The Shale Revolution is causing a big shift in US energy production. Will it spread around the world—that is the big question? Share of OPEC crude production is expected to decline from current 42% to 34% by 2038 as non-OPEC production grows faster than expected OPEC annual growth rate 2013 to 2017 of -1.4% while non-OPEC growth is about 3.1%.
US oil production in 2013 averaged 8.11 million barrels per day of crude oil production representing a production level not reached since 1988. The growth in oil supply from production in tight oil and shale continues to be a complete reversal of fortunes. The US Energy information Administration (EIA) estimates that US oil supply growth trend will continue through 2020 and then level-off, but first, US crude oil production is expected to meet or beat the 1970 historical high of 9.6 million barrels per day.
US oil production is up—way up reaching 8.075 million barrels per day and tipping the balance in oil trade around the world and upsetting longstanding patterns. At the current pace the US is expected to set a new all-time high in oil production surpassing 9.637 million barrels of oil per day by 2016. US oil supply growth from onshore tight oil in the Bakken shale in North Dakota and Eagle Ford and Permian Basin in Texas is projected to produce over 4 million bpd and grow through 2020 then peak at 10 million bpd. Offshore Gulf of Mexico production is also expected to grow, but more slowly than shale offering long term sustained growth in output and reserves.
Growth in plays such as the Bakken, Eagle Ford and Permian Basin plays is expected to peak prior to 2020, but this is not a peak oil story. There is plenty of oil left in the long tail of maturing plays and plenty of other onshore tight oil plays in the US yet to be developed so we expect to see more E&P over time as economics align favorably with market conditions. Producers have concentrated first on the ‘sweet spots’—the place easiest to reach and most economical to extract. They will continue to work these same plays to extract the longer tail of residual oil once the peak pumping of the sweet spots is reached.
US imports have declined from ~60% in 2005 to ~45% in 2012 and are expected to fall to ~35% in 2020. While US crude supply is growing, net US imports are projected to decline to 6 million bpd by 2018 and to a low of around 3.5 million bpd in 2020 as tight oil production surges in the US and the projected increase in Canadian crude production comes to market through projected pipeline capacity additions to drive down overall waterborne import volumes. Even as oil supply increases, post-recession gasoline demand is expected to decline, mostly due to fuel mileage improvements and growth in alternative light duty vehicle technologies.
The North American oil growth story is not all onshore reserve growth from tight oil and shale. Offshore Gulf of Mexico reserve growth is projected from deepwater production. Offshore is expected to grow more slowly than shale and tight oil production but offers long term sustained growth in output and reserves, improved operating efficiencies from newer technology, and better return on capital invested across the value chain. The US, Canada and Mexico are one large integrated energy market. Canada’s oil sands potential for long term production growth is expected to continue through the forecast period. Issues over new pipelines, access to export markets, and substitution risk from shale supply growth are disrupting US-Canadian energy relationships. New drilling in Gulf of Mexico offshore is also projected to provide additional growth in reserves through the forecast period.