U.S. oil industry set to break record, upend global trade

[Independent voter]

Poor Canada, Venezuela and Russia. And other oil dependent economies.

Is this a good thing or a bad thing?





https://www.reuters.com/article/us-u...-idUSKBN1F50HV

HOUSTON (Reuters) - Surging shale production is poised to push U.S. oil output to more than 10 million barrels per day - toppling a record set in 1970 and crossing a threshold few could have imagined even a decade ago.
FILE PHOTO: Workers hired by U.S. oil and gas company Apache Corp drill a horizontal well in the Wolfcamp Shale in west Texas Permian Basin near the town of Mertzon, Texas, U.S., October 29, 2013. REUTERS/Terry Wade/File Photo

And this new record, expected within days, likely won’t last long. The U.S. government forecasts that the nation’s production will climb to 11 million barrels a day by late 2019, a level that would rival Russia, the world’s top producer.

The economic and political impacts of soaring U.S. output are breathtaking, cutting the nation’s oil imports by a fifth over a decade, providing high-paying jobs in rural communities and lowering consumer prices for domestic gasoline by 37 percent from a 2008 peak.

Fears of dire energy shortages that gripped the country in the 1970s have been replaced by a presidential policy of global “energy dominance.”

“It has had incredibly positive impacts for the U.S. economy, for the workforce and even our reduced carbon footprint” as shale natural gas has displaced coal at power plants, said John England, head of consultancy Deloitte’s U.S. energy and resources practice.

U.S. energy exports now compete with Middle East oil for buyers in Asia. Daily trading volumes of U.S. oil futures contracts have more doubled in the past decade, averaging more than 1.2 billion barrels per day in 2017, according to exchange operator CME Group.

The U.S. oil price benchmark, West Texas Intermediate crude, is now watched closely worldwide by foreign customers of U.S. gasoline, diesel and crude.

The question of whether the shale sector can continue at this pace remains an open debate. The rapid growth has stirred concerns that the industry is already peaking and that production forecasts are too optimistic.

The costs of labor and contracted services have recently risen sharply in the most active oilfields; drillable land prices have soared; and some shale financiers are calling on producers to focus on improving short-term returns rather than expanding drilling.

But U.S. producers have already far outpaced expectations and overcome serious challenges, including the recent effort by the Organization of the Petroleum Exporting Countries (OPEC) to sink shale firms by flooding global markets with oil.

The cartel of oil-producing nations backed down in November 2016 and enacted production cuts amid pressure from their own members over low prices - which had plunged to below $27 earlier that year from more than $100 a barrel in 2014.

Shale producers won the price war through aggressive cost-cutting and rapid advances in drilling technology. Oil now trades above $64 a barrel, enough for many U.S. producers to finance both expanded drilling and dividends for shareholders.
BOOMING OIL EXPORTS

Efficiencies spurred by the battle with OPEC - including faster drilling, better well designs and more fracking - helped U.S. firms produce enough oil to successfully lobby for the repeal of a ban on oil exports. In late 2015, Congress overturned the prohibition it had imposed following OPEC’s 1973 embargo.

The United States now exports up to 1.7 million barrels per day of crude, and this year will have the capacity to export 3.8 billion cubic feet per day of natural gas. Terminals conceived for importing liquefied natural gas have now been overhauled to allow exports.

That export demand, along with surging production in remote locations such as West Texas and North Dakota, has led to a boom in U.S. pipeline construction. Firms including Kinder Morgan and Enterprise Products Partners added 26,000 miles of liquids pipelines in the five years between 2012 and 2016, according to the Pipeline and Hazardous Materials Safety Administration. Several more multi-billion-dollar pipeline projects are on the drawing board.

U.S. drillers say they can supply plenty more.

“We continue to see and drive improvements” in drilling speed and efficiency, said Mathias Schlecht, a technology vice president at Baker Hughes, General Electric Co’s oilfield services business.

