U.S. shale producers eye deeper reservoirs as drilling costs fall

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Shale taps deeper reservoirs

Highlights

Kimmeridge reports deep U.S. shale wells' drilling costs have dropped from $3.50 to $0.95 per thousand cubic feet equivalent, making them more competitive.
Deep high-pressure wells are projected to comprise about 25% of new U.S. shale developments within five years, with drilling costs forecast to fall another 20–30%.
Rystad Energy forecasts U.S. utility-scale solar additions will reach 49GW in 2024 and rise to a record 63.7GW by 2028, despite ending federal subsidies.

Deep-well economics reshape shale development

As reported by Financial Times, a new report from U.S. energy investment group Kimmeridge says the next frontier for U.S. shale lies in deep reservoirs, where falling drilling costs are making projects increasingly competitive with shallower wells.

Deep wells have long been viewed as uneconomic because higher temperatures and pressures raise the difficulty and cost of drilling and completing them. Kimmeridge says technological advances and the use of offshore drilling techniques in deeper wells have reduced those barriers and pushed costs down sharply over the past 15 years.

Kimmeridge managing partner Ben Dell says three or four new deep, high-pressure, high-temperature concepts are likely to emerge over the next decade and become highly competitive with some of the best shale wells in the U.S. The group estimates the cost to drill a deep well has fallen from about $3.50 per thousand cubic feet equivalent to roughly $0.95 today.

Dell says deep high-pressure wells are expected to account for roughly a quarter of new developments within five years. He also says drilling costs could fall another 20 to 30 per cent over that period, a shift that may help producers manage an oversupplied market and weaker commodity prices.

Renewables and hydropower face diverging pressures

Federal energy policy and weather risks are also reshaping the wider power market. U.S. energy secretary Chris Wright last week welcomed the end of federal subsidies for solar and wind, saying electricity prices should fall without tax credits.

Even so, analysts and developers still expect renewables to remain the cheapest and fastest source of new power for the grid. Before July 4, 2026, developers rushed to begin solar and wind projects to preserve eligibility for investment tax credits under safe-harbour rules, supporting expectations that solar remains the leading new energy source through 2030.

Rystad Energy says the U.S. is on track to deploy 49GW of utility-scale solar this year, up from 37.9GW last year, with that figure forecast to rise to a record 63.7GW by 2028. Onshore wind additions are expected to reach 8.4GW this year, up from 6.3GW last year, although permitting issues, transformer lead times and interconnection delays may still force some projects to be abandoned.

At the same time, El Niño is creating fresh risks for countries that depend heavily on hydropower. The World Meteorological Organization says El Niño conditions are already under way and are forecast to strengthen rapidly, raising the threat of drought, electricity shortages, higher prices and increased coal and liquefied natural gas use in markets including Colombia, Costa Rica, India and Vietnam.

In our earlier coverage of AI data center-driven power grid bottlenecks in the U.S., we explained how surging electricity demand is worsening shortages of transformers and other critical equipment, pushing delivery lead times out to multiple years. We also noted that utilities and developers are responding by locking in procurement much earlier, diversifying suppliers, and using upfront payments or long-term agreements to secure scarce components.

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