Texas oil producers say if Saudi Arabia hoped to wipe out shale oil production by refusing to cut production and allowing world oil prices to drift lower, they are about three years too late, Newsradio 1200 WOAI reports.
It is true, fracking is more expensive than traditional oil production, but with some 2600 frack wells already drilled in the Eagle Ford Shale south of San Antonio alone, that expense has already taken place, and the oil producers are now engaged in making back that investment, something that is not likely to stop with oil prices moving lower.
UTSA economist Tom Tunstall, who studies the Eagle Ford, says most producers can withstand oil prices as low as $60 a barrel and still remain profitable.
“Some companies have very choice acreage, and they are really good at keeping their production costs down, so their break even points will be even lower,” Tunstall said.
There have been some drilling plans halted in the newer Cline Shale formation in the Permian Basin, but Omar Garcia, the head of the South Texas Energy and Economic Roundtable says in the more mature Eagle Ford, its full steam ahead, at least for now.
“We have not seen any level of activity drop,” he said.
The web site EagleFordTexas.com says Texas has now far surpassed North Dakota and other states to become the most producing shale field in the country.
Tunstall says one impact that the Saudi move may have is to slow exploitation of new fracking opportunities, especially in Northern Mexico, where the oil industry has recently been deregulated after decades of state control which stifled innovation and encouraged corruption.
“The Saudis would like to not see shale oil and gas development occur in other places where it is starting to, like Mexico, like Argentina,” he said.
In fact, due to technological advances, including what is called ‘Super Fracking,’ experts say much of the Eagle Ford could withstand oil prices as low as $40 a barrel, a level which would bankrupt Saudi Arabia, which has 90% of its exports in crude oil.