World Energy Outlook 2012 – NYT article focusing on the USA

Today the IEA’s World Energy Outlook for 2012 was released. I will comment on the report when I have had an opportunity to read it. At the moment numerous newspaper articles have misunderstood the contents of WEO2012. For example, an article in the New York Times has been published under the headline: U.S. to Be World’s Top Oil Producer in 5 Years, Report Says. The errors in the article were so serious that the NYT was forced to publish the following correction.

Correction: November 12, 2012

“An earlier version of this article misstated the International Energy Agency’s prediction of American self-sufficiency in energy production. The agency said 55 percent of the improvement would come from more oil production and 45 percent from improvements in energy efficiency. It did not say that domestic oil production would rise 55 percent. Also, an earlier version of a photo caption with this article misidentified the equipment shown in use in an oil field in Greensburg, Kan. It is a pump jack, not an oil rig.”

The IEA published the prognosis for future US oil production shown above before WEO2012 was released. Conventional oil production will continue to decline while unconventional oil is estimated to grow to around 5 million barrels per day between 2020 and 2025 before declining. The IEA’s estimate for increased unconventional oil production is greater than those presented by experts in the oil industry. At a conference in China at the end of September Laura Atkins presented a prognosis that could, instead, see maximal production of unconventional oil in the USA at 4 Mb/d, i.e. 20% lower than the IEA’s estimate.

She made the following comments regarding the prognosis (Source: Hart Energy and Rystad Energy):

• Shale production volumes can increase rapidly
• But, it takes a massive drilling program
• And, not all wells are economic
• Continuous learning is essential

The first area where shale oil began to be produced was Montana’s section of the Bakken field. As shown in the figure above, this area already reached maximal production of shale oil in 2006 at 9 million barrels per quarter, i.e. 100,000 barrels per day. We do not know at which level the falling production rate will level off but it could be 50,000 barrels per day. If this production profile is characteristic for the Bakken field then production in North Dakota will also reach a maximum within a few years and then decline to a level of about half the peak rate. This means that a plateau of US shale oil production lasting 15-20 years from around 2020 until 2035 or later that Laura Atkins presents probably is unrealistic. All together, this means that the prognosis made by the IEA for the maximal rate of shale oil production in the USA may be an overestimate by around 2 Mb/d.

(The figure is Figure 14.4 from the book “Peeking at Peak Oil”, Aleklett, Lardelli, Qvennerstedt)

Production of 3 Mb/d of shale oil will not transform the USA into a
net oil exporter but will mean that the USA's need to import oil will
be reduced. In the report that the US EIA presented in February they showed acurrent production of 1 Mb/dof shale oil and an import dependence of 41%. An increase to 3 Mb/d of shale oil production will reduce imports to 7 Mb/d and import dependence to 32%. The USA will not surpass Saudi Arabia in terms of total crude oil production.