US onshore shale may not be able to fill the reserves gap left by the lack of upstream work undertaken during the oil downturn, it has been warned.
And the lack exploration combined with modest demand growth could create an industry price spike in the coming years, according to energy commentator Bruce Stover.
Stover, who has 40 years experience at the top levels of the oil and gas industry, claims that the lack of upstream work undertaken since the downturn started in 2014 could cause serious problems down the line.
He claims that a shortfall could lead to oil prices shooting up as reserves dry up – with the bounty of US shale not able to make up for deep water and other traditional resources.
Stover, a founding member of independent North Sea focused firm Endeavor International Corp., said: “There’s been a dramatic deferral of exploration by the industry, particularly offshore.
“Exploration is the pipeline that feeds new production and it is big, chunky production. It’s not little dribbles.
“In many cases, my observation is that there’s been three years of no exploration. And there’s been limited development on the discoveries that have been made.
“The underlying production base that we would have typically forecast in the past, except in the eighties, has always had a continuum of that exploration machine that feeds the production pipeline.
“The underlying decline of that is significant. Some experts believe that US onshore shale cannot fill that gap.
“In a couple of years with this modest demand growth, we might be in for another price spike because of the industry being unable to catch up with the exploration.”
Stover made the comments during the sell-out first session at the University of Oklahoma’s 2017 Energy Symposium on Thursday.