THE REALITIES OF OUR ENERGY CONDITIONS
(…are misrepresented by our politicos)

From the President on down, the realities of our energy conditions are misrepresented to us. Nor do various media pundits and other so-called experts do much better to clear things up for us either.

And trying to get simple answers to direct questions about the subject from government agencies involved with the question of energy, energy resources, imports, exports, costs, etc., is much like mining for gold. You have to dig through tons of useless data to find one nugget of worthwhile fact.

Here are some of those “nuggets” I’ve managed to mine out of all that obfuscating matrix:
1) Of the top twenty oil producing countries in the world, the US is No.3, right behind Saudi Arabia (No.2) and Russia (No.1).

2) In terms of volume the US currently produces some 9.2 million barrels of oil per day, and recent discoveries of new in-country (and on-shore) sources of oil, plus, new developments, both in drilling and extraction technologies are ramping up that output with production projected to reach some 10 million barrels per day within the next 3-5 years. A level of production that will overtake Saudi Arabia, and match Russia’s output.

3) The next tier of four top oil producers in the world only achieve between half and a third of our output at 3-4 million barrels per day. Two of them are our immediate neighbors of Canada and Mexico.

4) The rest of those oil producing countries barely achieve one quarter or less of our output.
In short, these top three oil producers account for 47% of the total world output, with the remainder producing only 53% of the total global output (see attached Annex I).
And because of these developments in our oil output, as of the end of 2011, the US has become a net exporter of petroleum based products Even so we still import about 41% of our crude needs, or an additional 9 million/bpd, for a total requirement of +/- 18 million/bpd.

And this is where it becomes interesting, putting the lie to most of what our politicos keep spouting to us about our “dependence on foreign oil,” a code phrase meaning Middle Eastern/OPEC sources. Actually we import crude oil from some 40 different countries, but only 6 of them are of any importance, and only 1 is in the Middle East. The six primary sources of our crude imports are:
1) Canada – which accounts for about half of our total imports (some 4 mb/day), plus natural gas. Canada has been our primary supplier of both of these for several decades.

2) Mexico – which accounts for about one quarter of our total imports (some 2mb/day)

3) Saudi Arabia – which accounts for only about one eighth of our total imports (about 1.5 mb/day, with most it going to the West Coast).

4) Venezuela – which due to political and other instabilities delivers much less to us than before ( even though it’s just across the Gulf from us)

5) Nigeria – also, like Venezuela, due to the same sort of instabilities, has also become much less of a supplier to us than before.

6) Russia – which due to a convergence of revitalized production from it s Urals fields, and US needs, has more than quintupled its exports to the US over the last five years now close to 1 mb/day, and mainly to our East Coast).

As we can see from this, our so-called “dependence” has very little to do with the Middle East, and is mainly tied to our immediate neighbors north and south of us, with whom we have long standing symbiotic trade relationships. And while Venezuela and Nigeria are becoming of less and less importance to us, Russia, is becoming a stronger and more important source compared to these.

But what has dramatically changed our energy realities, is that we’re at the point where, if we chose to, we could be energy “independent” almost overnight…. if only we could somehow sideline our politicos out of the way of our achieving that. And it may yet happen in spite of such obstacles, because there is a growing convergence of resources supply, technology, and demand, that is just beginning to generate major impacts on our economy’s rate of growth, and perhaps much sooner than we might think, because those impacts are already being felt.

The biggest and strongest generators of that are the recently developed oil and natural gas shale resources such as the Marcellus deposits in Pennsylvania/New York, the Bakken in North Dakota/Montana, and the Eagle Ford one, in southwest Texas. These shale deposits are only three of some seventeen known here in the continental US.

These three also appear to have much more significant reserves of oil and gas than previously estimated, because, much like a layer cake, they aren’t single, but multiple, layers of shale overlaid over each other, waiting to be tapped. As an example, the Marcellus shale beds currently tapped are above a larger and vaster layer deeper below it, whose reserves of oil and gas could actually be double that of the upper layer currently being exploited. The name for that new layer is called Utica, and it may extend far up into New York, and perhaps as far down into West Virginia.

