US shale energy creates global oil 'supply shock'

[Islandman]

http://www.telegraph.co.uk/finance/n...ply-shock.html

By Denise Roland, and AFP
10:22AM BST 14 May 2013

Booming oil production in North America brought on by the shale energy revolution has created a global "supply shock" that is reshaping the industry, the International Energy Agency said on Tuesday.

Shale's inexorable rise could see the US cross over from being the world's leading importer of oil to a net exporter within the next few years.

US shale oil will help meet most of the world's new oil needs in the next five years, even if demand rises from a pick-up in the global economy, said the agency in its five-year outlook for the oil market.

The "steeper than expected" rise in supply from North America constitutes a "game changer", said Maria van der Hoeven, IEA executive director, as she contrasted it with stalling oil production in some traditional export markets such as Iran.

"North America has set off a supply shock that is sending ripples throughout the world," she said.

The shale oil and gas boom has rekindled North America's oil industry, with tens of billions of dollars in revenues and hundreds of thousands of new jobs.

"A mature economy which some 150 years ago had been the cradle of the oil industry, but had since faced what seemed like an irreversible production decline, [has] all of a sudden found itself at the centre of a new oil boom," the IEA said.

An IEA forecast in November predicted that the US would become the world's biggest oil producer by 2017 thanks to shale energy.

But the process behind the boom has proved controversial, with environmentalists worried that the unconventional technology involved, known as fracking, poses a major threat to the environment and may trigger earthquakes.

On the back of shale output, the IEA said it expected North American supply to grow by 3.9 million barrels per day (mbd) from 2012 to 2018, or nearly two-thirds of total forecast non-OPEC supply growth of 6.0 mbd.

But North America was "just one part of the story" the IEA said, as production capacity in traditional OPEC suppliers in the Middle East will continue to grow in the next five years, "though adversely affected by growing insecurity in North and Sub-Saharan Africa" in the wake of the Arab Spring uprisings.

OPEC capacity, which counts for 35pc of today's global oil output, is expected to gain 1.75 mbd to 36.75 mbd in 2018, about 750,000 barrels per day less than under a 2012 forecast.

The IEA, an OECD offshoot that tracks the energy market for the world's industrialised nations, meanwhile raised marginally its earlier outlook for global oil demand growth in 2013 to 90.6 mbd.

The forecast for non-OPEC supply in 2013 meanwhile was raised 50,000 to 54.5 mbd due to strong output in North America.

Ms van der Hoeven also spoke of a "two-speed" recovery in demand for oil, in which non-OECD nations in Asia and Africa are becoming the driving force in place of western market

[Islandman]

Unless this article is grossly optimistic in its US production forecasts, this sounds like a really significant development.

[Assasin]

yeah I heard this too. Does that mean that renewables are pretty much dead in the US now? hasn't really taken off.

They said this resulted in low electricity bilss in the pass winter as gas companies passed on the savings.

[Islandman]

Does that mean that renewables are pretty much dead in the US now?

Looks so to me. I believe that eventually one of the renewable technologies will achieve a technology breakthrough to make them cost competitive with fossil fuels but until that happens it is going to be a tough sell to anyone but those who can afford to be environmentally conscious.

Hopefully this will also start to make the Middle East less relevant to US policy. When you consider what they spend to maintain some presence in that region, bwoy the oil REALLY costly and not just in cash.

[Assasin]

I think renewables technology will come but may originate somewhere else. People in other countries are more fed up with the high price of oil. Europe and others have more to gain in terms of the price of gas. Most of the US consumers are not really interested in supporting infancy technology in that field as it relate to their cars, heat etc. and the US companies making big profits and want to keep it going.

[Willi]

Other techniques are helping with the US oil boom.

In the past, as well was dry when you drained 50% of the oil from it. With new techniques, they can now recover 60% of that 50% left back and so California is in an oil boom again with their many small formally dead drill holes.

[Islandman]

Interesting...I am going to have to start following this closely as the implications could be widespread.

[Assasin]

I think it North Dakota have a 4% unemployment because of it. I saw a piece that even Mikey D can't find workers and have to pay at least 12 dollars an hour.

NY, Penn and other nothern states fighting about drilling and the effect on the environment especally as it relates to drinking water.

[Me]

And homes near the areas where they are using fracking technology are experiencing a lot of cracks around their foundation and roads are collapsing, but their is "no conclusive evidence" it is tied to the process.

[Don1]

The scale of these fracking operations is mindblowing. Travel by air across the central US and you'll be astonished at all the new wells producing hydrocarbons.

It's also an environmental disaster with vast amounts of toxic contaminants being released into the water table

Saw the movie "Gasland" at the Tribeca Film Festival... ghastly contamination from fracking...covered up by industry AND the Obama administration

[Assasin]

so Obama the environmentalist backslide????

[Don1]

absolutely ...politricks

...to shut up the "Drill Baby Drill" wackos

[Don1]

Ever seen tap water catch-a-fiya????

http://www.youtube.com/watch?v=dZe1AeH0Qz8

[Willi]

LoL

U haffi love America and dem legalism.

[World Fan]

3 Ways the U.S. Energy Boom Will Change the World

http://www.fool.com/investing/genera...the-world.aspx

3 Ways the U.S. Energy Boom Will Change the World

By Tyler Crowe | More Articles
May 27, 2013 | Comments (3)

Ever since the 1958, the United States has consumed more crude oil than it could produce domestically. That marked the defining moment when the United States could no longer be considered energy independent. Back in 2006, the U.S. imported more than 13 million barrels of oil per day, our highest level of foreign oil dependence. Thanks to the boom in oil and gas production in the U.S., though, today we import half that much.

