Below are highlights from the testimony given by Scott D. Sheffield, Chairman and CEO, Pioneer Natural Resources Company before the Subcommittee on Energy and Power hearing on ‘21st Century Energy Markets: How the Changing Dynamics of World Energy Markets Impact our Economy and Energy Security.’
The shale revolution
“As recently as 2005, the US depended on imports of foreign energy sources for more than half of our oil and natural gas needs, and experts generally predicted that our dependence would only rise in the future. A decade later, the US energy landscape has been transformed by the shale oil and natural gas revolution within our borders. The US energy renaissance is appropriately called the Age of Energy Abundance.
“Several developments have made this possible: (1) the realisation that the source rock for the oil and natural gas in conventional reservoirs could itself be developed; (2) the game changing advancements in science, technology, and engineering, in particular, horizontal drilling and hydraulic fracturing using state of the art three and four dimensional seismic mapping and drilling rigs that can bore more than 10 000 ft with pinpoint accuracy; (3) access to hydrocarbon resources under private ownership, with a stable and predictable legal environment; (4) a robust energy services sector and significant investment in midstream oil and gas transportation and infrastructure; and (5) strong commodity prices. Independent, entrepreneurial companies, many of which are small businesses, have lead the way, drilling the vast majority of shale wells.
“The result? Global and domestic energy markets have been transformed, hundreds of thousands of high paying jobs have been created in the US, and billions of dollars have been reinvested here that would otherwise have been invested abroad.”
“Over the past eight months, we have experienced a dramatic drop in US and global oil prices. Until last June, despite the significant increase in US shale oil production, North American oil prices had been fairly stable for many years, which encouraged significant capital investment. Generally speaking. The growth in US oil production reduced oil imports, while offsetting supply disruptions globally, particularly from Libya and Iran. Indeed, experts have noted that the US led nuclear sanctions targeting Iran would not have succeeded but for the vastly increased US production. Surging US oil production helped prevent oil prices from rising sharply, and likely averted another global recession.
“During the second half of 2014, however, as US production continued to surge, worldwide demand was sluggish, reflecting the decline in China’s growth rate, the lingering recession in Europe, and weaker economic performance in other regions. The combination of these factors resulted in worldwide oversupply of crude oil and oil price weakness. These conditions intensified late in the year, when the market reacted negatively to OPEC’s decision to maintain production quotas at current levels to preserve market share.”
“America’s independent oil and gas producers are second to none in their innovation and efficiency. On equal terms of engagement, we can compete successful with all foreign producers. But the terms are not equal: Government policy is effectively tying one hand behind our backs. Across the political and policy spectrum, there is near consensus among those who have looked at the issue: US restrictions on the export of crude oil are a self defeating anachronism that harms consumers, the economy, and vital US national security interests. There is no defensible reasons to maintain the ban. AS former Secretary of the Treasury, and Chair of the National Economic Council, Dr. Lawrence Summers stated:
‘I believe that the question of whether the US should have a substantially more permissive policy with respect to the export of crude oil and with respect to the export of natural gas is easy. The answer is affirmative. The merits are as clear as the merits with respect to any significant public policy issue that I have ever encountered.’
“Removing the ban is an action on which members of both political parties can and should readily agree. I urge the members of this Committee to take the lead in forging that path.”
Edited from testimony by Claira Lloyd