Limits of Technological Efficiency of Shale Oil Production in the USA

Alexander Malanichev ()
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Alexander Malanichev: New Economic School (Russia)

Foresight and STI Governance (Foresight-Russia till No. 3/2015), 2018, vol. 12, issue 4, 78-89

Abstract: The shale oil revolution in the United States had an irreversible impact upon the global oil market and was a key factor determining oil price reduction in 2014-2016. One of the main reasons for the rapid growth of the shale oil production in the US was the development of extracting technologies, which reduced the cost of production to an acceptable level. This article studies the problems of long-term forecasting in shale oil production and the productivity of drilling rigs. This research applies the fitting of an asymmetric bell-shaped function using an OLS approach. This function is derived as an analytical solution of the differential equation for oil production. Another innovation of this study is the asymmetric function, which correlates better with data on the extraction of traditional and non-traditional oil resources. An analysis of the empirical data with the derived asymmetrical bell-shaped curve shows that the productivity of drilling rigs will peak by 2026 at 1,200 bbl per day, which is 2 times higher than the current level. The peak of production would correspond to the maximum oil production of 11.3 mln bbl per day and to technically recoverable resources of 96 bln bbl. This could mean that starting from 2023, the volume of shale oil production in the US may not be enough to meet the growing global demand for oil and other resources with even higher production costs should be developed. The theoretically grounded and practically tested asymmetrical bell-shaped curve can serve as one of the tools for assessing the long-term impact of technological innovation and the growth of equipment productivity upon the development of oil production in the US in the course of Foresight studies.

Keywords: shale oil production; technological efficiency; institutional factors; bell-shaped curve fitting; rig productivity (search for similar items in EconPapers)
JEL-codes: E32 Q48 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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