The 2035 shale scenario: how unconventional oil and gas are going to transform the world energy scene
American shale may be good for the United States, but perhaps not for the energy situation globally. The International Energy Agency, in its new released World Energy Outlook 2013, warns that key Middle East producers may delay investment in new capacity due to the slackening demand for their product in North America. As the U.S. becomes more energy self-sufficient, the IEA warns that the wrong signals are being sent to the Gulf producers. In fact, there could as a result be an oil supply crunch and higher prices as the U.S. displaces Saudi Arabia as the world’s largest producer, an event just two years away, but then is unable to provide more oil in the long term.
The problem is that shale oil production in the U.S. is expected to peak in 2020, just seven years away. The IEA expects that China and Russia will make much slower than expected progress toward unlocking their own shale oil which could mean in the next decade the world will become once again dependent on OPEC to keep the wheels turning.
American wells produced 9.2 million barrels in 2012 and this is expected to reach 11.6 million by 2020, the main increases coming from the rock and shale layers in North Dakota and Texas, so-called tight oil. But then it will start to fall away. By 2020 Saudi production is estimated to be 10.6 million barrels (11.7 million now) while Russian output also eases slightly.
In the longer term, shale oil is going to become more crucial. By 2035, the IEA expects world consumption to be 101 million barrels a day, with 65 million coming from conventional wells and the remainder from unconventional production.
That’s oil. Shale gas hass quite a different scenario, but just as important in shaping the world’s energy mix over the coming decades.
The IEA report says that more than half the growth in unconventional gas production through to 2020 will come from the two main established producers, Canada and the U.S. Nevertheless, even with China and Australia gearing up, the two North American nations will be running at 80% of world unconventional output.
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The surge in production of unconventional gas in the U.S., especially shale gas, slowed in 2012 as companies, in the face of very low gas prices, shelved plans to drill new wells. The IEA thinks gas prices will recover.
By 2035, though, China will have overtaken Canada in the production of shale gas and Argentina will be catching up. The U.S. will still be in the lead, although India, the European Union, Algeria, Mexico and Indonesia will all be significant shale gas producers.
With coal-bed methane gas, Australia — now the world’s leading producer — will still be the primary source of CBM, but China will expand that output significantly, and be followed by India, Canada and the United States.
More good news for North America: the IEA says Mexico is set to become a significant producer of unconventional gas in the longer term, with output reaching 30 billion cubic metres by 2035. Pemex, the national oil and gas company with a monopoly over all upstream developments, has launched a $200 million program to explore shale gas over the next three years. The Mexican’s initial focus is to look for an extension of the Eagle Ford play in Texas.
Poland is seen as the European country with the most promising unconventional gas potential and the United Kingdom may be able to produce 3 billion cubic metres a year by 2035.
On the basis of its coal-bed methane gas, Australia is racing to get sufficient production to supply three planned liquefied natural gas plants planned for the Queensland port city of Gladstone. In the IEA’s projects, CBM output in Australia rises from 6 billion cubic metres in 2011 to 100 bcm in 2035. In China, 10 billion cubic metres of CBM gas was sold in 2011. Longer term, there is more potential for shale gas but most projects are still in the exploration stage. Indonesia by 2035 is expecting to produce 20 billion cubic metres a year from combined shale and CBM output.
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