand sourcing. MEI forecasts that the number of wells completed will grow at 21 percent annually until 2021, requiring total cap expenditure to increase 25 percent a year to reach 2014 spending levels.

MEI, a global market intelligence and analytics group with offices in Houston, London, Amsterdam and Singapore, focuses on the energy sector. The North American Shale Outlook to 2025 was developed by MEI analysts after reviewing forecasting models and other proprietary data from the company’s suite of oil and gas products.