US shale oil production could fall short of its most optimistic projections because of emerging problems in the industry, the chief executive of the world’s largest oilfield services group has warned. Paal Kibsgaard, CEO of Schlumberger, said that in addition to a shortage of pipeline capacity that was slowing growth in the Permian Basin of Texas and New Mexico, the heart of the US shale boom, there were other problems that could mean some forecasts of future output would have to be revised down.
On a call with analysts as the company reported earnings for the third quarter, Mr Kibsgaard said it was becoming more difficult to increase production as shale oilfields mature and new wells are being sunk in areas that have already been drilled. “The well-established market consensus that the Permian can continue to provide 1.5 million barrels per day of annual production growth for the foreseeable future is starting to be called into question,” he said.
He was speaking as Schlumberger reported earnings per share slightly above analysts’ expectations at 46 cents for the third quarter, up 10 per cent from the equivalent period of 2017, and said it expected a sustained upturn in activity in the oil and gas industry that would be “very good news” for its business. The threats to US oil production growth highlighted by Mr Kibsgaard centre on issues with what are known as “child” wells, drilled in areas that already have existing “parent” wells.
In the Eagle Ford shale of south Texas, average production per foot of well length and per pound of “proppant” — the sand or similar material pumped into a well to hold open small cracks in the rock so the oil can flow — has been falling steadily. Mr Kibsgaard blamed the decline on a rising proportion of child wells, which are now up to about 70 per cent of all new wells drilled. In the Permian Basin, the proportion of child wells in the Midland Wolf Camp formation, one of the most heavily drilled areas, has just reached 50 per cent.