At the risk of giving Rockslinger the heebie-jeebies, there's this view of the matter:
http://business.financialpost.com/2011/11/02/the-more-its-delayed-the-less-keystone-will-be-needed/
The more it's delayed, the less Keystone will be needed
Nov 2, 2011 – 6:31 PM ET | Last Updated: Nov 7, 2011 9:14 AM ET
Big Oil’s big focus on new unconventional oil deposits in the United States may present a new challenge for the proposed Keystone XL pipeline: The more it’s delayed, the less it will be needed.
Hydraulic fracturing and horizontal drilling technologies that transformed the natural-gas sector in the past five years are beginning to show success when applied to unconventional oil deposits, boosting U.S. oil production decades after it supposedly peaked.
High oil prices make this new source attractive and it has big advantages over the oil sands: It’s not as greenhouse gas-intensive to produce; it’s not as PR-challenged, even if the new technologies also have their critics; and it’s homegrown, making it more acceptable to U.S. protectionists.
Devon Energy Corp., previously a natural gas-focused company, provided a glimpse into the potential of the new oil source in third-quarter results released Wednesday. The Oklahoma City-based company directed 90% of its capital to oil and natural-gas liquids targets this year.
The company increased its liquids production by 17% year-over-year, to an average of 226,000 barrels a day.
While some of those liquids came from its position in the oil sands and other Canadian oil plays, some of it came from U.S. fields such as the Permian basin, the Barnett shale and the Granite Wash.
“In the future … we are going to continue to allocate the vast majority of our capital, 90% plus, to the liquids-rich plays,” executive vice-president David Hager said in a conference call. “I would expect that for some time frame the liquids growth rate will be consistent with what we are achieving this year, in the upper teens.”
Exxon Mobil Corp. is also looking for unconventional oil in the U.S. It has positions in the Bakken, the Permian, the Woodford shale and is exploring other liquids plays in the United States, including the Utica shale.
“Oil analysts may be making the same mistake as their counterparts in natural gas five years ago by failing to fully appreciate the revolutionary production changes that could ultimately transform oil output worldwide,” Reuters market analyst John Kemp said in a recent report.
While U.S. oil production is rebounding, the U.S. State Department is doing its best to slow Canada’s production down.
On Wednesday, it backed away from its commitment to approve the Keystone XL pipeline by the end of the year, saying it may have to take more time to decide if it will give the project a permit.
The delay chokes production growth in the oil sands because the sector has no backup plan on the same scale and time line.
The U.S. unconventional p-oil stampede started about five years ago in the Bakken field in North Dakota, where new technologies pushed production to 444,000 barrels a day in August, from about 100,000 b/d in 2005.
But it’s in the past two years that companies moved in a big way into shale oil and gas rich in liquids, which fetch the same price as oil.
The U.S. Energy Information Administration said in its October outlook that oil-directed drilling increased U.S. crude oil production by 110,000 b/d in 2010, and by an additional 180,000 b/d in 2011, to 5.68 million b/d.
Meanwhile, reliance on imports declined. Liquid fuel net imports, including both crude oil and refined products, fell to 49% of total U.S. consumption in 2010 from 57% in 2008 because of rising domestic production and a decline in consumption during the economic downturn. The EIA forecasts that liquid fuel net imports’ share of total consumption will decline further to 46% in 2011 before rising slightly to 47% in 2012.
