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Growth of the world’s future oil supply will be unprecedented. Iraq will become the production leader, followed by the US, according to a study by a research fellow with the Geopolitics of Energy Project.
A surge in production is expected to push global oil output up by approximately 17 MMb/d to 110 MMb/d by 2020, with Iraq, the US, Canada, Brazil, and Venezuela leading the way.
The increase could be the largest jump in a single decade since the 1980s.
That is according to the study, called “Oil: The Next Revolution. The Unprecedented Upsurge of Oil Production Capacity and What It Means For The World,” written by Harvard Kennedy School research fellow Leonardo Maugeri. The near 20% predicted jump in oil production is based on projects announced or under way in countries across the world and depletion rates.
“Quite unnoticed, a big wave of oil production is mounting worldwide, driven by high oil prices, booming investments, private companies’ desperate need to restore [reserves], and the misguided but still prevalent perception that oil must become a rare commodity,” Maugeri wrote in the study. “The year 2012 will likely set a new historic record with more than [US] $600 billion to be spent worldwide in oil and gas [E&P].”
What Maugeri called an oil revival was prompted by investment that commenced in 2003 and climaxed in 2010 with oil and gas E&P of more than $1.5 trillion worldwide.
The level of growth, expected to outpace consumption, also is predicted to lead to a “glut of overproduction and a steep dip in oil prices.”
In the global study, which covered both oil and gas, he determined that oil supplies could increase across the world. But four countries stand above the rest in terms of future yields: Iraq and the US along with Canada, home of tar sands, and Brazil, where presalt oil reserves have been discovered.
A large chunk of the supplies would be generated by unconventional means with the US at the top of the pack. Technology, such as hydraulic fracturing and 3-D seismic exploration techniques, was given credit for the anticipated growth.
Already, the US is leaving other countries – China among them – playing catch-up when it comes to tapping unconventional energy sources such as shale and tight oil. Maugeri estimated that additional unrestricted production from shale/tight oil in the US might reach 6.6 MMb/d by 2020. US shale/tight oil production was about 800,000 b/d in December 2011.
“Taking into consideration limitation in transportation infrastructure and refining capacity, and environmental barriers to development, the US could still increase oil production by 3.5 million barrels per day and conceivably produce a total of 11.6 million barrels per day of crude oil and natural gas liquids per year by 2020, making it the second largest oil producer in the world,” according to Maugeri.
The hike could eventually transform US dependency on other countries to supply its energy needs. The country could end up producing up to 65% of its oil consumption needs domestically, he predicted.
Magueri also targeted Iraq’s oil-producing potential, stating that only 2,300 wells have been drilled there since the 20th century, compared to about 1 million in Texas. Hindered by the lack of advanced technology, a large part of the country remains unexplored with only 21 of 80 oil fields discovered being developed so far, the study showed.
“Given this state of underdevelopment, it is realistic to assume that Iraq has far larger oil reserves than documented so far, probably about 200 billion barrels more. These numbers make Iraq, together with a few others, the fulcrum of any future equilibrium in the global oil market. To date, the Iraqi recovery rate has been much less than 20%, and probably lower than 15% of its [original oil in place].”
However, the study predicted a decline in output for a few of today’s major producing countries. These are Norway, the UK, Mexico, and Iran. Politics was the influencing factor behind Mexico and Iran’s anticipated production loss.
“Leonardo’s conclusions are not only startling, but his paper provides a transparent explanation for how he reaches them – something lacking in many studies,” Meghan O’Sullivan, director of Geopolitics of Energy Project, said in a prepared statement. “His findings have major implications for geopolitics, suggesting important shifts in how countries interact and wield influence.”
For example, if China proves successful in releasing its untapped resources and building necessary infrastructure, the country could have influence in the Middle East.
However, like most studies, Maugeri warned that predictions in the study are subject to a significant margin of error that depends on several factors. A worldwide recession, altered consumption patterns in China, or a sudden end to political tensions in places like Iran, a major oil producer, could upend predictions in the study.
“While opinion-makers, decision-makers, the academy, and the financial market seem to be caught up in the peak-oil mantra and an excessive enthusiasm for renewable energy alternatives to oil, oil prices and technologies are supporting a quiet revolution throughout the oil world,” Maugeri wrote. “If this oil revolution is true, it may change the way most people think about energy and geopolitics.”
The US Geological Survey estimates the remaining conventional oil resources in the world stand at about 7 Tbbl to 8 Tbbl.
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