The Drillionares

The Spillage People

Shale and Petroleum Oil

Petroleum is a naturally occurring complex mixture of hydrocarbons that are found beneath the Earth's surface. Oil Shale is a rock that contains kerogen. Kerogen is a mixture of organic chemical compounds and is found in sedimentary rocks. The advantage to developing oil shale is that the price of crude oil would be reduced and there would be plenty of it. Like shale oil, petroleum is one of the cheapest and most affordable energy sources. The main disadvantages for both types of oil is that they are expensive after awhile and eventually will run out.


Shale fuels a record rise in U.S. oil reserves

The picture of U.S. future energy supplies looked brighter Thursday after the federal Energy Information Administration said U.S. oil reserves grew by a record amount, driven by new shale discoveries. But the shares of two oil giants took hits as Royal Dutch Shell wrote down the value of its U.S. shale assets by $2 billion and warned that rebels' continuing sabotage of Nigeria's onshore output could damage the company's production. Exxon Mobil fell as earnings in its refining and chemical units suffered downturns. Separately, TransCanada, the Calgary-based company behind the proposed Keystone XL pipeline, announced that it would push ahead with a $12 billion pipeline from Canada's oil sands to the port of St. John on Canada's eastern coast. The new pipeline would carry 1.1 million barrels a day, more than a third more than the Keystone XL would. The EIA report said that "proved" oil reserves - oil that can be extracted and marketed under current conditions - grew by 15 percent, or almost 3.8 billion barrels, the second straight record year of increases. That brought U.S. proved oil reserves to the highest level since 1985. The agency said that U.S. proved reserves of natural gas jumped 10 percent, the second-largest annual increase since 1977. Texas posted the largest increase in proved oil reserves, largely because of shale developments in the state's Permian Basin and the Eagle Ford formation. North Dakota had the second-largest increase, boosted by activity in the Bakken formation in the Williston Basin. But Shell's earnings provided a warning that some shale prospects aren't as promising as initially thought. The company took an after-tax charge of more than $2 billion on its $24 billion of North American shale assets because of disappointing oil drilling results. The company's chief financial officer, Simon Henry, said, "There are sweet spots, but they are more difficult to find and develop." The company's stock slumped to $64.47 a share, down 5.7 percent. Exxon Mobil slid to $92.73 a share, down 1.1 percent. Much of the increased U.S. shale oil and shale gas production has come from large independent companies, not the integrated international oil giants. Exxon Mobil reported that its production of oil held steady in the United States, while domestic natural gas output slumped in part because low prices have discouraged development. TransCanada's pipeline announcement is an expected but still bold step for the company, which has waited for years for a decision on its Keystone XL proposal to the U.S. Gulf Coast. President Obama has kept supporters and foes of the pipeline guessing, most recently by downplaying down in a New York Times interview the significance of the modest number of direct jobs the project would create over a limited time. TransCanada said Thursday that it already has commitments by oil producers to fill about 900,000 barrels a day of the new pipeline's proposed capacity. The project involves converting a portion of an existing 1,864-mile natural gas pipeline to crude oil service and constructing about 870 miles of new pipeline. The new line, called Energy East, would help eastern Canadian refineries replace about 700,000 barrels a day of imports and would also provide export capacity through St. John. Some of that exported oil could go to U.S. Gulf Coast refineries.


Fun Facts

SHALE OIL

  • actually a rock
  • contains no petroleum
  • kerogen is actually where to oil comes from
  • retort is one machine used to get the oil
  • situ is where kerogen is melted underground and then pumped to the top

PETROLEUM

  • formed over 300 million years ago
  • used for more than 5000 years
  • can be made into pens
  • biggest producer is Saudi Arabia
  • measured in barrels

