Syed Rashid Husain SHALE revolution has transformed the world - none can dare deny. Yet questions persist. There is no dearth of skeptics - all around. Questions about the longevity of this revolution, severe north American winter and its impact on the overall shale activity, its growing environmental shadow, the safety issues associated with shale, the rising cost of drilling specially in the marginal formations and indeed the degree of its overall impact on global energy dynamics are still being discussed. Morten Frisch of MF Consultancy has been one suggesting to lower expectations, insisting to keep an open mind, regarding the ongoing shale developments and its continuity. There could be many slips in the process, he has been underlining. And he has a point. Signals being emitted may not be as rosy as is painted by some. North Dakota Industrial Commission's Department of Mineral Resources (DMR) has given a 48,305 barrel-a-day decline in the state's production for the month of December. The report attributed the production decline primarily to severe winter weather that hit the state at the end of last year. Oil production for November had climbed by 31,278 barrels a day to 911,292 barrels a day, for a 3.6 percent increase over October's level. The production drop in December was 5.3 percent. Brutal North American winter has hit tight oil production in both the Williston Basin (Bakken and Three Forks formations) and Eagle Ford. West Texas was also hit by the bad weather. And then crude output in North Dakota's Bakken shale stayed flat in January too, after falling sharply the month before. Although December's extraordinary chill gave way to relatively warmer weather in January, Bakken output hovered just below 860,000 barrels-per-day in the month, LCI Energy Insight, a Texas-based energy intelligence firm reported. Growth in the larger Eagle Ford shale in south Texas also grounded to a halt at around 1.1 million bpd, LCI data made available to Reuters said. Oil production in the Eagle Ford, also hit by unseasonably cold weather, was flat at 1.12 million bpd in January versus the month before, after declining by 10,000 bpd in December, the LCI data show - only the second monthly decline since heavy drilling began there. Frisch but points out in a message that lately rail shipments of Bakken crude oil fell by some 200,000 bpd, leading to an increase in US oil prices. And then he argues that though it is difficult to conclude at this moment if this drop has been caused by rail safety issues or a sharp fall in oil production, yet this is a development that needs to be watched - and - watched. The production decline, though clearly impacted by weather, may also be demonstrating that there is a fundamental slowing in output and activity underway, which is not a good omen for the future for America's oil output, Allen Brooks, Managing Director, Energy Musings writes. Bakken has been one of the hottest play in the area. Eyes have remained focused on its development and output. Analysis by Douglas-Westwood shows that the growth rate in Bakken production is slowing and that the basin's output will peak at 900,000 barrels a day in the 2016-2017 timeframe. If one assumes that 100 percent of the current drilling activity there is for Bakken oil, not an unreasonable assumption in practical sense, then one could look at the changes in the number of producing Bakken wells to understand what was actually happening to activity in North Dakota, underlines Brooks. Referring to another analysis, he concludes that Bakken requires 120 new wells a month merely to sustain the current production level. That study found that each drilling rig contributed to 0.84 wells being completed in a month, meaning the industry must operate a minimum of 138 rigs per month to sustain its minimum producing well total. Bad weather coupled with slowing oilfield activity contributed to the largest monthly production decline in 30 years in December, the analysis underlined. Some analysts hence suggest that what one witnessed in North Dakota in December, even though partially due to bad weather, could be a precursor of the nation's future shale oil production profile, if drilling and well completion activity slows down. The only offset would be if the future production output from wells can be boosted meaningfully either from higher initial production volumes or slowing these steep production decline rates. Technology has still to take a lead role for continued growth and sustainability of the revolution, one could hence assume. Logistics is another major impediment to shale growth. There are already indications that rail transportation of the very light, high volatility and high vapor pressure Bakken crude oil could be running into difficulties. When a senior North Dakota Republican feels oil production developments are going too fast, production activities in the state could be slowed down for safety reasons says Frisch. A slowdown could also help North Dakota to get a handle on its rapidly growing gas flaring problem. North Dakota is now producing more than 1 Bcf/d of associated gas of which some 70 percent is flared due to a lack of a gas pipeline infrastructure to collect, process and transport the gas to markets. Early this year, a prominent North Dakota Republican called for a slowdown in the state's oil production boom following the derailment and explosion of a train carrying crude oil. Robert Harms, chairman of North Dakota's Republican Party and an energy industry consultant, told Reuters that a "moderated approach" was needed amid the energy boom that has transformed the local economy, but created safety concerns. "Even people within the oil and gas industry that I've talked to feel that sometimes we're just going too fast and too hard," said Harms, who has also supported regulation requiring producers to cut back on flaring natural gas. Issues continue to haunt the ongoing shale revolution. Challenges are piling up. A final picture of the industry and its overall impact on the global energy scenario is still to crystallize. If and buts continue to haunt - and in plenty. The overall picture may not be as rosy, as is being projected currently.
