The new shale tech that terrifies OPEC

Credit: mining.com

Trying to write off shale drilling as a here-today-gone-tomorrow fad isn’t working out too well, it seems. The WSJ investigates.

What doesn’t kill you makes you stronger says The Wall Street Journal @ the GWPF.

Two years ago, it looked like Saudi Arabia was winning its fight against the U.S. shale oil industry by furiously pumping crude to drive down prices.

Some drillers went bust and many more flirted with bankruptcy while oil drilling in places like West Texas and North Dakota collapsed.

The Saudi effort backfired.

Instead of killing shale it spurred a wave of innovation that transformed drilling in the U.S. into a highly efficient industrial process, dramatically lowering costs and boosting output. During the next oil bust, it will be the Saudis who have to worry.

“High prices tend to create sloppiness in this industry because people focus only on growth,” says Doug Suttles, chief executive of shale driller Encana. “Downturns make you focus on cost because it’s the only thing you can control—the oil price is out of your hands.”

Meanwhile, something remarkable is happening. The U.S., where production was once thought to have peaked nearly 50 years ago, will become the largest oil producer on the planet by next year.

One region alone, the prolific Permian Basin, recently passed 3.1 million barrels a day of output. Stretching from West Texas to New Mexico, it would now rank No. 4 of the 14 members of the Organization of the Petroleum Exporting Countries and may soon produce more than No. 3, Iran.

The amount of oil being pulled from the ground there is already driving global markets. But what should really frighten energy ministers in Riyadh, Tehran and Moscow is how that oil is produced. The number of drilling rigs now active in the Permian is the same as back in October 2011, yet the region is producing three times as much crude.

Continued here.