The International Energy Agency just released its World Energy Outlook, and things are looking good for oil and gas in the US. The Outlook states that the 8 million barrel per day increase in shale oil production growth in the US from 2010 to 2025 will easily match the current record for the highest pace of production growth for a single country in recorded history.
Shale oil production is the reason for these statements. The US Energy Information Administration said in its drilling productivity report that expected oil production from the seven main inland shale basins will increase by 1.3 percent in December alone.
Oil exports will also increase. The World Energy Outlook states that the US is to become a major oil exporter from this shale production growth. It reads, “With the United States accounting for 80% of the increase in global oil supply to 2025 and maintaining near-term downward pressure on prices, the world’s consumers are not yet ready to say goodbye to the new era of oil.”
OPEC ministers will soon be sitting down in Vienna to discuss the terms of their multilateral effort to drain the Middle East surplus below the five-year average of crude oil inventories, and this only helps the US shale production. OPEC’s latest long-term forecast focuses on the proven ability of shale exporters to thrive through the Middle East surplus reduction. The report states that advances in guiding drillbits and fracking have increased production, with an 8.9% rise since 2016.
On Tuesday, OPEC boosted its long-term estimate for growth in American shale production by 56% from last year. They now expect output from the U.S.’s shale wells to reach 7.7 million barrels per day, compared to ten years ago the US shale production wasn’t even on the map.
How does all of this impact Alpha Seven Energy and our investors? Alpha Seven has a current play in the Wolfcamp formation. The Wolfcamp is located in the Permian Basin in West Texas and New Mexico, and OPEC’s report singled out the Permian basin in both states as a stand-out performer. In preparation for the expected growth, investors are pouring billions into the region and even shifting a substantial amount of their resources away from overseas projects.
Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University here in Dallas recently remarked, “The Saudis are finally recognizing they can’t kill the shale guys. It’s a brave new world in the oil market.”
We couldn’t agree more with Mr. Weinstein.