Sunday, December 04, 2011

Big Oil Redraws Energy Map and Heads Back Home; U.S. Is At Forefront of Unconventionals Revolution

In Monday's WSJ, Guy Chazan explains why energy companies are shifting their focus away from the Middle East and toward the West, and how this will have profound implications for the companies, global politics and consumers, here's an excerpt:

"Big Oil is redrawing the energy map.  For decades, its main stomping grounds were in the developing world—exotic locales like the Persian Gulf and the desert sands of North Africa, the Niger Delta and the Caspian Sea. But in recent years, that geographical focus has undergone a radical change. Western energy giants are increasingly hunting for supplies in rich, developed countries—a shift that could have profound implications for the industry, global politics and consumers.  

Driving the change is the boom in unconventionals—the tough kinds of hydrocarbons like shale gas and oil sands that were once considered too difficult and expensive to extract and are now being exploited on an unprecedented scale from Australia to Canada.  

The U.S. is at the forefront of the unconventionals revolution. By 2020, shale sources will make up about a third of total U.S. oil and gas production, according to PFC Energy, a Washington-based consultancy. By that time, the U.S. will be the top global oil and gas producer, surpassing Russia and Saudi Arabia, PFC predicts.  

That could have far-reaching ramifications for the politics of oil, potentially shifting power away from the Organization of Petroleum Exporting Countries toward the Western hemisphere. With more crude being produced in North America, there's less likelihood of Middle Eastern politics causing supply shocks that drive up gasoline prices. Consumers could also benefit from lower electricity prices, as power plants switch from coal to cheap and plentiful natural gas.  

And the change is reshaping the oil companies themselves, as they reallocate their vast resources to new areas and new kinds of fuel. Working in the rich world—with its more predictable taxes and investor-friendly policies—removes some of the risks about the big oil companies that worry investors, making them less vulnerable to the resource nationalism of petrostates like Russia and Venezuela."

7 Comments:

At 12/05/2011 2:47 AM, Blogger juandos said...

I can't help but wonder if the so called Arab Spring might be driving some of return...

From the Nov. 2 issue of the Financial Times: In its twice yearly “Regional Economic Outlook: Middle East and Central Asia” report , the IMF estimates that the break-even oil price for UAE has now risen above $80 a barrel, up more than $60 a barrel from 2008. For Saudi Arabia, it is now at just $80 a barrel, up nearly $30 a barrel from three years ago. Even Kuwait, traditionally the richest emirate in the Gulf, has seen a hefty increase...

 
At 12/05/2011 10:50 AM, Blogger Don said...

"Working in the rich world—with its more predictable taxes and investor-friendly policies—removes some of the risks about the big oil companies that worry investors, making them less vulnerable to the resource nationalism of petrostates like Russia and Venezuela."

It seems to be an open question as to whether resource nationalism is more or less of a threat than the unlimited political stupidity demonstrated every day in Washington.

Regards, Don Lloyd

 
At 12/05/2011 11:57 AM, Blogger Benjamin said...

Interesting post. My understanding is that more rigs are active in the USA now than during the Bush jr years.

Often missed is that natural gas can be converted into methanol cheaply. A company named Methanex sells methanol for $1.30 a gallon. That's today--that's not a theory, or federal project etc.

Methanol is what Indy cars ran on until the ethanol folks got their fuel in there for PR reasons.

Methanol has about one-half the calories as gasoline, so $1.30 might be read as $2.60.

Still, one can see that fuel is no problem. There is private-sector research going on to convert natural gasoline straight to gasoline.

Add on that hybrids are getting 40 mpg or more.

Let the price signal work--and bring home our fantastically expensive overseas military archipelago, that is draining hundreds of billions of dollars out of the USA's private jobs-creating sector every year.

Militaries are parasites, like the government that support them

 
At 12/05/2011 12:09 PM, Blogger juandos said...

"My understanding is that more rigs are active in the USA now than during the Bush jr years"...

Sadly you didn't pay attention a to why that was happening pseudo benny...

From the Washington Times dated Nov. 2008: The congressional drilling moratorium was first enacted in 1982 and had been renewed annually until Democrats decided in late September not to seek another extension. At the time, they said they would work with the new White House administration to reinstate the ban soon after the new Congress convenes in January...

 
At 12/05/2011 3:59 PM, Blogger Benjamin said...

"Oil rigs now represent 56.8% of the total rig count, which is the highest on a percentage basis since February 1992. At 1,132 this is the highest level of oil drilling activity since Baker Hughes started reporting oil rig count in July 1987. We expect continued growth in oil drilling at the current price."

So, there is more oil drilling under Obama than Bush jr.

I am no fan of Obama; but I am a fan of the truth.

 
At 12/06/2011 9:20 PM, Blogger VangelV said...

It is all about political risk and favourable accounting rules that allow companies to hide declining reserves by acquiring shale properties that do not have to be economic.

 
At 12/06/2011 9:22 PM, Blogger VangelV said...

From the Nov. 2 issue of the Financial Times: In its twice yearly “Regional Economic Outlook: Middle East and Central Asia” report , the IMF estimates that the break-even oil price for UAE has now risen above $80 a barrel, up more than $60 a barrel from 2008. For Saudi Arabia, it is now at just $80 a barrel, up nearly $30 a barrel from three years ago. Even Kuwait, traditionally the richest emirate in the Gulf, has seen a hefty increase...

This is the big elephant in the room. Yet, it is being ignored by most people because they fell for the promoters' siren song that promises easy riches by getting economic oil and gas from stone that has never been able to meet expectations.

 

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