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Craft Oil: The Lesser Known Side of America’s Energy Industry

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Craft Oil Infographic

Craft Oil: The Lesser Known Side of America’s Energy Industry

Go back a decade, and America’s energy industry was quite the hot button issue.

Oil prices were soaring past $100/bbl, the country was still reliant on OPEC for imports, and a lack of energy independence was becoming a costly issue. Meanwhile, the United States was being outclassed on the energy production front by both Saudi Arabia and Russia.

However, in the short span of eight years – and thanks to the use of technologies like horizontal drilling and hydraulic fracturing – the United States quickly went from having a questionable energy future to being in a clear position of strength. Today, even with lower prices, U.S. field production of crude is at a 43-year high.

America’s Independent Oil Producers

Since 2016, the U.S. has produced close to the equivalent of 30 million bpd in oil and natural gas, making the United States a champion of global energy production.

Today’s infographic from Jericho Oil focuses on a key part of the turnaround in the U.S. energy sector that often gets overshadowed by Big Oil players like ExxonMobil or Royal Dutch Shell. It covers the role of “Craft Oil” in the industry, an umbrella that includes many small, independent, and focused companies across America that produce oil and gas on a domestic basis.

The thousands of companies in this group, many which are community-driven or family-owned, actually drill 95% of the country’s oil wells to yield 54% of onshore oil and 85% of onshore gas production.

Comparing Big Oil to Craft Oil

Below is a comparison of ExxonMobil to the profile of an average Craft Oil company:

 
Big Oil
Craft Oil
Employees
71,300
12
Years in Business
108 years
23 years
Annual Gross Revenues
$218.6 billion
$9.25 million
Ownership
Publicly traded
75% private, 25% public
Level of Integration
Typically fully integrated, combining upstream and downstream activities to get the most out of the value chain
Usually a pure play, focused upstream on oil exploration and production
Focus
Produce, transport, refine, and market oil products
Develop new plays, and drive upstream trends such as technological innovation
Production
Domestic and international
Mostly domestic

Most Craft Oil companies are very small in comparison – but together, they contribute to a very significant portion of U.S. production, as well as the economy.

Investing in Craft Oil

Do these independent producers provide a strategic opportunity for investors?

Yes, but here are a few areas investors should consider evaluating before taking any action:

Location of Assets:
In the U.S. and Canada, independent oil companies undergo strong regulatory scrutiny to make sure their reporting and numbers give transparency to their operations.

Cash and Debt:
How much does the company have in cash? Will they have to raise more money soon?

Companies operating in junior oil and gas should not have more than 2x more debt than their current cash flow.

Management Team:
The strength of any management team is linked to their connections, past experience, and skill set. If the management team has built and sold successful projects in the past, that is a good sign of strength.

Economics:
Investors need to be aware of key metrics to gauge if junior oil and gas companies can make money in the current or projected cost environment. These include IRR (Internal Rate of Return), NPV (Net present value), and payback period. Companies that make their money back fast and with a good return can re-invest that capital into additional projects.

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Energy

Which Countries Have the World’s Largest Proven Oil Reserves?

The world holds 1.73 trillion barrels of proven oil reserves. Here we rank the top 14 countries that make up 93.5% of the world.

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The Countries With the Largest Proven Oil Reserves

Oil is a natural resource formed by the decay of organic matter over millions of years, and like many other natural resources, it can only be extracted from reserves where it already exists. The only difference between oil and every other natural resource is that oil is well and truly the lifeblood of the global economy.

The world derives over a third of its total energy production from oil, more than any other source by far. As a result, the countries that control the world’s oil reserves often have disproportionate geopolitical and economic power.

According to the BP Statistical Review of World Energy 2020, 14 countries make up 93.5% of the proven oil reserves globally. The countries on this list span five continents and control anywhere from 25.2 billion barrels of oil to 304 billion barrels of oil.

