U.S., pro­pelled by shale, is ex­pected to dom­i­nate oil mar­kets for decades

Global agency sees rise to ‘undis­puted leader’

The Buffalo News - - BUSINESS NEWS - By Grant Smith

The United States will be a dom­i­nant force in global oil and gas mar­kets for many years to come as the shale boom be­comes the big­gest sup­ply surge in his­tory, the In­ter­na­tional En­ergy Agency is pre­dict­ing.

By 2025, the growth in Amer­i­can oil pro­duc­tion will equal that achieved by Saudi Ara­bia at the height of its ex­pan­sion, and in­creases in the sup­ply of nat­u­ral gas will sur­pass those of the for­mer Soviet Union, the Paris-based agency says in its an­nual World En­ergy Out­look. The boom will turn the United States, still among the big­gest oil im­porters, into a net ex­porter of fos­sil fu­els, the agency said.

“The United States will be the undis­puted leader of global oil and gas mar­kets for decades to come,” IEA Ex­ec­u­tive Di­rec­tor Fatih Birol said Tues­day in an in­ter­view with Bloomberg TV.

“There’s big growth com­ing from shale oil, and, as such, there’ll be a big dif­fer­ence be­tween the U.S. and other pro­duc­ers.”

The agency raised es­ti­mates for the amount of shale oil that can be tech­ni­cally re­cov­ered by about 30 per­cent, to 105 bil­lion bar­rels. Fore­casts for shale oil out­put in 2025 were bol­stered by 34 per­cent, to 9 mil­lion bar­rels a day.

The U.S. in­dus­try “has emerged from its trial-by-fire as a leaner and hun­grier ver­sion of its for­mer self, re­mark­ably re­silient and re­act­ing to any sign of higher prices caused by OPEC’s re­turn to ac­tive mar­ket man­age­ment,” the IEA said.

While oil prices have re­cov­ered to a two-year high above $60 a bar­rel, they’re still about half the level traded ear­lier this decade, as the global mar­ket strug­gles to ab­sorb the scale of the U.S. bo­nanza. It has taken OPEC and Rus­sia al­most 11 months of pro­duc­tion cuts to clear up some of the over­sup­ply.

Re­flect­ing the ex­pected flood of sup­ply, the agency cut its fore­casts for oil prices to $83 a bar­rel for 2025, from $101 pre­vi­ously, and to $111 for 2040, from $125 be­fore.

Lower prices are help­ing to sup­port oil de­mand, and the IEA raised its pro­jec­tions for global con­sump­tion through to 2035, de­spite the grow­ing pop­u­lar­ity of elec­tric ve­hi­cles. The world will use just over 100 mil­lion bar­rels of oil a day by 2025.

That will ben­e­fit the United States as it turns from im­ports to ex­ports. The coun­try will “see a re­duc­tion of these huge im­port needs,” Birol said at a news con­fer­ence in London. That “will bring a lot of dol­lars to U.S. busi­ness.”

Nev­er­the­less, U.S. shale out­put is ex­pected to de­cline from the mid­dle of the next decade, and with in­vest­ment cuts tak­ing their toll on other new sup­plies, the world will be­come in­creas­ingly re­liant once again on OPEC, ac­cord­ing to the re­port. The car­tel, led by Mid­dle East pro­duc­ers, will see its share of the mar­ket grow to 46 per­cent in 2040, from 43 per­cent now.

Yet that could still change, the IEA said.

As shale has out­per­formed ex­pec­ta­tions so far, the IEA added a sce­nario in which the in­dus­try beats cur­rent pro­jec­tions. If shale re­sources turn out to be dou­ble cur­rent es­ti­mates, and the use of elec­tric ve­hi­cles erodes de­mand more than an­tic­i­pated, prices could stay in a “lower-for-longer” range of $50 to $70 a bar­rel through to 2040.

“There could be fur­ther sur­prises ahead,” the IEA said.

Pump jacks op­er­at­ing at an oil well are sil­hou­et­ted against the evening sky out­side Wil­lis­ton, N.D. Ac­cord­ing to In­ter­na­tional En­ergy Agency, the U.S. is ris­ing rapidly to­ward be­com­ing a net ex­porter of fos­sil fu­els.

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