REPOST: America's oil and gas revolution

The extraordinary growth in the U.S oil and gas production has a bigger impact in terms of  the economic expansion. This American Enterprise Institute article has the details. 

Image Source: aei.org

To grasp the importance of the revolutionary change in oil and gas drilling sweeping across the United States -- and its significance for our economy -- just consider how far behind the rest of the world is lagging.

America's innovative use of energy technology by "petropreneurs" is rejuvenating oil and gas production. Thanks to the combination of hydraulic fracturing and horizontal drilling in shale deposits, along with advances in seismic imaging that allow geologists to examine deposits more than a mile underground, energy resources long presumed to be beyond reach are now being tapped, or at least will be eventually. And it's happening as a result of something unique about America.

"In most of the world, if people are living on the land and there's hydrocarbons underneath it, they will fight it," Bob Dudley, group chief executive of BP, said recently in an interview with the Wall Street Journal. Private ownership of mineral rights in the U.S., along with an existing network of pipelines, enables oil and gas to find their way to market. And this, Dudley said, has given America its big head start.

The upshot is that a United States reliant on imported oil and natural gas is a thing of the past. To be sure, the U.S. will continue to be subject to world oil prices, and supply disruptions in the world will still create price spikes. But an abundance of domestic oil -- and growing use of natural gas in truck fleets -- will dampen price volatility, providing more stability for consumers.

We have seen a 40 percent increase in domestic oil production since 2008, the highest growth in oil output of any country in the world over that time period. As could be expected, net oil imports have plummeted, from more than a 60 percent share of domestic consumption in 2005 to less than 40 percent this year, the lowest dependence on foreign sources of oil in more than 20 years. Domestic oil production is booming, and the United States could even surpass Saudi Arabia to become the world's biggest oil producer by 2020.

The upsurge in U.S. natural gas production has been no less dramatic. The Energy Information Administration, or EIA, estimates that the U.S. has enough gas to last more than 100 years. What has become known as the "shale gale" has turned a shortage into a surplus, and now natural gas accounts for more than a quarter of America's total energy.

The abundance of cheap gas has helped reduce utility bills for consumers through lower electricity costs and lower costs for the millions of Americans who use gas to heat their homes. And the "shale gale" has sparked a revival in domestic manufacturing, mainly in the chemical industry but also in other energy-intensive industries like iron and steel. Because U.S. natural gas prices are now the lowest in the world, industries that once exported manufacturing facilities abroad are suddenly bringing them back home as they pursue new investments. All of this has increased economic growth, created jobs with good wages and produced revenue for governments at all levels.

Shale gas has also helped the environment by slashing carbon dioxide emissions. As natural gas has replaced coal in electricity generation, U.S. carbon dioxide emissions declined to their lowest levels in 20 years, the largest reduction of all countries. Solar and wind can't deliver comparable energy and environmental benefits within the same time frame, but the shift from coal to natural gas could buy the time needed to expand the use of carbon-free energy sources and further reduce greenhouse emissions to safe and acceptable levels.

The United States, moreover, could become a major exporter of natural gas in the future. With thousands of new wells being drilled, the EIA projects that natural gas supply could exceed demand by 2016, enabling the U.S. to liquefy and export natural gas to markets abroad.

The revolutionary drilling technologies developed in the United States will eventually be employed everywhere. Although foreign countries lag behind us, there has been considerable interest in oil-and-gas shale deposits in Europe, Latin America and Asia. China's shale gas resources alone are said to exceed those in the United States. This means that the U.S. will be an exporter of energy and drilling technologies well into the future.

The impact of the extraordinary production growth of U.S. oil and gas is becoming increasingly apparent. Even if the current growth subsides in the years ahead, the transformative impacts of this energy revolution on economic expansion will have dramatic effects. A study by Merrill Lynch pegged that contribution at 2.2 percent of America's GDP -- equivalent to an economic stimulus of $1 billion every day. The big takeaway is the unfolding scale of America's amazing oil and gas revolution -- and the huge economic impact it's having on jobs, manufacturing, the environment and competitiveness.


This blog site contains more information about Dr. Ali Ghalambor, his expertise, and remarkable contributions in the oil and gas industry.

REPOST: The Market Knows Best -- The Real Story Behind Drilling on Public Lands

This Huffington Post article talks about the new leasing and development on federal public lands that has not been sufficiently robust, according to some critics.

The evolution of horizontal drilling has caused a boom in oil and gas production throughout the United States. Indeed, our success in developing new resources has been so remarkable that the International Energy Association reported late last year that by around 2030, "North America becomes a net oil exporter... "

Yet this success has not quieted some critics of the Obama administration who complain that new leasing and development on our federal public lands has not been sufficiently robust. Industry allies have noted in particular that the current boom is largely occurring on private lands in states like North Dakota, Colorado and Texas. They argue that drilling on federal lands is not keeping pace and they blame the administration for a lackluster leasing record.

