U.S. shale oil production will double over the next 20 years as drillers that became more efficient amid a slump in oil prices unlock new resources, British energy giant BP (BP.L) said on Wednesday.
In its industry benchmark 2035 Energy Outlook, BP forecast global demand for energy to increase by 34 percent, driven by growth in the world population and economy, with the share of oil declining in favour of gas and renewables.
U.S. shale or tight oil production using fracking technology was a key driver behind global supply growth in recent years. The sector, with relatively expensive production costs, has nevertheless been hard hit by a 70 percent decline in oil prices over the past 18 months to around $30 a barrel.
But in the longer term, shale production is set to grow from around 4 million barrels per day (bpd) today to 8 million bpd in the 2030s, accounting for almost 40 percent of U.S. production, according to the report.
“We see U.S. tight oil falling over the coming years but thereafter tight oil picks up,” BP Chief Economist Spencer Dale said.
U.S. onshore production in the lower 48 states has declined by around 500,000 bpd since last spring and is expected to fall further in the near term as the global market readjusts before rebounding, Dale said.
According to the report, “technological innovation and productivity gains have unlocked vast resources of tight oil and shale gas, causing us to revise the outlook for U.S. production successively higher”.
Globally, tight oil production will rise by 5.7 million bpd to 10 million bpd but remain primarily concentrated in the United States.
The head of Russian state-run oil company Rosneft (ROSN.MM), in which BP holds a near 20 percent stake, said on Wednesday he expected U.S. shale oil production to peak by 2020 and decline in the long term.
Dale also said global oil demand, which grew by 1.8 million bpd last year, would continue to grow “strongly” this year albeit at a slower pace.