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U.S. Oil and Natural Gas Exports Shoot Up Due to Fracking

Institute for
Energy Research

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Oil and natural gas exports from the U.S. are booming and strengthening economies here and abroad thanks to hydraulic fracturing and horizontal drilling.

The United States is becoming a major oil and natural gas exporter. Canada and Mexico are purchasing natural gas shipped by pipeline from the United States and Cheniere Energy is shipping liquefied natural gas (LNG) from its Sabine Pass export terminal to Europe, Asia and South America.

Since 2015, when the ban on crude oil exports was lifted by Congress, U.S. oil companies have been exporting crude oil and are continuing to export petroleum products to areas around the world. China has become a regular recipient of U.S. oil and natural gas and in the first ten months of 2017 was the second largest importer of U.S. crude oil. The boom is due to U.S. ingenuity in applying horizontal drilling and hydraulic fracturing to extract oil and natural gas from shale rock, making the United States the largest oil and gas producer in the world and lowering energy prices for consumers.

Natural Gas Exports

Source: Bloomberg

U.S. Oil Exports

U.S. oil exports totaled $13.5 billion through September 2017; this is already a record high. In 2011, oil was the nation’s 146th-ranked export. Through September 2017, it ranked 15th. And through September 2017, the United States sent oil to 31 nations, up from ten countries in 2015 and four in 2011.

Asia is attracted to U.S. crude for a number of reasons: its refineries are configured to process high quality light, sweet crude that the U.S. oil companies produce from shale oil basins; U.S. crude is less expensive as the WTI trades at a discount to other oil benchmarks such as Brent; and cargoes can be bought on a spot basis, providing refiners flexibility to balance the conventional Middle Eastern supplies that are sourced via long-term contracts. In contrast to Asian refineries, the U.S. refining system operates with a heavier slate of crude oil.

Natural Gas Exports

When OPEC and Russia agreed to cut oil production to balance oil’s supply-demand fundamentals, the Middle East’s oil exports to China fell, encouraging China to diversify its suppliers. In 2017, China became the largest single buyer of U.S. seaborne crude. U.S. light, sweet crude is available for export from multiple U.S. terminals, is shipped in vessels of all sizes, is easy to process, helps to meet tightening product sulfur specifications in China and is priced to be exported. Nine ships carrying 369,000 barrels a day of crude oil left the United States for China in October 2017—a record high.

In November 2017, 19.7 million barrels of U.S. oil was due to arrive across Asia, equivalent to about 657,000 barrels per day based on vessels that are currently underway, and those that are discharging or have discharged their cargoes. This is over 50 percent more than the 427,000 barrels per day that was offloaded in Asia in October, and above the previous record-high month for U.S. crude shipments to Asia of 541,000 barrels per day in June. In December, there are already 11 vessels carrying a combined 16.5 million barrels of crude in route from U.S. Gulf ports to Asia.

U.S. Natural Gas Exports to China

The United States shipped $139 million of LNG to China in the first seven months of this year, higher than last year’s total of $137 million. U.S. transport costs to Asia are low and Asian LNG prices have fallen to the weakest level in more than a decade. Chinese buyers are purchasing U.S. LNG from third parties in short-term spot trades.

Chinese natural gas demand could grow from 206 billion cubic meters (7.27 trillion cubic feet) in 2016 to 330 billion cubic meters (11.65 trillion cubic feet) in 2020—an increase of 60 percent. The government wants to increase the role of natural gas within the country’s energy mix from six percent in 2016 to 8 to 10 percent by 2020. China’s natural gas demand is met by a combination of domestic supply, pipeline imports and LNG.

According to the Energy Information Administration, China has the world’s largest technically recoverable reserves of shale gas and by 2030, China could provide for about a third of its own gas needs. Wood Mackenzie expects LNG to account for about a third of China’s growing consumption through 2025. However, the United States will have to compete with Qatar, Australia, and Russia for China’s natural gas import market.

Currently, there is only one company, Cheniere Energy, capable of exporting large shipments of LNG from the United States. U.S. capacity to process LNG is set to grow nearly seven-fold by 2019 as five export terminals open. (See graph below.) Exporting LNG is a central theme of President Trump’s plan to achieve “energy dominance” for the United States.

