The World's Fast-Changing Oil Map: North America

It wasn't long ago that yours truly -- along with most other energy observers -- was mightily concerned about the potential for a slurping sound indicating that our continent's oil and gas reserves had been drained. What a difference a half-decade can make, however. Today, our thoughts have moved to such different considerations as how to transport and refine bitumen from Canada's tar sands and whether we'll be overwhelmed by our newfound surfeit of natural gas.

At the same time, ours isn't the only place on Planet Earth wherein the oil and gas scene is undergoing a revolution. The same can be said of South America, Africa, the North Sea, and, unless I miss my bet, the South China Sea. As such, I suggest that we take a look in a series of articles at these and others of the world's changing energy venues. In this piece, we'll take a quick gander at North America, before subsequently moving on to other areas of interest.

Our neighbors are flush
You almost certainly know about our neighbors to the north in Canada. They're good enough to lead the world in transporting crude oil into the United States. Most comes from the tar sands of Alberta, where the likes of Chevron (NYSE: CVX  ) are working diligently. At the same time, the country is garnering increasing hydrocarbons from the Montney and Duvernay Shales, primarily in British Columbia. All in all, it appears that, given expanding Canadian production, along with a turnaround in output declines in Mexico, our own fast growth in output could contribute to boost North America's production from near 15.4 million barrels of oil equivalent per day last year to nearly 27 million daily barrels by 2020.

And so are we
As indicated, our own country has become a hotbed of oil and gas production increases. Indeed, the Paris-based International Energy Agency now predicts that -- are you seated? -- the U.S. could surpass Saudi Arabia and Russia as the world's top oil producer within the next eight years. The agency, which consults with the world's developed nations on the vicissitudes of energy, is operating under the assumption that U.S. crude production will reach about 11.1 million barrels a day by 2020.

That heady rate would result from a combination of unconventional production in a host of new or revived locations and a growing array of discoveries in the deepwater Gulf of Mexico. Let's look briefly as some of the locations that are suddenly defining our country as nearly awash in oil. Onshore, I'm referring to the Eagle Ford, the Bakken, and the Permian Basin, although there clearly are other locales where more and more crude and liquids are being produced. Offshore, we'll check in on the Gulf.

The Eagle Ford: The Eagle Ford Shale runs from about the Mexican border with southern Texas, north to the Dallas area. The roughly 50 mile by 400 mile swath contains more carbonate to the south, making it more brittle and "frackable," and thereby more productive. The first well in the play was drilled in 2008 by Petrohawk, which was acquired last year by Australia's BHP Billiton (NYSE: BHP  ) . Today, activity in the oil and gas hotbed is being led by EOG Resources (NYSE: EOG  ) .

The Bakken Shale: The Bakken is clearly the most noteworthy part of the Williston Basin, which began largely as a gas play and runs from the Dakotas into Montana. Now, potentially the biggest oil find in U.S. history -- including earlier finds in Alaska -- the Bakken's productive areas continue to expand through the efforts of such independent producers as Continental Resources (NYSE: CLR  ) and Whiting Petroleum (NYSE: WLL  ) .

The Permian Basin: I'm frankly having a wonderful time observing the resurgence of the Permian Basin, which straddles southwest Texas and southeastern New Mexico. According to the Texas Railroad Commission, the Basin has yielded about 29 billion barrels of oil since way back in 1921. Several times it's been thought to have been played out, in mining vernacular. Today, however, if you'll pardon the expression, it has a new lease on life, thanks to the application of fracking technology. Chevron -- which recently added 246,000 Permian acres acquired from Chesapeake Energy (NYSE: CHK  ) -- today leads the pack in the newly revitalized play.

The Gulf of Mexico: You probably know enough about BP's (NYSE: BP  ) 2010 Gulf of Mexico tragedy to deliver a talk on the subject. The good news is that, following the catastrophic explosion and spill at the company's Macondo field, along with the subsequent deepwater drilling moratorium, things have just about returned to normal for producers in our nation's only "drillable" body of water. It's eruption notwithstanding, BP continues to be the Gulf's largest producer.

A Foolish takeaway
There are other "hot," liquids-prone venues in the U.S., such as the Niobrara Formation of Wyoming and Nebraska. The key takeaway, however, is that U.S. hydrocarbons production is, to lapse into the vernacular, blowing the doors off. And I haven't even mentioned such major dry gas plays as the Haynesville and Marcellus Shales. To my way of thinking, all this makes the world of energy that much more inviting and exciting for Foolish investors.

Despite the Permian Basin's resurgence, one hot energy company is looking for the exit. Investors were surprised when SandRidge hung a "For Sale" sign on its own Permian Basin property, but with the company halfway through its ambitious three-year plan to profitability, the future looks bright. If you are unsure about this emerging oil and gas junior, and are looking to find out more about its strengths and weaknesses, you should view this brand new premium report detailing SandRidge's game plan and what to expect from the company going forward. To get started -- click here!


Read/Post Comments (7) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 28, 2012, at 7:51 PM, sevenheart wrote:

    Good article from a general viewpoint. Having worked 3 decades in oil and gas, I'd like to note a few things. Chevron, and most majors move into plays after they are well established as profitable. Returns will be less than with a company like Range Resources that pioneered the Marcellus.

