U.S. Lower 48 oil production will continue to grow, but at a much slower pace than expected this time a year ago as lower oil prices impact production and industry capital expenditures, according to recent analysis by Wood Mackenzie.
However, a Wood Mackenzie analyst emphasized that the firm doesn’t expect an annual trend of declining production to occur until oil prices remain at $50/barrel for a two-year period.
Lower 48 production grew by 1.1 million barrels per day (bpd) during 2014, but Wood Mackenzie expects the rate of growth to decline going forward, with 675,000 bpd incremental production forecast for 2015 and 425,000 bpd of incremental production growth in 2016, Benjamin Shattuck, senior analyst for the analysis firm’s Lower 48 Upstream group, told reporters at a media briefing Friday in Houston. As a result, Wood Mackenzie estimates a long-term impact of this growth to be 800,000 bpd by the end of the decade.
Due to the reductions and cuts in rig activity, which happened more quickly than Wood Mackenzie expected, the firm anticipates seeing a flattening and plateau of monthly production in mid-2015. Beyond that, month-over-month declines in production could occur in the second half of 2015 as static comes out of the North America supply story, particularly for tight oil, over the next couple of years, said Shattuck.
Counter to other reports seen today, Shattuck emphasized that Wood Mackenzie doesn’t see a period of declining annual production, with production expected to remain flat at $50, $60, and $70/barrel production in Wood Mackenzie’s analysis.
Wood Mackenzie also believes that the effect on supply has probably been over magnified when talking about the backlog of uncompleted wells, said Shattuck.
Wood Mackenzie estimates a backlog of 3,000 to 4,000 wells today in the Lower 48, but that number didn’t start at zero, and in the normal course of business, the Lower 48 has more than 1,000 backlog wells. It would likely take two years for the current backlog of Lower 48 wells to be completed, but Wood Mackenzie sees these backlog wells having a fairly minimal long-term impact on the supply side, said Shattuck.
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