Thursday, August 23, 2012

Shale Oil: A Tremendous Development for U.S. Oil Production, Shovel-Ready Jobs, Economic Growth


Bloomberg -- "A boom in oil production from the shale formations of North Dakota and Texas has the U.S. on a course to cut its reliance on imported crude oil to about 42% this year, the lowest level in two decades. Dependence on crude purchased from foreign countries is on a pace to decline from last year, Adam Sieminski, the head of the U.S. Energy Information Administration, said during a Bloomberg Government lunch yesterday in Washington."

"Higher oil prices and an increased use of a drilling technique known as hydraulic fracturing has producers including Continental Resources Inc. (CLR), Marathon Oil Corp. (MRO) and Hess Corp. (HES) boosting production from oil-rich geologic formations. Hydraulic fracturing involves pumping millions of gallons of water into the ground to free oil and natural gas and has been widely used in shale-rock formations such as the Bakken of North Dakota and Eagle Ford in Texas."

“What’s happening in North Dakota, and in Texas, with Eagle Ford, Bakken formation in North Dakota, is a tremendous development for U.S. oil production and economic growth,” Sieminski said. 

"In 2011, the U.S. relied on imports for 44.8% of its petroleum consumption, down from 60.3% in 2005, according to EIA data (see chart above). This year, the country should end up at about 42%."

MP: The chart above shows net oil imports from 1992 to 2012 based on EIA data through June.  For the January-June period this year, net oil imports have fallen to an average of 42.2%, which is the lowest level since 40.7% in 1992, 20 years ago. In comparison, net oil imports during the first six months of 2011 were 46.8% and were 50.9% during that period in 2010.  

4 Comments:

At 8/23/2012 11:56 AM, Blogger Buddy R Pacifico said...

According to the EIA chart:

Yes, oil imports have steadily fallen since a peak in 2005 but...

oil exports have more than doubled per month during that time.

Oil, in the form of refined petroluem products and fuel, are the #1 and #2 U.S. exports.

 
At 8/23/2012 12:15 PM, Blogger marmico said...

Yes, oil imports have steadily fallen since a peak in 2005 but

Exactly. Gross petroleum imports have fallen from 65.9% of consumption in 2005 to 58.3% average in the first 6 months of 2012 whereas gross petroleum exports have risen from 5.6% of consumption in 2005 to 16.2% average in the first 6 months of 2012.

If exports are rising faster than imports, the net import ratio declines, all things equal.

 
At 8/23/2012 4:21 PM, Blogger Buddy R Pacifico said...

marmico,

The ability of the U.S. to produce oil from horizontal drilling, has made it possible for oil products to be the leading exports...

resulting in even more jobs and econmic growth.

You do agree with this very positive good news don't you?






 
At 8/25/2012 11:55 AM, Blogger VangelV said...

The ability of the U.S. to produce oil from horizontal drilling, has made it possible for oil products to be the leading exports...

resulting in even more jobs and econmic growth.

You do agree with this very positive good news don't you?


Only if the returns are economic. Spending $7 to $10 million a well to produce $100 bpd after a year does not seem like a good investment to me. Yes, as long as the negative cash flow problems can be solved by equity dilution and more debt you can have an increase in jobs and economic activity being reported but that is only meaningful and positive in the long run if there is no capital destruction. The problem for the shale sector is that outside of limited core areas in the best formations the production process cannot offer positive returns.

And since one way to reduce imports is to have an economic contraction that causes a lower use of gasoline and jet fuel it is hard to label such a development as 'positive'.

 

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