American Oil and Gas Reporter - December 2015 - 34

page 34-42_Layout 1 12/1/2015 3:59 PM Page 34

SpecialReport: Natural Gas White Papers
The pace at which domestic operators increased oil output astounded many market observers. As recently as two years ago,
for example, analysts were predicting that U.S. oil production
would peak at 8.2 million barrels a day in 2020-a prediction that
soon was left in the dust as oil production climbed to a peak 9.6
MMbbl/d in April 2015.
U.S. natural gas production from shale reservoirs has surged
also. In 2014, annual shale production jumped by 2 trillion cubic feet, or enough to satisfy total domestic demand growth over
the past decade.
Dry gas production from shale now totals 41 billion cubic feet
a day. If demand was strong enough to justify completing the huge
backlog of drilled but uncompleted (DUC) wells, total production might be closer to 50 Bcf/d, which would represent a 10-fold
increase over shale production 10 years ago.
Unfortunately, the impact of the shale revolution on the upstream sector's financial health has turned brutal. Over the past
12 months, at least 37 oil and gas companies have filed for bankruptcy, and large independent producers have lost billions in market capitalization.
The pain certainly will not last forever. The price declines of
the past 12 months have triggered steep cutbacks in capital expenditures. While these cuts have been largely offset by continued improvements in drilling productivity, additional 2016
budget reductions are likely. More than $200 billion worth of oil
and gas projects were deferred or canceled around the world in
the first six months of 2015, ironically matching industry estimates of the revenue costs to OPEC members since Saudi Arabia began to boost its production to recapture lost market share.
FIGURE 1
January 2016 Weather Forecast

Sources: Weather Decision Technologies, EBW Analytics

34 THE AMERICAN OIL & GAS REPORTER

The ongoing curtailing of capital investment in supply-side
projects, including those with long lead times, will have a significant impact on prices at some point. The question is when.
'Significant Uncertainties'

The U.S. Energy Information Administration projects that
West Texas Intermediate crude oil prices will average $51/bbl
in 2016. It is important to recognize, however, that published
price forecasts often are misleading. In fact, EIA itself acknowledges that its outlook is "subject to significant uncertainties,"
and concedes that oil prices could experience "periods of heightened volatility."
EIA's projection assumes the Organization of Petroleum Exporting Countries will cut production by nearly 1.0 MMbbl/d, reducing total production to 30.75 MMbbl/d in the first quarter. EIA
also assumes Iran will not increase production significantly until late 2016, and that even when it does, total OPEC production
will remain below current levels. EIA further assumes that U.S.
production is on track to decline to 8.6 MMbbl/d by next June
(1.0 MMbbl/d below the April 2015 peak).
Notably, however, even using these aggressive assump-

tions, EIA concludes that global supply will exceed demand
throughout 2016, with global inventories rising for four straight

quarters, albeit at a much slower pace. The assumptions used in

EIA's analysis are questionable, at best.
Despite occasional conciliatory statements by Saudi Arabia,
for example, there has been no evidence that OPEC members are
prepared to cut production. Instead, even before taking into account possible increases in OPEC production, it is more likely
that OPEC crude output will remain at 31.50 MMbbl/d-31.75
MMbbl/d.
Furthermore, Iran is one of the most experienced oil producers in the world, and has had more than a year to prepare for the
end of sanctions. The likelihood that it will achieve its goal of
increasing 500,000 bbl/d soon after sanctions are lifted should
not be dismissed lightly. Additional increases also are likely in
late 2016.
Global oil inventories rose an estimated 1.8 MMbbl/d through
the first three quarters of 2015, and EIA projects that an average
of 400,000 bbl/d will be added to stockpiles in 2016. Using more
realistic assumptions, however, unless OPEC abruptly changes
its policy or energy infrastructure in the Middle East or West Africa
is attacked by terrorists, the global surplus easily could be 1.0
MMbbl/d-1.5 MMbbl/d, potentially adding another 350 million500 million barrels of excess global supply.
It is obviously not all about production. Demand growth also



