Energy Watchblog: unconventional

Madalena announces test results for horizontal well in Neuquén basin

<div class="separator" style="clear: both; text-align: center;"><a href="http://ceo.ca/wp-content/uploads/2013/11/mvn_corp_pres_Nov2013.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="193" src="http://ceo.ca/wp-content/uploads/2013/11/mvn_corp_pres_Nov2013.jpg" width="320" /></a></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"><span style="line-height: 1.6em;">Independent Canadian oil and gas company </span>Madalena Energy<span style="line-height: 1.6em;"> (</span>TSX-V<span style="line-height: 1.6em;">:</span>MVN<span style="line-height: 1.6em;">) has announced the results of a multi-rate production test of the CAN.xr-2h horizontal lateral re-entry well, at the </span>Coiron Amargo<span style="line-height: 1.6em;"> block in Argentina's </span>Neuquén<span style="line-height: 1.6em;"> basin.</span></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;">The well represents the first horizontal well drilled into one of the six Sierras Blancas conventional light oil pools discovered to date on the Coiron Amargo block.</div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;">During the test period of 142 hours, the total produced cumulative volumes were approximately 2,736b of oil (38° API) and approximately 4.15Mf3 (116,099m3) of natural gas, for a total of approximately 3,428boe (80% oil).</div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;">The CAN.xr-2(h) well was drilled to a total measured depth of 3,751m with a horizontal lateral section of approximately 530m in length.</div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;">A second horizontal well targeting the Sierras Blancas light oil reservoir (CAN-15(h)) is expected to be spudded in January 2014.</div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;"></div><div style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 13px; line-height: 18px; margin-bottom: 20px;">Madalena is currently drilling a Vaca Muerta shale delineation well at the CAS.x-15 location in the southern portion of the Coiron Amargo block. Completion and testing operations on this well are expected to be carried out as part of a multi-well completion and frac program in 2014.</div>

Madalena announces test results for horizontal well in Neuquén basin

Independent Canadian oil and gas company Madalena Energy ( TSX-V : MVN ) has announced the results of a multi-rate production test of the ...

