Shale Boom Will Make U.S. Oil Self-Sufficient by 2035, but Global Need for OPEC Will Remain
The U.S. will become the world's biggest oil producer within two years, but rising global supplies of shale and other unconventional oils will not reduce the need for OPEC's oil over the next two decades, the Paris-based International Energy Agency said on Nov. 12.
Non-OPEC oil production will rise to 52.9 million barrels per day (bpd) in 2035, up from 49.4 million bpd in 2012 but down from a peak of 55.1 million bpd in 2025, the IEA said in its annual World Energy Outlook report.
During that period, supplies of unconventional non-OPEC oil, such as light, tight oil from the U.S. and Canadian oil sands, will swell to make up 12.3 million bpd of the total from 4.4 million in 2012, the IEA said. U.S. production of light, tight shale oil will help the country's output peak at 11.8 million bpd in 2025, before slipping to 10.9 million by a decade later, according to the report.
"The United States moves steadily toward meeting all of its energy needs from domestic resources by 2035," the IEA said in the report, noting that U.S. imported crude needs will almost disappear by 2035.
Even by 2015, the U.S. likely will overtake Saudi Arabia as the biggest oil producer in the world, the IEA said.
"On the assumption that Saudi Arabia reins back production levels in its capacity as the swing producer within OPEC, this means that the United States becomes the largest oil producer in the world (including crude, natural-gas liquids and unconventional oil) by 2015 and retains this status until the beginning of the 2030s," the IEA said.
Holistic Lens
Separately, in a Nov. 14 report, management consultant PwC, a unit of PricewaterhouseCoopers LLP, notes how U.S. engineering and construction firms speed delivery and cut costs for shale-oil project clients.
“Given the high stakes, cost pressure and intense competition in the shale industry, oil and gas companies are learning to apply a holistic lens to all aspects of shale development and managing them from end to end,” says report author John Doherty, engineering and construction advisory leader for the U.S. unit of PwC. “This creates an opportunity for engineering and construction firms to become a key asset in the process, as they adjust their traditional project management model and create fast-response systems to the changing environment.”
According to the report, E&C firms can cut annual costs by up to 25% and project development "cycle time" by as much as 40% "by tightening the functional handoffs and improving the line of sight between demand in the field and organizational capacity."
The firm suggests that E&C companies assist their clients in project planning and field execution through effective communication and integration of business data systems, among other strategies.
Despite recent project delays, the IEA said Brazil's massive deepwater-fields developments will triple the country's current crude-oil output to 6 million bpd by 2035, up from an estimated 5.7 million bpd the year before.
OPEC Remains Key Supplier
But global shale-oil development will struggle to replicate the success of the U.S., and unconventional oil from non-OPEC producers will fail to reduce the world's dependence on OPEC oil, the IEA said.
According to the IEA estimates, production of light, tight oil does not "take off at scale" outside North America before 2035 but still reaches 5.9 million bpd by the mid-2020s.
Meanwhile, OPEC's share of the global oil market will rise to 46% by 2035, when the producers' cartel will need to pump 45.2 million bpd, the IEA said. This compares to a market share of 43% in 2012, when OPEC pumped 37.6 million bpd.
"The share of OPEC countries in global output rises again in the 2020s, as they remain the only large source of relatively low-cost oil," the IEA said.
Saudi Arabia will continue to be OPEC's biggest producer, but Iraq will make up the biggest single contribution to OPEC production growth.
Due to security setbacks and declining output from mature fields, however, OPEC's two North African members, Libya and Algeria, will struggle to boost production capacity over the coming years unless they step up exploration, the IEA warned.
The IEA also raised its estimated global oil demand for 2035, saying it now sees demand expanding by 14 million bpd, to an average of 101 million bpd. In last year's report, the group estimated global oil demand in 2035 would be 99.7 million bpd.
Soaring energy demand in China, India and the Middle East will continue to drive global energy use up by a third over the next two decades, the IEA said.
Crude prices also will rise to $128 per barrel by 2035, helping to support the development of unconventional oil supplies, the IEA said. It said supplies of conventional crude during the period will drop to 65 million bpd.
Global Oil Demand Will Slow
But the group also sees the growth of oil demand slowing steadily, from an average of 1 million bpd per year through 2020 to just 400,000 bpd thereafter. This slowing will be the result of high prices pushing efficiency gains and fuel switching as well as a steady decline in oil use by Organization for Economic Cooperation and Development countries.
The IEA, which expects a drop of more than 40 million bpd in conventional crude output from existing fields between now and 2035, said its analysis of more than 1,600 fields showed that, once production had peaked, an average conventional field could expect to see an annual output decline of around 6%.
Downstream, the IEA estimated nearly 10 million bpd of global refinery capacity is at risk of closure as falling demand in Europe and the U.S. continues to swell overcapacity in the sector.
