Shale "miracle" U.S. unexpectedly received a serious blow after the government announced the revision of estimates of recoverable oil reserves in the largest formation in the United States .
Technically recoverable shale oil resources are widely publicized Monterey formation in California previously been identified at the level of 13.7 billion barrels , but earlier this week lowered their estimate to only 600 million barrels , then there was a 96 % lower.
Thus , Monterey lost the title of one of the largest shale formations , and even if we assume that all of these 600 million barrels will be able to get right , it needs to close the U.S. only 33 days .
And this despite the fact that the production of such oil is traditionally recorded large environmental and infrastructure losses.
The reasons are simple enough ratings decline . Initial findings were just guesses , which is based on the company, and not on actual results. Now with plenty of potential test wells formation Monterey became clear , and he obviously much less than anticipated.
Dreams authorities of California, associated with this project , and will not come true . The number of expected jobs fell from 2.8 million to 112 thousand, and tax revenues will decline from $ 24.6 billion to $ 984 million
But the most interesting thing is that in just one night, all U.S. shale reserves have declined by more than 2-fold from 24 billion barrels to about 11 billion barrels.
And by itself , this situation is not surprising , since the whole story with shale gas revolution in the U.S. perceived experts critically. There was no secret that best developed in the field primarily because it is easier and cheaper. Other fields were not as large , more expensive and less profitable , and people from the oil industry knew or assumed it .
Besides, not every geological formation has its own characteristics , so many experts initially speculated that Monterey has no such reserves as the Bakken and Eagle Ford .
But the situation with Monterey deserves special attention . Estimate of 13.7 billion barrels in 2011 made the company Intek of Virginia. That is virtually unknown company , the site which has no information about the technologies used for estimating reserves , reported data , which are then published U.S. Department of Energy (Energy Information Administration, EIA) and which became the basis for the formation of a national dream of " oil independence ." And suddenly these data were unreliable.
Company Occidental Petroleum, which had planned to start production in the Monterey formation , based on data from Intek, making great efforts to get out of the project now .
Now it is necessary to wait for further reductions in inventory valuation for other fields. And investors should also be careful . All the hype about shale prospects of the country has been associated with cheap capital from Wall Street , where there are obvious signs of overheating.
Until now shale companies, even with the highest credit risk experienced no problems in raising capital. But now investors will think critically and carefully.
In general, independent oil producers in the United States spends $ 1.5 in production for every $ 1 of income they received this year . And they spend more than they receive , in 2010 after four years of free cash flows were strongly negative.
For example , the company Rice Energy Inc. within three months this month raised $ 900 million , and it is $ 150 million more than planned . Not bad for the first bond issue , right? And this despite the fact that the company four years in a row losing money by drilling at least 50 wells. At each earned $ 1 Rice Energy in 2014 will spend $ 4.09 .
Can not continue drilling with financial support , as investors believe the story with shale oil, but four years - it's long enough for anyone to asked the obvious question: when all efforts to drilling shale finally start to generate positive free cash flow ? Never - this will be the answer to this question.
While the high-yield bond market increased by 2 times since 2004 , the volume of funds attracted companies for exploration and production increased by 9 times , according to the Barclays. This is exactly what keeps shale revolution and enables companies to spend money much faster than they earn their .
" People lose their discipline. They stopped counting. They stop to keep records . They just dream , and this is what is happening with shale boom "- said the chief investment officer of Peritus Asset Management Tim Gramatovich .
Monterey situation must demonstrate that any talk that the U.S. can export any amount of oil will remain just talk . The country still imports more than 7 million barrels per day , and it is unlikely that there will reimburse this amount due to domestic production . Inventory Reduction Monterey makes a dream come true for oil independence is much less likely.
IEA experts predict that the cost of U.S. oil producers by 2035 will exceed $ 2.8 trillion , production volumes for oil shale deposits with peak in 2025 The IEA estimates that the costs of the Middle East during this period will be more than three times lower , and the volume of oil produced - three times more . This means that the U.S. oil simply not be competitive .
There is another context for this news , which is that global energy resources are harder to come by , especially against China's actions , who works with the prospective energy suppliers , concluding long-term contracts . And , apparently , the trend in the long-term gradual increase in energy prices will be launched soon .
Given how many hopes and political ambitions was associated with shale boom in the U.S. , reducing inventory valuation Monterey is now one of the most important events in the world.