North America to Drown in Oil as Mexico Ends Monopoly

The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil fields.<br /><div id="lead_graphic"><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgS0joW2RJFSyWduhLMGXEAisqMBNAxZ1PDVu9snPFlG4WczT4YPdcVAn0Ps5lyfK4eOqysJAF-TS-gUaXV4a_TXLBdTlzLo0ZUqULjsFPhzGqyI7AExw7P5K52ApB-0tfXYZywHLeUimL0/s1600/iRvYObLYbSOI.jpg" /></div><br /><div class="photo_caption"><span style="font-size: x-small;">The  Petroleos Mexicanos (Pemex) La Muralla IV deep sea crude oil platform  in the waters off Veracruz, Mexico, on Aug. 30, 2013. Photographer:  Susana Gonzalez/Bloomberg</span></div><div class="photo_caption"><br /></div></div><div class="page current" id="_page1"><div class=""><div id="authorial"><span class="byline"><span class="byline-text">Joe Carroll and Bradley - BB</span></span><br /><span class="byline"><span class="byline-text"><br /></span></span></div></div>Plagued by almost a decade of slumping output that has  degraded Mexico’s take from a $100-a-barrel oil market, President  Enrique Pena Nieto is seeking an end to the state monopoly over one of  the biggest crude resources in the Western Hemisphere. The doubling in  Mexican oil output that Citigroup Inc. said may result from inviting  international explorers to drill would be equivalent to adding another  Nigeria to world supply, or about 2.5 million barrels a day.<br /><br />That boom would augment a supply surge from U.S. and Canadian wells that <span class="ticker_wrap"><span itemscope="" itemtype="http://schema.org/Corporation"><span itemprop="name">Exxon Mobil Corp.</span></span> (<a class="ticker" data-symbol="XOM:US" href="http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=XOM:US">XOM:US</a>)</span> predicts will vault North American production ahead of every OPEC  member except Saudi Arabia within two years. With U.S. refineries  already choking on more oil than they can process, producers from Exxon  to ConocoPhillips are clamoring for repeal of the export restrictions  that have outlawed most overseas sales of American crude for four  decades. <br /><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 1"><br /></div>“This is going to be a huge opportunity for any kind of player”  in the energy sector, said Pablo Medina, a Latin American upstream  analyst at Wood Mackenzie Ltd. in Houston. “All the companies are going  to have to turn their heads and start analyzing Mexico.” <br /><h2>Unprecedented Output </h2>An  influx of Mexican oil would contribute to a glut that is expected to  lower the price of Brent crude, the benchmark for more than half the  world’s crude that has averaged $108.62 a barrel this year, to as low as  $88 a barrel in 2017, based on estimates from analysts in a Bloomberg  survey. Five of the seven analysts who provided 2017 forecasts said  prices would be lower than this year.<br /><br />The revolution in shale  drilling that boosted U.S. oil output to a 25-year high this month will  allow North America to join the ranks of the world’s crude-exporting  continents by 2040, Exxon said in its annual global energy forecast on  Dec. 12. Europe and the Asia-Pacific region will be the sole crude  import markets by that date, the Irving, Texas-based energy producer  said. <br /><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 0"><br /></div>Exxon’s forecast, compiled annually by a team of company  economists, scientists and engineers, didn’t take into account any  changes in Mexico, William Colton, the company’s vice president of  strategic planning, said during a presentation at the Center for  Strategic and International Studies in Washington on Dec. 12.<br /><br />Opening  Mexico’s oilfields to foreign investment would be “a win-win if ever  there was one,” said Colton, who described the move as “very good for  the people of Mexico and people everywhere in the world who use energy.”  <br /><h2>$15 Billion Boost </h2>The bill ending the state monopoly was approved by the Mexican  Congress Dec. 12. Before becoming law, the proposal must be ratified by  state assemblies, most of which are controlled by proponents of the  reform. Oil companies will be offered production-sharing contracts, or  licenses where they get ownership of the pumped oil and authority to  book crude reserves for accounting purposes. The contracts will be  overseen by government regulators.<br /><br />Though some foreign companies  already operate in Mexico under service contracts with Petroleos  Mexicanos, or Pemex, the reform could increase foreign investment by as  much as $15 billion annually and boost potential economic growth by half  a percentage point, JPMorgan Chase & Co. said in a Nov. 28 report. <br /><h2>Potential Delays </h2>A  doubling in production as suggested by Citigroup’s Ed Morse would put  Mexican output at 5 million barrels a day, an unprecedented level for  Pemex, the state oil company created during nationalization in 1938.<br />  <br />U.S. crude production will expand to 9.5 million barrels a day  in 2016, the highest since the nation’s peak in 1970, the U.S. Energy  Information Administration said today. That contrasts with last year’s  EIA forecast that production would reach 7.5 million in 2019 before  gradually declining to 6.1 million in 2040. U.S. output reached an  all-time high 9.6 million in 1970.<br /><br />A doubling of Mexico’s output  maybe be slower to realize than the most bullish predictions as  companies confront barriers in accessing capital and human resources  needed for development, Riccardo Bertocco, a partner at Bain & Co.  in Dallas.<br /><br /><div class="">An increase of 1 million barrels a day in  output is the most realistic upper limit of what Mexico could achieve by  2025 based on the cost for new infrastructure, competition for new  fields and opportunities all over the U.S., Bertocco said in a telephone  interview Dec. 12. </div><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 0"><br /></div><div class="">“The opportunities are there, but they are still far from being materialized,” he said.<br /><br /><h2 class="">Regulator Inexperience </h2>Drilling in Mexico will be  held back by a lack of infrastructure, such as pipelines, in some of the  potential shale developments. The government will need to decide on  details for development such as tax rates, royalty structures and  standards for booking reserves, Kurt Hallead, an analyst at RBC Capital  Markets, wrote in a Dec. 12 note to clients.<br /><br />It will take time to  organize and conduct bidding rounds for licenses, and additional  exploration, such as seismic tests, will need to be done, Hallead said.<br /><br />“We are not expecting any significant impact from the reform to be felt in the next two years,” he wrote.<br /><br />Foreign  oil companies will face a backlash from Mexicans opposed to sharing the  nation’s oil wealth, said Ricardo Monreal Avila of Movimiento Ciudadano  Party, who sees the reform as violating Mexico’s constitution. <br /><h2>Local Opposition </h2>“We  are going to see serious problems in the operations of these reforms.  Indigenous communities and places chosen by foreign companies for  extraction will not allow them on their property. There are going to be  serious operational problems.”<br /><br />Brent crude futures, the benchmark  for more than half the world’s oil, rose as much as 1.8 percent to  $110.80 a barrel in London today, the biggest intraday gain in two  weeks, after Libyan rebels refused to relinquish control over oil ports  to the central government. Libya, home to Africa’s largest proven  reserves, has seen output tumble to the lowest since 2011 amid civil  strife.<br /><br />The first assets that will attract foreign investment  will be mature oil fields drilled decades ago and reservoirs that need  injections of steam or carbon dioxide to coax more crude out of the  ground, Medina said. Deep-water prospects, shale and other technically  challenging endeavors will follow later, he said.<br /><br />The level of  investor interest will be partly determined by which assets Pemex  chooses to keep and which it will put up for auction, Medina said. <br /><h2>Chicontepec Price </h2>The  Chicontepec field northeast of Mexico City may be among the richest  prizes Pemex surrenders after its problems overcoming low pressure and  disconnected crude deposits that have limited output, Medina said.  Production that has averaged about 60,000 barrels a day may be increased  to more than 100,000 by an international producer experienced in  handling such fields, he said. <br />Chicontepec is just one of the  over-budget, long-delayed projects for which Pemex will be eager to find  partners, said Jose Antonio Prado, a former general counsel of Mexico’s  energy ministry and Pemex official.<br /><br />“The Mexican state will be  able to incorporate private participants in projects that are already in  force as well as new opportunities,” said Prado, now a partner at the  law firm Holland & Knight LLP in Mexico City. <br /><h2>Deep Water </h2>The  reforms are especially important to open up exploration in Mexico’s  deep-water fields, where additional capital, as well as better  technology and expertise are needed, Carlos Solé, a Houston-based  partner at Baker Botts LLP, said in a telephone interview. Pemex  estimated the country’s deep-water Gulf of Mexico prospects may hold the  equivalent of 26.6 billion barrels of crude.<br /><br />Onshore, the  potential is even greater with more than 60 billion untapped barrels,  according to a Pemex presentation last month.<br /><br />Some of the  potential shale production sits across the border from Texas’s prolific  Eagle Ford formation. The most resource-rich area studied so far is  around the city of Tampico, a coastal city about 300 miles (480  kilometers) south of the bottom tip of the Texas border.<br /><br />“I can’t  tell you the amount of banks and investment funds coming from the U.S.  and Europe that have been talking to us and are trying to have an  expectation of what’s going to happen with the energy reform,” Prado  said. “All those guys are going to be in Mexico next year in various  forms trying to seek new opportunities.” </div></div>

North America to Drown in Oil as Mexico Ends Monopoly

The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil ...

