2017: The Year Shale Went Global

From its impact on world markets to its rise in U.S. exports, North American shale energy has officially become a global player that is creating market opportunities in the U.S. and abroad.
By Luke Geiver | December 18, 2017

The magic number for U.S. shale is 54. The number has nothing to do with breakeven prices, fracture stages per well or other data points linked to shale energy production. Fifty-four is the distance—in feet—needed to make the Port of Corpus Christi truly the shale energy export hub of the world (not that it isn’t already). As it currently exists, the Port’s main channel is 47 feet deep. At 54 feet, the channel could accommodate Very Large Crude Carriers, the massive vessels capable of moving more than 2 million barrels of liquid crude sourced from places like West Texas, Oklahoma and North Dakota to anywhere in the world. A VLCC can save a shale oil exporter up to $1 million per voyage and represents the ideal vessel for exports to European import hubs in Italy or China where refineries are in need of light sweet crude.

While the PCC team has already found alternative export vessels and shore-to-ship loading strategies for the export of shale oil, the goal of the community and port authority leaders remains sharply focused on that magic number. Investments and commitments by both the local and federal governments have already been made to gain the seven additional feet. It is only a matter of time—roughly two years—before VLCC’s can dock, load and ship out with no special processes and the PCC’s goal of sending North American shale energy to the rest of the world on a daily basis will be realized. Until then, however, the PCC and Corpus team are not the only entities helping to reveal a new energy reality to the entire world: U.S. shale has gone global.

Foreign Countries Want A Future in US Shale
West Virginia and Alaska each received a clear signal from China earlier this year that the country wanted U.S. shale gas. During a tour of several Asian countries, President Donald Trump sat with Chinese state leaders and representatives from the China Energy Investment Corp. and Sinopec, the national oil company, to establish an agreement that would bring Chinese investment to West Virginia and Alaska in exchange for access to shale gas produced from each state. With $83.7 billion, China will help develop multiple projects in the area in a 20-year span. Projects will include power generation from natural gas, chemical manufacturing and storage of NGLs and supply of NGL.
“West Virginia has actively sought foreign investment to strengthen and diversify our economy,” said Wood Thrasher, commerce secretary for West Virginia.

In Alaska, a long-time vision to transport shale gas produced inland to the coast could be realized from the same Trump trip. Through a five-party joint development deal that involves the state, along with Sinopec, Bank of China and the China Energy Investment Corp., Alaska could become a main supplier of liquified natural gas to China if the multibillion-dollar deal amongst the stakeholders plays out. The deal would help develop the infrastructure necessary to move shale gas to the coast.

In addition to the multibillion-dollar deals with West Virginia and Alaska, China has already shown its desire to obtain U.S. shale energy. This fall, China obtained roughly 1 million barrels of light sweet crude from Bakken and SCOOP/STACK producer Continental Resources. According to the U.S. Energy Information Administration and officials at the PCC, China is one of the leading destinations for U.S. light sweet crude.

The New World View on Shale
In its 2017 World Energy Outlook, the International Energy Agency declared the U.S. the undisputed leader for oil and gas, a first-ever declaration for the U.S. The new crown given to the U.S. comes directly from the exploration, production and development of shale oil and gas, IEA says. From 2010 to 2025, the U.S. will match the highest sustained oil output growth level by a single country in the history of oil markets, IEA says. The amount of shale gas produced in the country will far surpass any number previously recorded for such markets.

“Expansion on this scale is having wide-ranging impacts within North America, fueling major investments in petrochemicals and other energy-intensive industries,” IEA says. “It is also reordering international trade flows and challenging incumbent suppliers and business models.”

The Organization of Petroleum Exporting Countries has experienced firsthand how shale oil production in the U.S. can impact world markets. The IEA says shale has created a shift in the world dynamic that people are just starting to understand. The shift, IEA says, will last well into the future. “The old ways of understanding the world of energy are losing value as countries change roles,” the group says. For example, the Middle East is quickly becoming a major energy consumer and the U.S. a major exporter.