New wells can be drilled in as little as a week, he said. A few years ago, it could take up to a month.
TECHNOLOGY OPENS UP NEW FIELDS

The next phase of shale output growth depends on techniques to squeeze more oil from each well. Companies are now putting sensors on drill bits to more precisely access oil deposits, using artificial intelligence and remote operators to get the most out of equipment and trained engineers.

As expanded investments push more producers to add wells in less productive regions, technology will help make those plays more profitable, said Kate Richard, chief executive of Warwick Energy Group, which owns interests in more than 5,000 U.S. wells.

In an interview, she estimated about a third of the money from private equity investments in shale will be used to wring more oil from overlooked regions.

Higher prices - up about $10 a barrel in the last two months - also may encourage the industry to work through a backlog of some 7,300 drilled-but-uncompleted shale wells that have built up because of crew and equipment shortages.

The higher prices have suppliers that provide hydraulic fracturing services, such as Keane Group and Liberty Oilfield Services, buying expensive new equipment in anticipation of more work.

U.S. fracking service revenues are expected to grow by 20 percent this year, approaching a record of $29 billion set in 2014, according to oilfield research firm Spears & Associates.
OIL MAJORS JOIN SHALE FRAY

The shale revolution initially upended the traditional industry hierarchy, making billionaires out of wildcatters such as Harold Hamm, who founded Continental Resources, and the late Aubrey McClendon of Chesapeake Energy.

Top U.S. oil firms such as Exxon Mobil and Chevron a decade ago turned much of their focus to foreign fields, leaving smaller firms to develop U.S. shale. Now they’re back, buying shale companies, land and shifting more investments back home from overseas.

Exxon last year agreed to pay up to $6.6 billion for land in the Permian basin, the epicenter of U.S. shale. Chevron this year plans to spend $4.3 billion on shale development.

The majors’ shift is driving up costs for labor and drillable land in the region, another boost to wages and wealth in rural areas.

In the shale industry hub of Midland, Texas, unemployment has fallen to a mere 2.6 percent, said Willie Taylor, executive director of the Permian Basin Workforce Development Board, a group that helps firms find staff.

Companies are now offering signing bonuses to attract workers to West Texas. One oil company flies workers to Midland from Houston weekly to fill a local labor void, he said.

“It was an employer’s market,” he said. “Now it’s more of a job seeker’s market.”

[Deleted]

Good to hear!

[Cruor]

but..but... an owl was pushed out of a tree because of the drilling! It needs to stop! we should all ride horses and stop using oil!

for real though, why do we export the oil? We need it here, my V8 is thirsty. Good to see the industry thriving under Trump, aka President of Awesomeness.

[Kapadons]

Need the Eagle ford shale to take off like it was in 2014. Have a store in the closest town that was booming when it oil here was. Since the drop in price it’s profit has dropped.

[Elegiac]

for real though, why do we export the oil? We need it here, my V8 is thirsty.

Because oil companies are not your friends and have no interest in making gasoline cheaper for anyone.

[Daelak]

Because oil companies are not your friends and have no interest in making gasoline cheaper for anyone.

I am actually surprised his understanding of economics is that developed.

[Draco-Onis]

Poor Canada, Venezuela and Russia. And other oil dependent economies.

Is this a good thing or a bad thing?

The oil cartel controls the price of oil, the US production numbers in the long run doesn't have as much effect as what the cartel decides. If the cartel decides to go for market share US producers will suffer for it since they have more reserves and can afford to dump it at a cheap price if they do not then the price will remain unchanged maybe go higher.

[Ghostpanther]

Good move. The US should become more independent from foreign oil.

[Aggrophobic]

Sad to hear that.

[cubby]

The oil cartel controls the price of oil, the US production numbers in the long run doesn't have as much effect as what the cartel decides. If the cartel decides to go for market share US producers will suffer for it since they have more reserves and can afford to dump it at a cheap price if they do not then the price will remain unchanged maybe go higher.

