The Shale Oil Phenomena


Shale oil exploration and production teams are like guerilla groups capable of moving from project to project quickly while leveraging multiple skill sets, according to a new study released by former oil executive Leonardo Maugeri. The study, “The Shale Oil Boom: A U.S. Phenomenon,” examines the potential of U.S. shale oil development, including information that explains why guerilla-style operations are good for the Bakken. In his study, Maugeri asks, and attempts to answer the question: Is oil production from shale just a temporary bubble or is it an event capable of significantly altering the U.S.—and possibly global—energy outlook?

Maugeri analyzed 4,000 shale oil wells and more than 100 oil production firms in the U.S., revealing that the U.S. could become the largest global oil producer in only a few years. The combination of shale oil’s vulnerability to oil prices and the amount of drilling required to consistently produce at high volumes could hinder the growth of shale oil production, however. The presence of production firms focused on small retrieval projects made up of only a handful of wells makes it possible for quick operational changes if the price of oil negatively impacts the profits of shale energy production, the report explains.

Success in shale plays such as the Bakken and Eagle Ford won’t happen in other parts of the world, the report adds. “The central role played by drilling intensity in this early stage of shale oil and gas development has a crucial but almost unnoticed implication for the possibility of replicating the success of the American experience in other parts of the world,” Maugeri said, adding that no other country in the world has ever experienced a fraction of the overall drilling intensity happening in the U.S. In 2012, the U.S. completed 45,468 oil and gas wells with 28,354 of those wells coming online while the rest of the world completed 3,921 wells. The drilling-intense nature of the shale business will make expansion in other parts of the world improbable, he said. And, the absence of private mineral rights in most other countries outside of the U.S. will make replicating the success in the Bakken difficult to replicate.