Mission & Name
US Foreign Policy (Dr. El-Najjar's Articles)
OPEC, Get Ready For The Second US Oil Boom
By James Stafford
Al-Jazeerah, CCUN, July
What OPEC countries fear most is a follow-up
technological revolution that will lead to a second oil boom in the U.S.,
and that fear is now being realized.
A technological revolution
spurred the U.S. oil boom that resulted in the greatest increase in domestic
oil production in a century, and while that has stuttered in the face of a
major oil price slump and an OPEC campaign to maintain a grip on market
share, the American response could be another technological revolution that
demonstrates that the first one was merely an impressive embryonic
It's not only about shale now—it's about reviving mature
oil fields through advancements in enhanced oil recovery, potentially
opening up not only new shale fields, but older fields that have been
There are myriad gloom-and-doom stories about what is
often alluded to as a short-lived oil boom in the U.S. But what many fail to
understand is that revolutions of this nature are phased, with the advent of
new technology typically followed by a temporary halt in progress while we
study the results and come up with something even better.
looking at here are advancements in EOR for greater production and cost
efficiency that can weather oil price slumps and awaken America's sleeping
giant oil fields. Soon we are likely to see some new players in the field
buying up oil assets and putting more advanced EOR technologies to work to
re-ignite the revolution.
The shale revolution was stunning, indeed.
But there have been setbacks—even beyond the oil price slump that has
rendered fracking expensive. Fracking uses a lot of water. According to a
Geological Survey study, the process uses up to 9.6 million gallons of
water per well and is putting farming and drinking sources at risk in arid
states, and especially in major drought-ridden shale-boom venues like Texas.
Phase two of the U.S. oil boom hits at the heart of the inadequacies
of the first phase, in a natural progression.
There are two very
interesting EOR advancements that have caught our attention in recent
months: CO2 EOR and Plasma Pulse Technology (PPT).
carbon dioxide EOR, involves injecting CO2 into ageing oil fields to
sweep residual oil to the surface. In some cases, it can extend the
production life of a field by more than 25 years. The U.S. is fortunate in
this regard because it has a large volume of low-cost, naturally occurring
CO2 at its disposal; however, in order to be widely employed the
infrastructure to deliver it to oil fields has to be in place.
Visiongain estimates that global CO2 EOR spending will be $4.74 billion
this year. "This will decline in the short term as low oil prices take their
toll on the capital spending programmes of CO2 EOR operators, but is
expected to rise rapidly in the next decade."
Then we have something
a bit more futuristic, even though it is already commercially viable—Plasma
Pulse Technology, or PPT. This is a patent pending technology that enables
the "re-opening" of wells without water, without polluting chemicals and
without causing earthquakes. The "re-opening" side of this equation means
that it doesn't open rock like fracking, rather it comes in afterwards and
cleans up well bores to clear the pathway for oil to flow faster and more
efficiently to the surface like it once did.
Plasma Pulse Technology (PPT)
creates a controlled plasma arc within a vertical well, generating a
tremendous amount of heat for a fraction of a second, while the subsequent
high-speed hydraulic impulse wave emitted is strong enough to remove any
clogged sedimentation from the perforation zone without damaging the steel
casing. The series of impulse waves also penetrates deep into the reservoir,
which re-opens reservoir permeability for up to a year per treatment.
But to determine what new EOR technology is going to steal the limelight
in the coming months and years, we follow the progress of the EOR leaders
and the big strategic investors, such as
Russian billionaire Roman Abramovich.
The market leader in
extracting oil and gas using CO2 enhanced oil recovery processes is Denbury
Resources (NYSE:DNR), which
many will agree is a company that offers investors long-term value
because of its focus on efficiency.
As for Abramovich, he is a
metals magnate who also happens to own the Chelsea football club and is the
143rd wealthiest person in the world, worth about $9 billion
Forbes. He is the main owner of UK-registered Millhouse LLC, a private
investment company whose assets have included major stakes in Sibneft, which
is now Gazprom Neft. In 2005, Millhouse sold a 72 percent stake in Sibneft
to Gazprom for more than $13 billion.
In fact, PPT first caught our
eye back in February, when Abramovich—who has a track record of very
strategic investments--moved to invest $15 million in a Houston-based
company called Propell Technologies Group,
Inc. (OTC:PROP). Until Abramovich brought it to the world's attention,
few had probably ever heard of Propell, which has a wholly-owned subsidiary
called Novas Energy U.S.A, the licensee and developer of the PPT technology.
The subsidiary licenses the technology from a venture capital-backed
Russian energy technology company named Novas Energy, and the Russian
connection makes sense here. After all, Plasma Pulse technology has been
very successfully employed in both Russian producer and injector wells. More
than anything, this Russian connection speaks volumes about the efficiency
of this advanced EOR technology: Russia doesn't have draconian fracking
regulations pressuring companies to use environmentally friendly technology.
What this means is that it's
effective; otherwise Russians wouldn't be using it.
technology itself, if we follow Abramovich further we get a glimpse of
what's about to happen on the U.S. EOR scene. In February, Abramovich took a
stake with Propell, which was made through a Cyprus-registered company
Ervington Investments Limited. The February deal saw Propell raise $5
million from the sale of 1,525,424 shares of a preferred stock at $3.28 per
share. The deal also gave Ervington the option to invest an additional $9.75
million, under the same terms, which it took advantage of on July 6. This
Abramovich investment will be used to acquire oilfields with the overall aim
to employ the new technology to increase output.
You have to read
between the lines here. Abramovich doesn't do anything small. He'll get the
infrastructure in place and then look to acquire a significant position in
the U.S. oil sector at today's fire sale prices to employ this EOR
If OPEC keeps oil prices below $100 for some time to
come, the smart investor will be looking for something that captures
long-term value, which means focusing on operational efficiency.
while many might assume that EOR is now too expensive to be supported during
an oil price slump, a little counter-intuition tells us that this will
change in the immediate future and investors will start looking at companies
who are actually behind this new technology or the companies who are
focusing on using this new technology--whether it be CO2 EOR or PPT--to get
more out of their oilfields.
Over the long-term EOR makes production
cheaper. And as Chesapeake Energy's (NYSE:CHK)
Jason Pigott succinctly put it: "We can't control prices, so we have to
focus on how much it costs to get it out of the ground."
oil prices close doors, technology steps in to reopen them, and certainly
innovation will drive the next U.S. oil boom—and the latest advancements are
already commercially viable. The door has been re-opened.
knows is this: The U.S. has over
21 billion barrels of oil that could be economically recovered with
today's EOR technologies. And according to figures from the U.S. Department
of Energy and the Western Governors Association (WGA), further advances in
this technology could cause that figure to double.
By James Stafford of Oilprice.com
Share this article with your facebook friends