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CAMBRIDGE, MA – The dramatic surge in U.S. shale oil production could more than triple the current American output of shale oil to five million barrels a day by 2017, which would likely make the United States the No. 1 oil producer in the world, according to a new study by a researcher at Harvard Kennedy School.
Leonardo Maugeri, a former oil industry executive from Italy who is a fellow at the Kennedy School’s Belfer Center for Science and International Affairs, studied the performance of 4,000 American shale oil wells and the work of about 100 companies involved in shale oil production.
In a paper titled “The Shale Oil Boom: A U.S. Phenomenon,” Maugeri wrote that the unique characteristics of shale oil production are ideal for the United States -- and unlikely to be mirrored elsewhere in the world. These factors include the availability of drilling rigs, and the entrepreneurial nature of the American exploration and production industry, both critical for the thousands of wells required for shale oil exploitation.
Maugeri said the number of American shale oil wells in North Dakota and Texas could soar from the current 10,000 to more than 100,000 working wells by 2030. He said steady improvements in technology and cost would continue to drive industry growth in the shale oil fields in the Dakotas and Texas.
Maugeri, author of a 2012 report forecasting rapid growth of global oil production and belying the notion that oil output has “peaked,” argues in his new paper that the boom in U.S. shale oil production is central to the overall U.S. oil surge. If oil prices remain close to today’s levels, total U.S. production of all forms of oil could grow from 11.3 million barrels per day to 16 million by 2017.
A key distinction between shale oil production and conventional oil wells is the intensity of drilling required to extract shale oil. Maugeri said this drilling intensity required for shale oil will limit production in densely populated areas, especially in Europe. He noted that the Bakken-Three Forks region in North Dakota required 90 new wells per month to maintain production of 770,000 barrels per day. Shale oil wells reach peak output almost immediately but quickly decline, so new wells are constantly needed.
Only the U.S. oil industry is capable of such drilling intensity, he wrote. In 2012, the U.S. completed 45,468 oil and gas wells and brought online 28,354 of them, compared with 3,921 wells completed in the rest of the world. The United States holds more than 60 percent of global drilling rigs, and 95 percent of American rigs can perform horizontal drilling, which along with hydraulic fracturing (“fracking”), is necessary to exploit shale oil.
Maugeri also emphasized the contrast between financing shale oil wells vs. wells for conventional oil. Shale oil wells cost far less to drill and bring online, which makes it easier to increase drilling when oil prices are high, but also easier to rapidly scale back production when prices drop.
Leonardo Maugeri is a Roy Family Fellow in the Belfer Center’s Environment and Natural Resources Program, and works with the Geopolitics of Energy Project. Support from the Roy Family Fellowship made the study possible. Previously Maugeri was a senior executive with Eni, the Italian oil conglomerate. He left Eni in 2011. He is the author of four books on energy and oil.