Global shale oil reserves are currently estimated at over three trillion barrels recoverable under current technology. The US has well over two trillion of those barrels.
As far as I can research from true experts, properly done, horizontal drilling and fracking pose no danger to the environment.
The US Energy Information Administration (EIA) reports that over 750 trillion cubic feet of technically recoverable shale gas and 24 billion barrels of technically recoverable shale oil have been discovered in shale plays. Except that they are reportedly having to update their update. Just five days ago they announced new projections that suggest US energy imports (as a share of production) will fall in half in the next 30 years.
Harold Hamm and Continental Resources drilled the first horizontal well to use fracking in the Bakken in 2004. He knows something about the region. He is now telling us that there may be four more layers (which are called benches) of shale oil and gas below the Upper Bakken formation, including the promising Three Forks stratum. Just a week ago (onDecember 3), Continental announced they had completed a well in the “third bench.” The Three Forks could be a bigger story than the Upper Bakken formation, as it is much thicker. Hamm is projecting almost a trillion barrels of reserves in the area.
When we went into the “office” of the rig there was a young man who looked to be in his early 30s. He was a “tool-pusher,” which means he ran the rig. Clearly very smart and trustworthy, but he didn’t have a college degree, just lots of oil-field experience. He works 28 days, 12 hours a day straight and then takes two weeks off to go see his wife and kids. When working he lives in a small room at the rig. He makes $350,000 a year. The kid is one of those millionaires and billionaires that Obama wants to tax.
A starting salary on the rig is $120,000 a year, with no experience. But you work your tail off for very long hours. The consultant who oversaw the rig operation for the investors made around $250,000. (By the way, he could tell me to the dollar what his costs were for the well during the hour we were there. There were very sophisticated cost controls.)
An oil-truck driver makes $150-175,000 a year. All that oil has to be taken by truck to a railroad terminal and loaded onto railcars, to form 100-car trains that take the oil to refineries around the country. Loren took us to his new train terminal, where the trucks were lined up to empty their tanks and go back to another well for a load. All up and down the line, there are jobs that are begging to be filled.
The US will be exporting natural gas within 3-4 years from McAllen, Texas, and other LNG ports are in various stages of permitting. Natural gas in Japan is over $15, compared to $3.78 this morning in the US. Europe is in double digits ($11.83). There is an arbitrage available here. Even an economist can do the math.
But our real advantage may not come in exporting raw gas but rather in the chemical products you need gas to make. Not just fertilizers but feedstocks for plastics and other organic chemicals.
The Financial Times wrote last Saturday, "Europeans are already complaining that cheap US gas is encouraging a flight of energy intensive businesses [to the US]. How can, say Europe's chemical producers – buying expensive Russian gas – compete with US rivals guaranteed access to cut-price feedstock?” (Hat tip Vincent Farrell.)
One way for them to compete is, perhaps, to develop their own (seemingly considerable) shale oil and gas fields. But there seems to be a great deal of resistance to that. And that reluctance will help the US close its trade deficit.
The US is lucky; there is plenty of oil and gas below our borders, with much of it in private hands. There are estimates the US could be energy independent within 7-10 years
Analysis suggests that oil prices will have to remain high or go even higher for shale oil to be profitable. I think he is right on that. I have always maintained that we are not likely to run out of oil for a very long time; we will just run out of cheap oil. Thankfully, there are alternatives being developed over time. The cost of producing solar energy has dropped about 50% per decade for a long time. In another few decades solar will be quite competitive with carbon-based energy. Nuclear remains my favourite shorter-term source, but it confronts considerable political opposition in many countries.
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