Shale oil will keep getting cheaper

Better wells and more effective drilling techniques will help North America’s shale oil industry push down its break-even oil price this year.

The prediction from Fitch Ratings, a ratings agency, will dismay oil ministers in exporting countries such as Saudi Arabia, which had hoped a prolonged period of low prices would put the shale producers out of business.

“Robust efficiency gains in the US onshore shale patch are likely to outweigh expected cost inflation and contribute to lower full-cycle break-even oil prices for most North American exploration and production companies in 2017,” said Fitch Ratings in a statement.

The agency said a number of factors were helping to lower shale production costs, such as improved well designs, expanded multi-pad drilling, longer laterals, fracking stage optimisation and higher proppant loading.

The rise of US shale oil production was blamed for roughly halving the price of a barrel of Brent crude in the latter part of 2014. Prices have stayed at around $50 a barrel for the past year despite an attempt by the Organisation of the Petroleum Exporting Countries (Opec) to push up prices by cutting production.

Although the cost per barrel of extracting oil is much lower for Opec members than for the shale producers, countries such as Saudi Arabia require a high oil price to fund government spending and prevent them running a deficit.

©2017 funds global mena

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