    With every new play there can be tremendous initial production, the key to analyze is how quickly that production drops off. Some areas of the Niobrara out perform the Bakken, but some wells lose production quite rapidly. Within the Niobrara there are some winners and some losers, development of recovery technology specific to the plays will tell the final tale.

    Look carefully at the activity in the Utica of Eastern Ohio, (and into New York- but public hysteria over the myths around fracking, a proven safe sixty year old technology will hold NY back) many wells are holding steady at very high rates of production.

    Every one of these "new" plays have been known about for decades, sometimes drilled through to deeper formations, bypassed simply because current technology couldn't produce them or they contained high concentrations of H2S, a deadly and expensive gas to process. Smaller companies will use a strategy of re-entry to use existing wells to kick off horizontally and produce shallower formations or even to provide entry to deeper formations.

    A last area for investors to asses is support industries- drilling contractors, pipe and tubing product manufacturers and service companies that do the directional drilling, completions, transportation (truck, rail, pipeline) and other specialties. A couple no cost resources that can point you in direction of companies to investigate are Rigzone.com offering daily and weekly news summaries online and World Oil by Gulf Publishing offering no cost weekly news updates online, or can be a good subscription for the more hard core investor. You'll read most information there sooner than generalized business publications. Watch rig count trends and you'll see the general direction the industry is heading. Energy is the key to the future, but don't neglect the fact that oil and natural gas liquids provide a valuable and essential chemical feedstock that can be more valuable than fuels and natural gas.

  • Report this Comment On November 28, 2012, at 8:37 PM, JadedFoolalex wrote:

    You fail to mention the Utah oil-sands, another massive deposit of oil that can be recovered using environmentally friendly methods. What foolish investors also need to consider is the massive deposits that aren't in play, i.e. Quebec's massive shale gas deposits, Hudson's Bay deposits, Northern Territories, Alaskan & Yukon deposits and Arctic off-shore plays have all yet to be developed. Because of their higher costs, they will sit on the back burner for a while yet, but as more readily available deposits are used up, more and more of these "Frontier" plays will come into being! North America is literally sitting on an ocean of oil and gas!

  • Report this Comment On November 28, 2012, at 10:42 PM, sevenheart wrote:

    I think you mean Utah oil shale (which is kerogen rather than oil and not really shale-nonetheless a refinable commodity). There is a lot of energy tied up there and in western Colorado and Wyoming, but until in-situ retort can be perfected, it will remain an undeveloped resource rather than a reserve. As with the other formations I mentioned, oil shale formations have been drilled through to deeper formations containing very good natural gas which may be a key to extraction in the future. Peak oil theorists have always ignored the difference between resources, reserves and known proven reserves which, for lack of the proper term, are mobile and changing as technology improves. Another factor is that we haven't explored 95% of the oceans- there are still a lot of frontiers to "conquer."

  • Report this Comment On November 29, 2012, at 4:01 AM, Kiffit wrote:

    This article blithely omits to mention just how environmentally damaging these new technologies are to the environment. And that is before we even get to talk about global warming.

    It obviously hasn't yet dawned on the writer or the commentators above that sustainability questions are actually already starting to make themselves felt.

    Lack of sustainability means what it says. Living wildly beyond our environmental means has consequences, and pretty dire ones at that.

    The hydrocarbon party that has powered the modern era can't last. It would be reassuring if people in the investment community started to behave as if their economic system was mortal.

  • Report this Comment On November 29, 2012, at 8:49 AM, sevenheart wrote:

    Kiffit,

    You bitterly fail to acknowledge that new technology addresses environmental concerns and efficiency of operations. We do far more with less than we ever have in human history, yet amazingly the "environmental movement" has never had a "victory".

    The hydrocarbon party will not end because there remains a vast supply of hydrocarbons and also because nothing else in nature can do what hydrocarbons do. Only 35-45% of oil is used to fuel vehicles, the rest of it allows us to refrigerate our food, create kidney dialysis machines and so forth. To be determined to cast off hydrocarbons because of the politically created myth that somehow CO2, at less than 4/10ths of one percent of the content of the atmosphere and a critical ingredient for photosynthesis, is destroying the planet would be laughable if there weren't so many people willing to ignore real science and turn every modern advancement of society on it's head.

    Have you not read that global warming ended 12 years ago? Of course not. Now, question the value of the sources of your misguided information, take a class in geology and discover that the earth was far warmer before any hydrocarbons were utilized or any civilization existed- and life flourished! I hope your indoctrination is not complete.

  • Report this Comment On December 07, 2012, at 7:29 PM, sophiearoo wrote:

    I am astounded by your last post. Get your head out of the sand and learn from scientists worldwide, including James Hansen the lead scientist at the NASA Goddard Institute. Do you have a PhD in physics? Haven't you seen the comparison photographs of glaciers over the past 20 years? You must be willing to admit we are experiencing destructive storms and shifting weather patterns? These are with an apprx. one degree increase in temperatures worldwide. Scientists are predicting four degrees. We can not carry on full speed ahead fracking and drilling deeper and deeper. Fracking pollutes water and uses staggering amounts of energy in relation to the end product. Yes, I agree that hydrocarbons do what nothing else in nature can, so won't you at least agree that we as a society, and for future generations, would not be wise to conserve what we have and use it wisely?

  • Report this Comment On December 14, 2012, at 12:19 AM, thidmark wrote:

    What in the hell would a PhD in physics have to do with climate science???

    Before you tell people to get their head out of the sand, remove yours from your posterior ...

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