By Jennifer Hiller
HOUSTON, Sept 15 (Reuters) - U.S. shale producers have added
millions of barrels to global crude supply in recent years, but
that does not mean they can quickly replace barrels lost from
weekend attacks on Saudi Aramco facilities, energy experts said
on Sunday.
Shale producers this year have been cutting budgets and
workers and trimming production goals after years of heavy
spending. They remain under intense pressure from investors to
restrain spending and return money to shareholders through
buybacks and dividends rather than expand drilling.
Shale is a short-cycle oil supply - one able to add or
reduce production relatively quickly. Producers will see
increased demand, especially from Asian buyers. But producers
need 90 to 180 days to drill, complete and bring new production
online.
There are about 1,000 Permian wells that have been drilled
but not completed or hooked up to pipelines, said Bernadette
Johnson, vice president of market intelligence at consultants
Enverus.
Shale "cannot simply open up the spigot," she said, adding:
"The infrastructure simply isn’t there yet to get it to the
coast."
Representatives for Exxon Mobil Corp, Royal Dutch
Shell and Chevron Corp, which all produce
shale, declined to comment on the potential impact on their
operations.
If the attacks lead to sustained U.S. oil prices in the
mid-$60-a-barrel range, it could cause U.S. output to grow by
about 2 million barrels per day (bpd) next year, from about 1
million bpd this year, Johnson said.
U.S. oil companies could see some benefit. The strikes in
Saudi Arabia knocked out oil-processing facilities and
production at the Khurais oilfield, which produces a light oil
similar to what shale producers offer.
The Eagle Ford Shale field in South Texas has the ability to
add to supplies and prices in the mid-$60s would cause companies
operating there to add rigs gradually. Still, its ultralight,
sweet barrels are not similar enough to be a good substitute for
lost Arab Light oil, Johnson said.
Shale producers generally could use the expected jump in
crude prices to add hedges, or contracts that lock in future
prices, allowing them to capture some of the expected price
increases, said Matt Portillo, managing director at investment
bank Tudor, Pickering, Holt & Co.
“Producers will take the higher prices and essentially bank
that to balance-sheet repair or to accelerating shareholder
returns,” Portillo said.
U.S. oil companies operating in the Permian Basin will not
"be changing their plans this week based on what happened in
Saudi Arabia," said Andy Lipow, president of consultancy Lipow
Oil Associates.
(Reporting by Jennifer Hiller; Editing by Peter Cooney)
