3 charts to help you understand the American shale boom

Crude

Pump-jack mining crude oil with the sunset (Zbynek Burival)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Douglas Broom, Senior Writer, Formative Content


The US will drive global oil supply growth over the next five years, overtaking Russia and challenging Saudi Arabia as the world’s leading oil producer according to the International Energy Agency’s 2019 oil market forecast.

Image: IEA

Although the rate of growth in global demand for oil is set to slow as China moves to more renewable energy sources, the US shale industry will propel America towards the number one supplier slot, upending traditional certainties in world oil markets.

Its phenomenal growth in less than a decade is partly built on the US shale industry’s ability to respond rapidly to price signals by scaling up production. It also produces a lighter crude oil which is easier and quicker to refine.

US oil production grew by 2.2 million barrels a day last year and is set to account for 70% of the total increase in global oil capacity between now and 2024, in what the IEA calls “the second wave of the US shale revolution”. The US is also expected to provide 75% of the growth in liquified natural gas supplies.

Some experts believe that, when refined products and gas are taken into account, the US may eclipse Saudia Arabia’s energy exports as early as next year. Iraq is forecast to be the world’s third largest source of new supply, offsetting sharp declines in oil exports from Iran and Venezuela.

The balance of oil power

The geopolitics of oil are also changing as the balance of supply moves away from OPEC. Non-OPEC countries such as Brazil, Guyana and Norway are all expected to play an important role in production growth over the next five years.

Image: IEA

Although the rise of electric vehicles will reduce demand for petrol, the IEA expects demand for aviation fuel and petrochemicals to remain strong. New emissions rules for world shipping, taking effect next year, will boost demand for cleaner, low sulphur oil and diesel.

Environmentalists have warned for some time that we are approaching “peak oil”, the point at which oil extraction reaches its natural limit, after which production will decline indefinitely. The IEA says that, with demand growth slowing and more resources coming on stream, “peak oil” is still some way off.

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Comments

  1. One chart showing how fast shale wells deplete:

    Currently, there are 900,000 active oil and gas wells in the U.S.

    • BTW, 900,000 oil and gas wells in the U.S. means one well per 350 capita.

      A well remains a well, even when production is long ceased, the well is just being plugged. As shale exploration needs an ever growing amount of wells being drilled just to keep production flat, we will see a vast growth of wells being drilled. 5% of gas wells leak from day one. After 14 years, 50% of the wells are leaking. So it’s only a matter of time when methane will be released into the atmosphere. Fossil methane is 87 times as potent as CO2.

      => Why gas wells leak

  2. => Global spike in methane emissions over last decade likely due to US shale

    Methane is a greenhouse gas which is 87 times as potent as CO2.

  3. The “shale boom” in the US has profound consequences:

    => Oil and gas is sector top source of US methane emissions, ahead of agriculture

  4. Robert Howarth, PhD, concludes that the global increase in methane over the last 10 years is largely driven by the oil/gas industry. His updated estimate for average, full-cycle methane leakage rate from natural gas operations is 4.1%. At leakage rates above 2% natural gas has a higher global warming potential than coal.

  5. After a decade of the American fracking industry burning through hundreds of billions of dollars more than it earned, this industry previously dominated by shale drilling specialists is entering a new phase. The oil majors — a group of multinational companies that typically have divisions throughout the oil supply chain — now are investing heavily in fracked oil and gas operations.

    Reuters recently concluded, “U.S. shale producers last year again spent more money than they collected.” Chevron’s top executive says the company’s best investment option is a business model that consistently has delivered negative returns.

    The way the game is played now involves spending more money to produce shale oil than companies have been making selling that oil.

    => Chevron and Exxon Say They Can Turn Around the Failed Finances of Fracking Industry

    • “Our view is that there’s only five years of drilling inventory left in the core,” one prominent investor told McLean, whose book was published in September 2018. “If I’m OPEC, I would be laughing at shale. In five years, who cares?”

      Europe should stay away from building new infrastructure for fossil fuels, in particular new LNG terminals.

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