Eagle Ford development is proceeding a bit slower than I would have hoped. Nonetheless, the numbers are impressive.

From the Houston Chronicle

Production in the Eagle Ford could reach 1 million barrels a day by 2016, said Trevor Sloan, director of energy research at ITG Investment Research in Calgary, Alberta.

"So the growth rate out of there would be pretty spectacular," he said.

But before production can reach that level, some problems have to be solved.

About 1,400 Eagle Ford wells are waiting to be completed or to be tied into pipelines, ITG research shows. There are also shortages of crews and water and too few pipelines.

Once the problems of getting the oil and natural gas to market are gone, production from the Eagle Ford could double, and "the Eagle Ford would be the second-largest producing area if you could bring all those to market," Sloan said.

I haven’t looked at the raw data in some time but based on my earlier guess-estimate 1 million barrels per day by 2016 would be a significant disappointment. There are some bottle neck issues but assuming they are resolved I would expect a much faster ramp-up in production.

When these numbers get put together typically they assume that crude-oil prices are always headed back down toward $60 – $70 a barrel and they do historical ramp-up rates, which don’t take into account the blisteringly low real interest rate environment that we are in.

Negative real interest rates mean that investment doesn’t have to pay for itself in real terms. This allows you to “buy” lots of adjustment costs. In short, throwing money at a project to get it online as fast as possible makes business sense.

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