Natural Gas Exports

Source: Energy Information Administration

Conclusion

The United States is the world’s largest producer of oil and natural gas because of the ingenuity of U.S. oil and gas producers in applying hydraulic fracturing and directional drilling in shale basins. U.S. exports of oil and gas are soaring and Asia, particularly China, is a major recipient of U.S. oil and natural gas exports. U.S. light, sweet crude is in demand by Asian refiners whose equipment is configured for their use. And, low U.S. natural gas prices make U.S. LNG attractive to Asian markets.

Editor’s Note: Notice Cove Point in the above list, which is now beginning test operations and will be shipping Marcellus and Utica shale gas to all these far-flung places, stimulating economic development in Maryland, Ohio, Pennsylvania and China, not to mention other nations around the globe.It’s all due to American innovation with respect to hydraulic fracturing and horizontal drilling—”fracking” in slang terms.

 

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2 thoughts on “U.S. Oil and Natural Gas Exports Shoot Up Due to Fracking

  1. No thanks to all this exporting of oil and gas,
    which is taken on the backs of the residents of Pa. and other States
    as we residents, have to endure the impacts of fracking
    next to and near our homes
    so companies can make their profits and boast about being no. 1 in the world…

    We, our water, air, land are not to be sacrificed for your delight in business accomplishments…

    I don’t like how “guest blogger” has no personal name but hides behind a group….

  2. The economic benefit of horizontal drilling and hydraulic fracturing has added jobs, reduced USA energy costs and afforded USA energy independence.
    See my publication

    Goodwin, R.W.; “How Horizontal Drilling and Hydraulic Fracturing Helps USA Economy”: Energy Central, February 20, 1015
    http://www.energycentral.com/generationstorage/fossilandbiomass/articles/2904/USA-Hydraulic-Fracturing-Technology-Evolves-and-Improves/

    Also excerpt from recent health study in PA evaluating HD and HF
    Mortality rates in the six Pennsylvania counties with the most Marcellus Shale development have declined or remained stable since shale production began in the region, according to a new Energy In Depth-commissioned report. The findings directly refute accusations from anti-energy groups that the fracing boom is a threat to public health.
    Key findings include:
    • “There was no identifiable impact on death rates in the six counties attributable to the introduction of unconventional oil and gas development. In fact, the top Marcellus counties experienced declines in mortality rates in most of the indices.”
    • “The proportion of elderly-to-total population increased significantly in the top Marcellus counties compared to the state. Based on this fact, death rates in these six counties would be expected to increase, but this expected increase did not occur.”
    • “Unconventional gas development was not associated with an increase in infant mortality in the top Marcellus counties, as the mortality rate significantly declined (improved), even surpassing the improvement of the state.”
    • “Unconventional gas development was not associated with an increase in deaths related to chronic lower respiratory disease (including asthma) in the top Marcellus counties, as the overall chronic lower respiratory disease mortality rate declined (improved) or was variable for the six-county area. The only exception was Greene County where the increased mortality rate was consistent with the increase in the elderly population.”
    • “During the period that unconventional gas development was introduced to these counties, the trends reflected a positive economic change in the area. Therefore, any increases in the death rates in the top Marcellus counties cannot be associated with negative changes to the economic viability of the population.”
    • “Unconventional gas development was not associated with an increase in deaths related to cancer, heart disease, cerebrovascular disease, influenza or pneumonia, nephritis or nephrotic syndrome, or septicemia in the top Marcellus counties, as the mortality rates significantly declined (improved).”
    The report analyzed Pennsylvania Department of Health data for the state as a whole and the counties of Bradford, Greene, Lycoming, Susquehanna, Tioga, and Washington from 2000 to 2014. The report explains the significance of using the state’s data, noting, “Pennsylvania has a comprehensive database and a decades-long history of reporting this data, providing the reviewer a consistent, reliable and sanctioned independent database to draw from for this study. Most importantly, the source of the data is the Pennsylvania State Health Department, as part of the National Center for Disease Control reporting system, and therefore is not data generated by the researcher. This protects the conclusion from bias and ensures that the study can be replicated when peer-reviewed.”
    According to the report, these counties were chosen because of the level of Marcellus activity they have seen – more than 900 wells in each – since 2004, when the first Marcellus shale well was developed in Washington County.

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