US to achieve energy self-sufficiency by 2020: Exxon Mobil CEO

cnbc ^ | Thursday, 9 Jan 2014 | 3:16 AM ET | By: Reported by Sri Jegarajah, Written by Ansuya Harjani

[ckilmer]

US to achieve energy self-sufficiency by 2020: Exxon Mobil CEO

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 Published: Thursday, 9 Jan 2014 | 3:16 AM ET

By: Reported by Sri Jegarajah, Written by Ansuya Harjani

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US to be energy secure by 2020: Exxon Mobil

Thursday, 9 Jan 2014 | 12:47 AM ET

Rex Tillerson Chairman & CEO, ExxonMobil, describes why he thinks it is realistic for the US to be energy self-sufficient by the end of this decade.

The United States' energy self-sufficiency dream will become a reality by 2020, according to Rex Tillerson, CEO of the world's largest publicly traded oil company Exxon Mobil.

"I think it is realistic that the U.S. could be energy self-sufficient by the end of this decade," Tillerson told CNBC on Thursday."We're already the world's largest natural gas producer (and)last year crude oil production surpassed levels not seen since the 1980s," he said.

The U.S. is expected to surpass Saudi Arabia to become the world's top oil producer by 2016, the International Energy Agency (IEA) predicted in November, driven by a boom in the nation's shale oil output.

Getty Images

In October 2013, U.S. domestic crude oil production exceeded imports for the first time in almost two decades, according to the Energy Information Administration (EIA).

China's huge shale opportunity

According to Tillerson, China's shale reserves could be even bigger than those in the U.S., but complicated underground geology presents challenges.

"By every geological assessment that I've ever seen, they are larger than the U.S. However there are a number of attributes in China's shale gas reserves that make them particularly challenging," he said.

"Most of these formations are buried much deeper than they are in America. Many of them are in remote areas where there isn't infrastructure to support their development and some in areas where there isn't a lot of water available," he added. Shale gas is extracted by a high-volume hydraulicfracturing (fracking) process that requires large volumes of water.

(Read more: How the US shale gas boom could derail China)

There is no doubt that China will develop a portion of its shale gas reserves, but how much of the large endowment will be developed is difficult to judge, said Tillerson.

Exxon Mobil has partnered with a domestic state oil firm to study to test shale potential in China. However, Tillerson says the company is in the early stages of evaluation.

"Various companies are working with Chinese national oil companies to understand how productive these shale resources will be, what kind of cost would be required to develop them and what kind of infrastructure build out is going to be required,"he said.

(Read more: US to be top oil producer for only four years)

"So it's really a question of pace, and I think it's going to be smaller at the front, and when some of these questions are answered, I think the pace will pick up quite rapidly," he added.

[ckilmer]

This Wall Street bull says the US energy boom could go on for decades

By Steve LeVine @stevelevine 12 hours ago

Drill faster, we need the pumps. REUTERS/Terry Wade

 

The most prominent oil bull on Wall Street says the US government seriously underestimates the continuing rise in American oil production. Citi’s Edward Morse, who defied the tide to correctly call the 2008-2009 oil price crash, says that the US Energy Information Administration (EIA)—while boosting its previous projection for US oil production—is still far off the mark.

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In a succession of reports, the ultra-cautious EIA has significantly raised its estimate of US oil production, led by shale oil drilling. By 2019, the EIA said last month, the US will be producing 9.6 million barrels of oil a day, 22% higher than the estimate it issued last year at this time. After that, US production will start a slow decline (chart), but that will only mean going back to last year’s impressive 7.5 million barrels a day by 2038 or 2039, the agency estimates.

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Morse told Quartz that the new EIA estimates are “nonsense.” US production will continue to rise through 2022 “and stay there for 30 years,” he said.

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His remarks are important because if the EIA and other Wall Street analysts are correct, the US production boom will be ephemeral and the euphoria over an energy-led US economic boom relatively short-lived. But if Morse has it right, the US boom will go on for four decades. Who is right also has global ramifications: US production has already forced down global oil prices, thus undermining the petroleum-led economies of OPEC and Russia, and the question is how long the US will continue to exercise this influence.

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The vastly differing opinions stem from disagreements over how to allow for high production decline rates in shale oil fields. The bears note that production plummets in the first year, thus requiring constant new drilling. Morse argues that oil companies are getting better and better at hydraulic fracturing, the method used to drill in shale, and hence the worries about current decline rates are exaggerated.

[KTM rider]

We may have no other choice if the USD crashes

[ckilmer]

Actually the oil boom is what’s killing the dollar bears and the gold bulls.

[eyedigress]

Probably getting close to dollar investments. As the World Turns.

[Smokin' Joe]

Morse argues that oil companies are getting better and better at hydraulic fracturing, the method used to drill in shale, and hence the worries about current decline rates are exaggerated.

Hydraulic fracturing is a production technique, not a drilling method. Sheesh!

When I see fundamental errors (akin to calling a 'home run' a "goal"), I wonder just how conversant the writer is with the industry.

[thackney]

Morse argues that oil companies are getting better and better at hydraulic fracturing, the method used to drill in shale, and hence the worries about current decline rates are exaggerated.

