All eyes are on U.S. shale as we head into 2018, with a growing number of analysts worrying that shale will spoil the oil price rally. Estimates of supply growth varying quite a bit, but directionally, everyone is in agreement: Supply is set to surge.
However, there are some cracks in the shale complex that might not necessarily mean much in the short-term, but raises some questions about the long-term durability of shale output. According to Rystad Energy, there is empirical evidence that points to falling production in the Eagle Ford from some of the recently drilled shale wells.
Everyone knows that shale wells enjoy an initial burst of output that is quickly followed by a precipitous decline within a few months. A driller must constantly drill new wells in order to grow production.
The shale industry has boasted of higher initial production rates from their shale wells over the last few years, which is seemingly evidence of improved drilling techniques, such as longer laterals, the increased use of frac sand and fluids, etc. In short, the shale industry has been able to coax more oil and gas out of a shale well in the first few months of a well coming online than it used to.
However, Rystad Energy argues that there is some evidence that suggests those higher initial production (IP) rates do not necessarily translate into larger gains in the total volume of oil and gas that is ultimately recovered. A sample of wells in the Eagle Ford showed steadily higher IPs in recent years, but they also exhibited steeper and steeper decline rates.