Proven Oil Reserves, by Country

At the end of 2019, the world had 1.73 trillion barrels of oil reserves. Here are the 14 countries with at least a 1% share of global proven oil reserves:

RankCountryOil Reserves
(billion barrels)
Share of Global Reserves
#1🇻🇪 Venezuela30417.8%
#2🇸🇦 Saudi Arabia29817.2%
#3🇨🇦 Canada1709.8%
#4🇮🇷 Iran1569.0%
#5🇮🇶 Iraq1458.4%
#6🇷🇺 Russia1076.2%
#7🇰🇼 Kuwait1025.9%
#8🇦🇪 UAE985.6%
#9🇺🇸 United States694.0%
#10🇱🇾 Libya482.8%
#11🇳🇬 Nigeria372.1%
#12🇰🇿 Kazakhstan301.7%
#13🇨🇳 China26.21.5%
#14🇶🇦 Qatar25.21.5%

While these countries are found all over the globe, a few countries have much larger amounts than others. Venezuela is the leading country in terms of oil reserves, with over 304 billion barrels of oil beneath its surface. Saudi Arabia is a close second with 298 billion, and Canada is third with 170 billion barrels of oil reserves.

Oil Reserves vs. Oil Production

A country with large amounts of reserves does not always translate to strong production numbers for petroleum, oil, and by-products. Oil reserves simply serve as an estimate of the amount of economically recoverable crude oil in a particular region. To qualify, these reserves must have the potential of being extracted under current technological constraints.

While countries like the U.S. and Russia are low on the list of oil reserves, they rank highly in terms of oil production. More than 95 million barrels of oil were produced globally every day in 2019, and the U.S., Saudi Arabia, and Russia are among the world’s top oil-producing countries, respectively.

Oil Sands Contributing to Growing Reserves

Venezuela has long been an oil-producing country with heavy economic reliance on oil exports. However, in 2011, Venezuela’s energy and oil ministry announced an unprecedented increase in proven oil reserves as oil sands in the Orinoco Belt territory were certified.

Between 2005 and 2015, Venezuela jumped from fifth in the world to number one as nearly 200 billion barrels of proven oil reserves were identified. As a result, South and Central America’s proven oil reserves more than doubled between 2008 and 2011.

In 2002, Canada’s proven oil reserves jumped from 5 billion to 180 billion barrels based on new oil sands estimates.

Canada accounts for almost 10% of the world’s proven oil reserves at 170 billion barrels, with an estimated 166.3 billion located in Alberta’s oil sands, and the rest found in conventional, offshore, and tight oil formations.

Large Reserves in OPEC Nations

The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental global petroleum and oil distribution agency headquartered in Vienna, Austria.

The majority of countries with the largest oil reserves in the world are members of OPEC. Now composed of 14 member states, OPEC holds nearly 70% of crude oil reserves worldwide.

Most OPEC countries are in the Middle East, the region with the largest oil reserves, holding nearly half of the global share.

Regional Shifts

Though most of the proven oil reserves in the world were historically considered to be centered in the Middle East, in the past three decades their share of global oil reserves has dropped, from over 60% in 1992 to about 48% in 2019.

One of the main reasons for this drop was constant oil production and greater reserves discovered in the Americas. By 2012, Central and South America’s share had more than doubled and has remained just under 20% in the years since.

While oil sands ushered in a new era of global oil reserve domination, as the world shifts away from oil consumption and towards green energy and electrification, these reserves might not matter as much in the future as they once did.

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Energy

Visualizing the Power Consumption of Bitcoin Mining

Bitcoin mining requires significant amounts of energy, but what does this consumption look like when compared to countries and companies?

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Visualizing the Power Consumption of Bitcoin Mining

Cryptocurrencies have been some of the most talked-about assets in recent months, with bitcoin and ether prices reaching record highs. These gains were driven by a flurry of announcements, including increased adoption by businesses and institutions.

Lesser known, however, is just how much electricity is required to power the Bitcoin network. To put this into perspective, we’ve used data from the University of Cambridge’s Bitcoin Electricity Consumption Index (CBECI) to compare Bitcoin’s power consumption with a variety of countries and companies.

