Updated January 16, 2013, 1:33 p.m. ET By SELINA WILLIAMS
LONDON–Increasing output of shale oil in North America will put pressure on OPEC to cut its own crude production, resulting in the biggest global oil supply buffer in more than a decade, a time when prices were far lower, U.K.-listed oil company BP PLC said in its annual energy forecast Wednesday.
BP’s forecasts illustrate the extent to which the North American boom, first in shale gas production and now in shale oil, has redrawn the global energy map. Analysts said the shifts predicted by BP could make big oil-price moves less likely in the future but wouldn’t necessarily return prices to the much lower levels seen 10 years ago.
Despite the boom’s global impact on energy markets, BP said it doesn’t expect the shale revolution to take hold on any great scale outside North America by 2030, because conditions for investment in unconventional oil and gas are less favorable in Europe and Asia.
The shale boom, in which oil and natural gas trapped in shale rock is released using a combination of new technology, is causing rapid change to the balance of power in energy markets, BP said.
The U.S. could overtake Saudi Arabia to become the world’s largest producer of hydrocarbon liquids this year, thanks to the rapid growth in production from both shale oil and shale gas fields, BP said. Shale oil production alone is expected to grow to about 5 million barrels a day by 2030 in the U.S., said BP’s chief economist Christof Ruehl.
In order to prevent a large oversupply on global oil markets, this growth is likely to be offset by reductions in supply from the Organization of the Petroleum Exporting Countries, which has been pumping at historical highs in recent years to compensate for output losses in Libya due to the civil war and for Iranian sanctions, Mr. Ruehl said.
OPEC will be under the most pressure in 2015, when spare oil-production capacity in the group is expected to reach its highest level of about 6 million barrels a day, he said.
OPEC’s spare production capacity last exceeded 6 million barrels a day in February 2002, when the price of U.S. crude benchmark West Texas Intermediate averaged just under $21 a barrel, according to data from the International Energy Agency.
Higher spare production capacity is correlated with lower oil prices, due to the lower risk of an unexpected supply disruption causing shortages.
West Texas Intermediate averaged over $94 a barrel in 2012, according to BP data. OPEC spare capacity was just 2.5 million barrels a day in November, according to the IEA.
Having 6 million barrels a day of spare OPEC production capacity could help to cap oil-price gains in the event of a significant disruption to supplies, but it wouldn’t necessarily imply an easing in prices overall, said Harry Tchilinguirian, head of commodity strategy at BNP Paribas.
“Spare production capacity will still be in the hands of OPEC, which isn’t delivering that oil because their agenda is dominated by their own fiscal imperatives,” said Mr. Tchilinguirian, referring to the group’s need to maintain higher oil prices to cover growing social spending following the Arab Spring.
Increasing supplies from unconventional sources of oil–including tight oil, oil sands and biofuels–is expected to provide all of the net growth in global oil production to 2020, and more than 70% of growth to 2030, the BP report said.
However, shale oil and gas production is expected to remain concentrated in North America over the next two decades thanks to favorable investment conditions, technological advances, a competitive services industry and a nimble financial sector able to fund the large numbers of drilling rigs required, BP’s Mr. Ruehl said.
“No other country outside the U.S. and Canada has yet succeeded in combining these factors to support production growth. While we expect other regions will adapt over time to develop their resources, by 2030 we expect North America still to dominate production of these resources,” he said.
By 2030, the U.S. is likely to import only 1% of its energy needs, compared to 30% in 2005. This comes as major emerging economies such as China and India are likely to be more reliant on energy imports.
Although there are thought to be large deposits of shale gas in Europe and Asia, their exploitation has so far moved much more slowly due to a combination of tighter regulation, government ownership of mineral rights, environmental concerns and a lack of onshore infrastructure to drill and transport oil and gas.
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