NEW YORK, (Reuters) – Four years into the shale revolution, the U.S. is on track to pass Russia and Saudi Arabia as the world’s largest producer of crude oil, most analysts agree. When that happens and by how much, though, has produced disparate estimates that depend on uncertain factors ranging from progress in drilling technology to the availability of financing and the price of oil itself.
Forecasts for U.S. shale oil production vary from an increase of 7.5 million barrels per day by 2020 – almost doubling current domestic output of 8.5 bpd — to a gain of 1.5 million bpd, or less than half of what Iraq now produces.
The disparities are a function of the novelty of the shale boom, which has consistently confounded forecasts. In 2012, the U.S. Energy Information Administration (EIA) estimated that production from eight selected shale oil fields would range from 700,000 bpd of so-called tight oil to 2.8 million bpd by 2035. A year later, those predictions had been surpassed.
“The key issue is not whether production grows, it’s by how much,” said Ed Morse, global head of commodities research at Citigroup in New York. “We’re only at the beginning of the first inning and this is a nine-inning game.”
The stakes couldn’t be bigger, ranging from the multibillion-dollar investments needed to explore and drill to oil supply issues that go to the heart of U.S. foreign policy. Relations with countries ranging from Iraq and Iran to Russia, Ukraine, Libya and Venezuela are colored to one degree or another by the question of energy.
The U.S., a nation transformed by the 1973 Arab oil embargo, could become energy independent by 2035, according to bullish forecasts from BP Plc and the International Energy Agency. Coupled with growing output from oil-rich neighbors, the continent has a growing shield from supply shocks.
“Looking at North America, including Canada and Mexico, we’re much more politically stable,” said Lisa Viscidi, program director of the Inter-American Dialogue in Washington.
Still, many drillers have found that healthy forecasts of oil in the ground don’t guarantee it can be economically extracted.
For example, based on the promise of free-flowing oil, Chesapeake Energy’s then-top executive Aubrey McClendon bought up land in Ohio’s Utica shale oil field and touted it in 2011 as a $500-billion opportunity. State geologists estimated the shale play could hold as much as 5.5 billion barrels of reserves.
But last year, after months of drilling, Chesapeake’s average output per well per day was just 80 barrels. Competitor BP wrote off $521 million and exited the Utica just two years after leasing 85,000 acres.
SIX ESTIMATES
Shale production from the oldest shale patch, the Bakken of Montana and North Dakota, alone may rise to as much as 1.74 million barrels per day in the second half of this decade, according to the highest of six estimates compiled by Reuters. The lowest was 1 million bpd. Even that range belies disagreement over just how fast output will grow — and when it may peak. (Graphic: http://link.reuters.com/ref32w)
The EIA, the U.S. agency responsible for energy forecasts, predicts that tight oil output will rise 37 percent from about 3.5 million bpd in 2013 to 4.79 million barrels per day by 2020. The forecast includes the Bakken, Three Forks and Sanish, Eagle Ford, Woodford, Austin Chalk, Spraberry, Niobrara, Avalon/Bone Springs and Monterey.
“There are other forecasts that are much more optimistic than this one,” said agency administrator Adam Sieminski, speaking at a conference in New York. “We’re still a little concerned about what the geology looks like for crude oil production. As technology moves, these numbers could grow.”
