A recent report suggests that the US has become the world’s top producer of hydrocarbons, but many analysts take issue with this claim
The US has overtaken the Kingdom of Saudi Arabia and Russia as the world’s biggest oil producer this year, as extraction of energy from shale rock fuels the nation’s economic recovery, according to Bank of America Corp.
According to a bank report, US production of crude oil plus liquids separated from natural gas exceeded all other countries. It stated that US output exceeded 11 million barrels per day in the first quarter of 2014.
“The US increase in supply is a very meaningful chunk of oil,” said Francisco Blanch, head of commodities research, Bank of America. “The shale boom is playing a key role in the US recovery. If the US didn’t have this energy supply, prices at the pump would be completely unaffordable,” he said.
The report has caused a row among experts. Some analysts say it is conceivable that the US has overtaken Saudi Arabia as the world’s biggest crude oil producer; while others maintain that even if other petroleum liquids were included in the production figures, the US output numbers will remain lower than Saudi Arabia’s.
Considering the extensive range of petroleum liquids, including conventional and unconventional oil, condensates and biofuels, Jason Bordoff, director of Columbia University’s Center for Global Energy Policy says “it’s very possible we’ve passed Saudi Arabia in production, and if not it should happen pretty soon.”
Other energy watchers have implied that the notion that the US has ‘already surpassed’ KSA may not be entirely accurate, citing trends over the last 36 months which reveal that the US has only added about 1 million bpd each year over the period.
“That’s absolutely not going to happen,” said Chris Nelder, an independent energy analyst.
“We won’t add a million barrels per day in 2014. This year we’ll probably have more like a 500-700,000 bpd increase… If we take the EIA numbers, then for the US to surpass next year, we’d need to increase production by 1.7 million bpd in a year,” said Nelder.
The Energy Information Administration (EIA) released new figures in July revealing that the US only produced 8.1 million bpd of crude during the first quarter, in contrast to the claims made by the Bank of America report. The agency puts Saudi Arabia‘s current crude output at 10 million bpd.
US crude oil production has soared in the wake of shale oil production; which seems to be spurring confidence among proponents of the bank’s report. The effect of increasing shale oil production, commonly known as the ‘shale boom’ in the USA, has surely fueled this debate.
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Shale oil production is growing fast in the US as companies continue to use a high yielding oil extraction technique known as hydraulic facturing or fracking; commonly used at shale formations like those found in North Dakota and Texas.
The process involves the injection of high-pressure liquid in drill holes to create small fractures thus increasing the productivity of a well.
Supporters of the Bank of America report are also optimistic that the US shale oil boom will sustain the US’ top-producer ranking.
“It’s very likely the US stays as No. 1 producer for the rest of the year as output is set to increase in the second half” said Blanch.
According to a report released by the International Energy Agency (IEA) in its November World Energy Outlook, the US oil output will surge to 13.1 million barrels a day in 2019 and plateau thereafter. The agency said the country will lose its spot as top-producer at the start of the 2030s.
Regardless of who tops the world’s crude oil production rankings, it is apparent that the shale revolution will change the global oil market as we know it.
With the People’s Republic of China holding oil shale resources of about 720 billion tonnes, there is wide speculation that the Asian giant’s actual deposits may exceed oil shale reserves in the US. China has the technology required to develop shale exploration, well as the market to support it.
Analysts are watching events unfold, saying that only time will tell in what direction shale will take global prices and supply.
