08 December 2010

Is North America the New Energy Kingdom?

With rising production from shale fields, the U.S. surpassed Russia last year to become the world’s largest supplier of natural gas. Shale now accounts for 10 per cent of the country’s natural gas production – up from 2 per cent in 1990. Chesapeake’s production from its next Texas project, expected by the end of 2012, will by itself supply the energy equivalent of 500,000 barrels of oil a day. _Globe&Mail
We know that Canada is overflowing with hydrocarbons from shale oil to oil sands to coal to natural gas to methane hydrates.... But the US was supposed to be "all tapped out" ever since oil production peaked back around 1970. Is it possible that all of the peak oil and peak energy doomers who foretold the end of US oil & gas may have been a bit premature?
U.S. domestic production for the year will be 140,000 barrels a day higher than last year (which was 410,000 barrels a day higher than 2008). Although the U.S. Energy Information Administration (EIA) says U.S. production will decline next year, who knows?

...As an article last month in The New York Times observed: “Just as it seemed that the world was running on fumes, giant oil fields were discovered off the coasts of Brazil and Africa, and Canadian oil sands projects expanded so fast, they now provide North America with more oil than Saudi Arabia. In addition, the United States has increased domestic oil production for the first time in a generation.” Further still: “Another wave of natural gas drilling has taken off in shale rock fields across the United States, and more shale gas drilling is just beginning in Europe and Asia.”

...For natural gas, the U.S. has the four largest fields in the world: the Haynesville field in Louisiana (with production up by 77 per cent in 2009); the Fayetteville field in Arkansas and the Marcellus field in Pennsylvania (both with production up by 50 per cent); and the Barnett field in Texas and Oklahoma (with production up by double-digit increases). The EIA reports that proven U.S. reserves of natural gas increased last year by 11 per cent to 284 trillion cubic feet – the highest level since 1971.

Beyond shale oil and shale gas, there’s the awesome energy promise of methane hydrates, frozen crystals of water and gas that lie beneath the northern permafrost and beneath oceans floors around the world in quantities that boggle the imagination.

“Assuming 1 per cent recovery,” the U.S. Geological Survey says, “these deposits [in U.S. territory] could meet the natural gas needs of the country (at current rates of consumption) for 100 years.” _Globe&Mail
Gas producers are scurrying to find ways to export gas to cold, hungry customers in Asia and Europe. LNG -- liquified natural gas -- is one approach which is being developed for the export market. GTL -- gas to liquids -- is another approach that is likely to be developed inside the US within the next 10 years. Both approaches will allow for easier entry into the lucrative export markets. The GTL approach will also -- if economical -- allow gas to be converted into liquid fuels at a profit. That should help reduce North American dependency on overseas oil, once developed.

Cross-posted to Al Fin Energy

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Blogger Hell_Is_Like_Newark said...

Over the past three years, I have put a modest amount of my retirement money into energy stocks and funds that focus either on the domestic market and / or the unconventional gas / oil market. I figure if / when the economy comes back, the energy sector will see the biggest growth.

Since the energy stock crash in 2008, I have seen some of my investments recover from penny stock status to double digit stock values with positive cash flow.

I believe real exponential growth will happen when a company like Chesapeake Energy announces they will begin exporting LNG or GTL. China's state oil company already gave Chesapeake over a billion to develop and gas shale play. China wants the gas.

The only real threat that I see to the growth in the energy sector would be a collapse of the dollar and freezing of the credit markets, putting the USA into a third world status. You can't invest in infrastructure without a functioning capital market and cooperation from the government (as far as permits, approvals are concerned).

Thursday, 09 December, 2010  
Blogger DB said...

Without sustained hyperinflation for a long long time the USA won't become a third world country.
Britain had a brief period of extremely high inflation in the 1970s (reaching over 25%), yet they are still counted as an advanced nation.

The USA has to fall a long, long way before it becomes third world and even if it becomes more and more like France I'd like to point out that there are hordes of third worlders trying to GET TO France.

Wednesday, 15 December, 2010  
Blogger al fin said...

Obama is doing everything he can to make the US a third world country. Have some faith in the man.

Tuesday, 21 December, 2010  

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