The reemergence of the U.S. as a leading producer of crude oil, natural gas and other hydrocarbons is poised to reshape energy markets in short order. This is the bold overarching thesis that anchors Citi’s recent headline-making Energy 2020: Out of America report.
Citi supports its position with a number of compelling data and information sets. One model that sticks out indicates that if the current oil and gas production trajectory remains intact, the corresponding trade balance could go from a startling $350B (USD) deficit in 2011 to a breakeven point by 2020. Within this particular outlook, the report is projecting “high case” domestic crude production will rise from 7.5M barrels per day in 2013 to 14.3M barrels per day by 2020.
As a global investment firm with a targeted focus on energy and resources, Jynwel Capital is constantly evaluating the various global implications associated with a near-term increase in U.S. production. Here are three initial viewpoints from our team:
- As the U.S. transitions from being a major importer of hydrocarbons to a breakeven or surplus nation, African and Middle Eastern exporters may face downward price pressure – especially if global demand for crude oil and other petroleum products does not comparably rise. Lower price points could, however, have a positive impact for growing, high-consumption economies such as China and India.
- If the U.S. energy trajectory holds firm, additional infrastructure investments will be one of the keys to sustaining exploration and production (E&P) growth. There is clearly a need for more pipelines in order to move away from conventional ground and sea transportation options. The trick is for producers to balance keeping capital expenditures low with their need to modernize both field sites and shipping terminals. Much of the success in ensuring low capital expenditures has come from the formation of partnerships such as Summit Midstream MPLX’s relationship with Exxon subsidiaries and Dominion Resources in partnership with Carolina Gas Transmission.
- As we have said before, the advancement of civilization is built upon the intelligent use of energy and resources to re-shape the world around us. This is why future increases in hydrocarbon consumption and production must be accompanied by tangible sustainability commitments. In the near term, while we hope the public and private sectors can collaborate, as we have seen in the U.S. with Cuomo’s recent anti-fracking initiative in New York and community response in Western Massachusetts to Kinder Morgan’s pipeline, these fragile relationships require thoughtful conversation and genuine collaboration.
As an ever-evolving industry, the energy sector and the implications brought on by technology make this a continued focus of ours around the world.
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