Energy Independence? Not Yet, Says Canada

Todays top stocks to buy“A surprising look at why the shale boom may be a curse, and why we might need Canada’s help” —

For all the talk (and progress) in trying to rid ourselves of foreign oil and gas, our northerly neighbor certainly knows how to spoil the mood.

The International Energy Agency (IEA) recently indicated that the US could technically become a net exporter of natural gas by 2020 – and entirely energy self-sufficient by 2035.

But at a Bloomberg energy forum in Calgary this week, some Canadian analysts and producers were less optimistic that the US would be able to achieve energy independence in the coming two decades… if ever.

The belief is that America will still need to import huge amounts of crude for the foreseeable future, and that our recent growth in shale production isn’t sustainable.

According to Mike Tims, chairman of investment bank Peters & Co., in order to feasibly maintain output from wells in regions like the Bakken and Permian basins, more drilling investment is needed – thus squeezing margins.

Tims notes that production soon becomes too costly as well output can drop by as much as 70 percent after the first year, forcing companies to keep drilling.

Likewise, as the world’s largest economy the US will probably “never be able to meet its own supply needs,” said Chris Seasons, president of Devon Energy Corp. – Canada.

Now, before we assume these Canadians have had one too many shots of maple syrup… they may actually have a point.

The US Energy Information Agency’s state in their Annual Outlook 2013 that it expects the current decline in imported fuels to continue through 2019 and then rebound afterwards.

The EIA further anticipates that after 2019, imported liquid fuels as a share of total US liquid fuel use will rise from 34% to 37% by 2040.  And that domestic output could begin its decent as early as 2021 .

I bet few media outlets took the time to comb through all 244 pages of the document like I did to find these nuggets — or at the very least they decided to neglect them. Instead, they choose to paraphrase all the positive assumptions, painting a utopian future for our nation without considering any barriers.

And barriers… there are plenty.

You see, the possibility of energy independence still needs to take into account how we can efficiently manage our consumption.

In other words, the way we live our lives as we now know it… needs to change drastically.

Also revealed in the EIA Outlook report was a list of key challenges Americans would have to overcome if we are to stand any chance of reaching zero fuel imports in the near future:

  • Better vehicle efficiency, cheaper car technology, higher fuel economy standards through 2040, better batteries, and less driving
  • More natural gas in every transportation mode (truck, rail, etc.), and more conversion of natural gas and coal into liquid fuels
  • All sorts of successes for biomass-based fuels
  • Shale gas and tight oil wells each produce twice as much oil as is currently expected and wells are able to be spaced much closer together
  • Colorado oil shale and Alaska tight oil get developed
  • There is 50 percent more undiscovered oil in the United States than currently believed

As it stands, these milestones will be quite difficult to achieve all at once, let alone by 2035.

Even if reaching self-sufficiency by 2035 holds true for the US, it may be short-lived due to the inevitability of declining production – unless more fuel is found, of course.

The ability to identify oil and gas resources is the easy part…the challenge is recovering the resources economically.

The abundance of hydrocarbons found in regions like the Monterey Shale for example, has been well-documented.

Some estimates indicate that it holds three times the reserves found in the Bakken or Eagle Ford.

Unfortunately, the complex geology of the Monterey has made it challenging to tap into with the same level of success that the other shales have seen.

On the other hand, Canada is only more than happy to step in and pick up the slack if required

They just need a pipe.

With the present shale boom, capital spending in Canadian oil sands projects has slid 10 percent over the past year.

The downturn has been further impacted by delayed pipeline development, most notably the Keystone XL.

Canada’s crude output is expected to more than double to 6.7 million bpd by 2030, with the expectation that adequate transportation infrastructure into the US is in place before then, according to the Canadian Association of Petroleum Producers.

So again we ask, is energy independence possible for the US?

Clearly, the Canadians don’t think so.

But then again, supplementing your fuel needs from a next door neighbor instead of halfway around the world isn’t a bad thing.

Yours in profits,
Todays top stocks to buy
John Holt
for Top Stock Millionaire
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