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Threshold oil price for field operations activation has being unmistakably defined
within a range of $43-$45 per barrel for about 66% of the independent producers in the
US, which dictates the strength/weakness ratio for the lower/upper 16.66% each, in a
normal distribution curve.
Based on historical performance, there has not been any proof of a clear
improvement in the US field operations since the oil price collapse in June 2014; on the
contrary, they are actually showing more planes of weakness, as the threshold price
seems to be increasing.
Since 2013, US independent producers have been increasingly accumulating
drilled but uncompleted wells (DUC) at a growing pace. The rate and behavior at which
DUCs are being accumulated have changed drastically since mid 2014, when the oil
price collapsed.
The trend suggest that prior to June 2014, DUC cumulative volume was driven by
the potential speculative hedging opportunities, where as after June 2014 it has been
mostly driven by operational costs and borrowing implications. Furthermore, DUC
accumulation rate has changed with time, showing that a more costly operation is actually
occurring in the US fields, as the cut off WTI price seems to be moving upwards with
time, confirming our previous statement.
- Increasing
o operational complexity
o borrowing costs
o marginal costs
- Decreasing
o rig efficiency
o reserves replacement ratio
Shale oil can not and will not compete against conventional oil, as lifting and
even worst, marginal costs naturally has a detrimental ratio of at least 3:1 when compared
to conventional oil. Venezuela is among the most privileged producers simply because of
the beneficial geographic location, and solid reserves volumes with an upside potential
which only needs to fine tune operations and focus man power to become more efficient,
more cost effective and more productive to be the dominant pole in the fossil energy
arena.
Millan Arcia Einstein: Senior upstream adviser and SME. Has published around 11
highly specialized technical papers internationally, and more than 80 articles in a number
of journals, blogs and newspapers including; Soberania.org, aporrea.org,
NoticiasVenezuela.org, Plattsblog, Oilpro.com, Las Armas de Coronel, The Slush Pit
(Oklahoma Oil & Gas News), Energy Economist, and Los Angeles Times.