Shale oil could make US less dependent on oil imports
New technology for extracting oil and gas could reduce US dependence on OPEC.
A new Gold Rush is breaking out on the North American continent. While in the 19th century it was fortune hunters, today it is landowners in states such as North Dakota, Ohio and Pennsylvania who have struck gold, with energy giants battling it out for the rights to extract oil and natural gas from beneath their land. The nation as a whole also stands to benefit hugely.
Shale oil is oil extracted from layers of bituminous rock deep underground by fracturing, or “fracking”, the stone to release the oil. The shale can also be “fracked” to release gas.
Huge deposits
Experts reckon that there are such large reserves of shale oil and gas in the US that the country could eventually become an exporter of gas and less dependent on oil imports, which naturally goes down well in Washington. Indeed President Obama gave his support for unconventional oil in his State of the Union address.
Alexander Kokfelt, portfolio manager at Danske Capital, explains: “US production of shale oil is expected to climb from around 500,000 barrels a day to 2.5 million barrels a day over the next decade. The US currently imports around 9 million barrels of oil a day, around half of this from OPEC countries like Saudi Arabia, Iraq and Hugo Chavez’s Venezuela. On top of this, the US is now effectively self-sufficient in natural gas. In other words, the country could significantly reduce its dependence on OPEC and other oil-producing nations.”
Statoil investing in shale oil and gas
Norway’s Statoil, held by the Europa and Global Indeks funds among others, recently acquired shale oil company Brigham Exploration and partnered with Chesapeake on the recovery of shale gas. These agreements are part of Statoil’s strategy of focusing on international expansion and unconventional sources with the aim of more than doubling production outside Norway in the coming decades.
Considerable potential outside the US
Schoeller-Bleckmann (Europa Small Cap), which produces equipment for horizontal drilling, and oilfield service company Baker Hughes (Global StockPicking) also stand to benefit from shale extraction. Both supply unique products to the drilling companies and are likely to profit from increased activity both within and outside the US. Oil shale can also be found in many other parts of the world, including Argentina and China, which could well become new growth markets for these companies.
“China and Argentina both have considerable reserves of shale gas but lack the technological know-how that these companies have,” says Kokfelt. “Other countries are in a similar position, and if we add in the expected ramping up of production in the US, Schoeller-Bleckmann and Baker Hughes could very well grow their business considerably in the coming years.”
Shale gas also a possibility in Denmark
Drilling for shale gas is under way in Europe too, with the first test wells sunk in Poland in summer 2011. The results have disappointed some analysts, but far more wells will be needed to properly assess the potential.
Here in Denmark, France’s Total and the Danish North Sea Fund plan to begin test drilling in northern Jutland in 2012, and they also have two licences in Zealand. Only time will tell whether we see a new Klondike on home territory.