DrillingInfo / Allen Gilmer : Eagle Ford Shale Takeaways: 5 Reasons You Must Become an Exceptional Shale Oil Operator

<div class="entry" style="margin: 0px; padding: 0px;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeesaUbrJN_jRzMqlWi10h8usiwg2tDOdeaAyI9gZ2NRBp8UJkuzRk_XmHmg_lTygckdJurER_Sxrfe3hsyhAxycCAq_0jMnd1s7565a8PAj22KU5yx13vrgDrgjLB9MeQidnh8KS-xThW/s1600/Putin.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><br /><br /><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeesaUbrJN_jRzMqlWi10h8usiwg2tDOdeaAyI9gZ2NRBp8UJkuzRk_XmHmg_lTygckdJurER_Sxrfe3hsyhAxycCAq_0jMnd1s7565a8PAj22KU5yx13vrgDrgjLB9MeQidnh8KS-xThW/s1600/Putin.jpg" /></a></div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: start;"><span style="color: #003366; font-family: Helvetica Neue, Helvetica, sans-serif;"><span style="font-size: 22px; line-height: 22px;"><br /></span></span></div><div class="pf-content" style="background-color: white; color: #333333; font-family: 'Helvetica Neue', Helvetica, sans-serif; font-size: 14px; line-height: 19.59375px; margin: 0px; padding: 0px;">Many look to the Eagle Ford Shale as a phenomenal example of US oil and gas companies doing exceptional things. But not everyone shares our enthusiasm.<br /><div style="margin-bottom: 20px;"></div><div style="margin-bottom: 20px;"><a href="http://wapo.st/1gHajQZ" style="-webkit-transition: background-color 0.2s ease, border 0.2s ease, color 0.2s ease; color: #ff6600; outline: none; text-decoration: none; transition: background-color 0.2s ease, border 0.2s ease, color 0.2s ease;">Vladimir Putin recently said,</a> “It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation.”</div><div style="margin-bottom: 20px;">Apparently, he thinks the world would be better off if we all saw ourselves as hopeless lackeys.</div><div style="margin-bottom: 20px;">However, there is a certain amount of delicious irony in this statement,<strong>because the reality is that the whole story of the US unconventional oil and gas industry is about American Exceptionalism.</strong></div><div style="margin-bottom: 20px;">It’s about those operators in our industry that aren’t afraid to push the envelope. The operators that understand the risks AND rewards, and challenge the status quo with regards to what is and is not possible.</div><h2 style="color: #003366; font-size: 22px; font-weight: normal; line-height: 22px; margin: 0px 0px 10px; padding: 0px 0px 15px;">Not all Operators are Created Equal</h2><div style="margin-bottom: 20px;">We recently examined several thousand wells and extracted a variety of geological and petrophysical parameters to build a geological model across the Eagle Ford play to replicate the methods we employed in the Barnett and the Bakken. We then analyzed the over 7,000 wells that are producing today to reference against these to find out what things that are actually driving results in these shale plays.</div><div style="margin-bottom: 20px;"><strong>What we found in EACH PLAY is there really is no such thing as established “best practices” in unconventional oil and gas. There is only what we know today, and everything gets to be challenged.</strong></div><div style="margin-bottom: 20px;">There are a handful of operators that are starting to challenge what the others are doing and thinking. These operators demonstrate that in unconventional oil and gas, these shale reservoirs are not the same beasts for everyone. <strong>There are companies that do it more right, and there are companies that are doing it more wrong.</strong></div><div style="margin-bottom: 20px;">Not surprisingly, the companies doing it right are booking large reserves and seeing exceptional returns – both in terms of new production and new investments into the company. So a great divide exists between those operators that are willing to invest in the knowledge, <a href="http://bit.ly/17PjDBJ" style="-webkit-transition: background-color 0.2s ease, border 0.2s ease, color 0.2s ease; color: #ff6600; outline: none; text-decoration: none; transition: background-color 0.2s ease, border 0.2s ease, color 0.2s ease;">analytics</a> and technology you need to be successful in plays like the Eagle Ford Shale, and those operators that are crossing their fingers hoping for the best.</div><div style="margin-bottom: 20px;"><strong>If you are in the latter group, I present to you 5 reasons that show beyond a shadow of a doubt to thrive in the 21st Century oil and gas industry, you absolutely must become an exceptional shale oil operator.</strong></div><h2 style="color: #003366; font-size: 22px; font-weight: normal; line-height: 22px; margin: 0px 0px 10px; padding: 0px 0px 15px;">Lessons from the Eagle Ford Shale: 5 Reasons You Must Become an Exceptional Unconventional Operator</h2><div style="margin-bottom: 20px;"><strong>1. Accelerated Production:</strong> <strong>The very best Eagle Ford Shale operators produce 30% to 40% better than the median FOR THE SAME QUALITY OF ROCK, and they produce 3 times as much as operators at the low end.</strong> Companies like EOG, Marathon and Freeport can work the same rock, with basically the same equipment and get 3x the production. What would it do to your stock price or the amount of investors willing to partner with you on your next operation if you could go out there and say you produce as much as 3 times as the rest of the industry drilling the exact same rock?</div><div style="margin-bottom: 20px;"><strong>2. Access to Prime Acreage:</strong> The implications for mineral owners in this scenario are obvious. Massive gaps in production naturally lead to large gaps in royalty payments. <strong>A 25% royalty lease with an average operator is the equivalent to an 18% royalty lease with the best operators. That same lease with the worst operators is the same as an 8% lease with the best.</strong> As a mineral owner, when was the last time you gave an 8% lease? If it was recently, call me. Lets do some bidness! As an operator, are you taking advantage of your abilities to get the better leases?</div><div style="margin-bottom: 20px;"><strong>3. Opportunity Cost:</strong> Based on current numbers, we anticipate the Eagle Ford Shale will reach a maximum rate of production in as early as 2022. Production will flatten out until about 2028-2029 and then start to drop. Looking at the baseline production forecast in grade A to G acreage, there are up to 85,000 wells left to be drilled. If you take it down to H-grade acreage – which the best operators will eventually be able to go out and produce – <strong>you’re looking at as many as 100,000 wells left to drill in the Eagle Ford Shale.</strong> How much money are you leaving on the table if you don’t go out and get your biggest share of that 100,000?