Monday, November 12, 2012

IEA: US To Be World's Largest Oil Producer

The IEA has released it's 2012 World Energy Outlook.  The big headline is that they've bought into the idea that the US energy future is too bright to stare hard at:
Energy developments in the United States are profound and their effect will be felt well beyond North America – and the energy sector. The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity – with less expensive gas and electricity prices giving industry a competitive edge – and steadily changing the role of North America in global energy trade. By around 2020, the United States is projected to become the largest global oil producer (overtaking Saudi Arabia until the mid-2020s) and starts to see the impact of new fuel-efficiency measures in transport. The result is a continued fall in US oil imports, to the extent that North America becomes a net oil exporter around 2030.
I am less persuaded myself that using a thousand oil rigs to generate an extra one million barrels per day of oil is necessarily a sign of a large and long-term sustainable increase in US oil production (as opposed to, say, frenzied scraping of the bottom of the barrel).  But, still, I'm not certain beyond a reasonable doubt just how deep this particular barrel can be scraped.

At any rate, one thing that is interesting is that the chart above shows the US second peak just reaching 10mbd of oil, and yet the US will be the largest producer of oil.  Since the IEA says Saudi production is currently at 9.5mbd and Russia at 10.75mbd, the implication is that neither Russia or Saudi Arabian production will increase at all between now and 2020 when the US will surpass them.

Apparently, the strategy of massed hordes of drilling rigs fracking for shale oil can only be of benefit in the United States.

It used to be Saudi Arabia that was used to fill in the wedge between desired supply and expected demand in official energy projections.  Apparently the agencies have now accepted that Saudi Arabia cannot or will not increase production and the US is now being assigned the role of supplier of last resort for future energy projections.


Michael Cain said...

From the description of the 2012 World Energy Model (WEM) at the IEA web site: "The main exogenous assumptions concern economic growth, demographics, international fossil fuel prices and technological developments."

So it appears to be the same old process: assume a politically acceptable level of economic growth, work out the energy production and pricing necessary to sustain that, then assign the necessary increases in production to some set of sources we know about. I would be so much happier with a model where growth and energy prices were endogenous, and the external assumptions were about recoverable resources. At least then there might be a chance that one of the scenarios would be about the impact of limited energy supplies.

Emil said...

Good catch. Another thing to keep in mind is that the IEA was notorious for publishing extreme forecasts for global production.

They've now cut that nasty habit back a little bit, but old habits die hard.

They are essentially projecting that the U.S. produces 5 mb/d in tight oil by 2020. Even Maugeri(!) didn't expect that much.

I think the bullish upperside is probably around 3 mb/d. In either case, by 2015, most of the production will be done.

But yes, when your forecast is more extreme than Maugeri, you know you got issues.

The bad old IEA is back with a vengeance.

yvesT said...

Impressive declarations indeed, you really wonder what's behind it.

By the way Stuart, could you shed some light on current US production ?

From the eia sites :

It is currently a bit above 6
And looking at the details :

It includes the bakken, so the thing listed as "unconventional oil" in EIA graph.

But in the CIA world fact book, and BP also, it is 7.8 :

And Fatih Birol says 10.9 today in Le Monde

So where the difference between EAI and BP comes from ? Natural gas liquids ?

And the 10.9 ? Bio fuels added ?

yvesT said...


Having reports based on reserves estimations and not "demand growth" or something has apparently been tried by the IEA in 1998 :

But the result has been : the whole team fired except Fatih Birol (current head economist or something) ...

And also more or less tried in 2008 or 10 forgot, the year they annouced peak for conventional was done ...

Stuart Staniford said...


If you check out this EIA page:

You can see the breakdown between actual oil, refinery gains, biofuels and NGLs. Note that refinery gains include gains on imported oil in domestic refineries...

yvesT said...


Thanks a lot

Still not sure what the BP number corresponds to will try to see ... :)

buck smith said...

"Apparently, the strategy of massed hordes of drilling rigs fracking for shale oil..."

One thing that is often missed is that US and Canada benefit from private ownership of mineral resources. There is plenty of oil and gas in shale formations in other parts of the world, but where governments own the resources, decisions are slower and allocation of capital less efficient. Roads and infrastructure matter, too. I have been on drilling rigs in the amamzon region of peru and it is hellishly expensive to operate out there.