The US Oil Boom Is Far from Over: Part 2
Some cry out for "Peak Oil," claiming U.S. oil production is about to reach its ceiling. I recently wrote an article explaining why I disagree and focused on several things: large drilling inventories, new plays to be discovered, deeper laterals, and utilizing downspacing to increase reserves and potential drilling locations. This is just part of the argument -- there is still plenty more to be said.
The Arctic's potential for oil and gas production is huge, massive, colossal even. The United States Geological Survey estimates that the Arctic holds ~90 billion barrels of crude oil, with ~58 billion of it in North America. The U.S. has six of the 18 major Arctic fields (not including Russia), which means it will be able to cash in on the huge potential. This provides an OPEC style growth runway for U.S. oil production.
Crude is just part of the equation; the USGS estimates that there is ~412 billion barrels of oil equivalent in the region, including 1.67 trillion cubic feet of natural gas, and 44 billion barrels of NGL. ~435 trillion cubic feet of natural gas and ~16 billion barrels of NGL are in North American territory. Canada, which has 11 of the major fields, and the U.S. see huge production potential in the area.
Royal Dutch Shell is investing back into the Alaskan Arctic after leaving it in 1991 due to declining production rates. In 2005 Shell bought back into Alaska through the Beaufort Sea and in 2008 bought exploratory leaseholds for the Chukchi Sea. Shell sees as much as 8.2 billion barrels of oil and 27.6 trillion cubic feet of gas in the Beaufort Sea alone.
Imagine the potential: If just one play could yield that much oil and gas, then more is sure to come in other areas. Shell is smart to take advantage of such a huge opportunity, because oil prices aren't heading lower anything soon. The Arctic offers a huge growth runway for American oil production and a strong counterpoint for those who believe in Peak Oil.
The Arctic is just one of many plays America has the potential to see continued production from -- the Gulf also has some promise.
Big discoveries down south
The Gulf of Mexico has seen a flurry of new discoveries in recent years as oil companies drill down deeper to find good ol' crude.
Anadarko Petroleum has set its sights on the Gulf, with one of its prospects recently giving investors good news. In the Shenandoah field Anadarko's Shenandoah-2 appraisal well yielded great results. Previously Anadarko had seen the play having ~300 million barrels of oil equivalent, but now it's estimating that number could be two to three times that.
The Shenandoah field is part of the massive Lower Tertiary trend, which is a very hard play to navigate but holds an enormous amount of treasure. Those who are able to successfully navigate its deepest areas reap big rewards. Some analysts see the amount of recoverable oil at 15 billion barrels of oil equivalent, which is a substantial increase over the ~4.8 billion barrels of recoverable oil equivalent that the EIA predicted in 2010 for the whole of the Gulf.
When wells like Shenandoah-2 give us insight into the Gulf's hidden treasure, those estimates seem to be coming closer and closer to fruition. Increasing recoverable reserves is a good sign, but America needs more than reserves to boost production. America needs output!
Anadarko is doing just that, turning reserves into higher levels of production. Anadarko plans to begin production from its Lucius project, which will pump out 80,000 boe/d beginning in 2014. In 2016 production from the Heidelberg project will begin, and it also will pump out 80,000 boe/d. This is a significant boost to help propel America closer to energy independence.
Anadarko can't do it all by itself of course, so big old ExxonMobil is going to help out. In 2011 Exxon found one of the biggest discoveries in the area since 1999. The Hadrian field has 700 million barrels of recoverable oil equivalent in it, but as drilling continues that number could go higher, just as it did for Anadarko.
The US energy revolution is far from over. While plenty of focus is directed to onshore shale plays, and for good reason, investors can't forget two of America's biggest fields. The Arctic is full of energy, and higher oil and gas prices justify exploration in the frigidly cold region.
In the Gulf of Mexico exploration companies have become more daring and are drilling deeper into the area to find recoverable resources. It can cost over $100 million to drill a well ~30,000 feet deep to find oil, so you have to be either big or bold to do so.
America's energy revolution is far from over, and the amount of oil and gas that can be recovered from these two plays alone show just how far we can go. Add in domestic shale plays and the growth runway is long indeed.
How else can you invest in the American energy boom?
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