</div><div style="margin-bottom: 20px;"><strong>4. Lower Break Even Cost:</strong> As I alluded to in the last point, our <a href="http://info.drillinginfo.com/products/di-analytics/" style="-webkit-transition: background-color 0.2s ease, border 0.2s ease, color 0.2s ease; color: #ff6600; outline: none; text-decoration: none; transition: background-color 0.2s ease, border 0.2s ease, color 0.2s ease;" target="_blank">DI Analytics team</a> has graded the produceability of the Eagle Ford Shale and graded the acreage from A through J grades. What’s fascinating is at G-grade, the average operator needs oil prices at $101 to break even. However, the best operators can break even when prices are as low as $60 in this same grade of acreage! You see this same ratio all the way up into the best acreage. Naturally, this means if you’re not a very good operator, you have to have really fantastic acreage to turn a profit. <strong>But if you’re an incredible operator, there’s a whole lot of opportunity for you to pick up acreage belonging to worse operators for what is essentially the proven producing value.</strong> Which side of the equation would you rather be on?</div><div style="margin-bottom: 20px;"><strong>5. Service Companies Can’t Save You:</strong> There is a rule of thumb in the oil and gas industry that says oilfield service companies provide a wonderful method of technology transfer. In other words, you don’t really need to know how to do the work because you can get company A, B or C to go tell you how it’s done. After all, they do everybody else’s wells so they can just tell you the secret sauce, right? <strong>But the data shows that’s simply not true.</strong> As essential as they are to the industry, oilfield service companies are not involved in enough pieces of the puzzle to effectively take or even recognize best practices and successfully apply them across the board. How much money to you stand to lose by counting on service companies to save your GG&E team?</div><h2 style="color: #003366; font-size: 22px; font-weight: normal; line-height: 22px; margin: 0px 0px 10px; padding: 0px 0px 15px;">To the Victor Go the Spoils</h2><div style="margin-bottom: 20px;">What this all boils down to is it’s those companies that are willing to roll up their sleeves, do the work and make the investments necessary to master these plays that are seeing extraordinary returns. And these same companies stand to continue making gains well into the future.</div><div style="margin-bottom: 20px;"><strong>Operators like EOG, Marathon and Freeport may seem like the minority today because they are part of the small handful of people that “get it”. But it won’t take long before they begin to sweep up and produce the massive amounts of acreage that will be left behind by those that have not made the necessary effort to be good at unconventional drilling.</strong></div><div style="margin-bottom: 20px;">After the dust settles in the South Texas oilpatch, we will see it was the true unconventional innovators that were the majority all along … because these will be the operators that are left standing. These survivors will be the ones left happily maximizing production and returns from acreage so many others gave up on long ago.</div><div style="margin-bottom: 20px;"><strong>Thomas Jefferson once said, “One man with courage is a majority.”</strong></div><div style="margin-bottom: 20px;"><strong>Again, which side of the equation do you want to be on?</strong></div><h2 style="color: #003366; font-size: 22px; font-weight: normal; line-height: 22px; margin: 0px 0px 10px; padding: 0px 0px 15px;">Your Turn</h2><div style="margin-bottom: 20px;">What do you think? How much of a time horizon do we have left in the Eagle Ford Shale? And which operators will ultimately win out? Leave your thoughts in the comment below. If you want to learn more about Drillinginfo’s Analytics Subscriptions or how to bring this in-house at your shop, please email Bob Black at bblack [at] drillinginfo [dot] com.<strong>And if you want the slide deck from my DUG Eagle Ford 2013 presentation that created this post, enter you information below and click “Give It To Me!”</strong></div><div style="margin-bottom: 20px;"></div></div><div class="ts-fab-wrapper" id="ts-fab-below" style="background-color: white; clear: both; color: #333333; font-family: 'Helvetica Neue', Helvetica, sans-serif; font-size: 14px; line-height: 19.59375px; margin: 2em 0px; padding: 0px;"><span class="screen-reader-text" style="clip: rect(1px 1px 1px 1px); left: -9999px; position: absolute !important;">The following two tabs change content below.</span><br /><div class="ts-fab-tabs" style="margin: 0px; padding: 0px;"><div class="ts-fab-tab" id="ts-fab-bio-below" style="border: 2px solid rgb(51, 51, 51); margin: 0px; min-height: 80px; overflow: hidden; padding: 12px;"><div class="ts-fab-avatar" style="float: left; margin: 0px; padding: 0px; width: 80px;"><img alt="" class="avatar avatar-80 photo" height="80" src="http://0.gravatar.com/avatar/c77862abc00975bdb42157e7f29ed85b?s=80&d=http%3A%2F%2F0.gravatar.com%2Favatar%2Fad516503a11cd5ca435acc9bb6523536%3Fs%3D80&r=G" style="border: 0px !important; max-width: 100%; width: 80px;" width="80" /><br /><div class="ts-fab-social-links" style="margin: 0.1em 0px 0px; padding: 0px; text-align: center;"></div><div style="margin-bottom: 20px;"></div></div><div class="ts-fab-text" style="line-height: 1.5; margin: 0px 0px 0px 96px; padding: 0px;"><div class="ts-fab-header" style="margin: 0px 0px 10px; padding: 0px;"><h4 style="clear: none !important; color: #003366; font-size: 18px; line-height: 1 !important; margin: 0px 0px 0.2em !important; padding: 0px;">Allen Gilmer</h4></div><div style="margin-bottom: 20px;"></div><div class="ts-fab-content" style="margin: 0px; padding: 0px;">Allen Gilmer is the Co-founder, Chairman and CEO of Drillinginfo. Allen is active in all aspects of Drillinginfo’s new product development and is widely recognized for his industry leadership and vision. He holds several patents in the field of multi-component seismology. He received his Bachelor of Arts in Geology from Rice University and his Master of Science in Geology from The University of Texas at El Paso. Follow him on Twitter <a href="https://twitter.com/allengilmer" style="-webkit-transition: background-color 0.2s ease, border 0.2s ease, color 0.2s ease; color: #ff6600; outline: none; text-decoration: none !important; transition: background-color 0.2s ease, border 0.2s ease, color 0.2s ease;">@allengilmer</a>.</div><div style="margin-bottom: 20px;"></div></div><div style="margin-bottom: 20px;"></div></div><div style="margin-bottom: 20px;"></div></div><div style="margin-bottom: 20px;"></div></div><div style="background-color: white; clear: both; color: #333333; font-family: 'Helvetica Neue', Helvetica, sans-serif; font-size: 14px; line-height: 19.59375px; margin: 0px; padding: 0px;"></div><div align="center" class="ois_wrapper " data-popup-scroll="100px" data="3" id="ois_3" rel="10023" style="background-color: white; color: #333333; font-family: 'Helvetica Neue', Helvetica, sans-serif; font-size: 14px; line-height: 19.59375px; margin: 5px 0px; padding: 0px;"><div class="ois_box_14 container-fluid" style="background-color: transparent !important; border: none; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; max-width: 650px; overflow: visible; padding: 0px 20px; text-align: left; vertical-align: baseline;"></div></div></div><br />

