Sometimes you have to take the good with the bad.
At least, that much became evident after digging through a recent energy report released by IHS and CERA that highlights the impact of expanding our shale energy.
Turns out that we’ve been right all along…
The growth is staggering. And the benefits that come along with it are too good to pass up.
Over the next 20 years, more than $5.1 trillion will be spent developing our unconventional resources, split almost equally between oil and gas.
What’s more, those same oil and gas companies will pay out approximately $62 billion in federal, state, and local taxes this year — and that amount is expected to jump to over $100 billion in annual revenue in a few short years.
Where will this production boost take place?
We already know the answer to that question…
For years, we’ve focused on these flourishing plays, specifically the huge shale plays like the Bakken in North Dakota and the Eagle Ford in Texas.
But with the report’s happy news of a production boost came a handful of scary realities — including the slow death of conventional oil…
So Long — and Thanks for All the Barrels!
We’ve been beating the drum on the end of cheap oil for years in these very pages.
Today I want you to see for yourself exactly what I mean by “the slow death of conventional oil.”
U.S. oil production peaked in 1970 at 9.6 million barrels per day (for a fleeting moment that year, we actually topped 10 million bbls/d). We’re talking about the cheap, easy-to-get-to barrels that kept Uncle Sam atop the world’s oil stage.
When production began its decades-long decline, it wasn’t easy to watch…
Since then we’ve seen a sudden resurgence in oil production in the lower 48 states, thanks to boosting tight oil production.
That easy-to-get conventional oil, however, is still dropping like a stone. Buried in the report is a projection of our tight oil production — and the decline that comes with it:
The surge in unconventional oil production is masking a very serious problem in the U.S. oil industry — that is, the decline of conventional oil.
But it’s not all doom and gloom ahead of us. In fact, there’s a $2.5 trillion opportunity for investors on the horizon…
Drilling Bonanza: Take It or Leave It
Like it or not, these tight oil and gas plays are becoming the norm for U.S. production.
Less than a decade ago, shale gas accounted for a very small percentage of our total natural gas output. It’s almost 40% today.
And it’s the same story for our tight oil resources:
In 2000, it was hardly a blip on anyone’s radar…
By 2008 it started to gain momentum, especially after the USGS released its report on the Bakken Formation.
The cat is finally out of the bag. These unconventional plays are making headlines daily.
As you can see in the chart above, more than two million barrels of oil production come from tight oil production.
The truth is it doesn’t matter which puppet takes the White House in January, because whoever is there won’t pass up the opportunity to develop our unconventional resources — and the benefits that come with it.
So far, shale projects have created almost two million jobs. This year our unconventional oil and gas operations added 360,000 direct jobs and more than half a million indirect jobs.
Imports will continue dropping by as much as 60% between now and 2020, which alone will save us the hundreds of billions of dollars we spend every year on our addiction to foreign oil — and of course, the $2.5 trillion that will be pumped into state and federal coffers.
..
That’s how much cash will be generated through our unconventional activity between now and 2035 (click chart at right to enlarge).
Can we really afford not to take advantage of this unconventional future?
It’s precisely the reason why I’ve prepared this special report highlighting three small companies operating in the thick of the North Dakota oil boom. Each one is drilling at a furious pace, often outperforming companies 10x their size.
The clock is ticking. You don’t want to be on the sidelines when these stocks double on crude oil’s next run above $100…
Until next time,
Keith Kohl
Editor, Energy and Capital
P.S. I know many of my Energy and Capital readers like to pore over the details for themselves. That said, if you’re interested in reading the full report by IHS and CERA titled, “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy,” you can find it here.
