The oil and gas industry will see 800 fewer drilled, but uncompleted oil wells (DUCs) in 2H 2016, according to industry consulting firm Rystad Energy. The company believes horizontal oil completion activities in U.S. shale plays will surpass drilling operations by 30 percent, which will be sufficient enough to balance the decline in base production.
Currently, the U.S. has 4,000 DUCs which are estimated to hold nearly 2 billion barrels of oil reserves. While idle wells in the United States are considered normal, there appears to be an overabundance currently. This is due in part to the downturn that caused significant delays in projects and a decline in drilling activity.
“Research shows that operators are now starting to complete wells that have previously been put on hold deliberately,” Artem Abramov, senior analyst and product manager, Rystad Energy, said in a release. “This comes as more than 90 percent of the accumulated oil DUC inventory can be commercially completed at a WTI of [$50 per barrel].”
Royal Dutch Shell is one such company that seeks to use its well acreage to sustain the company’s cash flows. Bruce Palfreyman, general manager of Shell’s Permian asset group, said Monday that the company believes it has the best position in the Delaware Basin, part of the Permian Basin in West Texas, and sees future production potential from DUCs in the Permian Basin.
Citing the significant production decline recently in North Dakota – which suffered an all-time high decline rate in April 2016 of 70,000 barrels per day (bpd), Abramov said the decline was due to older “low decline” wells that were brought on prior to 2016.
“It is not the first time such temporary shifts in base decline are observed, and they were caused by road restrictions imposed by the state over the month,” said Abramov. “This trend is unlikely to persist and should not be extrapolated to the US Shale industry in general.”
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