Fascinating Read: "Shale And Demand Uncertainty Put Big Oil On Defensive"; Shale's Breakeven Price Is $25/Bbl -- September 2, 2016

For me, the biggest takeaway from this article: Saudi Arabia has much to fear. 

First half of the article; much more at the link:

Under pressure from low oil prices and their rising debt levels, top oil executives at the ONS 2016 conference this week might well have found the blunt message of shale driller Scott Douglas Sheffield unsettling.

The chief executive of Pioneer Natural Resources seemed to enjoy the role of spoiler-in-chief, harrying Big Oil with some uncomfortable assertions.

The bad news, for those in the industry who missed out on shale and expected it to fade in the face of low prices, is that the Permian basin should be able to increase its output from 2 million b/d to 5 million b/d in the next 10 years, assuming prices reach $56/b in 2025, Sheffield said. Pioneer itself is growing its output by 27-30% annually.

“It’s in that [price] strip that I see the Permian adding 300,000 b/d per year in US supply,” he told the Offshore Norwegian Seas conference, held Aug. 29 through Sept. 1 in Stavanger. Ramming home his contrarian stance, he said he was skeptical of some of the higher forecasts of long-term oil demand growth due to global warming, alternative energy and electric vehicles, while boasting of the company’s use of renewables in its own operations and the solar panels on his home.

In Sheffield’s view, the dip in US production has been misconstrued, with some in the industry underestimating the Permian basin as output falters in the Eagle Ford and the Bakken.

Some have failed to appreciate that rig reductions in the Permian have happened partly because of reduced drilling at conventional, non-shale sites, rather than in the shale plays, he said.

The Spraberry-Wolfcamp shale, where Pioneer operates, remains resilient and Pioneer’s own breakeven price is below $25/b.

Prices paid for shale acreage have been rising, in some cases, to levels higher than in 2013-2014, he said.

“In the Permian we still have about 600,000 b/d of conventional production that’s declining — it’s arresting the growth. [However] there’s one field in the Midland basin, six fields in the Delaware basin that make up most of the growth in production. The Permian is still growing,” he said. With the Permian accounting for over half of US oil rigs, he forecast another 50-75 would be added.

But while the world’s oil majors were largely caught off guard by shale and have of late struggled to maintain a foothold in many parts of the world, Shell chief executive Ben van Beurden insisted on their relevance, reiterating the International Energy Agency’s central scenario for a 25% increase in energy demand by 2035 and predictions of oil demand growth of 1-1.5 million b/d for the next five years.

That, together with decline from existing fields of 5% per year, means the notion of stranded assets, by which oil and gas becomes redundant, is a “red herring,” he said. The industry is now filling the gap between demand growth and natural decline “quite comfortably, with all the investment decisions that we took four-five years ago. [But] that time will dry up,” he said. “We will see the tightness come back into the market. I’m more worried about supply shrinkage.”

And then the second half at the link.