A similar situation exists with the Bakken shales, which reach from Montana, North and South Dakota, Wyoming, and perhaps over to Colorado and even western Nebraska. Adding to these resources, the use of CO2 injection technology is being applied to re-activate the supposedly depleted wells of the old fields in PA, LA, OK, TX, and CA. That technology is now showing that, far from being depleted, those old oil fields still have some 60% of their reserves….still in the ground….even after over one hundred years of extraction from them!

Meanwhile, because of all these new developments (not counting what we may have with our Alaskan resources) there is now a near glut of both oil and natural gas here in the US, with its own-produced sweet crude price dropped down to $72/b, and natural gas, way down to some $2.50/mcft. And the cause of that “glut” is a combination of inadequate pipeline and refinery capacity (and location).

And the reasons for that are due to the fact that our pipeline infrastructures are aging, many going back 20-30 years or more, resulting in growing numbers of “incidents” of leakage, and/or explosions and fires. As for out refineries, these also are aging (no new ones having been built in thirty years). Instead, these have only been upgraded here and there over that time with band-aid improvements. Compounding that problem is the fact that the bulk of our refineries are clustered along the Gulf Coast, with a secondary number along the Southeast Coast, a third, much smaller group in New Jersey and New England, and a very small one on the West Coast, with all of them working at over 90% capacity.

Thus, the biggest obstacle to our being able to take full advantage of these new petroleum and natural gas developments is our lack of both pipeline and refining capacity. Yet, despite all that, our refineries are still better and more efficient than those of Europe, Asia, and Latin America.

Meanwhile, as usual, everyone seems focused on the wrong end of the stick, which leaves us stuck with 3, 4 and 5 dollar fuel costs at the pump. In large part this is because, with such a glut, we’re exporting things such as diesel, gasoline, heating oil, jet fuels, etc., rather than meeting our domestic supply demands for these here first. Our producers do so because they can get higher prices for them….overseas.

So the main reason we’re not “energy independent” is because we haven’t made any serious efforts to rationalize our processing and distribution infrastructures. We simply haven’t got a coherent and coordinated national plan to resolve these problems. And without such a plan, we will still need to continue importing more costly foreign crude to meet our demand needs…for some time to come.

Another factor that’s preventing us from becoming truly energy “independent” is the obvious official agenda aimed at moving us towards alternative energy resources, such as wind, solar, thermal, nuclear, etc.. These agendas are driven by well-meaning but misapplied environmental intentions which overlook a critical aspect of such alternatives. They all have limited applications, compared to those of petroleum and even natural gas. Some, such as nuclear, are not only massively complex, and costly, but environmentally extremely dangerous as well (viz. Three Mile Island, Chernobyl, and Fukushima).

While America has the potential for again becoming a major oil and natural gas player on the international scene, with a revived industrial capacity because of that potential, it won’t achieve the full influence and soft power it could have from it…until it resolves such problems, and begins to approach the subject of “energy” in a common sense and pragmatic manner, rather than on environmentally emotional basis.

Fortunately, despite our politicos’ lack of vision about it, the sheer magnitude and economic impacts of these new developments are creating a momentum which will ultimately overcome such hindrances.

And the best example of that is natural gas. With such low cost levels, and almost limitless supplies of it to keep those cost levels down, there is now a growing stampede by power generating facilities, to switch from coal burning…to natural gas. Besides the environmental benefits of such a switch, their lower fuel costs are translating into lower kilowatt hour costs for electricity which, in turn, leverages that into cheaper production costs for business and industry, thereby creating more employment, and more competitive products for both the domestic and global market place.

None of this is wishful pipe-dreaming. It is happening as we write of it….even if we don’t really perceive it because the process is much like a rising tide cycle which, day by day, reaches just a little higher until…voila….we will find ourselves energy independent…. despite any obstructionism by our dipsticks….back there in…. Washington, D.C.

