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• Costs Finally Begin Falling in Shale Patch

• UK Turns Off Wind Farm, Pays for More Coal

• Upcoming Oil and Gas events

• Tweet of the Day

Costs Finally Begin Falling in Shale Patch

After years of persistent cost inflation, the U.S. shale patch can breathe a sigh of relief: costs have started reversing course.

A small but significant decline

At first glance, a 1% cost decline is nothing to write home about.

Especially since that’s the size of the quarterly cost decline in the shale patch for March to June.

But that 1% is the first quarterly cost decline in three years.

Cringe fact: in the Permian, costs ballooned by 50% between 2021 and 2023.

But now analysts say that the cost decline is only the beginning of a trend set to accelerate in the next few months.

Citi expects costs in the shale patch to be 10% lower this time next year.

It was about time for some good news for shale drillers.

The million-dollar question

Does the cost decline mean production will rise?

At any other time since the discovery of shale oil and gas, the answer would’ve been a resounding “Yes.”

Now, the Oilman ain’t to sure. Neither is anyone who’s honest.

The shale industry has been serving surprise after surprise to analysts, so they’ve become as cautious as drillers themselves.

Can’t really blame them.

It was easier in the old times – demand goes up, and so does production.

Now, you can never be sure where demand will be next, with all the anxiety around recession going around like the flu.

So I guess drillers might internalize those lower costs in some other way than boosting production.

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UK Turns Off Wind Farm, Pays for More Coal

The UK earlier this month had to turn off the turbines of a wind farm while paying to keep a coal plant going in case of energy shortages.

Even the best sitcom writers could never come up with this.

Energy security wins yet again

National Grid, the grid operator, said it ordered the shutdown of the offshore wind farm to ensure a balance between electricity supply and demand.

It’s not a popular concept these days, but the balance on the grid is, well, fundamentally important.

There must be as much electricity on the grid as is consumed. Period.

But when wind farms are producing a lot, and the output cannot be taken to, say, London, they overwhelm the grid.

Coal—and gas—on the other hand, can produce exactly as much as it is needed at any given minute.

It’s called baseload, and some activists have slammed it as obsolete.

I guess having power at all times is obsolete, too.

Of course, they are drawing the wrong conclusion

“It’s a situation that underscores the importance not just of building more renewable capacity, but also having it in the right place or with sufficient infrastructure to move the electricity.”

That’s how Bloomberg rationalized the obvious drawback of wind power generation.

Do you know how much transmission lines’ “sufficient infrastructure” means?

More than 460,000 km. Which is almost 286,000 miles.

For the U.S., the DoE has estimated we need to add 47,000 GW miles in transmission lines.

You don’t need to know what a GW-mile is to understand what a huge number this is.

Doesn’t look like coal and gas are dying anytime soon.

Upcoming Oil & Gas Events

• July 19-20: 2023 Independent Petroleum Association of New Mexico Annual Meeting

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Around the Global Patch

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🇮🇹 Eni's LNG shipment marks Piombino plant's inaugural delivery.
🇷🇺 The price of Russia's aerospace dreams.

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