Posted on 10/26/2013 8:48:16 PM PDT by ckilmer
After a decade or more of shale development in the US, the country remains "in the early innings" of that growth with tens of billions more dollars expected for infrastructure and development, according to an analysis by investment bank Credit Suisse unveiled Tuesday.
Overall, strong drilling activity and continued technological progress should lead to "significant oil production growth still to come in the key regions such as the Permian [Basin] ... as well as the Eagle Ford, Bakken and Niobrara (Wattenberg)" shales, the report, "The Shale Revolution II," said, referring to the West Texas, South Texas, North Dakota/Montana and Colorado fields, respectively.
Credit Suisse analyst Arun Jayaram, head of US E&P research, said during a conference call that the US is still in the early phases of one of today's "most powerful investment opportunities," the shale revolution.
"Using our model, we anticipate US oil production to grow from 6.5 million b/d in 2012 to 11.3 million b/d by 2020," Jayaram said.
Moreover, from an investment perspective, "the pie could get almost $425 billion bigger" than the $540 billion market cap that US exploration and production companies currently represent, he said. Among specific plays, there is still more "room to run" in the Permian Basin, Wattenberg field and the relatively undeveloped Utica Shale in Ohio.
On the infrastructure side, Credit Suisse forecasts $50 billion of crude pipeline additions through 2018 in North America, most of it relating to Canadian crude volumes, "which we expect to double through 2030," Paul Jacob, an analyst on the investment bank's Master Limited Partner/Infrastructure team, said.
Other infrastructure additions should total about 14 Bcf/d for natural gas processing and 1.3 million b/d of natural gas liquids fractionation capacity during the next several years, Jacob said. Fully 40% of that capacity will come out of the Marcellus Shale and Utica Shale alone, he added.
The 1.3 million b/d figure compares to 2.5 million b/d of current NGL production, meaning "about 50% of current production is what we'll add in infrastructure, and it's significant," Jacob said.
"We project the midstream infrastructure space will see about $40 billion of capex this year" -- a record level, he said. "We think next year you could see a similar level of spend and in 2015 it will be high as well. This dynamic should carry through to next three to five years."
NORTH AMERICA IN A 'THIRD PHASE'
Even as the boom continues, North America -- where almost all commercial shale production has occurred so far -- has moved into a "third phase" in the shale revolution, David Hewitt, Credit Suisse co-head of oil and gas research, said during the conference call.
The first step was "cracking the code" geologically and technologically, while the second is the manufacturing phase, Hewitt said. But "I sense a third phase, similar to total quality management in the 1990s where existing manufacturing processes chased efficiency gains."
In the core of nearly every play exists a "positive story" that should propel continued volume growth, the report said. "Over time, as the core gets drilled out and as the decline of existing wells becomes a more substantial hurdle, then production growth should slow. This appears several years off, particularly given recent geological success in the Permian," where companies are finding new productive areas such as the northern Midland Basin which has proved prolific this year.
DEVELOPMENT LESS STEADY ELSEWHERE
Outside North America, shale development has come in "fits and starts," according to the report. China has the world's largest shale resource, estimated at 1,100 Tcf versus 650 Tcf in the US, but only one foreign trial has resulted in a production sharing contract this year, between Shell and PetroChina. And progress on 21 shale blocks awarded so far has been "slow, with just 15% of the the three-year capital spending obligation likely to be spent in 2013, the report said.
In Argentina, which has held promise on the shale front for several years now, Chevron and Dow have taken positions and the government is signaling it will back higher gas prices.
But shale development in Poland has "cooled" while that of the Ukraine has heated up, Credit Suisse analysts said. Giant oilfield services providers Schlumberger and Halliburton "are clearly focusing hard on Argentina, Australia, China, Saudi Arabia and to a lesser extent, Poland," Credit Suisse oilfield services analyst Jim Wicklund said.
BANK EXPECTS CAP ON GAS PRICES, SUPPLIES TO KEEP RISING
However, the investment bank sees a cap on gas prices, given an "abundance" of those low-cost supplies in the US from enhanced productivity and cost control.
Industry has shown it can meet bullish demand projections for gas, power, transportation and LNG exports, Credit Suisse said. Despite a relatively low price environment of $5/MMBtu or below, and against the views of many commentators, Credit Suisse's Commodities Research team believes US gas supplies will keep on rising.
"It would require a significant increase in US demand to threaten a significant upward move in Henry Hub prices," the investment bank said.
US crude's impact on global oil prices is still "muted" as increased US production has coincided with global supply interruptions and Middle East/North African instability. Around 2.5 million b/d of oil production capacity has been put "offside" across the MENA region over the past few years including 2013, which roughly equates to the entire crude oil supply growth in the US of the last five years, the bank said.
"A significantly weaker oil price is not an imminent prospect," the report said.
Utah is more than 60% Federal land. The Rocky Mountains (which kinda run through the state) are loaded with oil-rich shale. If Utah were allowed to drill and get the oil out of our state alone - the influx of jobs here, the wealth that would be generated, would benefit the entire country.
Obama said “no”; so that’s all that to it.
I would LOVE to see Utah pull the Eminent Domain clause against Obama, and TAKE the state back from Washington.
as we write this, Obama plots how to screw it up!
a federal judge has already put issues in pipelines future construction.
“By Jeanine Prezioso and Sabina Zawadzki | October 24, 2013
(Reuters) – A ruling by a federal judge to cut agreed tariffs on a major oil pipeline has drawn fire from the energy industry which says it could jeopardize billions of dollars of future investment.” http://sustainability.thomsonreuters.com/2013/10/24/oil-shippers-decry-judge-ruling-seaway-pipeline-tariffs/
Not the same shale. That’s kerogen which is a lot more complex to get and process than what’s happening in the oil folds.
More bumpery here. :o)
What they’re saying is that the heart of the field is just to the east of boulder and running north of there.
Thanks ckilmer.
How the U.S. Shale Boom Is Splitting OPEC Apart
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