CENTURION

ANNEX I
THE TOP TWENTY OIL PRODUCING COUNTRIES OF THE WORLD
COUNTRY RANK MILLIONS/BPD % OF GLOBAL PRODUCTION
Russia (1) +/- 10.00 Million/BPD +/- 14 % Saudi Arabia (2) +/- 9.75 Million/BPD +/- 13% USA (3) +/- 9.20 Million/BPD +/- 12.75% Iran (4) +/- 4.00 Million/BPD +/- 5.5% China (5) +/- 3.90 Million/BPD +/- 5.5% Canada (6) +/- 3.30 Million/BPD +/- 4.5% Mexico (7) +/- 3.00 Million/BPD +/- 4.2% U.A.E. (8) +/- 2.80 Million/BPD +/- 3.9% Brazil (9) +/- 2.50 Million/BPD +/- 3.6% Kuwait (10) +/- 2.50 Million/BPD +/- 3.5% Venezuela (11) +/- 2.50 Million/BPD +/- 3.5% Iraq (12) +/- 2.40 Million/BPD +/- 3.4% Norway (13) +/- 2.30 Million/BPD +/- 3.3% Nigeria (14) +/- 2.20 Million/BPD +/- 3% Algeria (15) +/- 2.10 Million/BPD +/- 3% Angola (16) +/- 1.90 Million/BPD +/- 2.7% Libya (17) +/- 1.70 Million/BPD +/- 2.5% Kazakstan (18) +/- 1.50 Million/BPD +/- 2% UK (19) +/- 1.50 Million/BPD +/- 2% Qatar (20) +/- 1.20 Million/BPD +/- 1.7% ——————————————————————————————————————–
TOTAL WORLD OIL PRODUCTION: +/- 70 Million/BPD 100% TOP THREE OIL PRODUCERS COMBINED PRODUCE 47% ALL THE REMAINING PRODUCERS COMBINED PRODUCE 53%
NOTES: a) The second tier of four oil producing countries only produce about half the daily output of the top three, between 3-4 Million/BPD.
b)The bulk of all the others only produce about one quarter of the daily output of the top three, ranging only between 1.5 – 2.8 Million/BPD.
c) While China is the fourth largest producer, because of its high domestic demands, it not only doesn’t export, it has to import as much as possible from foreign sources, the main one being….Iran

ANNEX II
PRIMARY CRUDE IMPORT SOURCES FOR THE USA
(about 41% of its domestic needs, +/- 18 Million/BPD)
COUNTRY RANK MILLIONS/BPD % OF TOTAL IMPORTS
• Canada (1) +/- 4.00 Million/BPD +/- 50%
** Mexico (2) +/- 2.25 Million/BPD +/- 25%
*** Saudi Arabia (3) +/- 1.08 Million/BPD +/- 12%
Venezuela (4) +/- .54 Million/BPD +/- 6%
Nigeria (5) +/- .36 Million/BPD +/- 4%
**** Russia (6) +/- .27 Million/BPD +/- 3% ———————————————————————————————- TOTAL CRUDE IMPORTS +/- 9.5 Million/BPD 100%
NOTES:
* Canada is and has been the USAs primary source of foreign crude imports for several decades.
** Mexico is second in terms of crude supply to the USA (combined volume of Can/Mex exports to the USA accounts for +/- 65% of its oil imports)
*** Saudi Arabia is the only Middle East source of crude imports to the USA. Its exports amount to +/- 12% of the USA’s oil imports.
**** Russia is a growing source of crude exports to the USA, mainly to its East Coast.

ANNEX III
PRIMARY AMERICAN PETROLEUM EXPORTS
(as of end 2011)
DISTILLATES MILLIONS/BPD PRIMARY EXPORT MARKETS
Diesel & Heating Oils 215/BPD Brazil, Argentina, Mexico,
*Netherlands, Peru, Chile,
Central American countries
Residual Fuel Oils **Singapore, plus some other Asian (shipping and power generation) 121/BPD
Gasoline 121/BPD
Kerosene/Jet Fuels 21/BPD
NOTES:
• The Netherlands appears to be the main port of entry for the Euro market for these products.
** Singapore, like the Netherlands, appears to have the same function for Asian markets, especially for Japan.