Interesting piece from Reuter's on OPEC and shale oil.

OPEC acknowledged for the first time on Thursday that technology for extracting oil and gas from shale is changing the global supply picture significantly, and said demand for crude would rise more slowly than it had previously expected.

In its annual World Oil Outlook, OPEC cut its forecast of global oil demand to 2016 due to economic weakness and also increased its forecast of supplies from countries outside the 12-nation exporters' group.

The correct opening should be OPEC acknowledged for the first time publicly:  OPEC have  been looking at shale energy for a long time, and unlike Gazprom and shale gas, have always had an educated and open minded view of it. They've been among my readers for over three years for instance. So take some of the report with a large dose of salt flavoured fracking fluid. OPEC didn't get where they were by being stupid or blind. 

In OPEC's new forecast, shale oil will contribute 2 million barrels per day (bpd) to supply by 2020 and 3 million bpd by 2035. For comparison, 2 million bpd is equal to the current output of OPEC member Nigeria, which is Africa's top exporter.

OPEC said that in the medium-term shale oil would continue to come from North America only, but other parts of the world might make "modest contributions" in the longer term. Shale oil and gas may also play a role in OPEC members themselves.

Previous editions of the OPEC report saw no significant supply addition from shale oil. As recently as June, oil ministers including Rafael Ramirez of Venezuela played down the prospects as OPEC met in Vienna for its last meeting to set output policy.

OPEC Secretary General Abdullah al-Badri told reporters in Vienna that shale oil still did not pose a threat to the group as rising demand would easily absorb the higher output. "It doesn't concern us that much," he said.

Meanwhile from a presentation in Houston yesterday by a reader who wishes to remain anonymous explains why OPEC can no longer deny shale energy reality. Firstly, it's been a while since I've talked about US oil in general and the Eagle Ford in particular so we'll set the scene. This from an EOG presentation in January:

eaglefordThe speaker (who isn't EOG obviously) used these notes for the above slide, and predicted 2 million from the Eagle Ford alone by 2017.

The Eagle Ford Play is now the HOTTEST Oil Play in the US.

• And the Eagle Ford Play is HUGE.  
• EOG, a large public US exploration company that is a leader in using Multi-Stage Hydro Fracing in oil plays and owns a big position in the Eagle Ford Play has publicly stated that the Eagle Ford Oil Play will be ranked #6 on the list of the all time biggest Oil Fields discovered in the United States, with an estimate of 5 billion bbls of recoverable oil (and I believe this is a conservative estimate.)
The Eagle Ford Play illustrates just how far and how fast hydraulic fracing technology has progressed to unlock new Oil reserves here in the US since 2008.

But that slide only serves to illustrate the speed with which shale energy can evolve. Jack Welch said the other day that shale energy is the biggest thing since the Internet. There's an analogy there in how shale energy is evolving physically far sooner than people can keep up mentally. First the USA. Next stop China:

On this side of the ocean of course any number of "experts" think we'll never see such transformation. But they think big in Texas, so what really matters is China. As England Sleeps over shale energy, who wants to bet against China? Not NHA's friend from Texas and not me either. 

alWhat keeps OPEC awake at night is the last question on this slide


The interesting angle here is that  if we combine using less oil (via both efficiency and natural gas vehicles) with producing more oil via shale energy techniques, then we are talking not only interesting volumes, but very intereresting ones. I've shown you the slide.This from the speaker's notes, is for those for whom I have to draw a picture:

But, if both the US and China, the two biggest Oil consumers are able to scale quickly unconventional Oil play development, this new addition to global oil production could make a significant impact on global supplies bring as much as ±10 million barrels of excess capacity into the global markets.  If this happened, OPEC’s ability to control world oil markets would be doubtful and in the “perfect storm” we could see world oil prices dropping to new prices levels significantly lower than prices now projected by most experts.

Over the years there have been any number of cockamamie ideas printed here from any number of sources, myself included. Looking back I can say they've mostly been wrong in only degree or timing. Could history repeat? Maybe not. But the questions keep people awake.

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