Shale Oil Boom: Is it Going Bust Because of Costs?

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Shale oil has been such a hot topic in the industry that it has made so many people hopeful. But that was when the challenges were not recognized. Today, the industry professionals are not so sure and predict that energy independence might not be so easy to achieve as it seemed initially.

A few months from now, producers are going to have to spend increased amounts for shale oil drilling. Compared to traditional methods, shale output decreases at a faster rate. An agency claims that for just 1 billion barrels, over 2,500 wells must be drilled in just one year.

A Houston based company has already allocated $600 million for shale oil production this year. Last year, the revenue they earned is nearly half of this amount.  Perhaps they have thought of this because Texas is a hotbed for shale oil right now. In fact, it is because of this very region that the U.S. has managed to achieve its highest output for crude oil in the last 26 years..

A petroleum professor at a reputed engineering university stated that oil production can be increased but that a lot of effort will have to be put in. And this is not the only prerequisite. Oil production requires more energy and increased amounts have to be invested, making the technology more expensive than the past has ever seen.

Coming on to energy independence, maybe the U.S. can become self sufficient because shale oil is still an opportunistic endeavor. But if the production costs remain high, this is not going to be easy. Oil prices must be high enough to cover all the production costs, otherwise this technology cannot be utilized to the utmost. As of now, a crude oil barrel costs more than $100. This amount is already high, but as far as producers are concerned, they are still investing more than the revenues they can generate.

An industry expert told the press that up till now shale prices have been high enough to generate interest from investors because they are still hopeful about profits.  But if they do not get these, they will lose interest. The producers should come up with something that accelerates their drilling, yet brings down the costs. That is the only way to maintain the boom.

Source: www.dailyfinance.com

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