Friday, November 16, 2012

US could beat Saudi to top oil position!

The latest IEA report predicts that a relatively new technology for extracting oil from shale rock could make the United States the world’s leading oil producer within a decade, beating the current leader, Saudi Arabia. The International Energy Agency estimates that US production could reach 11.1 million barrels per day by 2020, almost entirely because of increases in the production of shale oil, which is extracted using the same horizontal drilling and fracking techniques that have flooded the U.S. with cheap natural gas.

As of the end of 2011, production had already increased to 8.1 million barrels per day, almost entirely because of shale oil. Production from two major shale resources in the U.S.—the Bakken formation in North Dakota and Montana and the Eagle Ford shale in Texas, now total about 900,000 barrels per day. In comparison, Saudi Arabia is expected to produce 10.6 million barrels per day in 2020. The shale oil resource, however, is limited. The IEA expects production to start gradually declining by the mid-2020s, at which time Saudi Arabia will reclaim the top spot.

Shale oil is creating a surge in U.S. oil production in part because it’s easy to find, says David
Houseknecht, a scientist at the U.S. Geological Survey. The oil is spread over large areas, compared to the relatively small pockets of more conventional oil deposits in the United States.

Just how much shale oil can be produced—and how fast—depends heavily on two factors: the price of oil, and how easy it is to overcome possible local objections to oil fracking, says Richard Sears, a former executive at Royal Dutch Shell and a visiting scientist at MIT.

Oil shale costs significantly more to produce than oil in Saudi Arabia and many other parts of the world, so for oil companies to go after this resource, oil prices need to stay relatively high. Concerns that fracking will contaminate drinking water have led to objections in some areas, as have concerns that shale oil requires far more drilling wells than conventional oil production.

The IEA does conclude that the United States will nearly be energy self-sufficient by 2035, but that’s after offsetting oil imports with exports of coal and natural gas. To be truly energy independent, the United States would have to invest in technology for converting natural gas and coal into the liquid fuels needed for transportation, or have other technical breakthroughs, such as improved batteries or biofuels, that would quickly reduce the demand for oil.

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