Why Does Bitcoin Mining Require So Much Power?

When people mine bitcoins, what they’re really doing is updating the ledger of Bitcoin transactions, also known as the blockchain. This requires them to solve numerical puzzles which have a 64-digit hexadecimal solution known as a hash.

Miners may be rewarded with bitcoins, but only if they arrive at the solution before others. It is for this reason that Bitcoin mining facilities—warehouses filled with computers—have been popping up around the world.

These facilities enable miners to scale up their hashrate, also known as the number of hashes produced each second. A higher hashrate requires greater amounts of electricity, and in some cases can even overload local infrastructure.

Putting Bitcoin’s Power Consumption Into Perspective

On March 18, 2021, the annual power consumption of the Bitcoin network was estimated to be 129 terawatt-hours (TWh). Here’s how this number compares to a selection of countries, companies, and more.

NamePopulation Annual Electricity Consumption (TWh)
China1,443M6,543
United States330.2M3,989
All of the world’s data centers-205
State of New York19.3M161
Bitcoin network -129 
Norway5.4M124
Bangladesh165.7M70
Google-12
Facebook-5
Walt Disney World Resort (Florida)-1

Note: A terawatt hour (TWh) is a measure of electricity that represents 1 trillion watts sustained for one hour.
Source: Cambridge Centre for Alternative Finance, Science Mag, New York ISO, Forbes, Facebook, Reedy Creek Improvement District, Worldometer

If Bitcoin were a country, it would rank 29th out of a theoretical 196, narrowly exceeding Norway’s consumption of 124 TWh. When compared to larger countries like the U.S. (3,989 TWh) and China (6,543 TWh), the cryptocurrency’s energy consumption is relatively light.

For further comparison, the Bitcoin network consumes 1,708% more electricity than Google, but 39% less than all of the world’s data centers—together, these represent over 2 trillion gigabytes of storage.

Where Does This Energy Come From?

In a 2020 report by the University of Cambridge, researchers found that 76% of cryptominers rely on some degree of renewable energy to power their operations. There’s still room for improvement, though, as renewables account for just 39% of cryptomining’s total energy consumption.

Here’s how the share of cryptominers that use each energy type vary across four global regions.

Energy SourceAsia-PacificEuropeLatin America
and the Caribbean
North America
Hydroelectric65%60%67%61%
Natural gas38%33%17%44%
Coal65%2%0%28%
Wind23%7%0%22%
Oil12%7%33%22%
Nuclear12%7%0%22%
Solar12%13%17%17%
Geothermal8%0%0%6%

Source: University of Cambridge
Editor’s note: Numbers in each column are not meant to add to 100%

Hydroelectric energy is the most common source globally, and it gets used by at least 60% of cryptominers across all four regions. Other types of clean energy such as wind and solar appear to be less popular.

Coal energy plays a significant role in the Asia-Pacific region, and was the only source to match hydroelectricity in terms of usage. This can be largely attributed to China, which is currently the world’s largest consumer of coal.

Researchers from the University of Cambridge noted that they weren’t surprised by these findings, as the Chinese government’s strategy to ensure energy self-sufficiency has led to an oversupply of both hydroelectric and coal power plants.

Towards a Greener Crypto Future

As cryptocurrencies move further into the mainstream, it’s likely that governments and other regulators will turn their attention to the industry’s carbon footprint. This isn’t necessarily a bad thing, however.

Mike Colyer, CEO of Foundry, a blockchain financing provider, believes that cryptomining can support the global transition to renewable energy. More specifically, he believes that clustering cryptomining facilities near renewable energy projects can mitigate a common issue: an oversupply of electricity.

“It allows for a faster payback on solar projects or wind projects… because they would [otherwise] produce too much energy for the grid in that area”
– Mike Colyer, CEO, Foundry

This type of thinking appears to be taking hold in China as well. In April 2020, Ya’an, a city located in China’s Sichuan province, issued a public guidance encouraging blockchain firms to take advantage of its excess hydroelectricity.

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