The World is Awash in Oil

Not in the greasy-pelican pollution sense, but in the magic of higher prices leading to increased production:

As an article last month in The New York Times observed: “Just as it seemed that the world was running on fumes, giant oil fields were discovered off the coasts of Brazil and Africa, and Canadian oil sands projects expanded so fast, they now provide North America with more oil than Saudi Arabia. In addition, the United States has increased domestic oil production for the first time in a generation.” Further still: “Another wave of natural gas drilling has taken off in shale rock fields across the United States, and more shale gas drilling is just beginning in Europe and Asia.”

A few years back, when oil was $120+ per barrel and gasoline was over $4 per gallon, the economically ignorant were concerned about the end of oil. Then the depression started and oil dropped back to the 60s for a while. The price of crude has drifted upward into the 80s over the past year. But the break-even price to make all those new fields viable was in the 40s.

So North American drillers kept working their plays.

With rising production from shale fields, the U.S. surpassed Russia last year to become the world’s largest supplier of natural gas.

Shale now accounts for 10 per cent of the country’s natural gas production – up from 2 per cent in 1990. Chesapeake’s production from its next Texas project, expected by the end of 2012, will by itself supply the energy equivalent of 500,000 barrels of oil a day.

For new oil, the U.S. has the huge Green River play that overlaps Colorado and Utah, one of the largest shale oil fields in the world. The EIA reports that the country’s proven reserves of crude rose last year by 9 per cent to 22.3 billion barrels.

For natural gas, the U.S. has the four largest fields in the world: the Haynesville field in Louisiana (with production up by 77 per cent in 2009); the Fayetteville field in Arkansas and the Marcellus field in Pennsylvania (both with production up by 50 per cent); and the Barnett field in Texas and Oklahoma (with production up by double-digit increases). The EIA reports that proven U.S. reserves of natural gas increased last year by 11 per cent to 284 trillion cubic feet – the highest level since 1971.

Let that sink in so you can withstand the next round of peak-oil hysteria: The United States has become the world’s largest supplier of natural gas.

And we’re just getting started on the next frontier:

Beyond shale oil and shale gas, there’s the awesome energy promise of methane hydrates, frozen crystals of water and gas that lie beneath the northern permafrost and beneath oceans floors around the world in quantities that boggle the imagination.

“Assuming 1 per cent recovery,” the U.S. Geological Survey says, “these deposits [in U.S. territory] could meet the natural gas needs of the country (at current rates of consumption) for 100 years.”

The UN Environment Program describes methane hydrates as “the most abundant form of organic carbon on Earth.” The agency says field testing, in which Canada has been a leader, will be finished by 2015; and that commercial exploitation will be under way by 2020 or 2025. Within a decade or so, North America will almost certainly emerge as the world’s biggest supplier – and exporter – of reasonably cheap energy.

Energy is not a resource problem. It is a technology problem. And a political one.