The Bakken, Eagle Ford and "new" Permian Basin make up what Continental Resources Inc. executives like to call "Cowboyistan." It's the seventh-largest petroleum liquids producing area in the world and has made the United States a player in the global oil game, lending more insight into where the global oil market is going, Continental COO Jack Stark said in Houston Wednesday.
"These three plays represent 65% of that North American growth wedge. If you translate that to world production, that means these three plays represent 50% of the liquids production growth in the world. Pretty amazing," Stark said during the Business Conference portion of Houston NAPE 2015. "In the the last year, the production in those plays has grown 1 million b/d."
By "new" Permian, Stark is referring to the incremental oil production growth in the basin over and above the base decline rate.
"We've brought on so much production [in Cowboyistan] that we are entering a whole new era in oil," Stark said. “The Saudis are no longer willing to be the swing producer, and so we're really getting down to where we're looking at really more of a free market for oil, so to speak, based on supply and demand, that's developing here."
Because of this, Stark said, U.S. producers have more insight now into where world oil markets are going, at least in the near term. The key plays (Cowboyistan) are known, so are the operators and their capital spending plants. Also known are rig counts and decline rates in the various plays. And so knowing that gives us the ability to model what world supply may be doing in the short term," he said.
What Stark is seeing is the potential for the oversupplied market to roll over sooner than some others are predicting. While forecasts, such as those from the U.S. Energy Information Administration, are calling for some relief in the supply-demand imbalance some time in the second half of this year, Stark said U.S. producers could get a reprieve from depressed prices a bit sooner, maybe during the second quarter.
The independent producers' response to the price crash has been rapid and strong, Stark said. Continental and others are deferring completions. Some producers are shutting in production, and stripper wells (which collectively represent about 800,000 b/d of production) are being taken out of the picture, too. "Were going to see supply roll over, maybe sooner than later," he said.
But bringing supply and demand back into balance is only part of the story for the United States and world oil markets. To take their rightful place in the global oil game, U.S. producers need to be able to export the raw commodity, Stark said.
"We've really become a material player in the global market. We have handcuffs on us here domestically because of the ban on exports," he said. "So we really need help from our legislators to lift the ban on exports. As a leading producer in the world, we need to be able to compete in the world market, the free market."