The new EIA projections show that even with falling rig counts, production will stay high. They have a great chart attached:
It is hard to see, but the new wells have very high depletion rates. Consider the dark brown band: wells that will be drilled in the first quarter of this year. Their production is estimated to fall by 54% in their first year and then another 38% in their second, for a total two-year decline of 71%. Yet production is still expected to rise, because we are getting much better at drilling: initial production is going up. Consider the Bakken in North Dakota:
Or the Eagle Ford in South Texas:
Or my favorite, the Permian in West Texas:
Of course, rig counts could go lower. How low would they need to go? Well, once again the indispensable bureaucrats at the EIA have done the work:
In other words, we have a long way to go before American production starts to fall. You heard it here.
And let me say that if I know this, then the very good technical people at Saudi Aramco also know this! Saudi oil strategy is not about trying to kill American unconventional production, no matter how much they head fake. It is, as we said here, about trying to kill substitutes for oil, including conservation.
And I am gratified to see that story make the front page of the Washington Post today!