Harold Hamm: "We Will See Energy Independence In This Country In 10 Years" And "Slower" Development In Bakken


Investor’s Business Daily has a good interview with Continental Resource CEO Harold Hamm (the biggest player in North Dakota’s oil boom) in which he says America will be energy independent within the next decade.

Here’s the pertinent excerpt:

IBD: How will drilling abroad affect domestic drilling?

Hamm: Everyone expected we would see shale development all over the world. But that earlier thought perhaps has waned some due to the experience in Poland, due to some of the obstacles in other places. Some of the countries could have a lot of shale gas and oil, but those countries don’t need it yet, like Russia for instance.

We are on track to see fulfillment of earlier predictions we will see energy independence in this country in 10 years, so that would be 2020-2021 — we are on track to do that.
A lot of people get into a little bit of a hurry — once they realize that this could happen they get to thinking that it would happen quicker.

It’s going to take longer with oil — it’s unlike natural gas, in that it’s a commodity that isn’t as plentiful on the Earth as gas is. Gas is easier to find, gas is easier to produce. A molecule of oil is about three times the size of a molecule of natural gas. It doesn’t come through the rock as well and it doesn’t come through the shale as well, so it’s going to take longer.
With gas we’ve reached a crowded market real quickly because when shale gas started coming on, supply and demand was pretty much in equilibrium, even though gas prices were a little bit elevated due to projected shortages and the fact that we would have to import natural gas. With oil we were at a 60% deficit at the height of imports in the country, in 1997 or 1998. As increased supplies come on we have to make that deficit up.

“Energy independence” is a concept that gets thrown around in politics a lot. There’s always some initiative – wind, solar, ethanol, shale oil/gas, etc. – that’s supposed to end our dependence on imported oil. But it never quite happens and, despite how often figures like Hamm talk about it, I don’t think it will ever happen.

In the energy marketplace, there is always going to be incentive to import some energy produced in foreign countries, and export some of the energy produced here. Our relationship with the Middle East, and dependence on their oil, has always been problematic but “energy independence” is a pipe dream, I think, despite Hamm’s comments.

Here are some other interesting tid-bits from Hamm’s interview. He predicts that there will be no significant moves by the federal government to regulate fracking:

IBD: What are your expectations for the regulatory and legal climate in 2014?

Hamm: Federal regulation for fracking has been pushed for, and I think everyone understands pretty well that the states have done pretty well for the past 100 years (in regulating drilling) and continue to do a good job. I don’t think there will be any regulations come about as a result of fracking.

He says fracking is a “distraction” from the real innovation in the shale oil/gas boom, which is horizontal drilling:

IBD: How important is fracking to drillers vs. other types of drilling?

Hamm: Fracking was basically a distraction, a divergence. There is just one thing that created this energy renaissance that we are experiencing today: horizontal drilling. The ability to use Space Age technology to drill down two miles below the ground and then turn right and go two to three miles further in these twin-bed reservoirs and expose a lot of the rock to the bore hole. Multistage completion technology has helped but the primary No. 1 factor has been horizontal drilling.

He also expects the pace of oil/gas development to level off, something he says is already happening in the Bakken:

IBD: What can we expect from a more mature drilling environment?

Hamm: Perhaps slower, more orderly development. And we are seeing that in the Bakken, going from a high rig count of 237 to a stabilized rig count of 180.

Read the full interview here.