But market forces, not federal lands policy are driving oil and gas development. The current market favors oil and other liquid "plays" -- the industry term for areas with known oil or gas resources -- that are found primarily on private lands, over natural gas, which often occurs on public lands in the West.

Natural gas prices are so low that gas producers are unable to make a reasonable profit. It seems that the industry has been the victim of its own success. New drilling and fracking technologies led to more production, which flooded the domestic market and pushed down natural gas prices to the point that many gas fields are simply uneconomical to develop. Oil and gas companies have lost interest in leasing and developing the natural gas deposits that are so often found on Western public lands.

In North Dakota, where the oil-rich Bakken formation is driving a domestic oil boom, the resources underlie primarily private lands. Likewise in Colorado, companies are focused on the Niobrara formation, located largely on private lands in the eastern part of the state. The Niobrara is largely a liquid play. Liquids are the goodies, such as propane, butane and pentane that are profitable under today's market conditions. By contrast, development of the Williams Fork of the Piceance Basin, a natural gas play on Colorado's public land-dense Western Slope, has fallen off dramatically along with the decline in the price of natural gas.

Let's not forget that oil and natural gas are fundamentally different commodities. The price of crude oil is set on a global market. Despite the fact that we currently produce more oil in the U.S. than we have at any time over the past two decades, we have seen no noticeable impact on the price at the pump.

Natural gas, on the other hand, is a regional commodity with prices more easily influenced by sudden changes in domestic supply. That's why as production has surged, the price of natural gas has fallen by more than 66 percent from its 2008 record high.

You won't often hear the oil industry talking about the market dynamics behind the shift to oil and private lands, but they are clear when writing to their investors. As Halliburton's 2012 Annual Report explains: "In North America, the industry has experienced an activity shift from natural gas plays to oil and liquids-rich basins due to low natural gas prices resulting from continued strong natural gas production. As a result, operators have been optimizing their budgets by focusing on basins with better economics." Private land oil plays, of course, are the basins with "better economics."

Policymakers in Washington should welcome this shift to private land development since it offers our public land managers some breathing room to manage our public lands for their many other important public uses. For those of us who live in the West, these precious lands offer so much more than just extractive minerals. They are special places for recreation, protection of freshwater resources, wildlife habitat, and other consumptive uses like forage and timber.

No one is calling for a moratorium on oil and gas leasing on public lands, but our political leaders and the public should know that any softening of leasing activity is due to market forces and not some nefarious attempt by the Department of the Interior to subvert public lands development. Rather than calling into question the rate of government oil and gas leasing, we should welcome the respite from the pell-mell pace of leasing and development activity that we witnessed just a few years ago. Our public lands feed the soul, not just our automobiles. 

This Facebook page for Dr. Ali Ghalambor features fresh takes and up-to-date analysis on the oil and gas industry.

Advanced drilling technologies revolutionize oil sector

The advancement in oil and gas exploration and production technology is doubtless one of the key components of the current global oil boom. The technological explosion that started to make huge impact in the oil sector in the past years now results to more efficiency in oil explorations and drilling operations.

Since they are more equipped, especially with advanced seismic imaging tools, oil drilling operators became more capable of efficiently and cost-effectively extracting oil from previously untapped sources commonly found in deeper and more remote and frigid regions. Some of the advanced drilling technologies that revolutionized the oil sector are the following:

• Horizontal drilling - Characterized by a vertical well that deviates horizontally within the reservoir rock

Image Source: geology.com

• Multilateral drilling - Characterized by wells branched out from a single main well to reach different targets, allowing engineers to tap oil reserves at reservoir compartments at different depths

Image Source: pet-oil.blogspot.com

• Extended reach drilling - Characterized by very long horizontal wells that enable producers to tap oil reserves at great distances away from the surface hole

Image Source: rwe.com

• Complex path drilling - Characterized by a single drill hole with complex paths intended to reach multiple targets

Image Source: dosits.org

At present, there is a continuous advancement in drilling operations. The advent of advance technologies has simply reduced the technical difficulties in drilling operations. These new approaches do not only save time, money, and other resources, but more importantly, reduce the environmental impacts of the operations, and increase safety.

Ali Ghalambor was an American Petroleum Institute endowed professor and is the co-author of the book “Gas Volume Requirements for Underbalanced Drilling: Deviated Holes.” For more related content about oil drilling technologies, follow this Twitter page.