Is The Shale Gas Boom A Second Gold Rush? – Exxon Mobil Corporation (XOM), Chevron Corporation (CVX)

It’s been the talk of the town in 2012. Unless you’ve been living in a bubble or hiding in a Tibetan monastery (and even there I’m sure the monks have Wi-Fi) you must have heard about it. No, I’m not talking about the Gangnam Style video or about Clint Eastwood discussing Medicare with a chair. I’m talking about the shale gas boom in the United States, the so-called “horizontal hydrofracking revolution” that has got everyone so excited that even Nancy Pelosi’s face moved when she talked about it.

You’ve probably heard it by now: how technological improvement in hydraulic fracturing allows the US to tap into the world’s second greatest shale gas reserves (after China). How America is now 75% energy independent.  How it will become a net natural gas exporter by 2016 and totally energy self-sufficient by 2035, thereby ending its addictive relationship with foreign oil, OPEC, the Middle East and all the geopolitical dangers that come with it. America’s shale gas production has been going through the roof and everybody is jumping on the bandwagon. As for the jobs created, the numbers are remarkable: only 10,000 people were employed in the shale gas industry in 2005. Now the number has reached 600,000 and is growing. According to energy consulting firm IHS Global Insight, about 900,000 new jobs directly related to shale gas development will be added to the US economy by 2015. Considering all this is happening during the most significant economic downturn since World War 2, this is stunning. Some have even gone as far as to label the hydrofracking breakthrough the “new Internet revolution.” Even Michael Economides, the editor in chief of the Energy Tribune and considered one of the world’s greatest energy experts, has called the shale gas boom: the «most important story in America’s energy mix over the last 40 years ». And he knows his stuff.

“Cui bono” from this?

Well, not everybody, but almost. Industries that will lower their costs by supplying themselves with cheaper energy -natgas instead of oil- will gain from this. These could be chemical companies, such as Dow Chemical, fertilizer companies, manufacturing companies, auto companies. Also water treatment companies and cement companies that provide the materials used in hydraulic fracturing. But no one will benefit as much as the energy industry.

Enter the sharks

The biggest fishes in the energy pond are now moving in. Yes, I’m talking about Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX). And as always with them, they mean business.

1). Exxon Mobil Corporation (NYSE: XOM)

After its disastrous Valdez oil spill in 1989, Exxon has turned its image around and reinvented itself as the most environmentally aware and safest oil company out there. This is a crucial advantage when it comes to shale gas production because it’s no secret that hydrofracking is a touchy subject for environmentalists. Exxon realizes better than any other E&P company that serious ecological issues could eventually get US authorities to halt production. Companies that adhere to strict environmental concerns and are technologically innovative will be the main beneficiaries from the shale gas boom because they will be able to prosper from this new source of revenue without having to worry about the EPA tapping on their shoulders. When its interest over hydrofracking started, one of the first things ExxonMobil did was to use increased amounts of recycled water that reduces the burden on local water infrastructure. Hydrofracking drilling technique needs a lot of fresh water and this is raising many concerns among local communities. Exxon is taking them seriously and is working on laying pipelines where economically and ecologically feasible in order to reduce the need to store fresh water and minimize truck traffic.