But the cartels entire economy is based on oil. They can't dump it at a cheap price because their economy will implode. It's already doing so in several areas, and it won't get better - so that isn't even remotely an option for them. They are stuck, having squandered the biggest resource in the history of the world.

Aside from all the other issues, it will be nice to get away from needing anything in the middle east.

[Zmaniac17]

Poor Canada, Venezuela and Russia. And other oil dependent economies.

Is this a good thing or a bad thing?

If you own stock in a U.S. oil company I suppose it's good. I have my doubts about carbon emissions. There is a purposeful lack of study into emissions from fracking.


I just hope it doesn't hamper transition into cheaper and more abundant energy alternatives in the future. I would hate for the U.S. to become more dependent on a finite resource like Saudi Arabia and other oil rich nations. Energy demand will only increase and oil will only decrease. The only way we get to the point where energy is nearly free is by investing in research and new tech.

I just don't want to be the in the last country driving around gas cars while everyone else has brand new clean tech.

[taliey]

The last gasps of a dying industry.

[Draco-Onis]

But the cartels entire economy is based on oil. They can't dump it at a cheap price because their economy will implode. It's already doing so in several areas, and it won't get better.

Aside from all the other issues, it will be nice to get away from needing anything in the middle east.

The US has been energy independent for a while now and the Saudis were dumping oil on the cheap for market share early on it was not until the last few OPEC meetings that all of them got together to limit price. There is a dynamic with Iran and Saudis competing in price it would not take much for them to say screw it, also once the Saudi funds are launched and their shift is successful they will have less incentives to worry about the price of oil.

I think everyone knows long term the days of oil are numbered regardless of what happens to the price, so countries that only rely on it are desperately scrambling to get away from it.

[cubby]

The US has been energy independent for a while now and the Saudis were dumping oil on the cheap for market share early on it was not until the last few OPEC meetings that all of them got together to limit price. There is a dynamic with Iran and Saudis competing in price it would not take much for them to say screw it, also once the Saudi funds are launched and their shift is successful they will have less incentives to worry about the price of oil.

I think everyone knows long term the days of oil are numbered regardless of what happens to the price, so countries that only rely on it are desperately scrambling to get away from it.

What can countries like Saudia Arabia turn to after their oil runs out or the market completely tanks? What's their next export or service? Second-hand goods?

[Cruor]

The last gasps of a dying industry.

Lol we will still have majority gas engines in 20 years. Electric is too short range and 95% of people do not have an hour to waste at a super charger. Even 10 minutes is too long. Let me know when the range is 500 miles With hard accelerations and air conditioning running and charge stations are everywhere and a charge happens in 5 mins or under. Then we can talk.

[Deleted]

Poor Canada, Venezuela and Russia. And other oil dependent economies.

Can supply more if you want?

US has to buy Russian natural gas as consumer prices soar.

RT
9 Jan, 2018 11:17

Russia will deliver liquefied natural gas (LNG) to the US, Kommersant daily reports. The reason for the deal is the sharp rise in gas prices on the east coast of the US.

An LNG tanker belonging to French energy company Engie is now shipping from the British port of Isle of Grain to an American terminal, Everett, located near Boston.

The gas being shipped is from Russia’s Yamal LNG plant, according to the newspaper. The tanker is due to arrive in the US on January 22.

As the newspaper reports, the deal was signed because of rising gas prices – to an unprecedented $6,300 per a thousand cubic meters – on the east coast of the US. Extreme weather conditions, in particular a snow storm, led to the price hike.

US sanctions against the Russian energy sector do not directly ban supplies of LNG to America from Moscow. However, Washington has repeatedly stressed it wants to oust Russia as Europe’s key gas supplier and has imposed sanctions that hinder the financing of Gazprom’s projects with Brussels.

The tanker was loaded in the British port just after Russian tanker Christophe de Margerie arrived in the UK in December with the first batch of Russian LNG.

In December, Russia opened an LNG plant in the country’s northern region of Yamal. The ice-breaking tanker was named after the former CEO of Total, Christophe de Margerie, who died in a plane crash in Russia. The tanker can carry up to 173,000 cubic meters of LNG. Russia plans to build 15 tankers of that size.

