There is no doubt that unconventional resources are changing the game in North America, with some expecting the U.S. to be self-sufficient in oil in a decade. Since 2008, there has been an eightfold increase in U.S. gas production and a fivefold increase in oil production.

“I think this industry is in the first or second inning of learning how to drill for oil with unconventional techniques. We could add $15 trillion to the U.S. economy in the next few years and that’s the equivalent of one year’s GDP,” said Ralph Eads III, vice chairman of Jefferies & Co. and chair of the energy investment-banking group.

“If these resource plays were as sexy as Apple, people would see this as being as significant as the iPad,” he said, opening the recent Jefferies 2011 Global Energy Conference in Houston.

“I think it’s more sexy than an iPad,” quipped Chesapeake Energy Corp. chairman and chief executive Aubrey McClendon. “I wouldn’t compare our industry to an iPad; I think it’s better. I see a lot of people wasting time with their iPads, but we are creating real value here that is underpinning the U.S. economy. I think this (unconventional resource trend) is the top one or two trend in the world.”

To keep the momentum going, the industry needs $35 billion of external capital to continue developing unconventional resources in the U.S. “That’s a lot for the stock and bond markets, but there is also a lot of capital coming from unconventional capital sources,” Eads said, such as private equity.

Since September 2008, some $50.5 billion has been invested in unconventional resource plays by foreign oil companies alone, and Jefferies has facilitated more than half of those JV deals. “In the past month alone, private-equity players have put close to $7 billion into the E&P industry for unconventional resources,” he said, citing the pending KKR & Co. et al. acquisition of privately held Sam-son Investment Co., and two Utica-shale financing deals an- nounced by Chesapeake. “These plays have very compelling project returns. It’s an amazing thing.”

The speakers agreed that the period of discovery seen in the past four years is largely over, but the largest companies in the world are well-capitalized and still seeking opportunities in the unconventional space.

“They have no need for capital. They have no need for assets. What they need is operational expertise. Who really has the capability to operate an incremental 30 rigs?” said Eads. “Companies smaller than $20 billion do need capital. That’s why you saw Brigham Exploration and Petrohawk sell to larger companies.”

Masamutsu Shinozaki, president and chief executive of Mitsui E&P USA, is one of the foreign investors in the U.S. unconventional space, having entered the Marcellus and Eagle Ford. “We look for good partners and political stability. Good returns are not the only thing we look for.”

One thing Japan definitely needs now is more liquefied natural gas. Only 10 of its 54 nuclear reactors are in operation after the tsunami in March devastated popular approval of nuclear energy. He said world LNG demand is projected to double by 2025, in turn creating huge new demand for natural gas. “I would say it is possible to export LNG from the U.S., but I cannot guarantee it.”

How likely is it that there be a permanent disconnect between low U.S. gas prices and higher prices in Europe and the rest of the world? McClendon thinks this cannot continue.

Reliance Industries of India is another company that has embraced the shales, with three joint ventures in the Marcellus and Eagle Ford, and 19 rigs running.

“But life is not as easy as we may think. There is no cookie-cutter approach,” cautioned Walter van de Vijver, president and chief executive of Houston-based Reliance Exploration & Production. “We have 20 different type curves going on in the Eagle Ford, which gives you some perspective on how the world operates,” he joked. “Obviously, these plays do look different given the current gas price. We have an amazing story to tell, but please, let’s stay humble in the process. We continue to have a lot to prove.”

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