American Oil and Gas Reporter - December 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - December 2015

Contents
American Oil and Gas Reporter - December 2015 - Cover1
American Oil and Gas Reporter - December 2015 - Cover2
American Oil and Gas Reporter - December 2015 - Contents
American Oil and Gas Reporter - December 2015 - 4
American Oil and Gas Reporter - December 2015 - 5
American Oil and Gas Reporter - December 2015 - 6
American Oil and Gas Reporter - December 2015 - 7
American Oil and Gas Reporter - December 2015 - 8
American Oil and Gas Reporter - December 2015 - 9
American Oil and Gas Reporter - December 2015 - 10
American Oil and Gas Reporter - December 2015 - 11
American Oil and Gas Reporter - December 2015 - 12
American Oil and Gas Reporter - December 2015 - 13
American Oil and Gas Reporter - December 2015 - 14
American Oil and Gas Reporter - December 2015 - 15
American Oil and Gas Reporter - December 2015 - 16
American Oil and Gas Reporter - December 2015 - 17
American Oil and Gas Reporter - December 2015 - 18
American Oil and Gas Reporter - December 2015 - 19
American Oil and Gas Reporter - December 2015 - 20
American Oil and Gas Reporter - December 2015 - 21
American Oil and Gas Reporter - December 2015 - 22
American Oil and Gas Reporter - December 2015 - 23
American Oil and Gas Reporter - December 2015 - 24
American Oil and Gas Reporter - December 2015 - 25
American Oil and Gas Reporter - December 2015 - 26
American Oil and Gas Reporter - December 2015 - 27
American Oil and Gas Reporter - December 2015 - 28
American Oil and Gas Reporter - December 2015 - 29
American Oil and Gas Reporter - December 2015 - 30
American Oil and Gas Reporter - December 2015 - 31
American Oil and Gas Reporter - December 2015 - 32
American Oil and Gas Reporter - December 2015 - 33
American Oil and Gas Reporter - December 2015 - 34
American Oil and Gas Reporter - December 2015 - 35
American Oil and Gas Reporter - December 2015 - 36
American Oil and Gas Reporter - December 2015 - 37
American Oil and Gas Reporter - December 2015 - 38
American Oil and Gas Reporter - December 2015 - 39
American Oil and Gas Reporter - December 2015 - 40
American Oil and Gas Reporter - December 2015 - 41
American Oil and Gas Reporter - December 2015 - 42
American Oil and Gas Reporter - December 2015 - 43
American Oil and Gas Reporter - December 2015 - 44
American Oil and Gas Reporter - December 2015 - 45
American Oil and Gas Reporter - December 2015 - 46
American Oil and Gas Reporter - December 2015 - 47
American Oil and Gas Reporter - December 2015 - 48
American Oil and Gas Reporter - December 2015 - 49
American Oil and Gas Reporter - December 2015 - 50
American Oil and Gas Reporter - December 2015 - 51
American Oil and Gas Reporter - December 2015 - 52
American Oil and Gas Reporter - December 2015 - 53
American Oil and Gas Reporter - December 2015 - 54
American Oil and Gas Reporter - December 2015 - 55
American Oil and Gas Reporter - December 2015 - 56
American Oil and Gas Reporter - December 2015 - 57
American Oil and Gas Reporter - December 2015 - 58
American Oil and Gas Reporter - December 2015 - 59
American Oil and Gas Reporter - December 2015 - 60
American Oil and Gas Reporter - December 2015 - 61
American Oil and Gas Reporter - December 2015 - 62
American Oil and Gas Reporter - December 2015 - 63
American Oil and Gas Reporter - December 2015 - 64
American Oil and Gas Reporter - December 2015 - 65
American Oil and Gas Reporter - December 2015 - 66
American Oil and Gas Reporter - December 2015 - 67
American Oil and Gas Reporter - December 2015 - 68
American Oil and Gas Reporter - December 2015 - 69
American Oil and Gas Reporter - December 2015 - 70
American Oil and Gas Reporter - December 2015 - 71
American Oil and Gas Reporter - December 2015 - 72
American Oil and Gas Reporter - December 2015 - 73
American Oil and Gas Reporter - December 2015 - 74
American Oil and Gas Reporter - December 2015 - 75
American Oil and Gas Reporter - December 2015 - 76
American Oil and Gas Reporter - December 2015 - 77
American Oil and Gas Reporter - December 2015 - 78
American Oil and Gas Reporter - December 2015 - 79
American Oil and Gas Reporter - December 2015 - 80
American Oil and Gas Reporter - December 2015 - 81
American Oil and Gas Reporter - December 2015 - 82
American Oil and Gas Reporter - December 2015 - 83
American Oil and Gas Reporter - December 2015 - 84
American Oil and Gas Reporter - December 2015 - 85
American Oil and Gas Reporter - December 2015 - 86
American Oil and Gas Reporter - December 2015 - 87
American Oil and Gas Reporter - December 2015 - 88
American Oil and Gas Reporter - December 2015 - 89
American Oil and Gas Reporter - December 2015 - 90
American Oil and Gas Reporter - December 2015 - 91
American Oil and Gas Reporter - December 2015 - 92
American Oil and Gas Reporter - December 2015 - 93
American Oil and Gas Reporter - December 2015 - 94
American Oil and Gas Reporter - December 2015 - 95
American Oil and Gas Reporter - December 2015 - 96
American Oil and Gas Reporter - December 2015 - 97
American Oil and Gas Reporter - December 2015 - 98
American Oil and Gas Reporter - December 2015 - 99
American Oil and Gas Reporter - December 2015 - 100
American Oil and Gas Reporter - December 2015 - 101