The Shale Energy Hub of The World
Jarl Pedersen, chief commercial officer at PCC, is doing everything he can to make the U.S. a major shale energy exporter. Two weeks after Congress lifted the export ban, Pedersen’s team helped to perform the country’s first export of U.S. shale oil. Today, PCC is shipping roughly 600,000 bpd to 26 different countries spread throughout Europe and China. In April, PCC shipped a large tanker of shale oil that held nearly 1 million barrels. A month later, PCC held a testing demonstration for Anne, a VLCC owned by Belgium-based Euronav that was 1,093 feet long and capable of holding more than 2 million barrels of oil. The exercise with Anne underscored the need to provide a 54-foot deep channel. Under current conditions, ships can be partially loaded at the dock, but must be loaded to capacity while in deeper water, a process that costs more time and money.

“I think what producers and midstream companies are looking for and need to have is certainty that we are working to widen and deepen the ship channel,” Pedersen says. “That is why we have been to Midland a couple of times over the last few months.”

When oil and gas gathering infrastructure capacity runs out in 2019 as Pedersen and others predict, Corpus Christi wants to be ready for pipelines bringing shale oil and gas to the region. Refining capacity for light sweet crude in the region is already maxed. The best option for Permian producers is to ship crude overseas or to Mexico, Pedersen says.

Through a major project designed to alter the port’s infrastructure, Pedersen believes his team is showing shale producers across the U.S. that PCC is serious about giving them a competitive advantage for export. PCC has invested $30 million for port upgrades, a portion of a much larger sum that will be paid in part by the federal government. “We could easily be doubling or tripling the volume of crude from this port,” Pedersen says. In January 2016, only 12 percent of the crude that left the port in Corpus was for export purposes. In October this year, more than 72 percent of the crude that moved through the port was for export. The majority of it was shale oil. Occidental Petroleum and others have already established loading docks for their own vessels, and some producers are working to pool their oil volumes and resources to lower shipping costs and meet requirements.

PCC’s all-in approach to becoming a shale energy export mecca isn’t just about the shale oil coming in and going out. Tommy Kurtz, vice president of business development at the Corpus Christi Regional Economic Development Corp., along with Iain Vasey, president and CEO, agree that there is more to the shale story along the Gulf Coast then just exports. According to Vasey, the industrial Gulf Coast has seen more than $300 billion of investment in the past five to six years because of its proximity and ability to use shale gas. Corpus Christi has experienced more than $50 billion worth of announced projects. For the past several years, the region has been adding 3,000 to 5,000 jobs per year, most of which are related to manufacturing, energy production and shipping.

Kurtz says the region will continue to grow because of its place on the coast and proximity to the Eagle Ford and Permian. In addition to petrochemical expansions, Kurtz and Vasey are working with steel manufacturers to expand. In the steel business, access to recycled products like cars is important and the recycled products typically must arrive via water. The enormous feed of shale gas capable of powering a production facility is a major bonus for such operations. For Vasey, the long-term future of the Port will always be linked to shale energy, including oil exports, but in the near-term the excitement the team is seeing is in ethane. “At the risk of sounding like the guy in the movie The Graduate,” Vasey says, “It is plastics young man.”

In 2018, PCC will also add capability to store more oil and LNG along with infrastructure needed to ship LNG. Like the team from the West Virginia Department of Commerce, the state of Alaska, the Oklahoma E&P Continental Resources, the Port of Houston, and many others that will surely be added to the list in the coming months, Vasey and Pedersen share a similar sentiment: these are interesting and exciting times for shale. The oil and gas is now being supplied, used or felt by the world.


Shale Makes The List
In market and research firm Energy Intelligence’s 2017 rankings of the largest and most prominent oil companies—private or state-run—shale has made a mark. For the first time ever, U.S. shale players now occupy 25 spots in the top 100 and hold 8 positions in the top 50 (up six from last year).

“The strong showing from shale-focused U.S. independents underscores how that sector has adapted to the lower price environment, while the mixed fortunes of the Supermajors show the challenges this price cycle is posing for bigger integrated players.

Companies on the Top 100 list were chosen based on six parameters:
1. Oil reserves
2. Natural gas reserves
3. Oil production
4. Natural gas production
5. Refinery distillation capacity
6. Refined product sales


Author: Luke Geiver
Editor, North American Shale magazine