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Maintaining Our Energy Superpower Status

Maintaining Our Energy Superpower Status
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By Tuesday, 27 June 2017 01:39 PM Current | Bio | Archive

It seems like every day a new U.S. energy record or milestone is being reached. Earlier this year, the U.S. Energy Information Administration (EIA) stated that daily U.S. oil production this year will reach a record 10 million barrels, surpassing a previous record achieved in 1970. Currently, U.S. oil exports are on track to average 1 million barrels per day, double the amount that was exported last year.

Natural gas exports to Mexico, through liquefied natural gas (LNG) and pipelines, are also breaking records. In May, Cheniere had 18 ship loads of LNG cargo bound for markets around the globe from its Sabine Pass facility. The recent move by the U.S. and China, working to negotiate long-term LNG contracts, is additional good news for continued growth in exports.

The U.S. is now the largest oil and natural gas producer, with markets set to take these commodities along with others like chemicals, refined products and manufactured goods that have been empowered by the energy revolution. The result has been a massive shot in the arm to the U.S. economy, less money needed to spent on fuel and utilities (we are saving $180 billion annually on gasoline) and a boost to the U.S. from a geopolitical perspective.

The energy revolution, led by the development of oil and gas from shale formations, has been the result of several factors. One, the U.S. has excellent geology. Our country has been blessed with immense oil and gas resources. Enormous plays like the Permian Basin, DJ Basin and offshore Gulf of Mexico, in addition to a multitude of other formations, have given us resources for decades.

Our country also has remarkable people with incredible know-how. Industry engineers and scientists in the U.S. are second to none, and they are constantly spreading their knowledge around the world, applying advanced technologies like hydraulic fracturing and horizontal drilling to meet new challenges that enable the industry to access new resources while profitably and efficiently producing old ones, onshore and offshore. This has been done through the continuous application of knowledgeable expertise and by technologies that have successfully grow these domestic resources and helped us become the energy leader we are today.

The final factor that has been key to our country’s success is our unique regulatory and legal structure. U.S. statutes and regulations have traditionally enabled and justified the capital investments needed to produce oil and gas in the U.S. There is even designation of rights to minerals that can be held by private citizens and minerals on public lands that are subject to a policy of multiple use.

Now that we have achieved the status of an energy leader, it is important for the U.S. to understand how we maintain and grow that status – along with the threats and unintended consequences to losing it. For decades, the oil and gas industry has been under assault by people and organizations who want it to go away. These campaigns and tactics are focused on stopping oil and gas production by banning hydraulic fracturing, halting offshore and federal land leasing, thwarting pipeline projects and infrastructure development, restricting exports and weakening the legal and regulatory system that has allowed us to develop our vast, domestic energy resources. And while the current administration is supportive of oil and gas development – and is working to reverse harmful regulations and policies passed in the waning months of the Obama administration – it is up against a well-funded global web of anti-fossil fuel groups that are determined to wage a prolonged campaign at the local, state, federal and international levels. To be successful, we need a long-term campaign to counter this threat, using similar tactics and equaled passion and determination.

The other great challenge to our domestic energy revolution is maintaining production levels by increasing efficiency – and doing so in a cost-effective way. Right now, U.S. shale plays have very low recovery factors – below 10 percent and often 5 percent or lower. We have drilled about 600,000 shale oil and gas wells since the shale revolution began. Today, shale production now accounts for 52 percent of the oil we produce, with 300,000 wells producing 4.3 million barrels per day and 50 percent of the natural gas we produce.

Because of the shale revolution, the U.S. has become an exporter of oil and gas, to the benefit of our balance of trade, economy, national security, and our geopolitical position in the world. As part of their lifecycle, shale wells experience declining output and become marginal. But with such low recovery factors, our shale wells – hundreds of thousands of them – are in danger of becoming marginal in the next few years. That’s much too early. It’s why it’s so important that we improve this recovery factor, to extend the life of these wells and the life of our shale revolution.

If we are going to be successful and continue to grow the energy revolution, we need to fully understand the threats and opportunities, successfully counter them, defend the legal and regulatory system that enables it, and continue to foster, develop and deploy the technologies that make us the energy leader we are today.

Jack Belcher is executive vice president for HBW Resources and consults energy and transportation clients on government relations, regulatory affairs, situational risk management, coalition building and stakeholder relations. He is also Managing Director of the National Ocean Policy Coalition

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If we are going to be successful and continue to grow the energy revolution, we need to fully understand the threats and opportunities.
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Tuesday, 27 June 2017 01:39 PM
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