Kemp: Will The Saudis Drive US Shale Out Of Business

Reuters

John Kemp is a Reuters market analyst. The views expressed are his own

LONDON, Nov 12 (Reuters) - There has always been a close link between U.S. oil production, international prices and OPEC, so it should come as no surprise that North America's shale drillers find themselves locked in a battle with Saudi Arabia over prices and market share.

Until the 1950s, the United States accounted for more than half of all global oil production. Big finds such as Oklahoma's Glenn Pool (1905) and the East Texas field (1930) drove oil price changes around the rest of the world.

Since the 1970s, the United States has been a net importer, and international prices have tended to drive changes in U.S. exploration and production.

Drilling and output in major oil-producing states have been closely correlated with the rise and fall in real oil prices. And nowhere has the relationship been closer than North Dakota, where the fortunes of its oil industry have mirrored the rise and fall in prices, resulting in a brutal cycle of boom and bust.

Light The Flare

After unsuccessful exploration for almost 40 years, the first oil was found in North Dakota in 1951, and the first well was drilled in the now-famous Bakken formation in 1953.

The extraordinary story of the state's dogged oil pioneers was chronicled by North Dakota State Geologist John Bluemle in a monograph to mark the 50th anniversary of the first successful find in 2001.


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Lester Jessop | Nov. 14, 2014
It is going to be very interesting to see what happens in the next year. I went to the oil and gas expo this year in Bismarck, ND and from what I heard it was near impossible for this play to go bust like it did in the 80s. If it goes bust this time I will head straight to school for engineer degree so I can catch it on the upswing again....after all we wont stop using oil and we have only harnessed around 7% of the oil in the Bakken, the other 93% represents Billions of barrels.

David M. | Nov. 14, 2014
Because of a glut of oil production within North America, prices have been falling. With this there is a labour shortage (at least here in Canada). Does it not seem plausible that there could be a better balance between lessening production to generate a dependable market price, which then would co-inside with the amount of labour available. Do meet the demand, situations could exist to match North America production with imports to keep OPEC at bay. Obviously this is a very broad solution, but maybe a possibility. Just ask T. Boone Pickens, who recently stated that US production is to great and has to be brought back to scale.

Leo Sinnott | Nov. 13, 2014
The cost of oil field services drives activity more than product pricing. Over the years, working shale and other non-conventional areas in the northern mid-continent, the cost of typical HZ/plug & perf drill & complete soared from $3.5 MM to $6.8 MM in 7 years making it impossible to profit. Having one foot on the gas pedal and one on the brake is not the way to run the oil business.


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