When I began my study of the geopolitics of energy, which pre-dates the existence of this blog, I quickly became convinced that technological innovation was about to unleash a new era of petroleum production – both globally and, in particular, in the United States and Canada. It was controversial 5 years ago (and remains so today among some), but the facts are becoming increasingly clear. What was scoffed at in 2007 is embraced by the mainstream in 2012. Harvard University’s Belfer Center last month published a study by Leonardo Maugeri that concludes we are, indeed, in the midst of a massive increase in oil production:
Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.
Based on original, bottom-up, field-by-field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production (the level of production targeted by each single project, according to its schedule, unadjusted for risk) of more than 49 million barrels per day of oil (crude oil and natural gas liquids, or NGLs) is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd.
After adjusting this substantial figure considering the risk factors affecting the actual accomplishment of the projects on a country-by-country basis, the additional production that could come by 2020 is about 29 mbd. Factoring in depletion rates of currently producing oilfields and their “reserve growth” (the estimated increases in crude oil, natural gas, and natural gas liquids that could be added to existing reserves through extension, revision, improved recovery efficiency, and the discovery of new pools or reservoirs), the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date – as shown in Figure 1. This would represent the most significant increase in any decade since the 1980s.
And, if anything, Maugeri is under-selling the potential. He includes shale oil (like that found in the Bakken and Eagle Ford formations) but not oil shale -the massive kerogen resources found primarily in Utah and Colorado. As discussed earlier this week, this is a non-controversial choice by Maugeri because processing oil shale presents particular economic and environmental challenges. However, I believe that we are as close to solving those problems now as we were with shale oil a decade ago; and, if the oil shale problem is engineered to a solution, then the United States will become – at once – the worlds largest consumer, producer and exporter of petroleum products.
