BREAKINGVIEWS-Booming U.S. oil is rare advert for big capitalism

Wed Jun 6, 2012 8:24pm BST

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

By Christopher Swann

NEW YORK, June 6 (Reuters Breakingviews) - The United States now boasts the world’s fastest-rising oil production outside the Organization of the Petroleum Exporting Countries. That leaves Brazil’s growth trailing, while output in Mexico is falling. With big banks in particular in the political doghouse, America’s oil prowess is a reminder that private enterprises seize opportunities better than governments.

OPEC ministers, meeting in Vienna next week, might take note. Free from the constraints of the production cartel, non-OPEC countries with largely private-sector oil industries are ramping up output. In the two years to 2013, the United States will add close to 400,000 barrels of oil a day to its production, consultancy PFC Energy reckons. That’s a rise of about 8 percent for America and equivalent to roughly half a percent of global output. Canada, where private businesses also predominate, comes a close second with an extra 300,000 barrels a day.

The contrast with state-run energy enterprises is particularly stark across the U.S. border with Mexico. While U.S. entrepreneurs have managed a sixfold increase in oil production from the Eagle Ford shale in Texas over the past year, Mexico has yet to squeeze a drop from the same geological formation. Pemex [PEMX.UL], the creaky state giant south of the border, has reported a 23 percent drop in output over the past six years and production is still shrinking.

Brazil, meanwhile, has seen plenty of hype over deep sea oil discoveries, but output growth at dominant government-controlled Petrobras (PETR4.SA)(PBR.N) has so far fallen short of expectations. Oil production is on track to increase by less than half as much as in the United States by 2013. And Russia, despite having more than twice America’s proven oil reserves, is expected to achieve barely a quarter of Uncle Sam’s expansion. Government meddling and constant changes to fiscal rules are partly to blame.

Within OPEC, post-war Iraq is increasing production fast and Saudi Arabia can do so simply by opening the valves wider on its existing oilfields. U.S. output, by contrast, is growing as new capacity is brought onstream. National champions, with their huge reserves, may yet regain the upper hand. For now, however, private sector oil explorers are setting the pace, providing a timely advertisement for the benefits of big capitalism.

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CONTEXT NEWS

- Oil output in the United States and Canada is growing faster than in any other nations outside the Organization of the Petroleum Exporting Countries, according to forecasts by consultancy PFC Energy.

- PFC expects U.S. crude production to climb by close to 400,000 barrels a day in the two years to 2013 – twice the increase expected from Brazil. The second-fastest rise in non-OPEC production is expected to come from Canada, with a rise of around 300,000 barrels a day.

- Production in Russia, which had the world’s highest oil output in 2010 with 10.2 million barrels a day, is forecast to climb by less than 200,000 barrels of oil over the same period. Russia controls about 5.6 percent of the world’s oil reserves, compared to 2.2 percent for the United States, according to BP.

- PFC expects production in Mexico to fall by around 100,000 barrels a day over the period.

- Saudi Arabia, OPEC’s biggest producer, has been stepping up production to compensate for falling output from Iran.

- From 2010 to 2011, oil production from the Eagle Ford shale in Texas increased more than sixfold to over 28 million barrels.

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(Editing by Richard Beales and Martin Langfield)

((christopher.swann@thomsonreuters.com)) Keywords: BREAKINGVIEWS OIL/

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