DrillingInfo / Allen Gilmer : Eagle Ford Shale Takeaways: 5 Reasons You Must Become an Exceptional Shale Oil Operator

Many look to the Eagle Ford Shale as a phenomenal example of US oil and gas companies doing exceptional things. But not everyone shares our ...

FRACK! local policy : new role.

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6SCdSZzAEWAJ_7VXZNC5as-WkZgaxeKE9moy9BDkEYYzTd4CcGjgU9We5uega4rHyrutVDjf_gD3tkAIxLGZWUCNxRkoyP9pqdR6XfWx2F4SaSsthB9s_TurrlnSViizO1gp7P4D2Ez30/s1600/3323f60.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6SCdSZzAEWAJ_7VXZNC5as-WkZgaxeKE9moy9BDkEYYzTd4CcGjgU9We5uega4rHyrutVDjf_gD3tkAIxLGZWUCNxRkoyP9pqdR6XfWx2F4SaSsthB9s_TurrlnSViizO1gp7P4D2Ez30/s1600/3323f60.jpg" /></a></div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="underline" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;"><strong style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><br /></strong></span></div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="underline" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;"><strong style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">A new role for local policy</strong></span></div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Our industry is fond of distinguishing “above ground” from “below ground” factors when debating resource access. Below ground is geology, circumstances inherited from nature; above ground lure man-made conditions, such as the political, legal or economic framework.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The role of “above ground” political discussions is likely to reach new heights in determining whether, where and when shale resources will be accessed. These debates will evolve around local, as opposed to big geopolitical, concerns - simply as a corollary of the widespread geographic distribution of shale resources.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The flukes of nature that distributed sizeable ‘conventional’ oil resources millions of years ago have distributed them in a highly concentrated fashion. Traditional politics of oil and gas are consequently, more often than not, reduced to the simple issue of who effectively controls these sweet spots, few and far between as they are.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">In the matter of tight oil and shale gas, in contrast, local debates will come to the fore, dominated by local attitudes toward energy, competition and environmental policies – all this in turn reflecting the interplay between the relatively even spatial distribution of shale resources and the role of free entry, competition and – and not least - environmental concerns in accessing them.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The signs are everywhere already.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">In Europe, Poland and the Ukraine are aggressively competing for investment whereas France and Bulgaria have put moratoria on fracking in place, removing shale prospects for the time being. Germany and the UK are debating.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">China’s lack of success to date in accessing shale gas as planned is largely due to the preferential allocation of prospective areas to national monopolists, with high barriers to entry for everyone else - including companies with better technologies or less risk aversion, be they domestic or foreign. Russia faces an interesting trade-off between pursuing entirely new and high cost technologies to shift production into the concentrated resources of the Arctic, or of allowing a little more of the trial and error necessary to explore technology to access it’s well known shale plays. Albeit hesitantly, it is reforming its tax sector in pursuit of the second option.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Even in the US, production from shale formations so far has remained concentrated in the middle of the country, leaving large known fields in the coastal areas of California and New York State untapped, in this case because of environmental concerns.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">All these examples reflect above ground, political discussions. They mirror local attitudes towards free access, competitive energy markets, and the environment. We should expect more of the same.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Increasingly, decisions determining whether and how these resources are brought to market will be made in consumer’s own town halls and parliaments - not by ‘big’ geopolitics mirroring the capricious design of nature in allocating conventional oil endowments in faraway places.</div>

