USE IT OR LOSE IT AMERICA: Domestic Energy Production @ Risk

Global Shale Gas Potential

Ok I admit it, I am an energy geek!

I spent the last twenty years earning my living helping clients turn their energy strategies into actionable results.  I believe in the power of markets and worship at the altar of competition in the belief that thriving, competitive wholesale energy markets are good for the energy industry, good for customers and good for the global economy.

Energy markets strive to be competitive but politics happens

  • OPEC wants to control oil supply and thus price to drive up the wealth of a few nations.  That game has worked pretty well but is now faces the forces of disruptive technology, competition and the need for change.
  • National oil companies were formed by nations eager to gain access to E&P technologies to develop their resources but were loathed sharing the wealth that technology produces.  The result has been an uncompetitive market for the super majors where finding new E&P resource potential material to growth has been made much more difficult.
  • Rapid depletion rates in conventional plays are a ticking time bomb for all these players. Technology has enabled them to drill deeper, go further offshore, and make themselves seductively attractive to non-OPEC players eager to compete.
  • Disruptive technology innovation gave rise to economic access to unconventional oil and gas resources onshore here in the US by using horizontal drilling and hydraulic fracturing.   This technology is not new having been used for years, but its growing prominence is brought about by America’s resistance to domestic oil and gas growth from conventional sources.

In America’s post WWII growth economy the answer was ‘satisfice’ by allowing ever larger imports of foreign oil from OPEC and other sources rather than face the domestic politics of domestic energy production.  It helped tremendously that we share a border with Canada and it harbored no such inhibitions about developing its domestic resources.  NAFTA made possible a bridge between North America’s three energy producing countries and all benefited from it.

Fast forward to today.  We’re struggling to recover from a deep recession and nothing seems to be working to create jobs and grow GDP at acceptable levels except for places like North Dakota and just recently the Marcellus Shale.  The boys in Texas looked up and said ‘told ya’ll’ this fracking stuff works!

Unconventional oil and gas developed into a material opportunity for GDP growth because disruptive technology was used to end-run the government’s limitations on conventional E&P.

Americans are not alone in believing unconventional oil and gas is a game changer.

America’s unconventional oil and gas technology is for sale to the highest bidder.  Today some of the best opportunities in unconventional plays are right here at home in the Barnett, Haynesville, Eagle Ford, Bakken and Marcellus Shales in the United States.

If we don’t use American technology will lose it to China and other places just as we are losing rigs from the Gulf of Mexico now working in Brazil, Egypt and elsewhere because Federal regulations, permitting delays and politics strangle the conventional energy business in America. Competition is working in the conventional side of the business but not in our favor, but we still have an opportunity to save the unconventional side to accelerate our growth and recovery.

It is use it or lose it time!