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Is a shortage of talent holding back the next US shale boom?

01/08/2017
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A new report from Paris-based research firm Kayrros, suggests that yes, a shortage of manpower and oilfield services support is causing a bottleneck which is harming production output.
The number of drilled but uncompleted wells has risen this year by close to 1,000
Image via USGS

Whilst American oil production has jumped more than 900,000 barrels per day since October of last year, further production from shale is being limited due to a shortage of both drilling rigs and the roughnecks that operate them.

According to the US Energy Information Administration (EIA), the backlog of drilled but uncompleted wells (DUCs) has risen this year by close to 1,000, reaching 6,000 in June.
As Antoine Rostand of Kayrros states:

“The fracking industry is taking time to ramp up; there are not enough crews available to complete all the wells that have been identified.”

Brad Handler, an analyst at Jeffries, the Global Banking Investment Firm, highlighted the extent to which this shortage is holding back production:

“If all the wells being drilled in the US were to be brought into production promptly, they would need about 14m horsepower of pump capacity for the fracking to complete them, and the industry only has about 12m horsepower of active capacity.”

Since the crash in oil prices we’ve seen a concerted pressure on oil field services companies to reduce costs, and therefore service capacity. Oil producers demanded significantly lower prices for rigs, equipment and completion services, but now the tables have turned.
Oil field services companies such as Schlumberger have reported that they almost fully booked throughout the rest of the year
Image via USGS

Shale companies now face a dilemma. Oil prices are hovering at around $50 a barrel (or less), whilst oil field services companies are now in a position to hike their prices, demanding higher rates for well completions. Schlumberger for example, has recently informed investors that its revenues from the shale industry were up 68 percent in the second quarter from the first.

The lack of manpower and oilfield services capacity looks set to undermine the next US shale boom. Conversely though, this development could push up the price for crude, making drilling for shale a yet more financially attractive proposition in the medium-to-long term.

If you’re looking to secure the best manpower for your shale production company, speak to Fircroft today.
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