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Oil prices in the world market hit a three-year low during November, but that has not inhibited the enthusiasm and positive long-term outlook for the energy industry. The surge in U.S. production has changed the game for the national economy and reset the world stage. The recent drop in prices represents a shift of market fundamentals adjusting to a new, abundant supply. It also signals the growing strength of the United States’ hand.
The U.S. energy revolution has been made possible through hydraulic fracturing and innovative technologies that allowed us to unlock resources within the shale that were not accessible just five years ago. As the world’s biggest supplier of hydraulic fracturing services, Halliburton has perhaps the best perspective on what’s driving the U.S. shale boom. “The downward pressure on prices is due mostly to an oversupply that will quickly prove self-correcting, especially when it comes to U.S. shale production,” said CEO Dave Lesar. “Unlike with conventional oil, shale wells peter out quickly, and companies depend on constant new drilling to maintain production levels. This also makes shale more responsive to price movements.”
In the past five years, this energy revolution has allowed the U.S. to gain more independence from volatile foreign oil producers, such as OPEC, the Middle East, overall, and Russia, by increasing our oil production efficiencies, through Petroleum Equipment & Services Association (PESA) members’ use of new technology, smarter wells and strategic data. “The key for America is that we shouldn’t let ourselves get distracted by falling oil prices, when there is much more at stake,” commands T. Boone Pickens, founder and chair of BP Capital.
The U.S. dependence on foreign oil has come at a high price, dictating our national security decisions for decades. In 2005, 60% of all fuel consumed in America was imported. The U.S. Energy Information Administration (EIA) projects that this number will fall to just 25% by 2016. The rapid increase in shale oil output over the past five years has played a pivotal role in bringing our energy production stateside, undercutting OPEC’s power by reducing our oil trade deficit and bolstering our economic recovery. The current oil price drop has constrained the members of OPEC, and Russia’s domestic and international power, by transferring wealth back to large consuming countries, like the U.S.
While some producers may experience challenges, due to the oil price drop, the leadership of PESA member companies is a critical driver of the technological innovations that will yield ongoing benefits. Founded in 1933, PESA now has more than 200 members, representing a diverse global workforce of 1.3 million people. The service-and-supply sector’s innovation, new technology and education are sustaining resources, which are even more important in a variable world market.
PESA member and Schlumberger CEO Paal Kibsgaard addressed his firm’s investors in October, discussing his macroeconomic take on North America and world markets. Kibsgaard told analysts, “Given the strength of the U.S. economy, and the ongoing efforts to stimulate and manage growth in Europe and China, we continue to believe that the slow-but-steady recovery in the world economy is intact.” Through new technology and more integration, Kibsgaard believes that the “transformational impact of our initiatives in reliability and efficiency will further support, and accelerate, our financial outperformance.”
New technology has propelled U.S. oil drilling, with six tight oil and shale gas plays—Eagle Ford, Bakken, Niobrara, Marcellus, Haynesville and Permian basin—accounting for nearly 90% of U.S. oil production growth over the last two years. Technologies, such as drill pads, have enabled hundreds of operators to get more wells out of a single rig. Smarter wells, and more disciplined engineering, could yield more oil from shale in the future.
Rustom Mody, V.P. of Technology at Baker Hughes, believes his sector reached an energy revolution through the innovation of hydraulic fracturing. “The current energy revolution was achieved while only producing 10% to 15% of recoverables.” EOR uses sophisticated techniques that can actually be initiated at any time during the productive life of an oil reservoir. Mody insists that “If we can increase production through enhanced recovery innovation, this will change the global landscape and lead to a revolution 2.0.”
Next year may be challenging, but the growth prospects for energy production remain high, with the EIA expecting U.S. oil production to increase 750,000 bpd. Even though no analyst can confidently predict where oil prices will go next, the future of U.S. energy is brimming with the hope and possibility of economic growth and enduring independence. The oil price drop could create a different type of pressure, in regard to efficiency in exploration, the development of new technologies and the stimulation of innovation and creativity. PESA’s member companies have established a firm foundation to create a lasting, positive long-term outlook.
Our industry was built on grit, determination and ingenuity. We help to set the course of this country, and our industry’s leadership is imperative for the prosperity of this great nation. Our best days are still ahead. 
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