Government and private-sector researchers have been cutting forecasts for 2023 US oil-supply growth in the face of surging cost inflation, labor shortages and investor demands that more cash be diverted from drilling to dividends and buybacks. Although output in the world’s biggest economy is set to continue rising for a least a few more years, the zenith is fast approaching, executives and analysts said.
“I wish we could get world leaders to realize that we need hydrocarbons for another 50 years,” said Pioneer CEO Scott Sheffield, who expects US production to peak in five or six years.
Before the dawn of the shale-oil revolution, theorists like the late investment banker Matthew Simmons were issuing dire warnings that the Middle Eastern oil bonanza that fed more than half a century of unprecedented economic expansion across the Western world was unsustainable.
But those fears were swept aside as fracking and horizontal drilling innovations perfected in US natural gas fields were adopted by oil drillers, who unleashed billions of barrels of crude that had been locked in heretofore impenetrable shale.
Shale-oil production began to surge early in the last decade, pushing overall US output to roughly 13 millions barrels a day in late 2019. But publicly traded oil companies have come under immense pressure to prioritize investor returns over production growth and it is in part why output is expected to peak, said Helen Currie, chief economist at ConocoPhillips.
Rising costs that squeeze profits also are discouraging management teams from pursuing some drilling projects. Commodity-trading house Gunvor Group Ltd. estimates that inflation in US oilfields will reach about 25% this year and 15% to 20% in 2024.
“It’s not about any downgrade to the resource or any negativity but it’s really about the pace of development of these resources,” Currie said.
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