U.S. shale boom transformed U.S. energy markets
According to the U.S. Energy Information Administration (or EIA), the top seven unconventional oil plays accounted for 95% of domestic oil production growth. They also accounted for all domestic natural gas production growth during 2011–2013.
The top seven unconventional oil plays are:
- Eagle Ford
During the past few years, oil production has surpassed the proportional increase in rig count. This is due to improved drilling productivity.
Drilling efficiency—or the number of wells drilled per rig each month—is defined by the EIA “by tracking the number of rigs in a play as well as the number of new wells started each month.”
Rig efficiency improves with a rig’s horizontal—or lateral—lengths, greater proppant injection—for example, sand or other granular substances injected into the shale formation to open the formation fractures created by hydraulic fracturing—and reduced drilling and completion time.
Rig efficiency in the Eagle Ford
As noted in the chart above, rig efficiency has improved significantly in the Eagle Ford Shale in south Texas—particularly in regards to oil production.
Monthly oil production from Eagle Ford wells increased more than ten times—from ~130 thousand barrels per day (or bbl/d) in 2011 to ~1.5 million bbl/d in August 2014.
The number of rigs has increased from an average of 185 in 2011 to 202 in August 2014—up by 9%.
The Eagle Ford is an oil play even though it produces oil and gas. Most of the drilling activity there is oil-targeted. Oil prices are more competitive than oil gas. This makes drilling oil more profitable.
Most of these companies are a part of the Energy Select Sector SPDR Fund (XLE). EOG is the largest oil producer in this region. It’s also a component of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
In the next part of the series we’ll discuss U.S. natural gas rigs and their production.