Cracking the Code

Over the past six years surging U.S. hydrocarbon production from shale has exceeded domestic demand in many cases – leading to the development of export infrastructure. Large volumes of natural gas liquids (NGLs) such as propane are already being exported. Natural gas exports in the form of liquefied natural gas (LNG) are about to start and the recent end to federal restrictions offers the possibility to increase crude exports if they become competitive. A critical assumption behind all these export opportunities is that the U.S. continues to be the only country (except Canada to a lesser degree) to successfully “crack the code” in shale exploitation to produce commercially significant volumes competitively. This assumption would be turned on its head if competing countries like Mexico, China, Poland, Argentina and the U.K. are able to unlock their own shale potential. Today we review RBN Energy’s first Drill Down report of 2016, which considers the many “below-ground” and “above-ground” factors that will determine whether and how quickly, shale development becomes a worldwide phenomenon.

Estimates of how much oil or natural gas are “technically” or “economically” recoverable are moving targets. Until just a few years ago, the hydrocarbon-producing potential of the Bakken, the Permian and the Marcellus were vastly underestimated—hardly anyone would have wagered in 1995 that North Dakota, West Texas and northeastern Pennsylvania would emerge as oil and gas hotspots. So what are we to make of California’s Monterey tight oil play, which as recently as 2011 was hailed as the next big thing for tight-oil production, but which is now on just about no one’s mind? Today, we consider what it might take to turn a hydrocarbon frog into a prince.