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US natural gas drillers face tough, permanent cuts

US natural gas drillers face tough, permanent cuts


Some steel aimed at the US shale drilling industry might no longer have a place in the domestic supply chain, understands from a Bank of America report.

The bank notes that shale drilling now accounts for 76% of domestic natural gas production, up from 24% in 2010.

“Consumers have benefited from the rapid supply growth, but there is a downside. It takes more drilling and completion activity just to maintain production due to the steep decline rates inherent in shale,” the bank says.

The pre-Covid-19 oil war and subsequent reductions in domestic capital expenditures “…might have finally knocked producers off the fast-moving shale treadmill,” the bank says.

Some cost-cutting measures – namely focusing on drilled-but-uncompleted wells, repurposing flared gas, and ethane rejection – will be instituted over the balance of the year.

“But it will be difficult for producers to get back on the shale treadmill,” Bank of America says. “Investor focus on ESG and poor historical equity and debt returns likely limit access to capital for the [exploration and production] sector.”

Source: Kallanish Energy

Read the latest issue of the OGV Energy magazine HERE.

Published: 26-06-2020

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