FRACK! local policy : new role.

A new role for local policy Our industry is fond of distinguishing “above ground” from “below ground” factors when debating resource access....

Oil Boom 2.0 – An American Dream Updated with Christof Rühl

<div id="content" itemscope="" itemtype="http://schema.org/Article" style="background-color: #e9e9e9; border: 0px; clear: both; float: left; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 17.77777862548828px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline; width: 646px;"><div id="article-5767888004492324951" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><div class="module-box  new-social-gestures" id="article-container" style="-webkit-box-shadow: rgba(0, 0, 0, 0.247059) 0px 1px 2px; background-color: white; border: 0px; box-shadow: rgba(0, 0, 0, 0.247059) 0px 1px 2px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px 0px 12px; outline: 0px; padding: 0px; vertical-align: baseline;"><div id="article-container" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><div id="article-body" style="border-top-color: rgb(230, 230, 230); border-top-style: solid; border-width: 1px 0px 0px; clear: both; color: #333333; font-family: inherit; font-size: 15px; font-style: inherit; font-variant: inherit; line-height: 20px; margin: 0px; outline: 0px; overflow: hidden; padding: 10px 20px; vertical-align: baseline;"><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaoTKnINZhnlTkRmolpKBwBbmpZdOskykNyT6H91YHcrMfRIx5pcWAWHp18qS8MXvLkr8TMChkPlhuuwS44XuB_8R-JDded0zGPbIQDAsTg0FSmWSCxEokRkMxQAWswHmdbwz6fCbbKy4a/s1600/1c7f78e.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaoTKnINZhnlTkRmolpKBwBbmpZdOskykNyT6H91YHcrMfRIx5pcWAWHp18qS8MXvLkr8TMChkPlhuuwS44XuB_8R-JDded0zGPbIQDAsTg0FSmWSCxEokRkMxQAWswHmdbwz6fCbbKy4a/s1600/1c7f78e.jpg" /></a></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><br /></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The impact of the US shale “revolution” has people all around the world scratching their heads – over what it means: Is North America really on the road to self-sufficiency? Of oil, of gas, or of all fuels? And increasingly, people wonder about the implications for their own regions: Are there similar resources? What would it take to get at them?</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">By the numbers, this already <i style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">IS</i> a big development. Last year, the US witnessed the world’s largest increase in oil as well as gas production. Not only did oil production expand faster than in any other country, last year also saw the biggest oil production increase in the history of the US – a country, mind you, which has produced oil since 1859.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">So far this year, production has grown even stronger.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The reason is tight oil - oil generated with the same technologies that gave us shale gas.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Production</b></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">US production last year grew by over 1 million barrels per day, 80% of which came from North Dakota and Texas, currently home to the country’s most prolific tight oil formations. North Dakota surpassed Alaska to become the second largest producing state and in Texas, the number one, output has doubled over the past five years.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Meanwhile, the US is well on its way to replace Saudi Arabia as the world’s largest oil producer – the switch may take place as early as next year.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">How did this happen?</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Parts of the story are well known:</div><ul style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; list-style-image: initial; list-style-position: initial; margin: 1em 0px; outline: 0px; padding: 0px 0px 0px 3em; vertical-align: baseline;"><li style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">The existence of a massive resource base.</li><li style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">A decade of high and rising prices for both oil and gas.</li><li style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Most importantly, a competitive environment, allowing entrepreneurs and their companies to take a gamble to connect the two.</li></ul><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Everyone can invest in oil and gas in the US or Canada – and many did. It was actually mostly small or medium sized firms which tried to develop the technologies to make it possible to connect high prices and known shale resources – first for gas, and then for oil. Many failed and lost their shirt in the process. A few succeeded. But the big ones, the BP’s or Exxon’s of this world, only came in once the basic technologies (such as horizontal drilling and hydraulic fracturing) had been developed – to buy them, and to apply them elsewhere.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Economics</b></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Economists use a big name for this type of development (named, of course, after a fellow economist) and call it a <i style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">“Schumpeterian”</i> process – otherwise also known as Economics 101: Under market conditions, high prices trigger competition, and competition triggers innovation. There are victims among those agile spirits who move in first, and there is a wave of followers who come in next, catching up with the new technologies and refining them to make them more efficient, until the system turns stable again. These waves of innovation indeed are one of the most fundamental characteristics of functioning market economies.</div><div class="center" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; text-align: center; vertical-align: baseline;"><img alt="" class="left" src="http://m.c.lnkd.licdn.com/mpr/mpr/p/1/000/2bd/2b9/0271df7.png" style="border: 0px; float: left; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px 1em 1em 0px; max-width: 606px; outline: 0px; padding: 0px; text-align: left; vertical-align: baseline; width: auto;" /></div><div class="left" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The US is now reaping the second round effects of such a wave of innovation: after access to the massive resource base has been granted by technological improvements, and thus the boom been triggered, comes the hour of efficiency improvements.