SEG ’14: Shale revolution transformed U.S. resources, economy
SEG ’14: Shale revolution transformed U.S. resources, economy
ROGER JORDAN, Associate Editor
DENVER, Colorado -- The technological innovations behind the shale revolution transformed North America’s resource potential and the U.S. economy in the aftermath of the worst financial crisis since the Great Depression, SEG 2014 heard.
The breakthroughs behind the U.S. shale boom were among a number of disruptive technologies identified by the McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company.
“Unconventional oil and gas is the enabler of many of the other items that are on this list,” Thomas Petrie, former vice chairman of Bank of America Merrill Lynch, told delegates at the conference’s opening session on Oct. 27.
According to Petrie, concern about peak oil -- the theory that the world is running out of oil -- came to a climax around 2005, spurred on by the demise of North Sea production “after only three decades of development.”
“However, we are coming to a rather different conclusion today, when we realize just what’s happened with the use of horizontal drilling, multistage fracing and a whole group of ancillary technologies,” he added.
These technologies have resulted “in a four-fold expansion in the resource potential of North America,” Petrie said, noting that the resource potential for natural gas had undergone a “more than a ten-fold expansion.”
According to EIA data, U.S oil production fell to 5 MMbpd in 2008. However, according to the latest available EIA data, U.S production has now climbed to 8.97 MMbopd.
Petrie, who is now the chairman of Petrie Partners, LLC, singled out four areas in which the unconventional revolution has had a major impact: the economy, technology, the environment and geopolitics.
“We are seeing a benefit from the development of these unconventional fuel sources that was unimaginable even a decade or a decade and a half ago,” he said.
Some of these benefits, Petrie said, include a sharply reduced foreign trade deficit, a restoration of U.S. manufacturing competitiveness and a transformation in “petrochemical feedstock availability.”
This increase in feedstock availability has facilitated a rejuvenation which “we can now say is likely to be sustainable over many decades,” Petrie said.
The shale revolution has, however, not been without opposition, with environmentalists seeking to block fracing.
The oil and gas industry is experiencing a lot of pushback, and it is “incumbent” on the industry to articulate the benefits of exploiting unconventional resources, he said, warning that there is not, currently, a balanced debate on the subject.
And while former President George W. Bush opted not make the U.S. a signatory to the Kyoto Protocol, Petrie pointed out that the U.S. is now the most compliant country in the world.
While many of the signatories are struggling to meet their quotas for CO2 emissions, the U.S. is already at 1992 levels, he said. Natural gas, vast quantities of which were unlocked by the shale revolution, produces significantly less CO2 than coal.
Helmerich & Payne’s introduction of more productive rigs, which “dovetailed the new scalable resources that came out of pursuing source rock or rock near source in tight formations,” was cited as a move that allowed the company to befit from the unconventional disruption. According to Petrie, who serves on the company’s board, Helmerich was able to “leapfrog its competitors” as a result of the disruption.
And while traditionally leaders in Saudi Arabia, Kuwait and Abu Dhabi would have looked to the West for their markets and their security, that is no longer the case, Petrie said. The emergence of power triangles in the Eastern hemisphere changed this, and, going forward, this will present a challenge for Western leaders as they think about energy.
The SEG’s International Exposition and 84th Annual Meeting is taking place in Denver’s Colorado Convention Center from Oct. 26 to Oct. 30. The conference moves to New Orleans, La., in 2015.
