US Investing in New Oil Drilling Technology

June 5, 2017 Share Print 0

Amid the frenetic activity of American shale oilfields recovering from a two-year recession sit a handful of oil towns that seemed impervious as many producers went into bankruptcy and the economy around them sank.

Occidental Petroleum Corp (OXY.N) and a few other oil producers with wells near this town on New Mexico’s border with Texas steadily pumped low-cost oil through the downturn, using a technique that has been heralded worldwide as a way to reduce carbon emissions and boost oil output.

“When everyone else in the oil industry was going down, Oxy kept working,” said Joshua Grassham, vice president of Lea County State Bank and a Hobbs Chamber of Commerce board member. The city of 35,000 rests on the Permian oilfield, the largest oilfield in the United States.

This way of drilling brings with it a sweetener for the oil industry to keep crude flowing: a tax credit that helps insulate these wells in a downturn, and could triple in size if Congress approves a new measure this summer.

Such a move could extend by decades the producing life of hundreds more wells, increasing oil supply which would be a drag on prices. To date, the technique has been employed only at conventional oilfields, rather than on shale deposits. Some firms are studying how to put the technique to work in shale drilling, too.

The drilling method harnesses the carbon dioxide produced during the extraction of oil or from power plants, and forces it back into the fields. That boosts the pressure underground and drives more oil to the surface.

via Reuters

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.