Shale Forces OPEC Member to Consider Importing U.S. Gas

Abundant supplies of natural gas — unlocked by hydraulic fracturing and horizontal drilling — are helping to lower home heating bills, create millions of jobs, boost American manufacturing, and deliver tangible environmental benefits. And yet for all of the known benefits of shale, the scale of its transformative power may not have been fully understood until this week.

In a historic moment for American energy, a leader from the United Arab Emirates — a member of OPEC — announced that the UAE is “seriously thinking” of importing North American natural gas. As Reuters reports:

“The United Arab Emirates, a Gulf OPEC oil producer, said it was looking at the possibility of importing natural gas from North America, in what would be one of the most striking developments since the start of the U.S. shale boom. The United States and Canada are producing record amounts of gas from shale rock formations, pulling down North American prices to levels that have attracted the interest of foreign buyers.” (emphasis added)

This news comes on the heels of other major announcements for American energy output. As a recent report from the Independent Petroleum Association of America (IPAA) highlights, the increase in American natural gas production  has helped to reduce net import reliance for natural gas from 16 percent of domestic consumption in 2005 to just six percent in 2012. As for oil, the International Energy Agency (IEA) recently reported U.S. production is on a “relentless rise.” From CBNC:

“As the U.S. looks toward a future of energy independence, the IEA noted that U.S. crude output for 2013 outstripped its projections from a year ago by around 455 kb/d, and noted that ‘U.S. crude oil supply in 2013 registered the fastest absolute annual supply growth of any country in the last two decades, rising 15 percent in 2013.’ This helped blunt the impact of supply declines elsewhere, notably Libya and Iran.” (emphasis added)

Earlier IEA reports from August 2013 made similar findings, stating oil output from American shale plays was a “defining feature of tomorrow’s market.”  As reported in CNBC, “the rise of North American oil supplies could test the future of OPEC which may have to curb supply to accommodate rising shale oil volumes.” IEA’s report also predicts North America will provide 40 percent of new oil supplies by 2018, while the contribution from OPEC will slip to 30 percent.

As the New York Times recently reported, development of America’s shale resources has tangible energy security benefits for the nation, which translate to positive impacts for American consumers by “providing a level of supply security and price regularity for the global oil market.”  One thing, however, is clear: North American shale development is curbing imports from OPEC, sending a clear signal to the global market that American energy is here to stay. The fact that OPEC countries are now looking to import energy from the United States demonstrates just how big of a game changer shale has been.

Comments

  1. Rick Munroe says:

    The shale boom in USA does not “force” any country to do anything. If UAE wants to import gas it has sources which are much closer than USA.

    Also, this article ignores the fact that the USA is still a net importer of gas (almost 4 bcf/day, mostly from western Canada). US conventional gas provides over half of US gas production but it is in steep decline (as is Canada’s) at around 20% per year.

    Two-thirds of US shale gas comes from just three plays. The best of them, the Haynesville, is clearly in decline and the Barnett seems to be struggling. Production from fracked gas wells declines very rapidly, so at best the USA (and Canada) are on a drilling treadmill to make up for ongoing depletion in both our conventional and our shale/tight gas wells.

    At worst, if anything should interfere with the pace of drilling & fracking (eg. a major environmental glitch) there would be an immediate gas supply crunch. In such circumstances, LNG exports (esp. to places like UAE) would be the first thing to go.

    • Hi Rick, thanks for reading. Unfortunately, your comments are largely unsupported by the facts.

      For example, your reference to the United States being “a net importer of gas” ignores the fact that, according to the EIA, the United States is projected to be a net exporter of LNG by 2016 and a net exporter of natural gas by 2018. For the latter, that’s actually two years earlier than EIA had projected previously, which is of course due to the abundant domestic production of natural gas: http://www.eia.gov/forecasts/aeo/er/early_production.cfm

      You also set up a straw man by referencing “declines” in shale plays without discussing the Marcellus Shale. Not only is the Marcellus the largest shale gas play in the United States, but it also accounts for nearly 20 percent of all natural gas production in the country. Whether that omission was deliberate or accidental is immaterial, however, because either way it demonstrates the fundamental inaccuracy (and inadequacy) of your argument. Here is the source for Marcellus accounting for nearly 20 percent of production: http://www.eia.gov/todayinenergy/detail.cfm?id=14091

      You should also pay attention to the EIA’s statements on efficiency, including this line: “drilling activity in U.S. shale plays is now generally producing greater quantities of oil and/or natural gas than in the past.” Also: “five of the six U.S. shale plays tracked by the DPR have seen increases in oil and natural gas production per rig over the past few years.”

      The argument on decline rates is similar to the Peak Oil argument, and it is equally flawed.

      Not for nothing, your suggestion that the Haynesville is the largest producer of shale gas (i.e. “the best of them”) is also wrong. The Marcellus has been producing more for at least the past year, if not longer. http://www.eia.gov/todayinenergy/detail.cfm?id=15351&src=Natural-b1

      Nonetheless, thank you again for taking the time to comment. Hopefully this clears up any misconceptions you had.

      • Rick Munroe says:

        No quarrel with your facts, though I question some of your opinions.

        I’m aware of forecasts that US will become a net exporter of gas in a few years, but it’s not there yet.

        No quarrel re. Marcellus, of course. My implication is that if Barnett is stalling and Haynesville clearly is, then a great deal hinges on Marcellus which is in a league of its own.

        No quarrel re. improved drilling efficiency, either.

        As for Peak Oil, I’ve seen nothing to discount its validity or its concerns. Conventional crude & condensate stalled in late 2004 at around 74 mbpd. Only the inclusion of 3 mbpd of US tight oil has allowed this volume to increase to around 77 mbpd. Add another 2 mbpd of bitumen and we’re getting close to 80 (assuming that conventional crude is holding steady and not yet in decline).

        The rest of the “all liquids” total of 90 to 91 mbpd that we so often hear touted as the new high for global oil production is primarily NGLs, topped up by biofuels and even refinery gains.

        My understanding is that reputable analysts are rather unanimous in expecting US tight oil production to peak around 2020 (please correct me if I’m wrong). In a decade’s time, I doubt that many people will view PO as a “flawed” concern.

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