Money Beat

Once captivated by Asia's untapped oil-and-gas riches, some midsize U.S. energy producers now are selling their Asian assets as the North American shale revolution offers bright prospects closer to home. Oil-and-gas producers now face more choices about where to drill. New technology that enables access to oil and natural gas trapped in dense rock formations is transforming global energy markets. The U.S. is expected to become the world's top oil producer by 2017, the IEA said last year. And oil and gas extracted from shale is expected to account for about one-third of U.S. output by 2020, according to PFC Energy, a Washington-based consultancy. Goldman Sachs is advising Newfield on the sale of its Asian assets, including stakes in both producing and prospective oil-and-gas fields offshore of Malaysia and China. A document sent to prospective investors said the Asian assets had operating earnings of US$657 million last year. SYDNEY -- Once captivated by Asia's untapped oil-and-gas riches, some midsize U.S. energy producers now are selling their Asian assets as the North American shale revolution offers bright prospects closer to home. Companies such as Anadarko Petroleum Corp., Hess Corp. and Newfield Exploration Co. recently started looking for buyers for either all or some of their Asian portfolios, together worth billions of dollars. Assets for sale include oil fields in China's Bohai Bay and natural-gas hubs in Thailand. Pulling back from Asia may appear counterintuitive. China's energy demand alone will rise by 60% between 2010 and 2035, accounting for the largest share of growth in global energy use, according to the International Energy Agency. But oil-and-gas producers now face more choices about where to drill. New technology that enables access to oil and natural gas trapped in dense rock formations is transforming global energy markets. The U.S. is expected to become the world's top oil producer by 2017, the IEA said last year. And oil and gas extracted from shale is expected to account for about one-third of U.S. output by 2020, according to PFC Energy, a Washington-based consultancy. With oil prices still relatively high amid declines in other commodities, the prospect of surging output in the U.S. is proving attractive to producers. "We believe that now is the right time to become a North American-focused operator," Newfield told investors in a statement this year. Goldman Sachs is advising Newfield on the sale of its Asian assets, including stakes in both producing and prospective oil-and-gas fields offshore of Malaysia and China. A document sent to prospective investors said the Asian assets had operating earnings of US$657 million last year. Newfield, based in Texas, hopes to receive final offers by the end of September. A spokesman for the company confirmed a sale was in progress, but declined to elaborate. Anadarko has hired Jefferies to advise it on the sale of interests of up to 40% in shallow-water oil fields in Bohai Bay, about 80 kilometers (50 miles) off the coast of northeastern China, according to a sale document seen by The Wall Street Journal. Anadarko's share of the assets, operated by China's Cnooc Ltd., produce about 9,000 barrels of oil a day and include several prospects that may contain more oil. Houston-based representatives for Anadarko weren't available for comment Wednesday. Goldman Sachs also is helping Hess sell assets such as its 75% interest in the Ujang Pangkah project offshore Indonesia, which produces natural gas and condensate, a type of light oil. A New York-based spokesman for Hess confirmed the company is selling all of its assets in Indonesia and Thailand, including stakes of up to 35% in offshore and onshore blocks. He declined to elaborate. All three companies operate large oil and natural-gas fields in the U.S., and have several undeveloped prospects. Newfield produces about three-quarters of its oil and natural gas in the U.S., and said in a statement in February that it sees its output there rising by as much as 43% through 2015. Some see risks in the strategy. One is that rising U.S. oil production could weigh on prices, hurting profitability. Companies will be mindful of what followed the shale-gas boom: sharp falls in domestic prices that led many producers to book multibillion-dollar asset write-downs. Andrew Williams, a Melbourne-based analyst at RBC Capital Markets, said a trend of U.S. companies selling assets is undoubtedly emerging. But he said factors other than shale oil's potential may be playing a part. Anadarko, for example, has enjoyed so much exploration success in other parts of the world that it needs to sell some fringe assets to redirect capital to bigger projects. Meanwhile, Hess is under pressure to unload assets after activist investors, frustrated by a string of dry holes and poor share-price performance, forced the ouster of former Chairman John Hess this year and called for a renewed focus on the U.S.


About The Spillage People

Caitlin Roberts, Nicole Saks, and Alec Clifford


Opinions from the Staff

As a group we think it is smart to consider using these types of oil as energy resources. They might be expensive but they could really help out the decreasing of our resources being used today. Using these oils could be really smart and resourceful or they could fail completely. Realistically many different factors need to be considered like prices in the long run and if the expenses are really worth it. How quickly these oils would help our planet is another thing that needs to be taken into consideration. We agree that one group of people can't make this decision and it needs to be looked at by a huge portion of our population on Earth. It would be a huge change for the economy and might come as a bit of a shock to consumers, but after doing calculations scientists might find it the smartest way to help our planet. If it really impacts our home on Earth then it could be a very smart motion to take.