Bottlenecks Are Holding Back a Second Shale Boom

American oil production has jumped more than 900,000 barrels per day since October of last year, as shale producers have gotten back on their feet and found new ways to stay profitable in today’s bargain-priced oil market. The U.S. is now less than 200,000 barrels per day off its June 2015 high of 9.6 million barrels per day, and analysts expect production to keep growing. But as good as all of that sounds, it could be even better. As the FT reports, shortages of drilling rigs and roughnecks to operate them are holding back even more impressive output increases:

…Kayrros, a Paris-based research firm backed by former Schlumberger chief executive Andrew Gould, [suggests that] there may be less oil coming than expected coming on to world markets over the next few months…Antoine Rostand, president of Kayrros, said: “The fracking industry is taking time to ramp up; there are not enough crews available to complete all the wells that have been drilled.” […]

As the recovery continues, capacity constraints have started to emerge. Brad Handler, an analyst at Jefferies, estimated that if all the wells being drilled in the US were to be brought into production promptly, they would need about 14m horsepower of pump capacity for the fracking to complete them, and the industry actually had only about 12m horsepower of active capacity.

This shouldn’t come as a huge surprise. After all, adding nearly one million barrels of oil per day in less than a year is going to put a strain on supply chains. And shale has seen bottlenecks hold back its growth before—the industry faced a serious shortage of pipeline capacity earlier this decade, and some of those transportation issues persist even today.

These bottlenecks emerge when the industry is unable to keep pace with explosive production growth, and here in the United States they embody the revolutionary power of fracking, which has completely remade this country’s energy landscape in just a handful of years. Producers will be taking these shortages seriously, and will be looking for ways around them. That includes training new workers, which has the added benefit of creating new American jobs.

These equipment and personnel shortages might be weakening shale’s second boom, but we’re still going to file this issue under “good problems to have.”

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