American Oil and Gas Reporter - December 2015 - 102
American Oil and Gas Reporter - December 2015 - 103
American Oil and Gas Reporter - December 2015 - 104
American Oil and Gas Reporter - December 2015 - 105
American Oil and Gas Reporter - December 2015 - 106
American Oil and Gas Reporter - December 2015 - 107
American Oil and Gas Reporter - December 2015 - 108
American Oil and Gas Reporter - December 2015 - 109
American Oil and Gas Reporter - December 2015 - 110
American Oil and Gas Reporter - December 2015 - 111
American Oil and Gas Reporter - December 2015 - 112
American Oil and Gas Reporter - December 2015 - 113
American Oil and Gas Reporter - December 2015 - 114
American Oil and Gas Reporter - December 2015 - 115
American Oil and Gas Reporter - December 2015 - 116
American Oil and Gas Reporter - December 2015 - 117
American Oil and Gas Reporter - December 2015 - 118
American Oil and Gas Reporter - December 2015 - 119
American Oil and Gas Reporter - December 2015 - 120
American Oil and Gas Reporter - December 2015 - 121
American Oil and Gas Reporter - December 2015 - 122
American Oil and Gas Reporter - December 2015 - Cover3
American Oil and Gas Reporter - December 2015 - Cover4
http://staging.nxtbook.com/nxtbooks/aogr/201702/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201701/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201612/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201611/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201610/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/pbios2016_programguide/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201609/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201608/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201607/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201606/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201605/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201604/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201603/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201602/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201601/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201512/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201511/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201510/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201509/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201508/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201507/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201506/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201505/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201504/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201503/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201502/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201501/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201412/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201411/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201410/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201409/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/pbios2014_programguide/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201408/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201407/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201406/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201405/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201404/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201403/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201402/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201401/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201312/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201311/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201310/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201309/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201308/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201307/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201306/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201305/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201304/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201303/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201302/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201301/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201212/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201211/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201210/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201209/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/2012_pbios/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201208/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201207/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201206/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201205/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201204/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201203/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201202/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201201/stage.php
http://staging.nxtbook.com/nxtbooks/demo/aogr_clone/stage.php
http://staging.nxtbook.com/nxtbooks/aogr/201112/stage.php
https://www.nxtbookmedia.com