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Oil Production Predictions By IEA Say US Is Set To Be World’s Biggest Player

November 13, 2012

redOrbit Staff & Wire Reports – Your Universe Online

U.S. oil output is set to surpass that of Saudi Arabia and Russia by 2017, reaching levels high enough to make the country nearly energy independent, the International Energy Agency (IEA) said on Monday in its annual World Energy Outlook report.

“North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world, yet the potential also exists for a similarly transformative shift in global energy efficiency,” said IEA Executive Director Maria van der Hoeven.

The Paris-based organization said it predicts a continued fall in U.S. oil imports in the coming years, with North America becoming a net oil exporter by 2030 and the U.S. becoming self-sufficient in energy by 2035.

The IEA based its forecasts on growing supplies of crude extracted through new technologies, such as hydraulic fracturing of underground rock formations, that will transform the U.S. into the world´s largest oil producer for about five years beginning sometime around 2020, the IEA said.

“The United States, which currently imports around 20 percent of its total energy needs, becomes all but self-sufficient in net terms – a dramatic reversal of the trend seen in most other energy importing countries,” said the IEA in its report.

The IEA forecast differs markedly from previous reports, which predicted Saudi Arabia would remain the world´s top oil producer until 2035.

“Energy developments in the United States are profound and their effect will be felt well beyond North America – and the energy sector,” said the IEA, which advises 28 industrialized nations on energy policy.

“The recent rebound in U.S. oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity – with less expensive gas and electricity prices giving industry a competitive edge.”

During a news conference in London, IEA Chief Economist Fatih Birol said he believes the U.S. would overtake Russia as the biggest gas producer by a substantial margin by 2015, and would become the world´s largest oil producer by 2017.

“Around 2017, the U.S. will be the largest oil producer of the world, overtaking Saudi Arabia,” said IEA Chief Economist Fatih Birol during a news conference in London on Monday.

This development will likely have important geopolitical implications, Birol said, since it would mean U.S. strategic interests may not be as great in the Middle East and other volatile oil producing areas of the world.

It also raises questions about whether an energy independent U.S. would still be prepared to protect major trade routes around the world, such as the Strait of Hormuz.

The IEA said the U.S. would rely more on natural gas than either oil or coal by 2035, as low-cost domestic supply drives demand among industry and power generators.

Birol acknowledged the optimistic nature of the agency´s forecasts, given the nascent state of the shale oil boom.

“Light, tight oil resources are poorly known … If no new resources are discovered (after 2020) and plus, if the prices are not as high as today, then we may see Saudi Arabia coming back and being the first producer again,” he said.

The IEA said it saw U.S. oil production rising to 10 million barrels per day (bpd) by 2015 and 11.1 million bpd in 2020, before sliding to 9.2 million bpd by 2035. By comparison, the agency forecasts that Saudi Arabian oil output would be 10.9 million bpd by 2015 and 10.6 million bpd in 2020, but would rise to 12.3 million bpd by 2035.

This means the world will grow increasingly dependent on OPEC after 2020. The agency predicts Iraq will account for 45 percent of the growth in global oil production through 2035, when it will become the second-largest exporter, surpassing Russia.

Russian oil output, which has consistently exceeded Saudi Arabia´s over the past ten years, is predicted to remain constant at over 10 million bpd until 2020, at which time it will begin to slide to just above 9 million bpd by 2035, the IEA said.

“Russia, which remains the largest individual energy exporter throughout the period, sees its revenues from oil, natural gas and coal exports rise from $380 billion in 2011 to $410 billion in 2035.”

The IEA said the U.S. oil boom would also hasten a change in the direction of international oil trade, with nearly 90 percent of Middle East oil being sold to Asia by 2035.

The agency assumes a vast growth in the Chinese economy, which it sees surpassing that of the U.S. shortly after 2015 in terms of purchasing power parity, and by 2020 using market exchange rates.

An increase in global population of 1.8 billion people — to 8.6 billion — will drive a growth in global oil demand by more than ten percent to over 99 million bpd by 2035, the IEA said.

The agency’s central “New Policies” scenario, which presumes a variety of steps are taken to limit oil consumption throughout the world, sees the average import cost of oil rising to just over $215 per barrel by 2035 in nominal terms, or $125 in 2011 terms.

If fewer measures are taken, oil will likely exceed $250 per barrel in nominal terms by 2035, and reach $145 in real terms.

At the same time, the share of coal in primary energy demand will drop only slightly by 2035, the agency said.

The IEA isn´t the only organization predicting the U.S. will overtake Saudi Arabia and Russia to become the largest oil producer. In a report issued in March, Citigroup Inc. said the U.S. would achieve that goal before the end of this decade.

The U.S. Energy Department has said the nation met 83 percent of its energy needs in the first six months of this year.

The IEA´s full World Energy Outlook report can be purchased at the IEA bookshop.


Source: redOrbit Staff & Wire Reports - Your Universe Online