US shale production a greater threat to OPEC after its price war
In a corner of the prolific Bakken shale play in North Dakota, oil companies can now pump crude at a price almost as low as that enjoyed by OPEC giants Iran and Iraq.The Permian Basin is where many of the serious plays are at this point. It has better infrastructure for getting the oil to market. The Standing Rock side show is being put on by the anti-energy left in order to keep the Bakken oil in the ground or drive up the cost of getting it to market.
Until a few years ago it was unprofitable to produce oil from shale in the United States. The steep slide in costs could encourage more U.S. shale output if OPEC members cut supplies, undermining the producer group's ability to boost prices....
In shale fields from Texas to North Dakota, production costs have roughly halved since 2014, when Saudi Arabia signaled an output free-for-all in an attempt to drive higher-cost shale producers out of the market.
Rather than killing the U.S. shale industry, the ensuing two-year price war made shale a stronger rival, even in the current low-price environment.
In Dunn County, North Dakota, there are around 2,000 square miles where the cost to produce Bakken shale is $15 a barrel and falling, according to Lynn Helms, head of the state's Department of Mineral Resources.
"The success in Dunn County has been fantastic," said Ron Ness, president of the North Dakota Petroleum Council.
Dunn County's cost is about the same as Iran's, and a little higher than Iraq's. Dunn County produces about 200,000 barrels of oil a day, about a fifth of daily production in the state.
It is North Dakota's sweet spot because it boasts the lowest costs in the state, yet improved technology and drilling techniques have boosted efficiency for the whole state and the entire U.S. oil industry.
"Everybody is drilling wells faster and completing them better," said Mike Breard, an energy stock analyst at Hodges Capital Management in Dallas. "It's not just a Bakken phenomenon."
Breard said he prefers shale stocks in the Permian basin in Texas, where he is expecting more big gains in production next year. He is eyeing firms such as Parsley Energy Inc, Ring Energy Inc and Matador Resources Co.
Oil companies are already investing big money to benefit from shale's resurgence. Tesoro Corp recently snapped up Western Refining Inc in a $4 billion deal to bulk up its exposure in Texas.
Separately, trading firm Castleton Commodities International LLC bought more than $1 billion in assets from Anadarko Petroleum Corp to increase its stake in East Texas.
Occidental Petroleum Corp's top executive recently said that company has enjoyed steady improvement in well productivity and lower drilling and completion costs in the Permian Basin.