AllianceBernstein’s Bob Brackett has weighed in on the debate over whether the global shale revolution is merely hype.
And his answer is: yes —in part.
As far as U.S. shale gas goes, it’s pretty much living up to the talk: the newer plays are seeing strong recovery rates over large acreage, meaning gas will keep flowing.
That is not the case for shale oil.
Productivity of the newest plays to come on drillers’ radars have not come close to what’s been coming out of the Bakken in North Dakota and Eagle Ford in Texas.
And even for those two, he says, peak recovery rates of new wells drilled have been declining and flat, respectively.
As a result, drillers are moving on to less productive basins and lower-quality acreage.
“The prime locations have already been drilled,” he writes.
All this means crude prices will have to go back up:
In order to maintain current levels of overall production, marginal conventional production must be maintained with high oil prices. We expect marginal cost inflation will continue as well productivity declines, resulting in an oil price forecast that differs significantly from the forward curves. We forecast $96/bbl WTI for 2013, $101/bbl WTI for 2014, and longer term prices above $120/bbl and rising after 2017.
Brackett extrapolates the struggle to find high-yielding, low-cost acreage to the rest of the world. The marginal cost of drilling is going to keep rising…
Bob Brackett/AllianceBernstein…Which means Brent price growth won’t see a dent from shale production. Quite the opposite, it’s going up to $160 by the end of the decade:
Bob Brackett/AllianceBernsteinIn sum:
Business Insider Emails & Alerts
Site highlights each day to your inbox.