Oil & Gas Market
With modern technology and production techniques making previously inaccessible energy supplies available, forecasts now call for North American liquids production to increase by over 40% from 2010’s levels by 2040.1
According to the International Energy Agency (IEA), North America’s trend of rising oil production will help increase non-OPEC oil output by the greatest amount since the 1970s.2
When it comes to US energy production, the IEA pointed out that America is “in the driver’s seat of growth,” which is a “throwback to decades past.”3
Most of the nation’s production increase comes from tight oil in shale formations, such as the prolific Bakken formation in the Williston Basin within North Dakota and Montana.
The shale oil boom is what made it possible for the US to become the world’s top oil producer in 2014, overtaking Saudi Arabia and Russia.4
Looking forward, the US Energy Information Administration (EIA) predicts that between 2012 and 2040, the US will produce roughly 25.3 billion barrels of tight oil. The Bakken formation, and the Three Forks formation that underlies it, are expected to contribute a full 32% of that production.5
Supply & Production
New horizontal drilling and hydraulic fracturing technologies initially led to a shale gas boom in the US, with production in 2008 being 64% higher than only a year before.6
The EIA now forecasts that US natural gas production will experience 1.6% annual growth through 2040; will meet growing domestic demand with America becoming a net gas exporter before 2020; and will reach net exports of 5.8 trillion cubic feet in 2040.7
US oil production, meanwhile, had been declining since 1986 but reversed that trend in 2008, also due to the same new technologies opening up new access to shale-based energy supplies.5
By late 2012, the IEA was forecasting that the US would surpass the world’s then-largest oil producer, Saudi Arabia, by 2017.8
By June 2014, however, the IEA had already announced America as being the world’s biggest oil producer, with Q1 output exceeding 11 million barrels per day.
Looking forward, the IEA forecasts that in 2019, US oil output will surge higher yet to 13.1 million barrels a day.4
The combination of horizontal drilling and hydraulic fracturing – both of which have been in use for decades – has enabled the US to economically and safely access and produce its abundant natural gas and oil supplies found in tight rock and shale.
In the case of hydraulic fracturing (“fracking”), the technology has been used safely in over 1 million wells drilled around the world for the past 60 years.9
Ongoing advances in those technologies, and growing industry experience, are currently contributing to lowering the overall cost of producing shale-based energy while raising efficiency.10
In the case of the Williston Basin’s North Dakota-Montana Bakken in particular, horizontal drilling and fracking increased production 200-fold from a modest 6,000 barrels of oil per day in 20079 to 1.2 million barrels of oil per day by October 2014.11
Those advanced technologies are now being used to target emerging shale resources, such as the Alberta Basin Bakken, due west of the prolific Williston Basin.
Alberta Basin Bakken
The Alberta Basin Bakken, where Black Stallion’s Woodrow Prospect is located, shares many characteristics with the Williston Basin and is expected to deliver ~2 to 3 billion barrels of recoverable oil.12
Industry players continue to be attracted to the Alberta Basin Bakken. In Q2 2014, Anadarko Petroleum took 7 new permits and assumed ownership of 3 others for horizontal wildcats seeking Bakken pay and the completion of a well that found the Bakken at 3,200 feet.13
Among the other major industry players that have invested in the Alberta Basin Bakken to date are ExxonMobil (NYSE:XOM | Market Cap: $405.57B), Royal Dutch Shell (NYSE:RDS.A | $228.06B), Occidental (NYSE:OXY | $68.72B) and Crescent Point Energy (TSX:CPG | $16.38B).
Crescent Point Energy, in particular, had acquired 1+ million acres of land in the Alberta Basin Bakken as of 2012 by gaining a percentage in smaller companies with land in interesting areas, and then buying them out if their drilling results were promising.
Between 2003 and 2012, Crescent Point completed $6.5 billion in acquisitions,14 and is currently conducting high-impact exploration on its Alberta Basin Bakken properties for both conventional and unconventional oil opportunities.15
DeeThree Exploration (TSX: DTX | $591.62M), meanwhile, has discovered an oil pool in the play running 14 miles long and 4 miles wide; had drilled 28 horizontal wells in the play as of year-end 2013 with reported production of ~4,000 barrels per day of light oil; and planned on drilling 18 more wells in the Alberta Bakken in 2014.16
[For a full profile of the Alberta Basin Bakken, see the Region section.]
Imports & Exports
The increased production of oil and gas from shale continues to transform America’s domestic and international energy realities.
By July 2014, total US crude oil imports had dropped to 7.6 million barrels per day, representing a 30% decline from peak levels in 2005 of 10.8 million barrels per day.17
As a direct result of lower imports, China replaced the US in Q4 2013 as the world’s top global oil importer for the first time,3 while US crude imports from Nigeria stopped all together in July 2014 after having peaked just over 8 years earlier at 1.3 million barrels per day.17
With imports shrinking, the US continues to face pressure from domestic energy companies to lift America’s ban on oil exports in order to increase the nation’s energy and employment security.18
Pressure has also come from various nations and international energy companies who see the ban as violating free trade agreements and putting refiners in Europe and Asia at a disadvantage.19
- The Outlook For Energy: A View To 2040. ExxonMobil, 2014.
- Bloomberg, Oct. 11, 2013.
- Reuters, Oct. 11, 2013.
- Bloomberg website, July 4, 2014.
- US Energy Information Administration (EIA), Annual Energy Outlook 2013.
- US Energy Information Administration (EIA) website, Nov. 8, 2013.
- US Energy Information Administration (EIA), Annual Energy Outlook 2014.
- Bloomberg, Nov. 12, 2012.
- The Outlook For Energy: A View To 2040. ExxonMobil, 2013.
- Financial Times, May 15, 2013.
- US Energy Information Administration website, Oct. 30, 2014.
- Hillcrest Resources Corporate Presentation, Jan. 2012.
- Oil and Gas Investor website, Aug. 18, 2014.
- Alberta Oil Magazine, Jan. 1, 2012.
- Crescent Point Energy website, Oct. 29, 2014.
- Oil and Gas Enquirer website, Apr. 30, 2014.
- Financial Times website, Oct. 2, 2014.
- OilPrice.com, Oct. 6, 2014.
- Reuters website, Oct. 30, 2014.