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The graph above shows how: In North Dakota, for example, the number of new wells started in 2012 grew by more than 50% and so did the state’s oil production – even though the number of rigs grew by only 10%. Producers are getting more oil out of the ground with less activity.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Perhaps the most important lesson one can ever hope to learn from this development is what it means for energy markets generally: that energy markets are governed by the very same simple principles as any other market.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">There is a reason this happened in the US or Canada and not, say, in Venezuela or China – despite the fact that they sit on unconventional resources at least as plentiful as those in the US and Canada (oil sands in Venezuela, shale formations in China). This reason has nothing to do with resource endowments below ground but everything to do with competition and markets above ground. Innovation tends not to happen in economies where government control extinguishes the private reward for trial and error - in energy markets just as in any other industry.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Global Impact</b></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Meanwhile, the developments in North America are changing energy relations for the rest of us. They are still too new to be emulated in other parts of the world, although the resource base is wide-spread. But while other places are busy trying to locate those resources (and remember, they will have to mimic the “above ground” competitive conditions as well to access them efficiently, which will take time), developments in the US are reshaping global oil markets as we used to know them.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Five years ago the US imported 2 million barrels per day of refined products (i.e. gasoline, diesel, etc.). Last year, it became the world’s biggest exporter, selling 1 million barrels per day of refined products abroad (crude oil exports are still legally constrained in the US). All told, the US still is a net oil importer and likely to remain one for years to come, but look at the graph below – I think it tells it all.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><img alt="" class="center" src="http://m.c.lnkd.licdn.com/mpr/mpr/p/3/000/2bd/2a3/177ed88.png" style="border: 0px; display: block; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px auto 1em; max-width: 606px; outline: 0px; padding: 0px; text-align: center; vertical-align: baseline; width: auto;" /></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Net US oil imports peaked in 2005 and have since fallen by 36% (or 4.5 million barrels per day). Just to clarify the order of magnitude; this reduction is equal in size to Japan’s entire oil consumption last year, Japan being the third largest oil consumer on the planet.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Just a few years ago, US imports were on a par with Europe’s; now they are one third below those of the European Union.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Over that same period, Chinese net oil imports rose 84% (2.8 million barrels per day). China is well on its way to overtake the US to become the world’s largest oil importer. You can take a guess as to how long it will take for the orange and light green lines cross - it is happening right as we speak. (Believe it or not, 20 years ago, China was a net exporter of energy!).</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">In my view, and this is a little guesswork now <a href="http://www.bp.com/en/global/corporate/about-bp/statistical-review-of-world-energy-2013/energy-outlook-2030.html" style="border: 0px; color: #006699; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;" target="_blank">the foundation of which can be found here</a>, the US is likely to remain a modest net oil importer until about 2030. North America as a region (comprising Canada, Mexico and the US) looks set to become self-sufficient around 2020. China, on the other hand, soon the world’s biggest importer of fossil fuels (oil, gas and coal), will import almost 80% of its oil and more than 40% of its natural gas by 2030.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">In this way the shale “revolution” becomes part of a much bigger development.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">But what triggered it? Accident? The North American resource base? Markets? What are the implications? And - will it happen elsewhere?<br /><br /><br /><br /></div><div class="module-box" id="author-header" style="-webkit-box-shadow: rgba(0, 0, 0, 0.247059) 0px 1px 2px; background-color: white; border: 0px; box-shadow: rgba(0, 0, 0, 0.247059) 0px 1px 2px; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 17.77777862548828px; margin: 0px 0px 12px; outline: 0px; overflow: visible; padding: 0px; vertical-align: baseline;"><div class="articles-header-bar" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; position: relative; vertical-align: baseline;"><img alt="Christof Rühl" class="member-photo" height="80" src="http://m.c.lnkd.licdn.com/mpr/mpr/shrink_80_80/p/5/000/26f/17d/071a24f.jpg" style="border: none; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; left: 0px; line-height: inherit; margin: 0px 20px; outline: 0px; padding: 0px; position: absolute; top: -10px; vertical-align: baseline;" width="80" /><br /><div class="author-info" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 10px 0px 10px 120px; vertical-align: baseline;"><h2 class="author-name" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Christof Rühl</h2><h3 class="author-headline" style="border: 0px; font-family: inherit; font-size: 13px; font-style: inherit; font-variant: inherit; font-weight: normal; line-height: 17px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Chief Economist at BP</h3></div></div></div></div></div></div></div></div>

Oil Boom 2.0 – An American Dream Updated with Christof Rühl

The impact of the US shale “revolution” has people all around the world scratching their heads – over what it means: Is North America really...

