Topic: Tight oil Shale gas

In a Nutshell

The so called tight oil and shale gas revolution, brought on by the breakthrough in hydraulic fracturing (fracking), ushering in a new era of oil and gas abundance and bringing hope for US energy independence, is one of the biggest marketing myths created by the oil and gas industry, pumped by investment banks and fanned by mainstream media.

Their environmental impacts aside, tight oil and shale gas are neither cheap to produce nor abundant in supply (will last only years, not decades), and more like a retirement party than the dawn of energy independence.


At the peak of tight oil production, the US is projected to still import about 25% of its oil needs.

Although the technology has no doubt improved, fracking has been known to the industry for a long time. The enabler of the technology is high price – $100 oil makes the drilling for tight oil economically feasible.

This claim takes advantage of the public’s ignorance in how resources and, more critically, reserves are counted. Once you learn how to count, the number is closer to 20 years based on 2010 consumption rate. See Deconstructing the 100 Years of Natural Gas Abundance Narrative.

Tight oil production will reach a plateau between 2015 and 2020 and then face a one way decline beyond. See Years, Not Decades For Shale Oil & Gas

None. The industry collectively has not made a dime but instead has been burning cash since the dawn of the ‘fracking revolution’. They did not make money even when oil was over $100 a barrel.

From $50 to $70 a barrel, depending on the quality of the oil plays and labour cost. Tight oil represents one of the most expensive sources of oil. That’s why it is called unconventional oil, a euphemism for expensive oil.

Tight oil companies are loaded with debt and need the revenue from oil sale to service debt. The lower the oil prices, the more they need to produce to generate revenue while they try to figure out how to raise more debt to make up for the shortfall.

Unlike conventional wells which deplete 4 to 6% a year, tight oil and gas wells deplete up to 90% in three years. That means every three years you would need to drill another well just to maintain production at the same level. There are now hundreds of thousands of wells. Mathematics and physical limitations will tell you that you cannot continue to grow production. This is called the drilling treadmill. See Drilling Treadmill In Action – US Shale Oil update

(1) The depletion rates of horizontal wells are extremely high. (2) Compared to conventional wells, oil and gas from fracking can be brought online fairly quickly, making a fast ramp-up in production possible.

Cheap money. Investors hungry for yield driven by the central banks’ zero interest rate policy have been ploughing billions into tight oil companies, enabling them to use other people’s money to produce oil and gas at a loss. See Tight Oil’s First Domino

‘Nothing To See Here’ – Frackers Ignore Rising Well Decline Rates

The steep decline rates of shale tight oil wells represent a mathematical certainty from which the fate of shale oil cannot escape. Now the math seems to be catching up sooner than expected.

August 11, 2017

Is The Bakken a Bust?

This latest piece from Peak Oil Barrel provides additional insight into the state of decline of the Bakken oil production. Bakken and North Dakota December 2016 oil production data Bakken production down 86,150 barrels per day to 895,330 bpd. Bakken an …

February 27, 2017

Drilling Deeper Reloaded – 2016 Tight Oil Reality Check

Two years after its tight oil analysis, a new report drills deeper into and deconstructs the EIA’s subsequent annual energy outlooks. Catch phrase: very to extremely optimistic.

February 25, 2017

Keystone XL Needs Much Higher Oil Prices To Be Viable

Latest piece from Art Berman arguing that the Keystone XL Pipeline is a bet on much higher oil prices a few years from now. Some key observations: It will take at least $85 oil prices to develop the new oil sand projects needed to fill the pipeline. U. …

February 13, 2017

Why Cheap Natural Gas Is History

With shale gas production declining and conventional gas having been in terminal decline for the past 15 years, the supply surplus that has existed since December 2014 has disappeared and a supply deficit began in January 2017.

February 11, 2017

Art Berman: Labor Day Weekend Oil Special

this interview with oil expert Art Berman is a must-listen for those who want a better understanding of the macro drivers of oil prices.

September 5, 2016

The Oil Short Squeeze Explained: Why Banks Are Aggressively Propping Up Energy Stocks

Distressed shale oil and gas companies are taking advantage of the recent oil price short squeeze to raise capital with the help of the investment banks. The catch? The money raised is to pay back the bank loans owned by the same banks before another w …

March 19, 2016

CCC-Rated Junk-Bond Yields hit 20%, Blow Past Lehman Moment, Consensual Hallucination Wanes

Junk bond yields hit 20%,  as high as 2008 just after Lehman Brothers filed for bankruptcy, plunging the world into a global financial crisis.

February 4, 2016

Tight Oil’s First Domino Reloaded: Bank Exposures

As tight oil and gas companies kick the bucket, the contagion begins to spread to the banks with significant loan exposures to the energy sector.

January 24, 2016

Energy Creditors Lucky To Recover 15 Cents On The Dollar In Bankruptcy

42 tight oil and gas bankruptcies in 2015 with $17.2 billion debts. Recoveries average 15 cents on the dollar for secured and unsecured creditors.

January 24, 2016