Timing Is Everything And The Choice Is Ours To Make --- The New Big Oil

 

Selected highlights after the fold.

I had in the past discussed a Rand paper (pdf)  in some detail.  It demonstrates the vast amount of oil available in the U.S. via Oil Shale extraction.  Now there’s a new paper (pdf) which reinforces this availability.  Well, it does a lot more than must reinforce it.  It’s from the Belfer Center described as the hub of the Harvard Kennedy School’s research.  This paper entirely destroys any remaining notion of peak oil.  It’s a rather lengthy paper which is incredibly informative in both the macro and micro. 

Typically, when writing for this blog, I would present the information and then discuss it.  I’m going to reverse that order because of the magnitude of the information.

Right now, the North America has an opportunity to grab much of the the concentration of oil production away from OPEC.   The amount of unconventional oil available is staggering, nearly unfathomable.  At current oil prices, we easily can move to mass production.  In fact, it has already started.  The paper asserts, and reasonably so, that the only thing standing in the way is government and advocacy.  The paper also makes it fairly clear that we have a certain window of opportunity which is unique to the U.S. and Canada only.  It also underscores the transport infrastructure isn’t built to handle this sort of capacity.  We need the pipelines built and we need to start building them now. 

Now, here’s the point of the post.  Regardless of the climate alarmist lunacy, oil consumption and production will continue.  There are no if and/or buts about this.  Again, currently the U.S. and Canada have the unique opportunity to seize the moment.  But, if we wait too long, other areas of the world will develop the ability to do the same things we can today.  So, for those worried about shale oil or tar sands or whatever, you needn’t worry, oil will be extracted from them.  The only question is who will do it?

In the immediate future, the U.S. has a monumental choice.  With the current president’s choices he’s made in his first term, it is abundantly clear that he will not allow the U.S. to move forward in this manner.  While Romney and Ryan have sail little towards the specifics of the immense oil reserves we have, I’ve little doubt that they wouldn’t be the obstructionists the Obama administration are. 

This is the path to prosperity for the U.S.   I find it wildly ironic that the president who campaigned with a slogan “yes, we can”, says we “can’t drill our way out of this”, when the obvious answer to that posit is, “yes, we can!”  Jobs, deficit reduction, increased GDP, fuel from reliable regions, less influence to radical extremists who whish us harm, a balancing of our trade deficit….. the list goes on and on of the positive benefits of once again being a major supplier of the world’s oil. 

We can either opt to continue this depressingly relentless and inevitable decline, or we can move to change then nature of not only the U.S.’ economic outlook but also our friendly neighbors.  We can sit idly by, watching and cursing history, or we can choose to make history and re-write the outcome of western civilization! 

I don’t know what my fellow countrymen will do, but as for me, I’m voting for America, I’m voting for North America, I’m voting for Western Civilization, I’m voting for Romney!

I probably don’t have to write about “peak oil” in that most people with an operating synapse already knows its simply a falsehood propagated by Malthusians. But, I enjoy poking the people who blathered about it. You know who you are, and we know who you are, so don’t even try denying it!   This paper lays this question at it’s final resting place. 

It also has a good piece in about what fracking is with a nice illustration.

Yes, very scary for the water table.  Idiots.

Here’s some highlights……

On a global scale, the U.S. Geological Survey (USGS) estimates the remaining conventional oil resources in the earth at about seven trillion to eight trillion barrels, out of eight-to-nine trillion barrels of Original Oil in Place (OOP). Part of this (about one trillion barrels) has already been consumed by humankind. With today’s technology and prices, only part of the OOP can be recovered economically and thus be classified as a proven reserve.

But, then the paper goes on to find that the USGS constantly lowballs the estimates. 

The USGS (2003) and the World Energy Council (WEC, 2007) estimated that there could be more than 9 trillion barrels of unconventional oil resources beneath the surface of our planet, with only 300 billion barrels of them potentially recoverable at the time of that estimation. However, as we can see from the shale/tight natural gas and oil boom in the U.S., those kinds of evaluations were both based on a conservative probabilistic approach that was already outdated, as they could not factor in the rapidly evolving use of new technologies to explore and develop hydrocarbon basins.