Pressure on the configuration of oil and gas markets

<div id="article-body" style="border-top-color: rgb(230, 230, 230); border-top-style: solid; border-width: 1px 0px 0px; clear: both; color: #333333; font-family: inherit; font-size: 15px; font-style: inherit; font-variant: inherit; line-height: 20px; margin: 0px; outline: 0px; overflow: hidden; padding: 10px 20px; vertical-align: baseline;"><div class="left" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJveD9C_5mLS5IR0w0IGK7iWayMUrH6oXZOxKa6wt6HOwZhRliiYeg8hdGIyVi-jx0v9AMs8ezrFy1ylkvZT74joDuSWg7oBj-_gQiXTuB2jpyMYmcVx-hGjzo3-MrbAvNMfJciYgVpvO8/s1600/0a4af9a.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="295" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJveD9C_5mLS5IR0w0IGK7iWayMUrH6oXZOxKa6wt6HOwZhRliiYeg8hdGIyVi-jx0v9AMs8ezrFy1ylkvZT74joDuSWg7oBj-_gQiXTuB2jpyMYmcVx-hGjzo3-MrbAvNMfJciYgVpvO8/s400/0a4af9a.jpg" width="400" /></a></div><i style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">(the two chief negotiators, Jamshid Amouzegar for OPEC and Lord Strathalmond for the oil companies, shaking hands after signing the Tehran Agreement in February 1971. Courtesy BP Archive)</i><br /><i style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><br /></i></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="underline" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Pressure on the configuration of oil and gas markets</b></span></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">One of the first questions raised by the shale “revolution” will be about the impact of rising shale oil (and gas) production on markets and prices. Let’s concentrate on oil. In a normal market, prices should fall and the only issue for an economist would be to calculate how fast and by how much. But the oil market is not exactly ‘normal’: It features a producer cartel with a long history of trying to manage prices and production. In oil markets, the question of the consequences of higher (shale) oil supplies seamlessly translates into the question of how OPEC is likely to react.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">There are good reasons to presume that OPEC members are willing and capable to react with production cuts to rising non-OPEC supplies.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Production cuts, in turn, lead to spare capacity. The build-up of spare capacity in OPEC countries required to neutralize the additional supplies (including biofuels and oil sand production) is substantial indeed: Taking our conservative production profile as a guide, spare capacity to accommodate the new supplies will have to exceed 6 million barrels per day (Mb/d) within this decade - the highest since the late 1980s, as shown on the right hand chart below;</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><img alt="" class="center" src="http://m.c.lnkd.licdn.com/mpr/mpr/p/4/005/02c/37a/1fbec1c.jpg" style="border: 0px; display: block; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px auto 1em; max-width: 606px; outline: 0px; padding: 0px; text-align: center; vertical-align: baseline; width: auto;" /></div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">This will be no easy task for OPEC. The cohesion of the organisation is the key uncertainty, especially in the current decade. It will be a world in which Russia, the US and Saudi Arabia account for a third of global production. Of the three, only OPEC member Saudi Arabia is likely to incur the cost of maintaining large amounts of spare production capacity. And Saudi Arabia is situated between Iraq, an OPEC member with steadily rising output but without a quota agreement, and Iran, for which no one can predict how long the current sanctions will limit production.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">On the other hand, we are unlikely to witness the return of the very low oil prices last seen in the 1990 or 1980s (assuming OPEC stays put). Tight oil production is not only relatively expensive; with its high well density, it is also eminently scalable (different from the conventional supplies in Alaska or the North Sea added in the 1980s). Supplies will react if prices fall substantially.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">In the first instance, the advent of shale oil (and gas) is likely to put pressure on prices by stressing the configuration of markets as we know them. In the case of oil, OPEC is the lynch pin of these markets. In the case of gas, it is the oil indexation of gas prices.</div><div style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><br /></div></div><div class="module-box" id="author-header" style="-webkit-box-shadow: rgba(0, 0, 0, 0.247059) 0px 1px 2px; background-color: white; border: 0px; box-shadow: rgba(0, 0, 0, 0.247059) 0px 1px 2px; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 17.77777862548828px; margin: 0px 0px 12px; outline: 0px; overflow: visible; padding: 0px; vertical-align: baseline;"><div class="articles-header-bar" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; position: relative; vertical-align: baseline;"><img alt="Christof Rühl" class="member-photo" height="80" src="http://m.c.lnkd.licdn.com/mpr/mpr/shrink_80_80/p/5/000/26f/17d/071a24f.jpg" style="border: none; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; left: 0px; line-height: inherit; margin: 0px 20px; outline: 0px; padding: 0px; position: absolute; top: -10px; vertical-align: baseline;" width="80" /><br /><div class="author-info" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 10px 0px 10px 120px; vertical-align: baseline;"><h2 class="author-name" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Christof Rühl</h2><h3 class="author-headline" style="border: 0px; font-family: inherit; font-size: 13px; font-style: inherit; font-variant: inherit; font-weight: normal; line-height: 17px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Chief Economist at BP</h3></div></div></div>

Pressure on the configuration of oil and gas markets

(the two chief negotiators, Jamshid Amouzegar for OPEC and Lord Strathalmond for the oil companies, shaking hands after signing the Tehran A...