US fastest-growing producer of oil and natural gas in the world

Unleashing the North American energy colossus

Extrait du rapport: Unleashing the north american energy colossus: hydrocarbons can fuel growth and Prosperity Mark P. Mills, Adjunct Fellow, Manhattan Institute


United States fastest-growing producer of oil and natural gas in the world

The United States, Canada, and Mexico are awash in hydrocarbon resources: oil, natural gas, and coal. The total  North American hydrocarbon resource base is more than four times greater than all the resources extant in the Middle East.

And the United States alone is now the fastest-growing producer of oil and natural gas in the world.

The recent growth in hydrocarbons production has already generated hundreds of thousands of jobs and billions in local tax receipts by unlocking billions of barrels of oil and natural gas in the hydrocarbon-dense shales of North Dakota, Ohio, Pennsylvania, Texas, and several other states, as well as the vast resources of Canada’s oil sands.

It is time to appreciate the staggering potential economic and geopolitical benefits that facilitating the development of these resources can bring to the United States. It is no overstatement to say that jobs related to extraction, transport, and trade of hydrocarbons can awaken the United States from its economic doldrums and produce revenue such that key national needs can be met—including renewal of infrastructure and investment in scientific research.

An affirmative policy to expand extraction and export capabilities for all hydrocarbons over the next two decades could yield as much as $7 trillion of value to the North American economy, with $5 trillion of that accruing to the United States, including generating $1–$2 trillion in tax receipts to federal and local governments.

Such a policy would also create millions of jobs rippling throughout the economy. While it would require substantial capital investment, essentially all of that would come from the private sector.


Hydrocarbons

Hydrocarbons—oil, coal, and natural gas—supply over 85 percent of world energy today. And in every credible forecast, hydrocarbons will provide the vast majority of the world’s energy two decades from now.

Over the decades, demographic changes and technology progress have fundamentally altered the framework for considering U.S. energy policies. But today’s policies are still anchored in a decades-old and invalid paradigm—to wit, the idea that America is resource poor and that changes in American energy demand can significantly alter world markets.

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Unleashing the North American energy colossus (3)The old paradigm does not account for two facts:

1.      America is an energy-rich, not energy-poor, nation.

2.      And America is no longer the swing consumer of  energy, and thus is increasingly unable to influence  global markets with changes on the demand side.

Even with an aggressive policy to accelerate American  automobile fuel efficiency (doubling the on-road fleet  average over two decades) and put several million electric cars on the road, the world’s energy use would  be reduced by just 1 percent and oil use by under 3 percent by 2040.


Technology changes the resource realities

Technology progress in hydrocarbon exploration and development has been transformative and is ongoing, enabling the emergence of a new era of hydrocarbon production, which is, in turn, unleashing the capability to efficiently tap into North America’s enormous resources of natural gas, oil, and coal.

The technological magic in hydraulic fracturing (an  important but not the sole manifestation of the aforementioned hydrocarbon tech advances) centers on the  maturation of directional and steerable drilling. Today,  you don’t just punch a vertical hole in the ground  with a dumb mechanical drill—petroleum engineers  now have dynamically steerable drilling technology  that permits precision snaking through meandering  underground hydrocarbon-rich seams.

Precision steerable drilling emerges from such advances as real-time microseismic monitoring and continuous data logging using technologies such as gamma ray and neutron.


Technology unlocks swaths of resources

And North America has total hydrocarbon resources that are some four times greater than those found in the Middle East. The geology of North America is profoundly hydrocarbon-rich.

The U.S. oil reserve figure was about 35 billion barrels in 1980. Yet, over the ensuing three decades, over 100 billion barrels of oil have been produced from America’s oil fields, and the reserve figure still stands at about 30 billion barrels.

The resource was obviously larger than the narrowly defined reserve number. Technology will enable yet more production from so-called conventional oil fields, and it unlocks even greater swaths of resources.

