U.S. ENERGY BOOMING

INDEPENDENCE NEARS, REPORT SAYS

The U.S. will be close to energy self-sufficiency in the next two decades as booming out put from shale formations puts it on course to be the world’s largest oil producer, the International Energy Agency said Tuesday.

Crude prices will advance to $128 US a barrel by 2035 with a 16 per cent increase in consumption, supporting the development of so-called tight oil in the U.S. and a tripling in output from Brazil, the IEA said in its annual World Energy Outlook.

The role of the Organization of Petroleum Exporting Countries will recover in the middle of the next decade as other nations struggle to repeat North America’s success with exploiting shale deposits, the agency predicted.

“As production goes up and imports go down, it does have positive macroeconomic effects for the U.S.,” said Mike Wittner, head of oil research at Societe Generale SA in New York.

“It’s good for the balance of payments, good for the dollar, good for jobs, for other heavy industries. But it doesn’t equate to being insulated from world oil markets.”

Soaring shale output in the U.S. is helping the world’s largest oil consumer achieve its highest level of energy independence in two decades, cushioning it against disrup- tions in Africa and the Middle East.

The boom threatens revenues for OPEC’s 12 members, whose production is at its lowest in two years amid political unrest in Libya and theft in Nigeria.

“The United States moves steadily towards meeting all of its energy needs from domestic resources by 2035,” the Parisbased adviser to 28 energyconsuming nations said.

“But this does not mean that the world is on the cusp of a new era of oil abundance. Light, tight oil shakes the next 10 years, but leaves the longer term unstirred.”

The U.S. is overtaking Russia and Saudi Arabia to be come the world’s biggest oil producer, as it taps rock and shale layers through horizontal drilling and hydraulic fracturing, the report said. The IEA predicted in last year’s World Energy Outlook that U.S. output would exceed Saudi Arabia toward the end of the decade.

U.S. crude production rose to 7.896 million barrels a day in the week ended Oct. 18, the most since March 1989, according to the U.S. Energy Information Administration. West Texas Intermediate futures slid one cent last week to cap a fifth weekly decline at $94.60 a barrel on Nov. 8.

Global oil demand will expand by 14 million barrels to average 101 million a day in 2035, according to the IEA report. The share of conventional crude will drop to 65 million barrels by the end of the period because of growth in unconventional supplies, the IEA said without providing current data.

The concentration in global oil trade will continue to shift to the Asia-Pacific from the Atlantic Basin, as China is on the verge of becoming the world’s biggest oil importer, the report showed.

India will displace China as the biggest driver of energy demand growth after 2020, the IEA said.

Expanding refinery capacity in Asia and the Middle East along with reduced demand in many developed nations is intensifying the pressure f or pl a nt s to close, the agency said.

The I EA estimates that almost 10 million barrels a day of oil processing capacity is “at risk” by 2035, with refineries in Europe in particular the most vulnerable, it said. This equates to about 10 per cent of current global capacity, based on data compiled by Bloomberg on more than 700 sites worldwide.

Brazil will triple output to six million bpd by 2035 as it exploits deepwater reserves, an expansion that will account

The Middle East … remains at the centre of the longer-term outlook IEA REPORT

for one-third of the increase in global production and make the nation the world’s sixthlargest oil producer, according to the agency.

While North American shale, coupled with rising production in Brazil and global supplies of natural gas liquids, will dominate output growth over the next 10 years, OPEC, and its Middle Eastern members in particular, will regain importance after that as supplies from outside the organization falter, according to the report. OPEC pumps about 40 per cent of global oil supplies.

“The Middle East, the only large source of low-cost oil, remains at the centre of the longer-term outlook,” the agency said.

OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. It will next meet to review production targets on Dec. 4 in Vienna.

More than half of the 790 billion barrels the world will need to produce by 2035 is needed to compensate for declining output from mature deposits, the agency said.

Output declines at a rate of six per cent a year at conventional oilfields once they reach peak production, according to the report.