What is in this article?:
- Plunging Oil Prices Threatens Shale Revolution
- Jump in Bankruptcies Anticipated
The number of active drilling rigs in the United States has fallen 60%, with the biggest losses in the main fracking zones of Texas, Oklahoma and North Dakota.
An oil derrick drills for oil in the Bakken shale formation outside Watford City, North Dakota
NEW YORK - Producers of oil and gas from once hard-to-tap shale deposits are now facing the payback of the energy revolution they wrought: ultra-low prices forcing them out of business.
This year is expected to be a make-or-break year for U.S. shale producers, after the 70% plunge in crude prices, with many at risk of failure.
Dozens of shale drillers sought bankruptcy protection in the last year as low oil prices made their operations uncompetitive and they could not pay debts.
But many are holding on toughly, hoping desperately for a turnaround in the market.
It has been a rapid reversal for an industry barely a decade old. While shale and other deep-rock strata have long been known to hold substantial oil and gas deposits, it was only recently that techniques were developed to economically tap this "tight" oil by hydraulic fracturing, or "fracking" the strata to release it.
Encouraged by U.S. policy to cut the country's dependence on imported energy, the fracking revolution led to a stunning increase in U.S. domestic crude oil production.
Total U.S. output rose from about 5.6 million barrels a day in 2010 to 9.4 million barrels a day last year.
But most of that surge, which made the United States rival Saudi Arabia as a crude producer, came while crude prices held above $80 a barrel. That made the relatively costly process of tapping shale reserves lucrative.
It is different now that crude is close to $30 a barrel, with estimates that U.S. oil and gas producers as a group are losing about $2 billion a week.