North America’s unconventional oil and natural gas revolution has led to a retooling of the world’s major projects and reduced the number of companies that are able to compete, according to an analysis by Goldman Sachs.

“The result is non-shale scale,” said analyst Brian Singer. There are “fewer participants driving projects that are at or below shale on the cost curve…”

In aggregate, however, not enough significant volume contributions are being made to prolong global oil oversupply “once shale growth decelerates, which we expect post-2020.”

“We estimate that the key shale plays have a reserve life of 45-plus years, which is down versus last year” because of strong unconventional growth and less resource additions, Singer said.

Unconventional growth should decelerate in the next decade as the plays mature.

“As technology innovation moves from ‘brawn to brains and bytes,’ we see differentiation and consolidation; differentiation may occur first,” he said. Higher recovery rates should follow as technology advances.

But it’s up to the producers with scale to bring it home, according to Goldman. Scale is a cyclical and secular driver of upstream differentiation in three ways, according to Singer. For the Big Oil operators, scale is manifesting itself through more concentration/consolidation, leading to improved free cash flow for the smaller pool of participants.

For the plethora of unconventional operators, the ones with large contiguous acreage positions are in the best position to efficiently develop their leaseholds and employ data analytics technology.

Unconventional output outside the Organization of the Petroleum Exporting Countries, again led by the United States, is forecast to increase in 2018/2019 by 1.8 million b/d before slowing down to 1.1/0.5 million b/d in 2020/2021.

Production growth from the Lower 48 states should drive the bulk of supply by about 1 million b/d in 2018/2019. Canada output is predicted to  rise 0.23/0.19 million b/d year/year in 2018/2019.

“While we still see U.S. shale production growing year/year, we begin to see production deceleration from 2022 onwards,” said Singer. “As non-OPEC supply growth sharply decelerates next decade, we see a higher call on OPEC production, even as global demand growth decelerates, as well.”

Goldman analysts are more optimistic about the long-term oil price outlook. West Texas Intermediate (WTI) oil prices likely should remain in the upper end of the firm’s $50-55/bbl range post-2020.

Analysts also estimate that the WTI price needed to achieve an 11% after-tax well level return now is $43-54/bbl, down about $2-3/bbl from prior estimates.

The revised estimate takes into account a lower U.S. tax rate, a lower long-term Henry Hub natural gas price of $2.75/MMBtu versus $3.00 previously, updated differentials and updated production/productivity/cost structures.

For the Permian Basin, analysts estimated the remaining life breakeven is $3/bbl lower than current economics, while for most other unconventional plays the remaining life of field breakeven is $3/bbl on average above current economics.

In Oklahoma’s Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties, i.e. STACK, Goldman raised the WTI breakeven by $3/bbl because of the lower oil mix, which analysts estimate is 27% versus a previous estimate of 36%.

The overall remaining life of play breakevens for several key oil plays in the Lower 48 that also include the Bakken and Eagle Ford shales and the Denver-Julesburg Basin, the range is $45-56/bbl WTI.