The paper also discusses the unique opportunity the U.S. currently has.

It is worth noting that the U.S. shale revolution cannot be easily replicated in other areas of the world – at least in a short period of time – due not only to the huge resource base of shale/tight oil plays existing in the U.S., but also to some unique features of the U.S. oil industry and market, such as the private ownership of mineral rights, the presence of thousands independent companies – oftentimes small – that historically played the role of pioneering new high-risk, high-reward targets, the huge availability of drilling rigs and other exploration and production tools, a very active financial market that supply money for new ventures. With the exception of Canada, these key features are foreign to other parts of the world, and they make the U.S. and Canada a sort of unique arena of experimentation and innovation.

Whatever the future, the analysis reported in this paper reveals some important points:

• Oil is not in short supply. From a purely physical point of view, there are huge volumes of conventional and unconventional oils still to be developed, with no “peak-oil” in sight. The real problems concerning future oil production are above the surface, not beneath it, and relate to political decisions and geopolitical instability.  …..

• The shale/tight oil boom in the United States is not a temporary bubble, but the most important revolution in the oil sector in decades. It will probably trigger worldwide emulation over the next decades that might bear surprising results – given the fact that most shale/tight oil resources in the world are still unknown and untapped. What’s more, the application of shale extraction key-technologies (horizontal drilling and hydraulic fracturing) to conventional oilfield could dramatically increase world’s oil production.

• The age of “cheap oil”is probably behind us, but it is still uncertain what the future level of oil prices might be. Technology may turn today’s expensive oil into tomorrow’s cheap oil.

[Cheap is defined as $20-$30/barrel]

• The oil market will remain highly volatile until 2015 and prone to extreme movements in opposite directions, thus representing a major challenge for investors, in spite of its short and long term opportunities. After 2015, however, most of the projects considered in this paper will advance significantly and contribute to a strong build-up of the world’s production capacity. This could provoke a major phenomenon of overproduction and lead to a significant, stable dip of oil prices, unless oil demand were to grow at a sustained yearly rate of at least 1.6 percent for the entire decade.

The U.S. shale/tight oil could be a paradigm-shifter for the oil world, because it could alter its features by allowing not only for the development of the world’s still virgin shale/tight oil formations, but also for recovering more oil from conventional, established oilfields – whose average recovery rate is currently no higher than 35 percent.

The paper also discusses transport and capacity issues…….

Consequently, the oil production of Western Canada and North Dakota relies on the same transportation system, stretching along a north-south corridor from Canada to the U.S. Gulf Coast, with a critical point at Cushing, Oklahoma, the most important oil-trading hub in the U.S. and the largest oil storage location in the world. That corridor is already inadequate to carry the growing supply of Canadian unconventional oils and North Dakota shale oil, but Montana and other states also rely on the same corridor. That is why part of the Bakken oil production moves by rail and truck, an inefficient and expensive way to move the oil.  In view of President Obama’s speech in Cushing in March 2012 supporting additional oil pipelines, it is probable that the situation could change drastically, particularly after the Presidential elections of November 2012.

It continues with a discussion of a economic analysis paper……….

So far, the only estimate of the broader effects of the combined shale oil and gas revolution on the United States economy has been made by Citigroup, according to which “the cumulative impact Oil: The Next Revolution of new production and reduced consumption could increase real U.S. gross domestic product (GDP) by 2% to 3.3%, or by $370 billion to $624 billion, by 2020.” As to the labor market, Citigroup estimated “that as many as 3.6 million new jobs may be created on net by 2020. Some 600,000 jobs would be in the oil and gas extraction sector, another 1.1 million jobs in related industrial and manufacturing activity, and the remainder in ancillary job sectors.” Finally, the shale hydrocarbon revolution may substantially affect the U.S. current account deficit, which, “currently running at negative 3% of GDP, may be reduced by anywhere from 1.2% of GDP to 2.4% of GDP.”

I would encourage all the read the paper.  It’s excellently written, it discusses the author’s uncertainties and has much more information to offer than I could possibly put in a blog post. 

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