Tight Oil output at Brent $70/b (2017$) long term

What happens to US tight oil output if the long term Brent oil price in 2017$ is $70/bo?

To investigate this I adjusted my usual oil price scenario (EIA AEO 2018 reference oil price scenario) which uses constant 2017 US$ to one that follows the AEO reference oil price scenario up to $70/bo in 2017$ and then holds the oil price constant at that level until December 2079.  A separate scenario is used for the Permian Basin, Eagle Ford, North Dakota Bakken/Three Forks, Niobrara, and the rest of US tight oil (that is not part of the first 4 plays mentioned).  The mean USGS TRR estimate is assumed for the Permian (74 Gb), ND Bakken/TF (11 Gb), and Eagle Ford (10 Gb).  I made guesses for mean TRR of Niobrara (3.5 Gb) and the rest of US tight oil (7 Gb).  The total is about 106 Gb for a mean TRR estimate.

The economics of producing the oil will determine actual production so oil prices and well costs, royalty payments, taxes, and operating costs will all matter.  I assume natural gas sales are used to offset some of the operating costs, though in many cases a substantial proportion of natural gas is flared rather than sold so this assumption may be too optimistic.

In the chart below the "high output" scenario corresponds with the higher oil price scenario (AEO 2018 reference oil price case) and the "low output" scenario corresponds with the modified oil price scenario where oil prices never rise above $70/b in 2017$.

The peak in US tight oil output for this low scenario is in 2021 at 8 Mb/d (about 600 kb/d above the EIA's estimate for March 2019).  For the high scenario the peak is in 2025 at 10.7 Mb/d.

The second chart below shows World C+C output minus tight oil and minus Canadian oil sands output(12 month trailing average) as well as simply World C+C minus tight oil output.  For the former the slope from Jan 2005 to Jan 2019 is 124 kb/d for annual rate of increase in output, for latter the annual rate of increase is 267 kb/d.  If oil is stuck at $70/b and tight oil declines by 2000 kb/d from 2021 to 2028 (an average annual rate of decrease of 285 kb/d), then the rest of the World may find it difficult to make up the difference if 2005 to 2018 is any guide.

Putting these two charts together suggests a peak in World C+C output by 2021, if Brent oil prices remain $70/bo in 2017$ or lower for the long term (through 2079).

Be careful what you wish for.  Note that I expect oil prices are more likely to rise as in the AEO reference case and the peak will be 2024.

tight oil scenarios1905.png

world minus tight+bitumen.png

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