Costing $27 billion, the plant will have three production lines and a total capacity of 16.5 million tons of LNG per year. Almost 96 percent of the Yamal LNG plant’s production has already been contracted.

The project is a joint venture between Russia’s NOVATEK (50.1 percent), Total (20 percent), CNPC (20 percent), and the Silk Road Fund (9.9 percent).

[Elegiac]

Lol we will still have majority gas engines in 20 years. Electric is too short range and 95% of people do not have an hour to waste at a super charger. Even 10 minutes is too long. Let me know when the range is 500 miles With hard accelerations and air conditioning running and charge stations are everywhere and a charge happens in 5 mins or under. Then we can talk.

Exactly who drives 500 miles in a day with no breaks that isn't a long haul trucker? Lol.

[Draco-Onis]

What can countries like Saudia Arabia turn to after their oil runs out or the market completely tanks? What's their next export or service? Second-hand goods?

Internal spending to increase GDP which is why they have given women the right to drive and go around without a shadow, they are also doing tons of financial engineering using external and internal investments and side projects including cryptocurrency. The Russians are seeking a similar path which is why it is vital that those sanctions are removed so they can invest in outside entities and bring in foreign investments.

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Lol we will still have majority gas engines in 20 years. Electric is too short range and 95% of people do not have an hour to waste at a super charger. Even 10 minutes is too long. Let me know when the range is 500 miles With hard accelerations and air conditioning running and charge stations are everywhere and a charge happens in 5 mins or under. Then we can talk.

Oil is not an infinite resource the oil companies know this as evidenced by their large green energy investments, we should run out of oil within 40 years if not sooner.

[Cruor]

Exactly who drives 500 miles in a day with no breaks that isn't a long haul trucker? Lol.

My V8 f150? 36 gal tank. 18 miles A gallon. A Toyota Tundra 38 gal. 18 miles A gallon. My Jaguar XJR 21.5
gallon tank 24 miles A gallon (it would be close) get out of your lame little car 12 gallon tank world please. Also even for a car that is 300, fill time is 2 mins max vs 1 hour "super charge" station.

As for who drives it, long road trips, not a daily thing but I did GA to south Florida on a monthly basis. Also, when I do need to fuel I don't want to wait an hour.

[cubby]

Lol we will still have majority gas engines in 20 years. Electric is too short range and 95% of people do not have an hour to waste at a super charger. Even 10 minutes is too long. Let me know when the range is 500 miles With hard accelerations and air conditioning running and charge stations are everywhere and a charge happens in 5 mins or under. Then we can talk.

You're talking about maybe 5% of the people who drive. Probably 1%. Not sure why we have to meet that threshold to make electric viable.

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My V8 f150? 36 gal tank. 18 miles A gallon. A Toyota Tundra 38 gal. 18 miles A gallon. My Jaguar XJR 21.5
gallon tank 24 miles A gallon (it would be close) get out of your lame little car 12 gallon tank world please. Also even for a car that is 300, fill time is 2 mins max vs 1 hour "super charge" station.

As for who drives it, long road trips, not a daily thing but I did GA to south Florida on a monthly basis. Also, when I do need to fuel I don't want to wait an hour.

And you're aware that electric trucks have more torq than gas ones, right? And charging overnight is a thing, too.

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Internal spending to increase GDP which is why they have given women the right to drive and go around without a shadow, they are also doing tons of financial engineering using external and internal investments and side projects including cryptocurrency. The Russians are seeking a similar path which is why it is vital that those sanctions are removed so they can invest in outside entities and bring in foreign investments.

But internal spending on what? External investments make sense - but you can't drive a country's economy off the stock market. They need real $$$ coming in from something they do or produce. From what I've read/seen recently, they are already dialing back their free utilities and gas. And that was six months or a year ago. I can't imagine it's getting better.

Looks like Russia is going to be doubly fucked then. Good stuff.