“Formula for success: rise early, work hard, strike oil.”
These famous words came from legendary oilman J. Paul Getty.
In his heyday, the founder of Getty Oil was one of the richest men in America, and his success was largely due to this mantra.
Thing is, we’ll need to amend it a bit over the next few years…
Rise Early, Work Hard, Strike… Gas
Mark my words, this will soon be the new motto of drillers and Getty admirers the world over.
With companies looking to profit off of the new EPA regulations against coal, manufacturers moving back to America for natural gas, and the eventual export of LNG to much less saturated markets in Asia and Europe, gas will soon be considered the new oil.
We’re not trying to shortchange oil, especially now that prices are in the triple-digits, but the new EPA regulations announced earlier this week will usher in a new wave of natural gas millionaires and billionaires like Getty.
Only this next boom in the energy industry won’t just come from natural gas…
And it won’t come from the discovery of another massive oil field.
No, the biggest windfalls will happen in technology. You see, anything companies in the industry can get their hands on to extract more oil and gas — while also boosting their bottom line — will drive the next era of energy production.
And there’s a new rule that took effect in North Dakota on June 1st that jump-started the race towards the most efficient oil and gas production.
One Last Look…
I have no doubt that some of you have seen this picture before:
In the satellite image above, the bright lights of Chicago and Minneapolis seem only a hop and a skip away from the gas flaring taking place in the Bakken.
Methane is a byproduct of oil production. And when an operator can no longer store all of the gas produced during its drilling operations, it simply burns it off. The flaring results in photos like the one above, where you can see millions of cubic feet (and dollars) being burned off into the atmosphere.
Up until now, companies have been perfectly content to do this because there were no regulations stopping them, nor any financial incentives and infrastructure to help them move this extra gas to market.
So with gas prices at all-time lows and a lack of access to pipelines and processing plants, drillers simply burned off the gas without consequence.
That’s no longer the case anymore.
A new rule set forth by North Dakota’s Industrial Commission requires all oil and gas companies to submit a methane capturing plan with every new drilling permit they apply for. In other words, say goodbye to flaring gas without incurring a huge financial penalty.
The goal is to motivate Bakken operators to capture 85% of the gas they produce by 2016 and 90% within six more years.
As it stands now, drillers end up flaring or leaking more than 30% of the gas they produce.
But with the new rule in effect, drillers will be looking to capture more gas and make more money off of their wells as technology and pipeline capacity improve.
Go ahead and take one last look at the Bakken from space. I’ll wait.
Green Completions
Perhaps one model to follow is Devon Energy’s efforts in the Barnett Shale. Devon has been making headlines over the last few years thanks to its land-grabbing prowess in tight oil formations like the Eagle Ford.
In the Barnett, however, Devon is utilizing a technique on its wells known as “green” completions. The complicated process involves using water and advanced filtration systems to capture the natural gas byproducts of well drilling and divert them into a pipeline.
Don’t worry; it’s not as easy as it sounds.
By doing this, Devon prevented 25 billion cubic feet of methane emissions and added about $120 million more to its revenue from its operations in the Barnett.
Unfortunately for Bakken drillers looking to use this technology, there’s just not as much available infrastructure in North Dakota as there is in Texas.
Stricter rules in North Dakota, however, may open the door for new construction. Whiting Petroleum, for example, recently built two facilities in North Dakota.
Gas Goes Gangbusters
I know what you’re thinking… more natural gas supply.
What you might not realize, however, is how vital this fuel will be to the U.S. in the coming decades. But I’m not referring to the United States’ upcoming LNG exports.
One of my colleagues, Christian DeHaemer, reiterated this point this morning when the topic of cheap gas came up. His eyes lit up, and a devious smile spread across his face.
“Just wait,” he said. “Soon, you’ll understand how every last bit of that gas will be put to good use.”
I knew right away he had an ace up his sleeve. I even joked that he should at least be worried that gas prices will still be incredibly cheap decades down the road.
He wasn’t worried in the slightest… Actually, I think he’s counting on it!
You see, he’s taken a completely different approach to capitalizing off of the shale gas boom. Rather than trying to bet on which U.S. LNG exporter will get the green light from the Department of Energy, Chris found a much easier way to cash in on cheap gas…
And this is how he’s doing it.
Until next time, Keith Kohl 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
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