The United States is on its way to become the world’s top crude oil producer, overtaking Russia and Saudi Arabia in the process. It held on to that mantle a couple of years ago too and seems now set to sit on the throne, once again.
The US Energy Information Administration reported last Tuesday that the US oil output will be at an all-time high in 2019, surpassing 11 million barrels per day (mbpd) by the end of that year.
The US crude oil production is now expected to climb to more than 10mbpd, early in 2018, for the first time since 1970, and, would continue to surge into 2019, the EIA said.
The average production in 2019 will rise from 580,000bpd to 10.85mbpd, the agency said in its first outlook for 2019.
As per the report, the US crude output would hit 10.04mbpd during the first quarter of this year, and that it would average 10.3mbpd this year - the highest output levels ever for the country.
The 10mbpd milestone was not expected until the fourth quarter. However, the EIA has revised its production growth forecast for 2018, sharply higher to 970,000bpd from 780,000bpd in its previous outlook.
The forecast further said US production would average 10.8mbpd in 2019 and would be more than 11mbpd by November of next year.
Russia produced an average of nearly 11mbpd in 2017, while Saudi Arabia produced about 10m barrels. Both countries, though, have been keeping a check on their output in 2017 courtesy the output constraint arrangement between the Opec and its non-Opec allies.
This all is interesting. When the US shale output began impacting the global energy scenario, many felt it was phase in passing. Not anymore, it seems!
In fact, already by 2012, the crude scenario appeared changing as the long-term impact of the shale revolution began to unfold. In its 2012 World Energy Outlook, the Paris based International Energy Agency conceded that the global energy map was changing, ‘with potentially far-reaching consequences for energy markets and trade.’
As per the IEA, a new era was being redrawn by the resurgence in oil and gas production in the United States. How true!
It then emphasised that energy developments in the United States were profound and that their effect was to be felt well beyond North America – and the energy sector.
As a consequence, global energy geopolitics also underwent major adjustments over the next few years.
The IEA then underlined that the US energy market was going through radical upheaval, sparked by the development of new technologies, especially the extraction of shale gas through a controversial process called ‘fracking’ that has been limited or banned in other countries.
The report projected that by 2020, the United States was set to become the largest global oil producer (overtaking Saudi Arabia until the mid-2020s), and resulting in a continued fall in US oil imports, to the extent that North America would become a net oil exporter around 2030.
Global headlines began screaming almost immediately: The United States will overtake Saudi Arabia as the world’s leading oil producer around 2017 and will become a net oil exporter by 2030.
“North America is at the forefront of a sweeping transformation in oil and gas production,” Maria van der Hoeven, the then IEA Executive Director said in London while unveiling the WEO-2012, underlining that the US would overtake Russia in gas production by 2015.
“The foundations of the global energy systems are shifting,” good, old, friend Fatih Birol, the current Executive Director at the IEA, who as organisation’s chief economist then was the principal author of the report, emphasised in his comments. Several components were causing this shift in the world’s energy supply. The prime mover was a resurgence of oil and gas production in the United States, he argued.
The IEA pointed out then that the US oil production would rise to 10mbpd by 2015 and to 11.1mbpd in 2020 before slipping to 9.2mbpd by 2035.
It also underlined the Saudi oil output was projected to be 10.9mbpd by 2015, 10.6mbpd in 2020 and 12.3mbpd by 2035.
Again in 2015, the IEA insisted, the rise of US shale oil meant, Opec would never regain the oil market share that the producer group held before the 2008 financial crisis, and, that the US would emerge and remain the world’s top source of oil supply growth up to 2020.
Prophetic words, indeed.
Published in Dawn, January 14th, 2018