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This docFinder Alert brings us back to fundamentals beyond the daily myopic focus on rig counts and storage numbers. The trend is clear. Cheniere Energy has termed this A New Hydrocarbon World Order. On a global basis, oil and gas will continue to be the dominant energy source for the world. And the world will demand more and more over time.
The slide above left, from Cheniere Energy, clearly shows the impact of the US unconventional revolution propelling the US as the world’s largest oil and gas producer. For reasons well-documented, not the least important of which are existing infrastructure and private mineral rights, this growth IS uniquely a North American phenomenon. After unleashing the benefit of horizontal drilling and hydraulic fracturing in shale source rocks nearly a decade ago, the US stands alone as the undisputed leader of this new supply. Despite efforts and ambitions to export this disruptive technology profitably across the world, the stars have not aligned to make this a profitable endeavor. With the exception of Canada, no other country has even drilled more than 200 gas shale wells, despite having tremendous gas shale resources. On the oil side, US production is responsible for a remarkable ~75% of global incremental growth from 2010 through 2014. Knocking it back a notch, Texas alone achieved over half of the US growth and now as a stand-alone “country” would be the 4th largest global oil producer – behind Saudi Arabia, Russia and the US (ex-Texas).
The slide above right, from ExxonMobil, shows that over the next 25 years, global energy demand is expected to grow by 35%, driven almost exclusively by Non-OECD countries. Oil and gas is expected to account for 60% of this future growth. Gas is seen as the fuel of choice with an annual growth rate of 1.6% versus 0.8% for oil. On a global scale this translates into production in 2040 of ~550 Bcf/d of natural gas and 115 MMbbl/d of oil – up from current rates of ~330 Bcf/d and ~93 MMbbl/d. For XOM, the short-game playbook (through 2017) based on this outlook (and $55/bbl Brent) shows a doubling of US onshore oil production and startup of 24 major projects with higher margins, the majority of which have long-plateau production. This year alone has 7 major projects adding 300,000 bbl/d.
More HOT slides and data below.
Shown below are more hot slides from PLS’s docFinder database that allow you to take a deeper dive into the calculus behind the long-term bullishness for global oil and gas. Below are slides from Liquefied Natural Gas Ltd, BP, Enterprise Products Partners, and Lukoil.
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