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Dec 09, 2012
The North America Unconventional Playing Field and Scorecards
The revival in North America oil and gas supplies has shifted the energy playing field in North America and potentially the globe. The scorecard for tight oil below is impressive and even the gas scorecard offers a glimpse of a better future. The impacts are undeniable and exciting, but this revolution is occurring in the midst of and often in spite of considerable market turbulence.
Unconventionals in an age of uncertainty A simple view of the day's headlines shows geo-political and economic uncertainty around the world. US and OECD oil demand is reaching a plateau, but supply anxieties ranging from Iranian potential disruptions to short-lived but still price-driving actual disruptions in Gulf of Mexico supplies from Hurricane Isaac continue price volatility. Challenging business conditions continue from the crush of above ground uncertainty.
What kind of new regulations are coming? Will public confusion and mistrust force regulators to slow or even stall the boom? Or will the industry and stakeholders be able to work together to effectively communicate, understand, and safely manage the risks and impacts from expanded onshore development?
Add in increasing costs, competition for capital, equipment and human resources, and the need to be cost efficient and technologically savvy is not only critical to a company's success but may be critical for survival.
Source: IHS estimates
Rebalancing Gas Supply and Demand The summer's record high temperatures limited injections to gas storage and higher draws from crude storage were bullish for oil and gas prices, but gas-in-storage is still 12% higher than it was a year ago. Average gas prices in August are far below last year's averages. Natural gas drilling continued to slump with year-to-date gas completions down more than 28% from 2011. This is part of important rebalancing of gas supplies with demand.
As part of the rebalancing, gas supply growth has flattened over the past few months and gas demand has increased to fuel record levels of gas fired power generation and a surge in construction of chemical plants that will use natural gas as feedstock. With 2012 WTI oil averaging almost $93 per barrel, year to date oil well completions are up 37% from 2011 levels.
Positive News in Unconventional Plays Most of the news on the evolution of unconventional oil and gas plays suggests continuing growth. Recent developments reported in IHS Energy News On Demand® underscore impressive commerciality gains for the Niobrara play in the Denver Basin plus successful new efforts to expand the Mississippi lime play in Oklahoma and Kansas and the Tuscaloosa Marine Shale play in Louisiana. Drilling continues to expand in the Collingwood shale play in Michigan and there is increased deepwater Gulf of Mexico exploratory drilling.
A Paleozoic play along the Las Animas Arch in Colorado and oil targeted drilling in the Pearsall shale in the western part of the Eagle Ford fairway also highlight new play activity. These developments significantly overshadow news that Rosetta Resources is suspending efforts to establish commercial Bakken production in the southern Alberta Basin of northwest Montana. Other companies like Newfield, Primary Petroleum, Nexen, Crescent Point Energy and Shell continue with Bakken exploration in the basin.
The scorecards below provide details on the future of unconventional gas in the US with dramatic contributions to economic recovery and the key role gas can have as a clean energy transition fuel that does not require the kind of subsidies that renewable energy sources currently require. The tight oil scorecard underscores the significant size of the opportunity this new work promises as well as the contribution tight oil makes to the US economy.
Source: IHS Report – America's New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy
Posted 9 December 2012
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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