U.S. to become world’s top oil producer in 2020
January 28, 2013 | posted by The Institute
In a turnaround that would have seemed far-fetched a few years ago, the United States is projected to surpass Saudi Arabia as the world's top oil producer by 2020 while cutting its own energy use faster than any other nation, the International Energy Agency reports.
The agency's World Energy Outlook 2012, published Monday, projects the U.S. to remain the world's top oil producer until later in that decade. Experts said that would be an economic boon for the national economy.
The agency cited a combination of industry innovations and government efficiency mandates for the coming changes, far different from the era of shrinking oil production and gas-guzzling SUVs in the early 2000s.
Still, world oil demand was forecast to grow steadily, reaching 99.7 million barrels a day by 2035, up from 87.4 million last year. China alone accounts for 50 percent of the net increase in world oil demand by 2035, the agency said.
And though the U.S. will shrink its per-capita use of fossil fuels, the nation will remain among the world's highest energy users, the report said.
New fuel efficiency standards for automobiles championed by the Obama administration, new cars and light-duty trucks must average 54.5 mpg by 2025. Along with increased use of renewable energy and biofuels, this will cut the nation's per-capita use of fossil-fuel energy 17 percent between 2010 and 2035, more than any other nation, the report said.
It also projected the dip in domestic oil demand will help slash carbon dioxide emissions in the U.S. by 19 percent by 2035, the largest expected decline of any of the 34 nations in the Organization for Economic Cooperation and Development.
“A renaissance of the U.S. energy sector is reshaping the world's energy landscape, with far-reaching implications,” the report said.
Decreasing domestic consumption and increasing production would allow U.S. energy companies to sell more of their oil elsewhere.
“It basically means we're going to be making more money, here in the U.S., off of oil production than has been anticipated,” said Craig Pirrong, director of the University of Houston's Global Energy Management Institute.
The Eagle Ford Shale in South Texas is among several new plays nationwide where horizontal drilling has unlocked oil and gas from dense rock. The 50-mile-wide swath runs from the Mexican border to East Texas. There already have been 4,970 wells permitted in 25 counties over the shale.
Eagle Ford has the steepest growth rate of any U.S. basin, Becca Followill, senior managing director and head of equity research at U.S. Capital Advisors, told attendees at Hart Energy's third annual Developing Unconventional Gas Eagle Ford Conference, held last month. She estimated that the Eagle Ford could produce as much as 2.1 million barrels of crude oil per day, although she said that is on the high end of estimates.
In July, the shale play already had reached production levels of 282,721 barrels per day, according to the Texas Railroad Commission.
The U.S. relies on imports for 20 percent of its energy needs, but the report said increased production and higher vehicle-fuel standards will help make the country “all but self-sufficient” by 2035.
“By contrast, most other energy importers become more dependent on imports” in coming years, the agency said.
The U.S. has not held the title of the world's top oil producer in earnest in 40 years. But the bigger effect would be as a net exporter, said Ken Medlock, a fellow in energy and resource economics at Rice University's Baker Institute.
Much of the growth in U.S. oil production and exports will depend on strong prices, fueled by growing consumption in China, Medlock said. Any serious drop in demand there could force companies to suspend expensive exploration and production operations.
“If the growth in China comes unhinged for any reason, that's when you'll see oil prices collapse, and that would affect domestic producers in a pretty dramatic way,” Medlock said.
The International Energy Agency's projections appeared optimistic and uncertain, particularly given recent history that saw the U.S. re-emerge as an oil-producing power despite projections of a steady decline in oil reserves before the shale drilling revolution, experts said.
“You're really going out on a limb when you're making even medium-term forecasts, because the technology is so dynamic, who knows what'll change,” said Pirrong of the Global Energy Management Institute.
The agency's estimates for growth in U.S. production of oil and other liquid hydrocarbons is especially dramatic over the next decade, Medlock said. Daily production here is forecast to grow by 23 percent, to 10 million barrels from 8.1 million, between 2011 and 2015, and to 11.1 million barrels in 2020, the report said.
“You're talking about a massive increase in just production,” Medlock said. “Yes, the capability is there, but you've got to have prices remain strong enough to support it.”
Meanwhile, Saudi Arabia's daily production will slump to 10.6 million barrels in 2020, from 11.1 million in 2011, before rebounding to 11.4 million in 2030, the report said.
Iraq is expected to lead the world's oil supply growth by 2035, with its daily production capacity jumping 5 million barrels, to 8.1 million, the agency said.
The San Antonio Express-News contributed to this report.