An even greater emphasis on unconventional resources is needed to meet growing energy demand by 2035.

Unconventional oil and natural gas liquids will account for 9.2 million barrels per day (b/d) or 35% of the total increase in liquids production in the reference case by 2035, according to the U.S. Energy Information Administration’s (EIA) International Energy Outlook 2011, which was released Sept. 19.  Unconventional natural gas production is predicted to rise from 14 trillion cubic feet (Tcf) in 2008 to 43 Tcf in 2035.

“High oil prices, improvements in exploration and extraction technologies, emphasis on recovery efficiency, and the emergence and continued growth of unconventional resource production are the primary factors supporting the growth of non-OPEC liquids production in the reference case,” noted the report.

Natural gas is expected to have the fastest growth rate among fossil fuels over the projection period.  Unconventional natural gas supplies are expected to increase substantially , especially from the U.S., China and Canada.

Other areas, such as Europe, will continue to see declines in gas production at a rate of about 0.9% per year through 2035 due to declining conventional, North Sea production primarily.  Unconventional production will slow the rate of overall decline.

Growth in Australian gas production is expected from 1.7 Tcf in 2008 to 5.7 Tcf in 2035.  The Australia/New Zealand region shows the strongest growth in gas production among OECD regions – 4.5% per year.

“With more than 40% of the world’s proved natural gas reserves, the Middle East accounts for the largest increase in regional natural gas production from 2008 to 2035 and for 26% of the total increment in world natural gas production in the reference case,” the outlook stated.

About 17% of the global increase in gas production will come from non-OECD Europe and Eurasia, which includes Russia, Central Asia and non-OECD Europe.

“If Russia is to increase exports to Asia while at least maintaining exports to Europe, it must invest in new fields,” the report noted.   “Moreover, it will require such investment simply to maintain current production levels because production is in decline at its three largest gas fields (Yamburg, Urengoy and Medvezh’ye).”

Natural gas production from Africa is expected to nearly double from 7.5 Tcf in 2008 to 14.1 Tcf in 2035.  “Remaining resources are more promising in West Africa than in North Africa, which has been producing large volumes of natural gas over a much longer period,” the report explained.

The fastest growth for natural gas production in Latin America is forecast for Brazil, averaging 6.9% per year.  “Recent discoveries of oil and natural gas in the subsalt Santos Basin are expected to increase the country’s gas production,” according to the outlook. 

On the oil side, non-OPEC production is being boosted by the return to sustained high oil prices, which has encouraged investment in conventional liquids production, enhanced oil recovery projects and unconventional liquids production. Non-OPEC production should rise from 50 million b/d in 2008 to 65.3 million b/d in 2035. 

“The overall increase results primarily from higher production in four countries: Brazil; Russia; Kazakhstan; and the U.S.  Among non-OPEC producers, the near absence of prospects for new, large, conventional  petroleum liquids projects, along with declines in production from existing conventional fields, results in heavy investment in the development of smaller fields,” the report continued.

The major areas of decline are in Mexico and the North Sea, while the most significant decline in non-OPEC liquids production is projected for Europe.  A decrease from 5.1 million b/d in 2008 to 3.0 million b/d in 2035 is expected.

“Although the shortage of investment in Mexico is expected to lead to a mid-term decline, Mexico has potential resources to support a long-term recovery in total production, primarily in the Gulf of Mexico,” the report noted.  “The extent and timing of a recovery will depend in part on the level of economic access granted to foreign investors and operators.  Pemex currently does not have the technical capability or financial means to develop potential deepwater projects in the Gulf of Mexico.”

For OPEC producers, Saudi Arabia will maintain its lead in liquids production.  Iraq’s production could increase by 3.7% per year, assuming “that political, legislative, logistical, investment and security uncertainties will be resolved in the long term, and that OPEC constraints and resource availability will be the factors with the strongest influence on Iraq’s willingness and ability to increase production,” the outlook stated.

Unconventional liquids production in OPEC rests primarily in projects in Venezuela’s Orinoco region and Qatar’s gas-to-liquids plant.

“Outside OPEC, unconventional liquids production comes from a much more diverse group of countries and resource types,” the report continued.  “As a whole, non-OPEC unconventional liquids production in the reference case increase by 8.2 million b/d.  By volume, the countries making the largest contributions to the increase in non-OPEC unconventional liquids are Canada (3.3 million b/d), the U.S. (2.3 million b/d), Brazil (1.2 million b/d) and China (900,000 b/d).”

Contact the author, Scott Weeden, at sweeden@hartenergy.com.