American ingenuity and free markets are quickly finding ways to more efficiently and cheaply produce crude oil — bad news for the Saudis.
So what’s going on here? Lots of news coverage lately has focused on how the U.S. oil industry is struggling amid low crude prices. It’s hypothesized by some energy experts that Saudi Arabia is continuing to pump out oil, therefore keeping prices down and pricing out costlier shale production.
Yes, there have been job cuts and fewer oil rigs being used to drill new wells, but companies are becoming more efficient and focusing on the most productive shale plays. That means companies are producing more with less.
Category Archives: Shale
Oil prices sank again on Monday, giving consumers more of a break and causing a split among OPEC leaders about what action should be taken, if any, to halt the slide.
The price drop has led to a near free fall in gasoline prices in the United States. On Monday, the national average price for regular gasoline was $3.20, 9 cents lower than it was a week ago and 14 cents below the price a year ago, according to the AAA motor club.
The price at the pump generally follows oil after a few days, leading energy experts to predict lower prices for the rest of the month at least.
“This is not your garden variety autumn price decline,” said Tom Kloza, chief oil analyst at GasBuddy.com, which reports fuel prices from filling stations across the country. “Clearly there is a rift in OPEC, and that means we are more likely to see a price war over the next six months. Crude oil is teetering on the brink of collapse.”
Most oil analysts say that the companies that have led the boom in drilling across North Dakota and Texas are insulated from the declines for the time being, with the break-even levels for investments around $60 a barrel — which is more than $20 below current levels.
With the number of rigs working in the United States at or near record levels, some oil executives are beginning to express concern about investment decisions next year.
n this period of national gloom comes an idea — a crazy-sounding notion, or maybe, actually, an epiphany. How about an all-Canadian route to liberate that oil sands crude from Alberta’s isolation and America’s fickleness? Canada’s own environmental and aboriginal politics are holding up a shorter and cheaper pipeline to the Pacific that would supply a shipping portal to oil-thirsty Asia.
Instead, go east, all the way to the Atlantic.
Thus was born Energy East, an improbable pipeline that its backers say has a high probability of being built. It will cost C$12 billion ($10.7 billion) and could be up and running by 2018. Its 4,600-kilometer (2,858-mile) path, taking advantage of a vast length of existing and underused natural gas pipeline, would wend through six provinces and four time zones. It would be Keystone on steroids, more than twice as long and carrying a third more crude.
“The best way to get Keystone XL built is to make it irrelevant,” said Frank McKenna, who served three terms as premier of New Brunswick and was ambassador to the U.S. before becoming a banker.
So confident is TransCanada Corp., the chief backer of both Keystone and Energy East, of success that Alex Pourbaix, the executive in charge, spoke of the cross-Canada line as virtually a done deal.
The U.S. shale boom is about to hit another big milestone, as it looks like fracking will propel American liquid petroleum production (that includes oil and natural gas liquids) past Saudi Arabia for the first time in nearly a quarter century. The FT reports:
US production of oil and related liquids such as ethane and propane was neck-and-neck with Saudi Arabia in June and again in August at about 11.5m barrels a day, according to the International Energy Agency, the watchdog backed by rich countries.
With US production continuing to boom, its output is set to exceed Saudi Arabia’s this month or next for the first time since 1991. […]
Rising oil and gas production has caused the US trade deficit in energy to shrink, and prompted a wave of investment in petrochemicals and other related industries. […] It is also having an impact on global security. Imports are expected to provide just 21 per cent of US liquid fuel consumption next year, down from 60 per cent in 2005.
The natural gas liquids portion is largely a byproduct of drilling for shale gas, and are used as a feedstock for petrochemical companies (like BASF, which recently decided to move more of its operations into the United States). Take those NGLs out of the equation, and Saudi Arabia and Russia both edge out the United States on crude production. But American oil output is expected to break 9 million barrels per day sometime this year, edging closer to Russia’s 10.1 million b/d and Saudi’s 9.7 million b/d.
With productivity continuing to rise, the United States has a chance to become the single biggest producer of crude oil sometime in the near future. If you had said that a decade ago, you would’ve been laughed at and called a fool. What a difference fracking makes.
The United States, sometime in the first quarter of 2014, passed Saudi Arabia to become the world’s largest producer of petroleum liquids, with daily output exceeding eleven million barrels per day (bpd), according to the International Energy Agency. Growth from January 2011 to July 2014 included three million bpd of crude oil and another one million bpd of hydrocarbon gas liquids and biofuels. U.S. crude oil production growth more than offset the 2.8 million bpd of global “unplanned supply disruptions” associated with the “Arab Spring.”
Global “unplanned supply disruptions” averaged 3.2 million bpd during the first seven months of 2014 and peaked at 3.5 million bpd in May. The recent supply disruptions are the highest since the 1990-to-1991 Iraq/Kuwait War, when supply disruptions peaked at 4.3 million bpd according to the International Energy Agency data.
However, over the last thirteen months, from July 2013 to July 2014, the international standard price of crude oil, referred to as “Brent Crude,” stabilized in a narrow $5 per barrel range between $107 and $112 per barrel due to booming U.S. production. This compares to the $21 range for Brent Crude during the prior thirteen-month period from June 2012 to June 2013.
