The U.S. shale industry has faced many challenges and difficulties since 2015. Over 250 oil and gas operators filed for Chapter 11 protection due to debt accumulation. In 2020, mergers and acquisitions between oil companies increased to raise the productivity and efficiency of the sector.
To shed light on shale development post-COVID-19 and how to benefit from the U.S. experience, King Abdullah Petroleum Studies and Research Center (KAPSARC) held a two-day workshop, in collaboration with the Oxford Institute for Energy Studies (OIES) and King Fahad University of Petroleum and Minerals (KFUPM). Over 20 experts were invited to discuss many economic and technical aspects of this vital sector.
The workshop, titled “Would Shale Impede or Accelerate the Global Energy Transition?”, discussed on the first day insights into how the sector’s landscape has changed post-COVID-19. On the second day, the participants presented the lessons learned from the U.S. shale industry to benefit from them in supporting global production. They also examined the dynamic innovation and technological adoption in the sector.
The workshop brief indicated that global oil demand contracted between 8 and 10 million barrels per day (MMb/d) during the second quarter of 2020. At the same time, oil demand recovery has been slower than expected, resulting in downward revisions to oil demand for almost every month between 2020 and 2022. It may take longer for demand to go back to pre-pandemic levels. It is currently envisaged to return to pre-pandemic levels by mid-to-end of 2022.
Due to increased costs, which coincided with a significant price decline in 2020, many tight oil producers temporarily shut-in their wells. At the end of 2019, U.S. tight oil production averaged over 9 MMb/d before dropping to an average of 7.26 MMb/d in 2020.
The workshop participants found that the process of transitioning to cleaner energy resources may take longer than expected. Tight oil (or shale gas) will play a major role in meeting global energy demand.
The paper indicated four challenges that face the U.S. oil industry, and the shale sector in particular. These include low investment in exploration and production, possibly prolonged low oil prices below the breakeven costs of shale wells, and increased pressure from regulators and investors to decarbonize and reduce gas flaring and venting.
The paper also highlighted Saudi Arabia’s experience in developing and extracting shale from the Jafurah field. Saudi Aramco benefited from the U.S. shale gas experience in shale gas development. It established an unconventional gas department to oversee the development of unconventional resources across the Kingdom.
The extraction of shale from the Jafurah field is economically viable, as it offers condensate and ethane production. Aramco was able to increase well productivity using directional drilling and multi-stage fracking. The company is also experimenting with using seawater and treated sewage water to frack new wells.
KAPSARC workshops are an interactive and participatory platform, bringing together stakeholders, experts, and specialists in energy and economics. The Center collaborates with a number of global think tanks, public policy organizations, government and industrial institutions to exchange knowledge and recommendations which aim at improving the communities’ wellbeing locally and globally.