Positive reports surrounding shale plays continue to fuel optimism for the oil and gas industry’s future in the US. The latest survey, released by the professional services firm BDO, showed 77% of US oil and gas CFOs surveyed expect the domestic oil supply to increase in 2013, while 69% anticipate a rise in natural gas supplies. The survey also revealed that 31% of US energy companies had plans to increase capital investments next year in unconventionals, including shale. But optimism aside, reality is there is still plenty of work to do. Although technology has enabled operators to unlock shale plays with horizontal drilling and hydraulic fracturing, there is work to be done when it comes to boosting recovery rates. And if the natural gas price, which is still below US $4, doesn’t increase soon, I wonder how much longer shale gas production will continue to proliferate if operators are not making much of a profit. However, hope may lie with liquids associated with the plays. Good news is that the US Energy Information Administration (EIA) predicts natural gas prices will rise with the marginal cost of production. However, the rate of change in future prices varies depending on macroeconomic growth and the expected cumulative production of shale gas wells over their lifetimes, according to the EIA. “Companies are banking on a combination of continued development of shale plays, an increase in prices, and new production technologies to help turn their investments into a profit,” the survey said. But the survey noted the “bullish outlook is tempered somewhat by uncertainty elsewhere in the industry.” These areas included the economy, regulation, and legislation. • 60% of CFOs polled feel worse about the US economy in 2012 compared to 2011; • 50% cited legislative changes as the biggest threat to growth, especially financially, for the year ahead; and • 63% of the CFOs reported delays or termination of projects as a result of federal regulation, state regulation, or both. “As the next Congress convenes in January, 36% fear more restrictive government regulation in 2013, followed by 28% who think tax proposals targeting the energy sector, including possible corporate tax hikes, lie ahead,” the survey said. In the face of perceived potential tough times ahead, the industry should let its lawyers, lobbyists, and industry organizations fight the legislative battle while the industry itself continues to do what it does best – keep making strides in technology and ramp up production. And do whatever you can to help drop pump prices to win the hearts of American drivers, who oftentimes equate oil and gas companies to whatever is happening at local gas stations. The Obama administration said it wants to reduce dependence on oil, promote energy efficiency, and invest in clean energy. The industry should let its actions speak louder than words – continue the shale revolution, seek EOR techniques, and diversify energy resources. Hopefully, the regulatory and legislative decision-makers will notice. Operators have already proven that they can overcome hurdles, considering high production levels during President Obama’s first term. Contact the author, Velda Addison, firstname.lastname@example.org.
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