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A natural gas production surge is reducing US reliance on foreign countries to meet energy needs. The transformation, fueled by shale development, also is increasing investment opportunities.
With the shale boom driving unprecedented growth in US natural gas production, the nation is likely to import less and export more energy over the next decade.
Already, change in the nation’s energy climate is sparking more investment in North America, where low domestic natural gas prices are impacting not only power generation and petrochemical production, but also natural gas intensive manufacturing. Foreign companies are “placing bets” in the US, sinking billions of dollars into North American shale plays.
Plays aside, development in the US Gulf of Mexico also has a growing potential. Its large resource base of 16 Bbbl and short time to first production – about 5.5 years – places it among the most attractive deepwater regions in the world.
These facts, presented during Deloitte’s Aug. 7 webcast called “US Energy Independence?: Implications for Imports and Exports of Major Energy Resources,” show that the energy renaissance under way in North America has established the US as a major competitor in the energy world.
“We have a fantastic opportunity here in the US,” said Peter Robertson, an independent senior advisor for Deloitte LLP. “We have the resource base to supply our own energy, but it is not a given .... Our industry has to perform extremely well, and government policy is critical to making this resource base work for the country.”
Shale gas production has increased from less than 2 Bcf/d in 2000 to about 20 Bcf/d in 2011. Analysts previously predicted the US would be importing more energy sources at this time, but shale discoveries changed the situation.
Also, North America’s oil supply potential is predicted to well exceed 20 Mbbl/d, with unconventional oil making up the bulk of the supply by 2035, Deloitte said.
“We’re getting almost a million barrels a day of oil coming from these kinds of plays,” Robertson said, referring to North Dakota’s Bakken and Texas’ Eagle Ford plays.
Continued growth of shale gas also could support LNG exports, US production for which could reach 80 Bcf/year by 2030, according to Deloitte. The exports aren’t likely to impact energy security, Robertson said, referencing a chart that shows LNG exports at 44 Tcf over 20 years compared to a US demand of 520 Tcf with technically recoverable gas at 2,170 Tcf.
Deloitte predicted LNG exports could generate US $300 billion in cumulative exports by 2025.
Similar growth is being seen in tight oil plays. Major plays have sent production from about 100 Mb/d in 2000 to about 900 Mb/d in 2011. The same thing is happening in Canada, where tight oil production from selected plays climbed from less than 5 Mb/d in 2005 to more than 160 Mb/d in 2011. There, oil sands also have witnessed a production surge, jumping from about 0.6 MMb/d in 2000 to about 1.5 MMb/d in 2011.
No one really knows where all of this will lead, Robertson said, but there is opportunity.
The US already has become a significant exporter of refined products such as distilled fuel oil and motor gasoline, Deloitte said. Exports of total petroleum products jumped to more than 2,500 Mb/d in 2011 from about 1,000 Mb/d in 2000.
And the nation is reducing its dependence on petroleum imports. US net imports of petroleum continue to drop, going from 60% in 2005 to 45% in 2011, as US petroleum production increases. That number went from 40% in 2005 to 55% in 2011.
Overall, the energy developments are attracting interest in North America, something Robertson called “pretty profound.”
For example, foreign investment in US shale plays totaled $63 billion from 1Q 2009 to 1Q 2012. Australia, Japan, and China were among the top countries investing in shale plays at 32%, 12%, and 9%, respectively.
About half of the M&A investment in North American shale plays represented foreign capital -- $170 billion from 1Q 2009 to 1Q 2012:
• Foreign companies (excluding BP and Shell), 34%;
• Five super majors, 31%;
• US companies, 29%; and
• Canadian companies, 6%.
This growth could have a dramatic effect on the nation’s trade development and GDP, Robertson said, but the government must be willing to provide access to areas that can be tapped responsibly. Free trade and open markets will be the way to go, he said, adding the industry has the ability to maximize its potential.
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