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By Sabina Zawadzki
NEW YORK Dec 16 U.S. crude oil production,
rejuvenated by the advent of "fracking" shale formations, will
approach historic highs by 2019, the Energy Information
Administration (EIA) said on Monday, raising its forecast to
levels that would have been unforeseen just a few years ago.
The U.S. oil and gas industry has been a bright spot in
recent years as the economy struggles to recover from a
financial crisis and growth stagnation.
The energy renaissance has prompted some large U.S. oil
companies to sell foreign assets and come home to focus on
shale, leading to a upsurge of infrastructure projects. Cheap
gas, meanwhile, has reinvigorated the refining and energy-heavy
industrial sectors by lowering costs.
The EIA said production in the world's largest oil consumer
will rise by 800,000 barrels per day (bpd) every year until
2016, when it will total 9.5 million bpd. By 2019 it will peak
at 9.61 million bpd, nearly matching a 1970 record of 9.64
In 2019, domestic production of crude oil will account for
63 percent of total supplies, a significant increase from 2011
when it barely covered 38 percent of the country's needs.
The government agency's two-million-barrel-per-day upgrade
from last year's report shows how production from tightly packed
shale rock has consistently confounded analysts, as higher
prices and rapidly evolving technology fuel growth.
The EIA increased its forecast for shale oil production and
pushed back the year of its peak. It now sees production peaking
in 2021, from 2020, at 4.8 million bpd, not 2.8 million bpd.
"One thing I am sure of: The technology and prices really,
really matter when you look at what the likely production
numbers for oil and gas are going to be," EIA Administrator Adam
Sieminski told analysts. "It's not just trying to estimate what
the resource level is in the ground."
The EIA is the statistical arm of the U.S. Department of
Just a few years ago, U.S. policymakers were considering the
risks of an ever-rising dependence on imported fuel. The EIA
itself barely mentioned shale oil in its 2010 outlook, focusing
rather on offshore production growth.
Now policymakers are struggling to get to grips with a
complete reversal of that equation. The government has begun
approving more natural gas exports and may consider lifting a
ban on crude oil exports.
Sieminski said the government may want to consider oil swaps
with Mexico, if not a total elimination of the near-blanket ban
on exports which was imposed after the 1970s Arab oil embargo. A
mere 60,000-130,000 bpd leave the country, all for Canada under
"They might want to look at the possibility of whether it
would make some sense to allow the light sweet crude to go to
refineries in Mexico that need that oil and have more sour crude
coming from Mexico," he said.
Members of OPEC, including Saudi Arabia, are being forced to
confront a trend they initially greeted with skepticism. The
global oil cartel said in November it may lose 8 percent of its
market share to shale in the next five years.
The EIA on Monday said OPEC's world market share would fall
to below 40 percent in the near term but then recover after
2016. Last year it had expected OPEC's share to remain at 40-45
percent in the coming years.
The EIA maintained its view from last year that output will
peak by 2020 and begin to decline. The sharp decline rates of
most shale oil wells has fueled some skepticism of the long-term
trend from a handful of geologists.
The EIA said the United States would be pumping 9 million
bpd by 2025, a million barrels more than today, and 7.5 million
bpd in 2040, above last year's 6.1 million bpd forecast.
Higher U.S. production will also help tamp down global
benchmark Brent crude oil prices, which are now expected to fall
to $92 a barrel in 2012 prices in 2017, before rising to $141 in
2040. Last year the EIA saw a fall of $96 in 2015.
GAS SLICKER THROUGH SHALE
U.S. oil and gas output reversed years of decline after
companies learned how to drill long horizontal wells and
hydraulically fracture shale rock to entice out oil and gas.
The EIA raised its forecast on natural gas production to
31.9 trillion cubic feet (tcf) by 2025 from the 28.7 tcf it had
forecast last year, and to 37.6 tcf by 2040 against the 33.2 tcf
The 2040 total annual gas production number equates to just
over 100 billion cubic feet a day from around 70 bcf/d now.
Natural gas output will increase steadily, growing 56
percent between 2012 and 2040.
"It turns out it's easier for natural gas molecules to
squeeze their way through the (fractured) cracks than crude
oil," said Sieminski. "The resource base in terms of the level
of production that it would support for gas looks better at
least at this point than it does on the oil side."
Natural gas exports will continue to rise. The country will
become a net natural gas exporter two years sooner than the EIA
had previously judged, in 2018, and a net exporter of liquefied
natural gas (LNG) by 2016.
Imports of liquid fuels will fall to 25 percent of total
U.S. consumption by 2016, far lower than the EIA's previous
forecast of 34 percent by 2019, from 40 percent today. As oil
output starts to fall, the share will increase to 32 percent by
2040, still lower than the 37 percent it expected a year ago.
Consumption of liquid fuels will rise to 19.3 million bpd in
2025, but then slip to 18.7 million bpd from 18.5 million bpd in
2012. Natural gas consumption will rise to 28.4 tcf by 2025 and
to 31.6 tcf in 2040 from 25.6 tcf last year.
(Reporting by Sabina Zawadzki; Editing by Joseph Radford and
Cynthia Osterman; Editing by Alden Bentley)