Shale deposits put US on course as top oil producer

THE US would be close to energy selfsufficiency in the next two decades as booming output from shale formations put it on course to be the largest oil producer, the International Energy Agency (IEA) said yesterday.

The IEA said in its annual World Energy Outlook that crude prices would advance to $128 (R1 334) a barrel by 2035 with a 16 percent increase in consumption, supporting the development of so-called tight oil in the US and a tripling in output from Brazil.

It predicted that the role of the oil exporters’ cartel, Opec, would recover in the middle of the next decade as other nations struggled to repeat North America’s success with exploiting shale deposits.

“The US moves steadily towards meeting all of its energy needs from domestic resources by 2035,” the Paris-based 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.”

Soaring shale output in the US is helping the largest oil consumer achieve its highest level of energy independence in two decades, cushioning it against disruptions 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 US is overtaking Russia and Saudi Arabia to become the biggest oil producer, as it taps rock and shale layers in North Dakota and Texas with the use of horizontal drilling and hydraulic fracturing, according to the report.

The IEA predicted in last year’s World Energy Outlook that US output would exceed Saudi Arabia towards the end of the decade.

Global oil demand will expand by 14 million barrels a day to average 101 million a day in 2035, according to the IEA report.

The share of conventional crude would drop to 65 million barrels a day 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 would continue to shift to the Asia-Pacific from the Atlantic Basin, as China was about to become the biggest oil importer, the report noted.

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

The agency estimated that almost 10 million barrels a day of oil-processing capacity was “at risk” by 2035, with refineries in Europe in particular the most vulnerable, it said.

This equates to about 10 percent of current global capacity.

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 organisation falter, according to the report. Opec pumps about 40 percent 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. – Bloomberg