U.S. CHAMBER OF COMMERCE

Energy Blog

Energy Blog

US Chamber of Commerce Blog

Sean Hackbarth An oil rig worker in the Permian basin outside of Midland, Texas. An oil rig worker in the Permian basin outside of Midland, Texas.Photo credit: Brittany Sowacke/Bloomberg.

The shale boom is back.

After a decrease in shale oil production in 2016 we’re seeing an upswing in 2017:

The Energy Information Administration on Monday said it expects an increase in domestic shale-oil production to nearly 5 million barrels a day for April, which would be the highest monthly level in roughly a year.

The EIA offered forecasts for a climb from seven major U.S. shale producers by 109,000 barrels a day to 4.962 million barrels a day in April from March, according to the agencies monthly Drilling Productivity Report.

 Monthly oil production by basin.EIA: Monthly oil production by basin.Source: Energy Information Administration.
Improved Efficiency

During the two-year span of falling oil prices, companies retooled. By employing new technology and rethinking the fracking process, they became more efficient and lowered their “brake-even price,” the lowest oil can be for a producer to recoup its costs.

When oil prices rebounded, companies took advantage and ramped up production.

Big Oil Finds in Texas and Alaska

In addition, as technology and techniques to find and get shale oil continue to advance, more areas become commercially available for production.

For instance, late last year, a massive oil and natural gas field was found in Texas:

Geologists say a new survey shows an oilfield in west Texas dwarfs others found so far in the United States, according to the US Geological Survey.

The Midland Basin of the Wolfcamp Shale area in the Permian Basin is now estimated to have 20 billion barrels of oil and 1.6 billion barrels of natural gas, according to a new assessment by the USGS.

That makes it three times larger than the assessment of the oil in the mammoth Bakken formation in North Dakota.

The estimate would make the oilfield, which encompasses the cities of Lubbock and Midland -- 118 miles apart -- the largest "continuous oil" discovery in the United States, according to the USGS.

And Alaska could be the next fracking frontier:

A pioneer of the U.S. shale revolution wants to take fracking to America’s final frontier. Success could help revive Alaska’s flagging oil fortunes.

Paul Basinski, the geologist who helped discover the Eagle Ford basin in Texas, is part of a fledgling effort on Alaska’s North Slope to emulate the shale boom that reinvigorated production in the rest of the U.S. His venture, Project Icewine, has gained rights to 700,000 acres inside the Arctic Circle and says they could hold 3.6 billion barrels of oil, rivaling the legendary Eagle Ford.

The companies’ first well, Icewine 1, confirmed the presence of petroleum in the shale and found a geology that should be conducive to fracking, Basinski said. Their second well, due to be drilled in the first half of 2017, will fracture a small section of that range and see how readily the oil flows.

“We don’t know what we have yet," said Michael McFarlane, Burgundy’s president. “We know that the shale has sourced a tremendous amount of oil, but is it commercial? That’s a question that we haven’t answered yet."

If companies can figure out how to safely get and transport shale oil at a cost that makes business sense, we’ll see it come to market.

Great for U.S. Companies and Workers

Rising domestic energy production is great news for U.S. companies and workers.

Even with the fall in oil prices in the last few years, since President Barack Obama lifted the oil export ban in 2015, exports have surged. As production increases, there will be more opportunity for American workers to satisfy overseas energy appetites.

Abundant shale energy is also good for manufacturing. ExxonMobil recently announced $20 billion in manufacturing investments that will create 45,000 jobs.

After some dark times, it’s looking brighter for American shale energy.

UPDATE: Check out this facinating 360-degree video from a drilling rig in Texas' Permian Basin.

Karen Alderman Harbert m82785.jpegA storage tank is seen at an ExxonMobil oil refinery.Photographer: Carlos Javier Sanchez/ Bloomberg News.

The energy revolution continues to bring good economic news to an otherwise anemic economy.  For years, we’ve been arguing that America’s energy revolution will bring jobs and investment to our economy.  Now, there’s a new example to demonstrate just how true that is.  Today at the annual CERAWeek 2017 conference, ExxonMobil CEO Darren Woods announced a new Growing the Gulf initiative to increase its manufacturing capabilities in the Gulf coast region.

As part of the initiative, the company will be investing $20 billion to build or expand 11 different facilities—creating 45,000 new American jobs.  

