Skip to comments.Unconventionals to Make US Largest Oil, Gas Producer
Posted on 10/04/2013 12:13:50 PM PDT by thackney
This opinion piece presents the opinions of the author. It does not necessarily reflect the views of Rigzone.
The head of the Energy Information Administration (EIA), the data collection arm of the Energy Department, projects that the U.S. will become the largest producer of crude oil and natural gas in the world this year if it hasnt done so already.
"This is a remarkable turn of events, said Adam Sieminski, the head of the Energy Information Administration. This is a new era of thinking about market conditions, and opportunities created by these conditions, that you wouldn't in a million years have dreamed about not long ago."
Saudi Arabia remains the world's largest producer of crude oil and related liquids. As of July, Saudi Arabia was producing 11.7 million barrels per day (bpd), according to the International Energy Agency. Russia was second, at 10.8 million bpd, with the US third at 10.3 million bpd.
While oil production in Russia has remained flat the past few years, U.S. oil production has grown and erased a 3 million barrel per day difference. The amount of crude from the Bakken oil field in North Dakota, the Permian Basin in West Texas and the Eagle Ford shale formation in South Texas continues to rise rapidly.
The Russian government predicts oil output will remain flat through 2016, while natural gas is up three percent. If Russia's oil and natural gas wells flowed at the same rates as they did in 2012, total US production would have surpassed them on a daily basis this summer, according to EIA.
In 2012, the U.S. produced more natural gas than Russia for the first time since 1982. The rise in oil and gas production in the U.S. has reduced imports and closed the huge trade deficit. Oil imports are down 32 percent and natural gas imports declined 15 percent. Russia's natural gas exports have declined because of economic conditions in Europe and increased competition.
Increased competition in global crude oil markets have hurt Russias oil exports, too. Russian energy analysts believe that the increase in U.S. oil and gas production will not last very long. They believe the increased production from shale will run into trouble. The head of OPEC also cast doubt on increased U.S. production recently.
Everyone in the oil and gas industry in the U.S. knows that shale drilling and production is very expensive. If exploration and production cannot be profitable, activity will decline. The industry has witnessed the decline in natural gas activity because natural gas prices have fallen and costs have not followed suit.
Just as important as price is action taken by government regulators that could drive up costs dramatically or prohibit drilling activity altogether.
However, the industry in the U.S. and Texas continues to expand.
Dramatic upward revisions of crude oil production in Texas combined with strong crude prices and strengthening natural gas prices propeled the Texas Petro Index to a record high for the second straight month.
"The Texas Petro Index continued its march into record territory in August, rising to 289.8, said Karr Ingham, the economist who created the TPI and updates it monthly. That eclipsed the old record, set in July, which itself was revised upward by Ingham to 288.2 from 287.7 due to ongoing, upward revisions of Texas oil production since the July 2013 TPI was released less than 30 days ago.
Alex Mills is President of the Texas Alliance of Energy Producers.
There are times when we have to thank God for the gifts that he bestows on us. We are such a sinful people, but we do more than get by with all the natural blessings we have.
Thank you Thackney for all you do by bringing us news about the oil and gas industry.
It’s called GRACE.