July 2018 – @alvaroriosroca – The United States was, is and continue to be an economic world power, fundamentally due to the continuous technological innovation that the US generates and the thriving marketing that practices to introduce these products and services to the market. The mobile phone, the car, the internet and thousands of other advances that humanity has adopted immediately, come from this country.
Fracking technology used to produce shale gas and shale/tight oil, is another technological breakthrough in the US to economically extract hydrocarbons from an impermeable and porous deep rock formations, by fracturing them with high pressure water and directed horizontal drilling.
This technological breakthrough has changed the profile to the hydrocarbon industry worldwide and the US economy in particular. It has helped to greatly improve its trade deficit, given it was headed to import the totallity of theses energetics. This innovation also gives the power to President Trump to be able to say everything he says and do everything he does. The economy and employment have been tremendously strengthened by shale.
Studies indicate that the USA has 11% of the world’s total shale / tight oil resources and 46% of the world’s shale gas. It is the only country that has achieved massive and economic production so far. Shale gas competitive production becomes a reality back in 2001 and oil around 2005/2006.
Oil imports (1985) were 5 Million barrels per day (MMBbld) and rose in 2006 to 14 MMBbld (annual growth of 8%), when fracking breaks out. Without fracking, imports would have been approximately 19 MMBbld in 2017, but reduced to 10 MMBbld. This saving in imports, at an average real price of 75.2 USD / barrel (WTI), results in approximately 976 billion dollars (BUsd) or an average annual saving of 97.6 BUsd.
If we add the incremental oil exports due to the effect of fracking, which have been carried out between 2007 and 2017 (annual growth of 16%), 376 BUsd were generated with an annual average of 37.7 BUsd. Oil positive balance in favor of the trade deficit by fewer imports and more exports is 1.352 BUsd during the study period.
The same analysis is possible for natural gas from the drastic reduction in imports of natural gas as of 2007. The average annual import growth from 1986 to 2007 was 24% per year. The saving for unrealized imports of natural gas in the period 2007 to 2017 was therefore 115.7 BUsd with an annual average savings of 11.5 BUSD. All this at a real average price of 7 USD / MMBTU (NBP marker).
New and growing exports of natural gas begin to take off slowly from 2002 to Mexico and Canada by pipeline, and on a large scale, from 2015 by LNG to the world. The increase for additional natural gas exports, at a real average price of 5.5 USD / MMBtu (average NPB marker in Europe and Henry Hub in USA) generated new exports for 89.5 BUsd with an annual average of 5.5 BUsd. The reduction of imports and new exports of natural gas ad up to 205.3 BUsd in the period studied.
In summary we can conclude and say that the trade balance in favor of the US has been in total approximately 1,558 Billion dollars in these 16 years due to the development of fracking
And this is just beginning. Oil production and particularly natural gas production continues and will continue to increase, further strengthening the economy, reducing the fiscal deficit and of course empowering President Trump.
It is worth mentioning that this basic analysis of the trade balance, does not take into account the significant generation of technological employment and labor that has been generated, nor the royalties paid by thousands of producers (who have experienced how to break the rock more and more efficiently ) to the owners of the resource in the subsoil, which are not other than the American citizens. Neither does it consider the booming petrochemical industry that has been growing and much more.
In order to conclude and compare and only as an example, in our region, it is almost impossible for Argentina to lift the natural gas massive economic production from the super abundant and neat shale gas in Vaca Muerta. Needless to say the debacle of the oil industry in Venezuela and in other countries also. We are invaded by grief and healthy envy.
* Former Hydrocarbons Minister of Bolivia and Current Managing Partner of Gas Energy Latin America.