Some of the big international fossils that recently pulled out of hugely expensive, long-term capital commitments to Alberta’s tar sands/oil sands are instead investing heavily in U.S. shale-oil deposits, whose development and production costs are a fraction of those in Canada.
“ExxonMobil Corporation, Royal Dutch Shell Plc, and Chevron Corporation are jumping into American shale with gusto,” Bloomberg reports. The three global giants are “planning to spend a combined $10 billion this year, up from next to nothing only a few years ago.”
The majors’ move into shale represents a change both for them and for the smaller, wildcat-type operations that have dominated shale oil plays in the Dakotas and Texas until now, the news agency observes. “If the big boys are successful, they’ll scramble the U.S. energy business, boost American oil production, keep prices low, and steal influence from big producers such as Saudi Arabia.” Other countries like Canada “would have to contend with lower oil prices.”
The attraction of low cost-of-entry shale has already shifted the investment outlook for Canada’s tar sands/oil sands, among the world’s costliest fossil resources to produce. While Chevron continues (for now) to have an active presence in northern Alberta, both Exxon and Shell have been stepping back.
In February, Exxon wrote off 3.6 billion barrels of its Alberta reserves, conceding that they could no longer be developed profitably. Then earlier this month, Shell announced it would sell off almost all its tar sands/oil sands holdings for US$7.25 billion.
Shell now “plans to spend about US$2.5 billion a year, or about one-tenth of its total spending,” developing U.S. shale properties, Bloomberg reports. “Exxon said it plans to spend one-third of its drilling budget this year on shale, with a goal to lift output to nearly 800,000 barrels a day by 2025.” For comparison, Suncor, the largest tar sands/oil sands operator, produces about 550,000 barrels per day of synthetic crude.
The additional investment is likely to push U.S. domestic oil production above 10 million barrels per day by the end of 2018, Bloomberg predicted, “a level surpassed only twice, in October and November 1970.”