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US shale output growth 'unlikely to be maintained'

Ex-BP boss John Browne points to changing dynamics in the shale patch, with majors taking over

US shale output growth is “unlikely” to continue at the same impressive rate as seen in the previous few years, with the influx of majors to in particular the Permian basin bringing with it a new financial reality, according to L1 Energy chairman John Browne.

Although growth in Permian tight oil production has been “a remarkable revolution”, that “growth rate is unlikely to be maintained” in the year ahead, the former BP chief executive said at the World Energy Congress in Abu Dhabi.

The US unconventionals market was opened up by smaller, “clever, entrepreneurial companies”, that were fuelled by debt and the ability to continue to tap equity markets.

“That is changing and it is much more in the hands of the bigger companies now,” Browne said.

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“It is part and parcel of the supermajor planning approach, which means there will be a certain amount of capital going in and not a penny more, and in the end it has to produce cash flow. That wasn’t the case with smaller companies.”

Browne added: “That is undergoing a big change. I would expect, therefore, the rate of change to be moderated significantly.”

Current tight oil output in the US is around 9 million barrels per day, with takeaway capacity constraints in key plays such as the Permian basin in Texas and New Mexico one factor in limiting production.

Output is predicted to grow, with some projecting 20 million bpd or more in the years ahead. Jarand Rystad, chief executive of Norwegian consultancy Rystad Energy, said recently that tight oil production could hit 25 million bpd in a little over a decade.

Permian and the Delaware sub-basin will remain central to US tight oil production, while the Midland, Eagle Ford, Bakken and Haynesville are other key basins.

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