The Green River Formation, for example, a shale region largely beneath Colorado, Wyoming, and Utah, contains an estimated 2,000–3,000 billion barrels of oil.

The Rand Corporation estimates that 30–60 percent of that oil is extractable with technology now available.

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In Canada, the vast oil sands in Alberta alone contain about 2,000 billion barrels of oil—the resource at the epicenter of the Keystone Pipeline project that was intended to transport some of that oil to U.S. refineries.


What would happen if North America became the leading energy supplier?

Unleashing the North American energy colossus (6)But what would happen if policies were enacted to accelerate and encourage even greater expansion of North American hydrocarbon production and to expand access to the vast tracts of federal lands that sit atop staggeringly large resources? Why not push beyond self-sufficiency to energy influence, even dominance? The benefits would be even greater than those itemized above.

Such a change in policy would also bring much more of what the Citi team calls “many other silver linings,” including:

·         A great expansion in the kinds of highly skilled and highly paid employment directly and indirectly associated with the hydrocarbon industry;

·         State budget surpluses that inevitably lead to increased funding for the arts, universities, and social programs;

·         Greater wealth and profits, which invariably spur more R&D as well as more vigorous venture investments across all sectors;

·         A robust economic environment where wealth enables wider adoption of non-hydrocarbon alternatives that become more tolerable, even where expensive;

·         A radical reset in the geopolitics associated with energy, with North America seen not just as the world’s fastest-growing but, in the foreseeable future, the world’s major supplier of critical fuels;

·         A moderation in global energy prices and, critically, a stabilization of price swings by dramatically increasing the world’s available marginal production capacity at any given time (marginal production capability is a primary factor in global price volatility)

Economic research noted earlier finds about $75 billion in broad economic benefits for every billion barrels of oil produced (or oil-equivalent in hydrocarbons).This would imply that the aggregate 100 billion barrels of additional hydrocarbons extracted and sold over the next two decades in the accelerated scenario would yield over $7 trillion of value to the North American economy, with $5 trillion of that accruing to the U.S.

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What would stop north america from accelerating hydrocarbon production?

To be a player of significance in world energy markets, you need three things:

1.      physical resources;

2.      technology to efficiently and sensibly extract them;

3.      and willingness to unleash industry.

The U.S. already leads in two out of three of these.

For the U.S., the single most effective policy change would be to emulate Canada’s solution for permitting major energy projects: create a one-portal, one permit federal policy for all permits. The current regulatory morass, unintended conflicts, and frequent capriciousness are common complaints across the hydrocarbon industries.

Rather than subject businesses to the long, costly, sometimes opaque, and often counterproductive array of permits and compliance challenges across various agencies and federal domains, energy projects could be channeled through a single federal portal. Canada’s single-portal policy, outlined in that government’s

Economic Action Plan 2012, lubricates the process for industry while maintaining a focus on responsible environmental regulation.

Canada’s system provides a clear timeline for regulatory and permitting decisions and eliminates much uncertainty. A proposal review and decision are both made within 45 days of submission. If further regulatory discussion is necessary, a review panel reaches a decision within one year. The single-portal policy also recognizes that provincial regulatory processes are substitutes for or equivalents to federal ones. By integrating provincial and federal policy, the one-portal, one-permit policy reduces the number of governmental organizations responsible for environmental oversight from more than 40 to three. The Canadian Minister of Natural Resources is certainly correct in noting that all this is “more effective, efficient, and predictable.

There will doubtless be objections to the idea of a radical shift in policies and attitudes toward hydrocarbons. But the benefits to the U.S., to the rest of North America, and to the rest of the world are so dramatic and so important that abandoning them without serious policy deliberations would be unconscionable.

The U.S. has yet to adopt a coherent policy in response to the deep changes in energy demand and supply. No single region of the world could make as significant a difference to the supply dynamic as could North America. In the energy arena, North America, to paraphrase, is punching below its weight class.