The way the U.S. is weaning its way off of imports will have a profound effect on more than just domestic consumption -- it will also fundamentally change the way we think about the global energy supply. Here are three ways the U.S. could profoundly alter the way the world does energy.

1. OPEC and Russia will have less pricing control
In October, it will have been 40 years since OPEC cut oil shipments to the U.S. in response to the United States' support of Israel in the Yom Kippur War. For parts of Europe, though, their struggles with supply shortages are much more recent. Multiple times in the past decade, Russia has cut gas supplies off from Ukraine, which has resulted in supply problems and price spikes in as many as 18 European countries.

Combined, OPEC nations and Russia represent 69% of the world's crude oil and 40% of the world's natural gas exports. These countries' capacity to produce oil is so great that they are able to shut in production to help control global oil prices.

At the peak of U.S. imports, we represented 25% of the world's import demand. As that position winds down to zero, our former suppliers will need to find new clients, especially our North American trade partners, Canada and Mexico. Combined, the two countries currently supply the U.S. with about 4 million barrels per day that will need to eventually go elsewhere.

Oil and gas revenues make up 45% and 10% of Saudi Arabia's and Russia's GDP, respectively. The two oil powers may have the ability to shut in production, but they can only do so much because they need oil revenues to keep their respective countries going. As oil that was previously destined for the U.S. starts to find its way toward other clients, OPEC and Russia's share of exported oil will shrink, which will give them less pricing control and make the global oil market less volatile. Of course, it won't completely cripple these countries, and OPEC and Russia will continue to be large players in the global supply market, but more domestic oil production in the U.S. will certainly chip away at the throne.

2. Improved U.S.-China relationship
There aren't many things the U.S. and China have in common, but there is one thing these two economic giants share: They rely greatly on foreign energy sources to keep their economic engines running. For years, both countries have divided up the global energy markets and to a certain degree enacted very different foreign policies along the way to secure them. As a country that's more politically agnostic with its foreign policy, China has been willing to work with the likes of Sudan, Myanmar, and Zimbabwe -- countries that the U.S. hasn't had a working relationship with for quite some time because of their leadership. The most egregious example is our differing relationships with Iran. While the U.S. has been employing strict economic sanctions against the nation, China imports about 500,000 barrels per day from there, making China Iran's largest oil export market.

Surprisingly, our energy boom could help China, but not in the way you might think. The energy sector in the U.S. has been an incubator for innovative drilling techniques and technologies over the past few years. Now we have a near monopoly on the technology. Like the U.S., China has massive shale gas deposits, and the technology we possess could help them develop domestic sources and allow them to become more energy self-sufficient. We're starting to see it happen. Royal Dutch Shell (NYSE: RDS-A ) has signed a deal with PetroChina (NYSE: PTR ) to spend $1 billion a year to develop shale resources there. Also, fracking specialists Haliburton (NYSE: HAL ) and Schlumberger (NYSE: SLB ) are partnering with various Chinese companies to supply the country with hydraulic fracturing equipment and specialty fluids.

As both countries move toward more domestic energy production, the two countries won't have to outmaneuver each other as much for foreign sources. That should ease tensions between the two counties somewhat and could lead to more cooperation in dealing with countries like Iran. There will still be several ideological, political, and economic topics where the U.S. will not see eye-to-eye with China, but this step will certainly help the situation.

3. Countries will adapt the American gas market model
Before the U.S. starts to export oil, it will have a much larger excess supply of natural gas. The U.S. has been deliberating the merits of exporting LNG for some time now, but some recent signs signal that the government will give the OK for natural gas exports. If this were to happen, it would pit two global pricing models against each other.

In parts of Europe and Asia, natural gas prices are based on long-term contracts that have a minimum price indexed to oil based on a BTU equivalency. This arrangement makes natural gas prices artificially high in comparison with the U.S., where natural gas prices are based on spot prices and are independent from oil prices. In Europe, Russian gas companies and Norway's Statoil (NYSE: STO ) combined supply more than 40% of the continent's gas under these lucrative contracts.

If the U.S. were to start exporting natural gas to these markets, our pricing model would allow us to sell at a pretty hefty discount to current gas contract prices. We would have the potential to disrupt the way these markets currently price natural gas and would force them to go away from their oil-indexed contracts. This model is already starting to take place. Today, 50% of all natural gas in Europe is sold based on a spot price model, compared with only 20% less than a decade ago.

What a Fool believes
The world's energy supply is caught in a delicate balancing act. Small disruptions in supply from the smallest countries can reverberate throughout the entire market. Having the U.S. take on a larger share of the global supply will have a deep effect on the market in many other ways not mentioned here. Ultimately, though, the energy sector is not a binary-outcome industry, and there are some things that will never change. Will it bring an end to OPEC's dominance? Absolutely not. Will the U.S. completely overhaul its foreign policy based U.S. energy independence? Unlikely. But making the U.S. energy-independent will certainly shift momentum in those directions.

There are few companies that understand the global energy market better than Halliburton. As one of the premier oil services companies around the world, the company has intimate working relationships that help them gain strong insight into what companies needs. To access The Motley Fool's new premium research report on this industry stalwart, simply click here now and learn everything you need to know about how Halliburton is positioning itself both at home and abroad.