All Value Chains Begin Upstream

Repeated rounds of regeneration and replenishment that sustain legacy production and open new frontiers characterize the global oil and gas upstream businesses. The U.S. domestic industry, in particular, moved aggressively along the oil and gas technology pathway to the next iteration in the shale era. The pursuit of light tight oil and shale gas plays resulted in production gains that reversed patterns previously taken as the long-term paradigm—lower and even declining U.S. supply, with the United States as a large, swing importer with broad geopolitical implications. The U.S. domestic upstream is distinguished by a number of attributes including privately owned lands and minerals, a diverse industry organization and funding sources, a large oil field service support industry and an independent midstream industry that helps to accomplish field-to-market linkages. The dominance of shale plays and focus on oilier acreage for value has linked natural gas supply strongly with the price of oil. This relationship will hold as the industry works through the best oil and liquids rich locations, yielding large increments of low-cost, associated gas byproduct. U.S. companies are monetizing abundant, cheap supply through power generation, petrochemicals and LNG exports, with the latter contributing to a new paradigm of the United States as a significant supplier to world markets. Future prospects, for the U.S. and global energy interests, hinge on the ability of U.S. producers to define business models that can support sustained profitability in the face of technical challenges and large volumes that can overwhelm midstream and downstream markets and their realized prices.