Increase in drilling efficiency and well productivity has been driving growth in U.S. unconventional crude oil and natural gas production, claims the Drilling Productivity Report (DPR), recently released by the U.S. Energy Information Administration (EIA). The drilling productivity report shows that while the number of active rigs has grown trivially, the growth in productivity of these rigs has brought about a major increase in U.S. oil and gas production in recent months.

oil & gas

Oil and Gas production region

The report looks into the production from six shale / tight oil and gas production regions including Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara and Permian. The six regions reported by the EIA in the DPR account for nearly 90% of domestic oil production growth and virtually all domestic natural gas production growth during 2011-12, professes the EIA, emphasizing the need to study these six regions.

Of the six regions, Bakken and Eagle Ford lead the oil production growth, together accounting for nearly 80% of the growth in current monthly oil production. “Over the past year, production in these two regions increased by nearly 700,000 barrels (bbl) per day. The Permian remains the biggest absolute oil producer, and grew by 93,000 barrels per day year-over-year,” says the EIA.

Figure 1: Production of oil and gas by region

oil production
Source: Energy Information Administration (EIA)

Strongest gas production region

Marcellus and Haynesville emerged as the strongest gas producing region, together contributing more than 56% to the current total monthly gas production of the six regions. “Although natural gas production increased in 4 of the 6 DPR regions over the past year and the latest month, the Marcellus alone accounts for about 75% of natural gas production growth in the 6 regions over both periods,” states the EIA.

Marcellus also leads the growth in natural gas production, with the increase in Marcellus compensating for decline in production in other regions. Marcellus is expected to add 408 million cubic feet per day (mmcfd) to the aggregate production of the six regions.

Table 1: New well production per rig by region

Source: Energy Information Administration (EIA)

For an average rig, new wells add 9 bbl per day to oil production while adding 0.025 mmcfd to gas production. The leaders in this measure were again determined as Bakken in oil production and Marcellus in gas production.

For major oil giants operating in this area, it is important to understand that they need to focus their efforts to bring the other fields up to par with the efficiency of Bakken and Marcellus. They also need to focus perpetual investments to these productive fields in order to milk these cash cow regions.