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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Will the U.S. Become World’s Largest Oil Producer?

Commodities / Crude Oil Nov 05, 2011 - 03:54 AM GMT

By: Keith_Schaefer

Commodities The Surprising News about U.S. Oil Production

Dear OGIB Reader,

The U.S. likes to fancy itself a place that does everything a bit bigger and better than the rest of the world.


And while some of this might just be American bluster, the Yanks have plenty to crow about it when it comes to oil production in recent years.

James Burkhard, the managing director of IHS CERA’s Global Oil Group, said at a Montana Petroleum Association conference that U.S. production of oil increased by 1.2 million barrels per day between 2008 and 2010, reports the Billings Gazette. This reversed four decades of decreasing domestic oil production.

“Not only have we reversed the trend, we’re reversing that in a very big way,” Burkhard said.

However, the U.S. may not be done when it comes to upping its oil production as The Sunday Times recently quoted a report released by Goldman Sachs that predicts America will become the world’s largest oil producer by the year 2017. This estimate was obtained by using a different definition of oil and utilizing generous estimates for liquids-rich shale production, according to The Oil Drum web site.

Using these new parameters, the report predicts that U.S. daily production of oil will rise to 10.9 million barrels in 2017 from the current level of 8.3 million barrels, according to the media outlet. This estimate is not unreasonable when one considers the growth the country attained between 2008 and 2010.

The news source states that how Goldman Sachs arrived at the current production level of 8.3 million barrels of oil per day is ambiguous. June oil production for the country averaged 5.6 million barrels per day in June, the Energy Information Agency (EIA) reports.

Predictions for U.S. oil production released by the EIA differ from the figures released by Goldman Sachs. U.S. crude oil production will increase to roughly 6 million barrels of oil per day by 2020, according to the agency’s 2011 Annual Energy Outlook. The EIA attributes gains in production to larger shale oil resources and new enhanced oil recovery techniques. The agency states that the Eagle Ford shale, Bakken formation and the Marcellus shale will all contribute to this rise in production.

Thomas Petrie, vice-chairman of global corporate and investment banking at Bank of America, offered another estimate. He told Reuters that over the next five years, U.S. oil production stemming from shale plays such as Eagle Ford, Bakken and Niobrara could potentially increase to 2 million barrels per day.

What makes Goldman Sachs’ prediction even more surprising is that its estimate would place U.S. production higher than that of Saudi Arabia and Russia. Press reports stated that Russia will not increase its current production of 10.7 million barrels of oil per day by any more than 100,000 barrels in the coming years. For what it’s worth, Saudi Arabia says it can produce 12 million barrels of oil per day by 2020, reports The Oil Drum.

This huge increase in U.S. oil production hinges on a number of important plays located across the country.

One of these plays, the Bakken shale, has grown rapidly in recent years. Production at Bakken-Three Forks has climbed to around 400,000 barrels per day and some industry insiders believe that number could eventually be greater than 1 million barrels of oil per day. The Permian basin will significantly contribute to rising production of U.S. oil. Permian production was at 841,000 barrels per day in 2004, according to Well Servicing Magazine. The Oil Drum estimates that in 2010, this figure crept up by 100,000 barrels.

Another play that could contribute significantly to production is the Marcellus shale. A United States Geological Survey report released in August estimates that the Devonian Marcellus shale formation holds 84 trillion cubic feet of natural gas that could be recovered and 3.4 billion barrels of untapped natural gas liquids.

The Utica shale, which exists below Marcellus, is another play that holds significant potential. Aubrey McClendon, President of Chesapeake Energy, told The Gartman Letter that it currently has 12 horizontal drills that are active in its section of the Utica. Some estimates put the amount of oil in the Utica formation at 5.5 billion barrels.

Regardless of what U.S. oil production is predicted to reach within the next decade, it is clear that the country will be one of the largest producers of oil in the world for years to come.
- Keith Schaefer

About Oil & Gas Investments Bulletin

Keith Schaefer, Editor and Publisher of Oil & Gas Investments Bulletin, writes on oil and natural gas markets - and stocks - in a simple, easy to read manner. He uses research reports and trade magazines, interviews industry experts and executives to identify trends in the oil and gas industry - and writes about them in a public blog. He then finds investments that make money based on that information. Company information is shared only with Oil & Gas Investments subscribers in the Bulletin - they see what he’s buying, when he buys it, and why.

The Oil & Gas Investments Bulletin subscription service finds, researches and profiles growing oil and gas companies.  The Oil and Gas Investments Bulletin is a completely independent service, written to build subscriber loyalty. Companies do not pay in any way to be profiled. For more information about the Bulletin or to subscribe, please visit: www.oilandgas-investments.com.

Legal Disclaimer: Under no circumstances should any Oil and Gas Investments Bulletin material be construed as an offering of securities or investment advice. Readers should consult with his/her professional investment advisor regarding investments in securities referred to herein. It is our opinion that junior public oil and gas companies should be evaluated as speculative investments. The companies on which we focus are typically smaller, early stage, oil and gas producers. Such companies by nature carry a high level of risk. Keith Schaefer is not a registered investment dealer or advisor. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer to buy or sell the securities mentioned, or the giving of investment advice. Oil and Gas Investments is a commercial enterprise whose revenue is solely derived from subscription fees. It has been designed to serve as a research portal for subscribers, who must rely on themselves or their investment advisors in determining the suitability of any investment decisions they wish to make. Keith Schaefer does not receive fees directly or indirectly in connection with any comments or opinions expressed in his reports. He bases his investment decisions based on his research, and will state in each instance the shares held by him in each company. The copyright in all material on this site is held or used by permission by us. The contents of this site are provided for informational purposes only and may not, in any form or by any means, be copied or reproduced, summarized, distributed, modified, transmitted, revised or commercially exploited without our prior written permission.

© 2011, Oil & Gas Investments Bulletin


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