ROYAL Dutch Shell chief Ben van Beurden says the onshore US shale-oil boom that now has the oil-hungry nation rivaling Saudi Arabia’s production has only just begun, and expectations it will taper off may prove wrong.
Speaking to The Australian in Sydney yesterday, the head of the world’s biggest oil company said the US shale boom of the past decade was likely to see production continue to grow, especially if the US government allowed crude exports.
“I believe this is the early stages of the revolution and there is quite a lot of change that can happen … I think it is going to be a decade where more and more we will see the US being increasingly self-sufficient and able to export,” said Mr van Beurden, who became CEO in January.
“The trend that the US is going to be closer to self-sufficiency rather than a big importer is a very strong and more enduring trend than a lot of observers like to believe.”
The US shale-oil boom, of which BHP Billiton is a big participant thanks to $US20 billion of 2011 acquisitions, has the potential to cause big shifts to both global economic and geopolitical dynamics as the world’s biggest economy puts more oil into the mix and no longer needs to rely on imports.
The boom, driven by horizontal drilling and fracking technology, was originally focused on gas, but after success turned a US gas shortage into a glut and drove down prices at the start of this decade, producers turned their focus to oil.
Despite the rapid oil production increase, there are questions over the longevity of the boom because the hundreds of shale-oil wells being drilled across the US release most of their oil in the first few years of operation, and because of uncertainty over the potential of untested shale ground.
In its latest World Energy Outlook in November, the International Energy Agency forecast that US oil production would plateau at the end of the decade and then start to fall.
Mr van Beurden, who did not directly address the IEA forecast, is more optimistic, both on the geology and the potential for technology to extract more oil out of the shale.
“You will probably see it (oil production) go up,” he said.
“There is a lot of resource that is still being understood better: what the sweet spots are and how much it can do.”
At the same time, he said the fracking and horizontal drilling technologies had each been around for decades and had been used together now for more than a decade.
“The amount of innovation the industry has put there is actually quite limited. I think we are still at an early part of the technology curve and therefore there is much more to come in terms of productivity and cost take-out and novel ways of doing it.”
If the US government allowed crude exports, this would probably foster more production, Mr van Beurden said.
There are signs the US is looking to relax a ban on crude oil exports that was put in place during the Arab oil embargo of the 1970s.
Last month, for the first time it quietly allowed two US companies to export an ultra light crude from the Eagle Ford shale site in Texas to foreign customers.
“There are some questions around whether the US government will lift the ban on exporting crude but probably when they do so it will enable even more production to come on,” Mr van Beurden said.
Shell has not been as successful as some in the US and, under Mr van Beurden and his predecessor Peter Voser, has sold ground, cut spending and reduced workforces. But Mr van Beurden said he expected the US shale boom to drive significant LNG exports but not to the extent it will have a big impact on Australian production. “Gas demand, LNG demand will grow very significantly in the next few decades,” he said.
“We are going to need an awful lot of North American gas to supply that demand.”
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