Oil production in the United States has climbed steeply over the last decade, with a 2015 peak of nearly 10 million daily barrels of output likely to be bested before long. While the near-record lows in petroleum pricing of last year made a dip in production totals inevitable, activity has since resumed the steady upward trend that has become so familiar in recent years. At the same time, oil remains far from the triple-digit highs that shocked world markets years back, leaving some to wonder what makes all this production viable.
Extracting oil from shale formations, as has allowed for the recent surge in American production activity, is always expensive and difficult, after all. Worse yet, shale extraction operations decline in output quickly, with most remaining productive for only a few years after ground is first broken. Instead of paying off for a decade or more like a conventional oil well, a shale operation must therefore justify itself in financial terms much more quickly.
With the price of West Texas Intermediate petroleum currently sitting somewhere in the familiar neighborhood of the 50-dollar mark, shale producers have to be careful in order to remain viable. In some cases, the economics of a particular operation will allow for this without any particularly difficult adjustments, but this is not necessarily common.
Instead, most shale oil extraction projects have to find ways of cutting costs and keeping them as low as possible. As those who check out here will see, one way of doing so is by passing up relatively expensive conventional means of transportation in favor of far cheaper ones. While the nation’s railways make for fast, convenient ways to move unrefined oil around, they tend to charge a fairly steep price for the privilege.
Interest in transporting oil by barge has therefore grown steadily right alongside the shale extraction boom. Companies like Kirby that offer this waterborne service can save their clients a third or more what they might pay to accomplish the same thing by rail, instead. While enjoying those savings can necessitate a bit of delay compared to the most common alternatives, this simple measure alone will sometimes help the financials of a particular shale project make excellent sense.