U.S. production gains have been geographically concentrated in Texas and North Dakota, which together accounted for 83% of U.S. production growth. Production in the South Texas Eagle Ford formation reached 1.22 million bpd in December 2013, and production from the Bakken formation in North Dakota and Montana reached one million bpd in November 2013. Oklahoma, New Mexico, and Colorado saw smaller increases.
The U.S. average retail price for regular gasoline was $3.45 per gallon on August 25th, the lowest price on the Monday before Labor Day since 2010. The average price at the pump is also $0.25 per gallon lower than it was at the end of June.
Here’s the bottom line: natural gas is a cleaner fossil fuel than coal, and unlike renewables, it can supply power consistently (even on cloudy, windless days). We are well-served by unlocking new reserves of natural gas not just for the economic boost these plays provide, but also for their environmental benefits. One day, with the right technologies, we’ll be able to power society without relying on fossil fuels, but we’re not there yet. Until then, natural gas is one of our best options, and greens would do well to recognize the fracking boom for what it is: good news.
Shale gas displaces coal as a source of cheap baseload power, which this chart shows pretty handily, and it does so with just half the greenhouse gas emissions. There are other advantages that make natural gas—and the shale boom that’s supplying it here in the U.S.—a boon to Gaia, but its ability to help us wean ourselves off our dependence on dirty-burning coal is the reason why shale gas is fracking green.
You just can’t keep a good boom down. Oil production from North Dakota’s Bakken formation has quintupled over the past five years as drillers employ the dual technologies of hydraulic fracturing and horizontal well drilling to tap previously inaccessible hydrocarbons trapped in shale. This summer, it looks as if Gaia will cooperate, offering mild weather to spur what one official is predicting will be a “big surge” in output. Bloomberg reports:
Better summer weather will lead to production growth in the region of 5 to 6 percent a month in June, July and August, said Lynn Helms, director of the state’s Department of Mineral Resources.
“We still expect the big surge to come in June, July and August in terms of completions and some really rapid production increases,” Helms said on a conference call with reporters yesterday.
The shale boom has been so sudden, and so unexpected, that we still lack the transportation infrastructure to deliver shale-sourced crude to refineries. Without pipelines to link North Dakota’s Bakken formation to Gulf Coast refineries, that crude is riding our nation’s rails and being transported by truck—more expensive and more dangerous options. Building new pipelines will cut down on bottlenecks, save money, and potentially save lives. This is a challenge, but it’s the kind we’d like to see more of: one of abundance, not scarcity.
As the debate over how to regulate fracking — and whether to permit the process at all — rages in the U.S. and Europe, there are powerful interests that can benefit from blocking its expansion, namely, existing oil and gas producers, such as the Gulf States and Russia.
The FT reports:
Russian intelligence agencies are covertly funding and working with European environmental groups to campaign against fracking and maintain EU dependence on Russian gas, the head of Nato has claimed.
“The potential for Russia using energy supplies as a means of putting pressure on European nations is a matter of concern. No country should use supply and pricing terms as tools of coercion,” they said. “We share a concern by some allies that Russia could try to obstruct possible projects on shale gas exploration in Europe in order to maintain Europe’s reliance on Russian gas.”
It is the most remarkable economic story of our time and it comes in the midst of the Obama economy’s miserable performance.
The United States of America leads the world again in petroleum production, which includes crude oil, natural gas, and other liquids. We’re number 3 in crude oil production behind Russia and Saudi Arabia and the Financial Times notes that we will eventually surpass both countries and become the leading producer of crude oil in the world.
Four decades of declining oil production has been reversed in just the last 5 years.
The growth in production in North Dakota has been phenomenal. The US Geological Survey keeps raising the estimate of proven, retrievable reserves in the Bakken Formation. It currently stands at about 8 billion bbl but with the technology to extract it improving by leaps and bounds, no one can guess how much of the estimated 80 billion bbl in the 220,000 square mile expanse of the Formation will actually be recovered.
In April, North Dakota surpassed the milestone of averaging 1 million bpd. The state has seen its oil production increase twelve-fold over the last decade from only 83,233 bpd in April 2004 to 1,001,149 bpd in April this year.
So why are our gas prices still so high??
A group of over fifty lecturers and professors has written to the Guardian newspaper in support of fracking and shale gas exploitation in the abundant Bowland Shale in North-East England.
It’s quite possible that, given their educational background and training, they know slightly more about the subject than the group of fashion designers, installation artists, pop stars, children of rich celebrities, green activists, actors and models who signed that letter the other day demanding that fracking should be stopped.
Then again, perhaps not. As I’m sure Radiohead’s Thom Yorke or designer Stella McCartney or public intellectual Russell Brand would happily confirm, every one of these scientific experts is tainted by their association with the Big Oil industry and therefore cannot be trusted to tell the truth.
Unlike, say, their fellow signatories wind farm developer Dale Vince, Greenpeace or Friends Of The Earth, none of whom have any vested interest whatsoever in promulgating the global warming scare and the green energy scam, apart from the small fact that it makes them millions and millions of pounds.