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🛢️ Shocking Truth: The End of the Shale Era

and Shell's CEO Warns of Global Energy Crisis

Good morning, here's what the Oilman has for you today:

  • Shocking Truth: The End of the Shale Era

  • Shell CEO Warns of Global Energy Crisis

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Shocking Truth: The End of the Shale Era

The US shale oil and gas production has been a significant source of incremental growth over the past decade, contributing more than Saudi Arabia's production.

However, the trend of lower spending by investors has put the development of shale oil production at risk, and if it slows down, global oil markets will lose their only source of growth, according to Goehring & Rozencwajg Associates.

Shale oil production has been the only source of non-OPEC+ production growth over the past two decades

The shale development massively shifted the US current account deficit and reduced the geopolitical influence of foreign oil-producing countries.

Additionally, the surge in shale production made investors forget about the energy challenges society had faced in the past.

The theories of resource depletion and energy economics, such as EROI and Peak Oil, were discarded with the rise of shale production, but they may become critical issues in the 2020s if shale production slows down.

Shale production has had a significant impact on the US current account deficit and reduced the geopolitical influence of foreign oil-producing countries

From 1970 to 2008, oil production in the US dwindled steadily, prompting concerns about its scarcity and value.

However, the advent of shale oil changed the game and put an end to the public's interest in the concept of Peak Oil, which was once dismissed and even ridiculed.

This change saw US production grow and surpass other nations, leading some to write off the theories of EROI and Peak Oil as "blown calls."

Nonetheless, there is value in these theories, and investors would do well to consider them.

For instance, a proper understanding of EROI could have predicted the negative consequences of renewable energy today. As for Peak Oil, the trend in shale has obscured the trends in the rest of the world.

Despite the recent surge in production, conventional oil production continues to stagnate, with the US producing 70% less crude oil than it did 52 years ago.

The shale industry may have saved the US oil industry, but it has not changed the underlying forces of depletion and Peak Oil.

If shale production growth slows and eventually turns, negative, global oil markets will have lost their only source of growth

The article discusses the impact of new technologies on oil recovery, specifically in relation to Peak Oil and shale development.

The authors conducted research on shale drilling productivity and found that drilling location was the most significant factor influencing productivity improvement.

They concluded that shale basins exhibit Hubbert-style production profiles and have a depletion problem.

The Eagle Ford and Bakken fields have likely reached maximum production and are undergoing a consistent decline due to depletion and running out of high-quality inventory.

The Permian still has room to grow but is expected to peak in 2024-2025 and then begin to decline.

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Shell CEO Warns of Global Energy Crisis

Shell's new CEO, Wael Sawan, recently spoke at CERAWeek by S&P Global and highlighted the need for the energy industry to address the challenges of energy transition and energy security.

Shell CEO reaffirms commitment to net-zero target

Shell is set to unveil its latest energy-transition strategy update soon, which has led to speculation that the company may ease its efforts toward energy transition.

However, Sawan clarified that Shell remains committed to achieving its 2050 net-zero target and emphasized the industry's need to make significant progress in decarbonization and reducing emissions.

Energy consumption will increase by 50% over the next 30 years

To meet this demand, he stressed the need to abate fossil fuels with carbon capture and storage while scaling up low-carbon energy solutions.

Sawan also touched on the current natural gas turmoil in Europe, where high gas prices have led to concerns about energy security.

He noted that LNG imports to Europe went up by 60% last year but warned that the region needs to secure long-term contracts for LNG to meet its future energy demands.

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