Shale drilling is an American phenomenon, and likely will stay that way for several more years, geopolitical strategist Peter Zeihan said this week in San Antonio.
Zeihan, who spoke at South Texas Money Management’s annual Energy Symposium at the San Antonio Country Club, said that no place else in the world has the combination the U.S. does – the capital, engineers, geologists, chemists, a legal system that recognizes mineral rights, pipelines, midstream infrastructure and a ready market.
“This is not something that your average state-run thug can do,” he said.
“We have more petroleum engineers than the rest of the countries put together. Of all of the horizontal wells that have been drilled in the last five years, 99 percent of them are in the United States. Of all the wells that have ever been drilled ever, three quarters are in the United States.”
Zeihan said that U.S. shale fields have taken off for a number of factors, starting with the fact that shale wells cost “a metric butt ton of money” to drill, and there happens to be a lot of U.S. money looking for an investment.
He said that Mexico – because it’s next to Texas – is the country where shale drilling will take off next.
That will ultimately give Mexican manufacturers a reliable source of natural gas, making Mexico a growth story for many years.
Zeihan said that shale drilling has made the U.S. functionally energy independent.
Amy Myers Jaffe, executive director of energy and sustainability at the University of California, Davis, disagreed and said that the U.S. will be importing oil for the next five years. But she said energy independence isn’t the point – the main thing is that shale oil in the U.S. has helped prevent supply disruptions (and price spikes) that would have otherwise happened because of turmoil in places such as Iraq, Libya and Nigeria.
Jaffe also expects to see crude oil exports from the U.S. “We are a global power. We want a world that is what I call a status-quo world,” she said. “As a global power we support global institutions and therefore it’s not in our interest to hold our oil and gas inside our borders.”
She said President Obama is likely to support crude oil exports, which would smooth over the delays of the Keystone pipeline.
Jaffe also said that people forget that the U.S. ran low on gasoline supplies during hurricanes Katrina and Rita. “Europe lent us the fuel we needed,” Jaffe said. She said it’s unlikely that the U.S. would ever deny fuel to Europe and keep hydrocarbons within its borders.