Alaska's Peak Oil Realities
When $100 Oil Just Doesn't Cut it
I know we typically look at the trouble our three largest oil-producing states are having with Peak Oil.
Today, let's focus on just one: Alaska.
Because quite frankly, they're having a lot more trouble than the rest.
Last year, Alaskan oil took a blow when the USGS cut their estimate for the amount of conventional, undiscovered oil in Alaska's National Petroleum Reserve (NPR) by 90%.
The NPR — once thought to hold 10.6 billion barrels of oil — is now thought to contain about 896 million barrels. The area is located on Alaska's North Slope, where 97% of the state's oil production is found.
As if the state didn't have enough trouble with Peak Oil...
Even despite two major spikes in oil prices within the last decade, Alaska's oil production simply hasn't been able to recover.
Oh, how the mighty have fallen.
Back in 1988, Alaskan year-over-year crude production increased 3.8%, pumping more than two million barrels per day — making it our largest oil-producing state. But its slight lead over Texas was only temporary.
For the next two decades, Alaska's year-over-year production increased just once!
If things continue at this rate, production could easily affect the performance of the Trans Alaska Pipeline.
Bloomberg reports: "If no new fields come on-line, lower volume makes it more difficult to operate the pipeline because the oil flows more slowly and cools more quickly, increasing the chance of wax buildup and water freezing in the line or gumming up pumping stations."
It doesn't exactly add up to a bright future for Alaska's oil industry.
Too Little, Too Late — Or is it?
Let's not let wishful thinking take over for The Last Frontier.
If by some magical force drilling ANWR were permitted today, it would be years — possibly even decades — before we saw a single drop of oil.
How about drilling the Arctic waters?
Shell's has tried that avenue, time and time... and time again. The company's latest exploration plan marks the fourth time they've tried to drill in the Beaufort Sea. This time, they're looking to spend almost $4 billion to drill in the Arctic Ocean.
Only time will tell if Shell will be able to obtain the permits to explore in the Arctic. So far, their attempts are being spoiled by environmental lawsuits.
We can't help but wonder at what point they'll throw in the towel and join the rest of their competitors, because we can clearly see where drilling has shifted.
An Unconventional Future Ahead
Does it even surprise you anymore that the future will be shaped by shale?
It's the only conclusion after looking at the latest rig count by Baker Hughes: Approximately 60% of the rigs operating in the U.S. are drilling horizontally.
You can take a safe guess on what they're after.
In North Dakota alone, there are more than 175 rigs, nearly all of which are drilling into the Bakken. For the last several years, we've seen a perfect storm developing for these emerging shale stocks.
Unfortunately, there's also been a lot of opposition building against one of the techniques used to tap those plays: hydraulic fracturing.
And whether or not the outrage is justified or not, it's become a public relations nightmare. Accusations have been flying; from tainting our drinking water to destroying the formation deep underground... But the opposition is leaving the door wide open for companies to off safer, alternative fracturing methods.
Believe it or not, but those drillers aren't limited to blasting the rock formation with millions of gallons of water. There are much better — and more profitable ways — to go about doing it. And it's certainly capturing the attention of the big boys...
The Last of Their Oil Profits
Two weeks ago, we got a firsthand look at where the world's largest publicly-traded oil and gas companies are turning for their last round of oil and gas production.
Remember Shell's $4.7 billion deal to dip its hand into one of the most promising shale plays in the United States?
Although Shell's latest foray into the Marcellus is admirable, it's the same old story as the rest of the majors. They're late to the party — again.
I know for a fact that Ian Cooper's latest Marcellus stock is already posting a solid gain for his readers. And going forward, it's those small, hidden oil and gas gems that will continue to break new highs for investors.
Later this week, I'll show you three of those plays that Wall Street is overlooking.
Until next time,
Editor, Energy and Capital