Jun 26, 2012 9:37 PM GMT
A pretty remarkable report of the upsurge in oil production capacity as a result of new drilling technologies being developed primarily in the US that is reshaping global geopolitics.
Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.
The most surprising factor of the global picture, however, is the explosion of the U.S. oil output.Thanks to the technological revolution brought about by the combined use of horizontal drilling and hydraulic fracturing, the U.S. is now exploiting its huge and virtually untouched shale and tight oil fields, whose production – although still in its infancy – is already skyrocketing in North Dakota and Texas.
The natural endowment of the initial American shale play, Bakken/Three Forks (a tight oil formation) in North Dakota and Montana, could become a big Persian Gulf producing country within the United States. But the country has more than twenty big shale oil formations, especially the Eagle Ford Shale, where the recent boom is revealing a hydrocarbon endowment comparable to that of the Bakken Shale. Most of U.S. shale and tight oil are profitable at a price of oil (WTI) ranging from $50 to $65 per barrel, thus making them sufficiently resilient to a significant downturn of oil prices.
The combined additional, unrestricted liquid production from the aggregate shale/tight oil formations examined in this paper could reach 6.6 mbd by 2020, in addition to another 1 mbd of new conventional production. However, there remain obstacles that could significantly reduce the U.S. shale output: among them, the inadequate U.S. oil transportation system, the country’s refining structure, the amount of associated natural gas produced with shale oil, and environmental doubts about hydraulic fracturing, one of the key technologies for extracting oil from shale. After considering risk factors and the depletion of currently producing oilfields, the U.S. could see its production capacity increase by 3.5 mbd. Thus, the U.S. could produce 11.6 mbd of crude oil and NGLs by 2020, making the country the second largest oil producer in the world after Saudi Arabia. Adding biofuels to this figure, the overall U.S. liquid capacity could exceed 13 mbd, representing about 65 percent of its current consumption.