US shale oil production amounted to just 5 million barrels per day at the end of 2014, less than 6% of world production and consumption.
Despite the shale sector’s small market share, it has disrupted the entire oil industry because it emerged in the middle of the cost curve and accounted for more than half of the increase in global supplies since 2010, Reuters reported.
Between 2010 and 2014, shale output rose by 4 million bpd, accounting for more than half of the 7 million bpd increase in global liquids production over the same period, according to the US Energy Information Administration.
Shale is more expensive to produce than oil from the giant conventional fields of the Middle East but cheaper than deepwater megaprojects and competes directly against the North Sea and Canada’s oil sands.
Its price competitiveness and fast growth have scrambled the plans for every other participant in the oil industry.
Megaprojects developed by the major international companies must now be benchmarked at prices of just $70 or even $50 a barrel rather than the $80-$100 which underpinned planning assumptions until a year ago.
Middle East exporters, accustomed to spending profits of more than $50 per barrel on social programs, must now adjust to far smaller revenues. And high-cost producers in the North Sea, Alberta, Latin America, Africa and frontier exploration areas are struggling to survive.
Shale Breakevens
Experts originally put the marginal cost of oil from the shale plays in North Dakota and Texas at $70 per barrel but efficiency gains have cut breakeven prices to $60 or even $50 and they could be as low as $40 or even $30 in the best areas.
Medium-term outlook for the oil market depends on continued growth in conventional production and applying the techniques pioneered in North Dakota and Texas to other plays in the United States and to Argentina, Russia and China, where costs are much higher.
According to most forecasters, global oil demand is growing at an annual rate of 1.5 million bpd or more, which must be met from somewhere.
US oil production has held up surprisingly well in the face of a slump in prices, but is set to be lower at the end of both 2015 and 2016 than at the end of 2014, according to the EIA.
After three years in which US production grew on average by more than 1 million bpd annually, US output is expected to expand by just 650,000 bpd on average in 2015 and then shrink by 400,000 bpd in 2016.
With shale stalling, increased demand will have to be met by OPEC and non-OPEC non-shale producers.
