Shale oil production in the U.S. can be stopped

By Natalia Dembinskaya, MOSCOW, RIA Novosti


 In an effort to increase oil production, American shale oil shale is flaring more and more associated gas. During the year, the volumes of blue fuel burned without any use doubled and reached a record level of 18.7 million cubic meters per day. Many companies have already exceeded the legal limits of combustion, and production can be stopped at the request of the authorities.

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According to estimates of Norwegian consulting company Rystad Energy, the volume of flaring and gas discharge in the Permian shale basin is now twice as high as the volume of gas production at the most productive gas well in the Gulf of Mexico - owned by Royal Dutch Shell complex Mars-Ursa, which produces up to 7.5 million cubic meters a day.

    Natural gas worth about a million dollars is burned every day at shale oil fields in West Texas, and in vain, says The Wall Street Journal (WSJ). Things are even worse at the Bakken shale field in North Dakota, where the daily flaring of gas reached 14 million cubic meters in the first quarter of the year.

Drillers do not comply with the state's restrictions. In 2016, for example, a 15% flaring limit was introduced, and it should be reduced to ten percent by 2020. However, in the first three months of this year, shale oil shale burnt 20% of the gas.

These two oil fields annually utilize more blue fuel than the need for it in countries such as Hungary, Israel, Azerbaijan, Colombia and Romania, said Rystad.

Production will have to be cut

Analysts predict that in the second half of the year, the volume of gas flaring in the Perm Basin will be at the level of 18.4 million cubic meters per day. The problem of associated gas has become so acute that it can undermine the growth of oil production.

Now it is possible to burn associated gas within 45 days after the start of production at the well. After that, if there is no special permit, the gas must be captured, otherwise production must be stopped.

However, there is no necessary infrastructure and production capacity to capture, store and transport associated gas at shale fields. The few pipelines built on shale oil fields are filled to the limit. Therefore, the gas is also burned after the allowed time has passed.

Texas authorities are increasingly concerned about the violation of restrictions on the timing of flaring, as they are being pressured by environmentalists. The U.S. Environmental Protection Agency says that methane emissions from flaring in the Perm Basin are now comparable to emissions from two million cars.

The North Dakota administration is also determined. As a result, the prospect of well closures is becoming increasingly real, Rystad analysts confirm.

No money available

This will hit the shale industry, which is already in crisis. Oil production in the United States reached a record 11.5 million barrels per day, largely due to oil shale. But the oil shale boom also has the downside. In order to maintain a high performance, operators need to drill more and more wells, and this requires huge expenses. There is nowhere to take money: last year investors invested half as much in the industry as they were tired of unprofitable projects.

As a result, the industry is facing a wave of bankruptcies. In May, the American oilfield service company Weatherford International, one of the leading providers of drilling services, announced that it was preparing for the relevant procedure. The heads of the other two oil and gas industry players, Halcon Resources and Alta Mesa Resources, have questioned the ability of the companies to continue their operations.

California Resources, which specializes in the exploration and production of oil and natural gas, also faces problems. The bankruptcy of Bristow Group, PHI, Jones Energy and Rex Energy has not escaped, also burdened with debts.

Revenue from the sale of a quarter of U.S. shale oil is used entirely to pay interest on corporate debt, costs are constantly rising, production is falling, and technology is only accelerating the cycle from boom to bust. Analysts say that in ten years the shale oil shale industry has not lived up to its expectations.

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