Energy Independence: Complex Issue

Some key slides illustrate important dynamics

The dramatic growth of U.S. oil and gas supplies is a positive game changer for our industry and our country's energy picture and reverses our historical growing dependence on global oil sources. This  docFinder Alert highlights a few recent slides that will be familiar to many involved in the day-to-day business of drilling and producing these valued commodities.  For those on the periphery, these slides demonstrate some of the complexity involved in fulfilling the goal of energy independence.

The slide above left was recently presented by the EIA at a conference in Brazil and encapsulates just how quickly dry shale gas production has ramped to over 25 Bcfpd, beginning in earnest a short five years ago.  On the oil side, the major tight plays show rapid growth and now have almost added 1.0 MMbpd.  Looking to 2013, the U.S. will lead all non-OPEC countries in oil growth with an expected incremental 0.5 MMbpd. Contained in the full presentation, one slide concludes that 2013 WTI oil prices will be in the $90 range while global GDP growth will hover between 2%-3%.  Looking even farther ahead, the EIA has a scenario that shows the U.S. cutting its petroleum imports from 50% of consumption to 14% by 2035.

The slide above right, courtesy of the world's largest independent refiner Valero (NYSE: VLO - up 37% YTD), also displays the growth of U.S. oil and gas supplies -- although in a larger context and over an extended period of time.  Focusing on the oil side, Valero's internal estimates create a scenario of U.S. shale oil adding over 3.0 MMbpd by 2016.  Also, U.S. refiners are globally competitive and shifted to a net exporter of products in 2009.  Regarding midstream, Valero is projecting another 2.25 MMbpd of capacity to the Gulf Coast by YE2014.  On price, Valero's analyses of increased Gulf Coast supplies are expected to shift LLS pricing from a structural $2/bbl premium to a discount under Brent.   Valero expects natural gas prices to remain low and remain disconnected from global oil and LNG prices for the foreseeable future.

More HOT slides and data below. 

Additional views on U.S. and global oil supply fundamentals are presented below courtesy of EOG Resources, Royal Dutch Shell, Laricina Corporation and Canadian Association of Petroleum Producers.

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