OIL and GAS in the USA
I came across this interesting interview of T. Boon Pickens at the American Trucking Associations Conference dedicated to exploring the use of Natural Gas as a fuel in the US trucking industry. Some of the points I found interesting are summarized below.
These insights are offered by T. Boon Pickens (TBP) for the most part.
TBP - We have known about the existence of Shale Gas since 1951; and he has seen fracking in action since 1952. It was just previously not possible to extract the shale gas; and the horizontal drilling of wells is what has made it possible.
TBP - According to a J.P. Morgan report there are 8,000 Trillion cubic feet of proven reserves in the US - and until a few years ago we were expecting to recover only 5-10% - however now they are estimating recovery in the 30-40% range. To be conservative TBP estimates that they will recover more at than 2,000 Trillion cubic feet.
TBP - The Marcellus Shale will be producing 100+ years from now.(KM - this extends from Upstate New York across the Appalachian Basin all the way to Western Pennsylvania and Ohio.
TBP - Just so that people have an idea of how much gas we are talking about - 3,000 Trillion Cubic Feet of Gas is equal to 2x the Saudi Oil Reserves.
TBP - Saudi Oil production seems to have peaked at 10 MM barrels/day, and they are going to be heading lower. KM - Saudi Production Numbers via the EIA
TBP - The US is the largest producer of Natural Gas in the World - our current consumption runs at 24 Trillion cubic feet / year - we are using it as a fuel for Transportation, Powerplants and for Industry.
TBP - We will run out of oil, before we will run out of Natural Gas
TBP - US oil usage is at about ~20 million barrels/day
TBP - Exxon Mobile derives 81% of it’s revenue from outside the USA.
TBP - US Oil production
2011 -> 5.8 Million barrels / day
2012 -> 6.8 million barrels /day
Today our imports are around 11 MM barrels /day
Chart of US oil imports, and from where we get them
TBP also talked about global oil & gas consumption
Global Oil usage is ~ 91 MM barrels / day
USA usage ~ 20 MM barrels / day
China usage -> ~ 10 MM (5 MM imported but covered via land ownership and state company ownership
Global oil usage is supposed to increase from 91 MM to 93 MM barrels/day. The largest increase in the oil consumption is going to come from India and China.
We should not count on the oversupply of OIL in the market.
Saudi Arabia needs an oil price of ~$94/barrel to meet it’s social commitments (These are payout commitments to it’s citizens - if it’s not able to meet them, then there will be unrest in the kingdom - hence they will do everything in their power to keep the price of oil about $94).
OPEC produces ~30 MM barrels of oil, which is about 1/3 of the daily global usage, so they can have a very significant effect on oil prices via their cartel.
Something that the general public does not know is that there are currently 1,300 operational oil rigs in the USA and US oil is about 20% cheaper than global oil price which is “Brent North Sea”. US oil is “West Texas Crude”.
Natural Gas on the other hand is 75% cheaper than in the rest of the world - the prices in different parts of the world are below:
Japan -> $18/MCF (Million Cubic Feet)
China -> $15/MCF
Europe -> $15/MCF
UK -> $12/MCF
US -> $4/MCF
TBP - Natural Gas is also about 30% cleaner than Oil, Coal etc.
TBP - There are plans to export US Natural Gas starting in 2015 from Louisiana; the cost of this gas including shipping will be ~$9.