 So why is a giant company best known for oil production investing so much in manufacturing?  Last year, the Chamber’s Sean Hackbarth captured the essence of how America’s energy revolution has sparked a manufacturing revolution as well.  The natural gas, crude oil, and gas liquids being produced across the country in record amounts are the chemical building blocks to products we use every day, from clothing to cosmetics to pharmaceuticals.  One needs to look no further than the aisles of a department store to see all the plastic products, and that plastic comes from natural gas and oil.  Sophisticated high-tech manufacturing facilities turn these energy resources into the products we buy.

 As we produce more home-grown energy, it is leading to more home-grown manufacturing as well. Plentiful energy resources are making it less expensive to build products in the United States, and those same resources are also providing the electricity needed to run manufacturing facilities at reduced costs.

 All this manufacturing means more choices for American consumers, and it gives us an opportunity to export products.  Domestic U.S. manufacturers are now competing all over the world, helping to reduce our trade deficit and creating jobs back at home. 

 As a result, the United States, and especially the Gulf coast, is becoming the epicenter of a manufacturing renaissance—exactly as we predicted.  In 2014, the Energy Institute launched our “Shale Works for US” campaign, which included a report produced with IHS CERA that quantified the far-reaching benefits from the shale revolution. It is important to note that because of our national supply-chain, the benefits from investments reach each and every state, and in turn bring jobs, revenues and benefits to every corner of our nation.

 It’s exciting to see these predictions borne out, and it’s a continued sign that America’s status as an energy superpower will help bring prosperity to us all—while driving innovation and technological advancement that help make America an economic superpower as well. 

Sean Hackbarth A PEMEX employee fuels a scooter at a company gas station in Mexico City, Mexico.A PEMEX employee fuels a scooter at a company gas station in Mexico City, Mexico.Photo credit: Susana Gonzalez/Bloomberg.

North American trade is the new Commerce Secretary’s top priority.

Secretary Wilbur Ross told CNBC, “The first on our agenda is NAFTA because we think it makes sense to solidify your own neighborhood first.”

Since trade agreement is 24 years old, it’s not surprising that there are areas where NAFTA could be modernized.

Recently in a speech in Canada, U.S. Chamber President and CEO Tom Donohue noted that “things like e-commerce and the digital economy didn’t even exist when NAFTA was negotiated more than two decades ago.”

Another applicable area is energy.

Senator John Cornyn (R-Tex.), whose state economy has benefitted greatly by the trade agreement, wrote in Politico:

Consider the nation’s energy landscape. It has changed dramatically since the trade deal was hammered out in the 1990s. With the recent lifting of the U.S. crude oil export ban and Mexico’s energy reforms, a renegotiated deal should account for regulatory cooperation and capacity-building provisions that promote investment and the free flow of American energy, particularly a streamlined approval process for LNG exports.

Given the U.S.-Mexico energy trade relationship, changes with NAFTA on this front could have important implications to U.S. companies.

Mexico is the United States’ number two energy trading partner behind Canada. Oil imports from Mexico have decreased while U.S. exports of petroleum products (gasoline, diesel, jet fuel, etc.) to Mexico have gone up. The Energy Information Administration (EIA) points out:

In 2015 and 2016, the value of U.S. energy exports to Mexico, including rapidly growing volumes of both petroleum products and natural gas, exceeded the value of U.S. energy imports from Mexico as volumes of Mexican crude oil sold in the United States continued to decline.

Mexican crude oil production is declining, while more of it is going to Europe and Asia instead of the U.S.

As for natural gas, EIA notes how it is a growing part of Mexican electricity generation:

According to Mexico’s national energy ministry (SENER), more than 60% of Mexico’s electric capacity additions between 2016 and 2020 are projected to come from natural gas-fired power plants, and significant natural gas capacity additions are expected to continue through 2029.

With the fracking boom, U.S. natural gas can be sold to our southern neighbor. Again from EIA:

Expected demand growth will be met mainly by a combination of increasing imports of natural gas from the United States and by large expansions of both cross-border U.S.-Mexico pipeline capacity and Mexico’s domestic natural gas pipeline networks.

What’s more, these numbers don’t fully take into account the increasing opportunities U.S. energy companies--developers, service companies, and equipment manufacturers--now have as Mexico opens more domestic energy development to foreign companies.

Any modifications to NAFTA must take these changes into account to protect these mutually-beneficial (and job-creating) gains. Keeping barriers to the flow of investment and energy low is good for U.S. businesses and consumers.

At the same time, strengthening energy ties among Canada, Mexico, and the U.S. will make North America businesses more competitive, helping American workers.