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ExxonMobil CEO Wrong About “Resilience” Of Tight Oil Production

ExxonMobil CEO Wrong About “Resilience” Of Tight Oil Production

ExxonMobil CEO Rex Tillerson is wrong about the resilience of U.S. tight oil production.

Last week, The Wall Street Journal reported:

“…Mr. Tillerson pointed out that the collapse in natural-gas prices similarly had led the number of rigs drilling for that fuel to drop to 280 from north of 1,600 in 2008. Gas output jumped 50% in that time, he said. That is what you call resilience…While he didn’t see a perfect parallel between shale gas and shale oil, he said there were “lessons” to be learned.”

His point is that we should not expect a big drop in U.S. tight oil production just because the rig count is falling. He bases this prediction on what happened with gas production in 2008-2009 and afterward. That is wrong.

The fact that gas production didn’t decrease much in 2008-2009 despite a huge drop in rig count is incorrectly attributed to the high productivity of shale gas wells. The truth is that shale gas wasn’t a big component of total gas production at that time.

Related: Rig Count Irrelevant As US Output Continues To Soar

Let’s look at the rig count drop in 2008-2009. The chart below shows the various components of U.S. gas production and the gas-directed rig count.

NatGasProd07-14

Natural gas production components and gas-directed rig count, 2007-2014.

Source: Baker Hughes, EIA, DrillingInfo and Labyrinth Consulting Services, Inc.
(click image to enlarge)

The gas rig count fell from 1,601 in September 2008 to 675 by July 2009. By September 2009, gas production had decreased about 4.5 Bcf per day (4.5% of total). Shale gas only amounted to 12% of total gas supply at that time.

 

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