Back in May, U.S. Energy Secretary Ernest Moniz let some very valuable information slip in a press briefing…
He was in Seoul, South Korea, and he agreed to speak with the media after a two-day conference.
The rhetoric was extremely bullish for U.S. oil — and for one play in particular.
He said, “The nature of the oil we’re producing may not be well matched for our current refinery capacity.”
Secretary Moniz also hinted, “The issue of crude oil exports is under consideration.”
Refinery Coma
When the Energy Secretary of an administration that isn’t particularly fond of fossil fuels says this, you’d better take note…
You see, our refineries on the Gulf Coast are still struggling to keep up with the pace of U.S. oil production. One of the reason is that most U.S. refineries are designed to process heavier crudes from places like the Middle East and Africa, but the oil coming from our shale is actually very light and sweet.
In fact, crude with a lighter API gravity and sulfur content will account for most of our production growth over the next few years:
This difference forces companies like Valero Energy, one of the biggest U.S. refiners, to retool their facilities and adjust to the higher-quality supply.
Naturally, the result makes us less dependent on foreign imports from geopolitical hot spots around the world, and specifically in the Middle East.
And we both know U.S. crude production is breaking records nearly every day…
Quarter Century
The EIA released news this week in its Short-Term Energy Outlook that said the U.S. produced 8.5 million barrels of crude per day in July, a number not seen since 1987.
It also projected that daily U.S. production would reach 9.3 million barrels per day in 2015… but I find that hard to believe.
You see, the EIA didn’t think we would reach 8.5 million barrels per day until the end of this year…
We broke that benchmark in July.
So is it really a stretch to say that its prediction of 9.3 million barrels in 2015 is another lowball estimate?
As you can see in the image below, the lion’s share of our oil production growth has come from just two states:
That isn’t a misprint on the EIA’s part. A jaw-dropping 48% of the United States’ domestic oil production now comes from these two states, where three dominant oil regions are producing well over 1 million barrels per day… each.
And they aren’t even close to finished yet.
Eagle Ford Cash Frenzy
For example, look at the Eagle Ford formation in South Texas, where oil exports will be particularly lucrative…
It took drillers in the Eagle Ford shale just four years to surpass the 1 million barrels per day mark!
Remember, it took Bakken producers seven years to accomplish this.
Some of that success is due to the Eagle Ford’s proximity to Gulf Coast refineries, as well as the fact that Texas already had strong infrastructure in place (something North Dakota has struggled with over the last few years).
Wood Mackenzie has already projected that the Eagle Ford would produce over 2 million barrels per day by 2020.
At the same time, Baker Hughes announced that the Eagle Ford spudded 2,364 wells in the first half of 2014. That’s a 10.8% increase year over year, with 231 more wells drilled than in the beginning of 2013.
In fact, the EIA just announced yesterday that oil production in the Eagle Ford is expected to top 1.5 million barrels per day next month.
And with the possibility of Congress lifting the ban on crude oil exports, the Eagle Ford is in a perfect position thanks to its close proximity to the Gulf Coast.
Although unrestricted crude exports haven’t been approved, I believe it is only a matter of time.
After all, the Commerce Department just approved the export of condensate by two Texas oil companies.
And if you haven’t already invested in the Eagle Ford — the formation that accounts for 70% of U.S. condensate production — it’s hard to pass up the opportunity.
A few weeks ago, I mentioned that I would give you full access to information on three undervalued investment gems drilling in the Eagle Ford right now.
Well, my report was released yesterday, and there’s still some time left to access it before it’s too late.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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