The U.S. tight-oil boom is here to stay despite low crude prices as technological breakthroughs will allow steep reductions in costs, the head of U.S. firm ConocoPhillips told a seminar organised by oil-producing group OPEC.
“Innovations have already led to a U.S. energy renaissance. Tight-oil reservoirs can remain viable today, breakeven costs are already down by 15 to 30 percent,” Ryan Lance, chairman and CEO of Conoco, said on Thursday.
The North American shale oil industry “will survive at $100 and it will survive at $50 or $60 Brent pricing too,” Lance told an audience packed with OPEC officials, including Saudi Arabia’s influential oil minister Ali al-Naimi.
International benchmark Brent crude was trading just below $64 a barrel at 1015 GMT.
Oil prices crashed over the past year after OPEC decided against cutting production to tackle a global glut that arose from a U.S. shale oil boom. OPEC chose instead to fight for market share, betting that a price drop would depress output in higher-cost producers such as the United States.
Lance said cost reductions had been partly achieved due to cuts in service costs.
“We’re in the second inning of a nine-inning game. We’re still trying to figure out how to get the optimum amount of flow through the reservoir. There are more (gains) to come.”
Breakeven costs for tight oil would likely go down another 15-20 percent by 2020, he said.
“So the message – unconventional production is here to stay,” Lance said.
U.S. oil production growth has slowed in recent months and the number of rigs drilling for crude shrank dramatically.
“If prices stabilize and start to improve a little bit, I think you will see rigs start to improve and come back as we go into 2016 and 2017 and create more supply into the system,” Lance said.
He said he expected world demand growth for oil to recover to 1.1 or 1.2 million barrels per day, double its rate over the past few years.
“It is hard to envision it (the oil price) going back down to the $40s,” he said.
Lance’s comments on unconventional oil chime with the views of other CEOs who have spoken at the seminar held by the Organization of the Petroleum Exporting Countries in the past two days.
“If prices remain at $60, we will have to find a way to make projects profitable,” the head of French oil company Total , Patrick Pouyanne, said on Wednesday.
Claudio Descalzi, chief executive of Italy’s Eni, said he expected U.S. shale oil production to seesaw with oil prices, and oil prices to seesaw with increases and drops in U.S. production.
“If oil prices recover, shale production will go higher again. So we need to get used to a totally different dynamic,” Descalzi said on Wednesday.