So if that truly is making a difference in lowering the decline rates, why isn't that happening?

[thackney]

I wonder just how conversant the writer is with the industry.

BTTT

[ryan71]

I never hear the obama administration speak of this oil boom. They hate it so badly even they won't claim credit for it.

[DaveA37]

Not going to happen unless we rid ourselves of every demodummie on American soil.

[ckilmer]

Morse argues that oil companies are getting better and better at hydraulic fracturing, the method used to drill in shale, and hence the worries about current decline rates are exaggerated.

So if that truly is making a difference in lowering the decline rates, why isn’t that happening?
..............
beats me. I guess that’s the inverse of asking the question....if the decline rates are so steep—why is production going nearly straight up in many places.

The answer has to be “that oil companies are getting better and better at hydraulic fracturing”

That likely means for example that there’s some benefit to drilling 30 wells on one pad rather than one. As well they’re learning how to set pads down at the exact intersection of half a dozen stacked plays so they can drill at half a dozen depths and directions.

This is certainly what’s happening in the Baaken.

What puzzles me is that the mother of all stacked plays is in the Permian basin. And yet drilling results don’t seem to reflect any great improvements.

[thackney]

As I understand it, and I could be off here, "getting better at hydraulic fracturing" translates to lower cost of hydraulic fracturing (including faster) and better initial production. I don't see how that activity translates to a slower decline curve.

The answer has to be “that oil companies are getting better and better at hydraulic fracturing”

That likely means for example that there’s some benefit to drilling 30 wells on one pad rather than one.

We did a lot wells from single pads in Alaska. It is in no way related to hydraulic fracturing. It is from very good directional-steerable drilling and good 3D seismic. It lowers the cost of drilling, it does nothing related to production decline rates.

Now the fact that at that point you have good directional-steerable drilling also means you have better control on putting more well-bore in the better production zones of the play.

[Starstruck]

US to achieve energy self-sufficiency by 2020: Exxon Mobil CEO

Too bad we will be a third-world nation by then.

[EERinOK]

ckilmer, thanks for the near daily posts on energy topics. lately rather than peruse the usual energy/business sites, I just search energy here on FR and see what you and thackney have found.

on the decline curve matter in shales, the article probably refers to the criticism the industry has received from allegedly inflating 30+ year recovery based on extrapolating short term (3-5 yrs) average well production. early on in the shale boom there were and still are some awful plays in certain areas, uneconomic prospects. Once wide spaced leasehold drilling slowed down a couple years ago as land positions were secured, operators stopped drilling in poor reservoir quality and focused on drilling in better reservoir quality. when you stop dragging down the average with bad wells and increase the wells in the sweet spots, the average well decline curves improved.

on a single well basis, companies are not getting better per se at hydraulic fracturing. that technology only makes a major leap every 3-5 years, and then only limited suppliers possess the latest improvement. where people are making a lot of progress is better distributing the frac treatments along long horizontal wells exposing more productive rock to wellbores than 2-3 years ago. it’s been more the changes in the well completion process than changes to frac treatments themselves, along with the better wellsite and target selections, that improved the decline curves.

at the same time, the completion efficiency has improved fast, addressing the well/field economics.

The NYT did a nasty hit piece on the industry a few years back, basically calling the CEOs of shale developers con men concerning well decline curves. they had a basis for criticism with independent consultants saying truthfully that the average well production was less than advertised in stock reports and press releases. what they did not consider was the E&P companies tossed out the dog wells in their estimates, knowing where they were never going to drill those targets again and having learned from prior mistakes on wells. toss out the dogs, factor in steady improvement and all of the sudden you have better, but still steep, production declines.

another technical development improving decline curves and recovery estimates is the understanding of phases of production from low permeability fractured horizontals and applying different math to each period. the old method of using a single equation, or 2 at most, for the whole well life just does not work. this can cut both ways.

[ckilmer]

Maybe you know the answer to this question.

Why is that production is not just exploding in the Permian basin.

There are so many stacked pay streaks one on top of the other that you would think they would be able to zoom up volumes and push down costs fairly rapidly. That sure is the case in the Baaken where they have a third the number of pay formations. But its not happening in the permian. costs remain high and volumes move up only incrementally.

[EERinOK]

I am not certain since I don’t work the Permain, but did just read an interesting article in Jour. Petroleum Technology about it.

the Permian is legacy oilfields, land positions are established and there is far less land competition since leases are held by production. so no rush by 100s of operators from majors to mom and pops, to punch a 1000 holes in the next 1-2 years.

operators are taking a slower measured approach to locate the best of many geographic and stratigraphic targets. in a sense still exploratory, not large scale development yet.

another reason that might have to take a more diligent quality over quantity approach is that it is oil in the rock, not gas with 50 times gas viscosity in low permeability. a bust well is true bust, total loss. at least in the gas shales and eagleford there is some gas cash flow even on marginal wells.

once the geology is better understood, identifying where the permeability is located, it could go nuts like the eagleford & bakken. a lot of the horizontal activity is on the basin fringes, not in existing 50-60 year old depleted fields, so again, today it seems more exploratory rather than field development phase.