The unconventional resource success story unfolding in North America has the potential to change the dynamics of the world’s energy scene, while also causing a geopolitical shakeup.

If the U.S. said it is getting into the natural gas export business, recognizing that it may be at least four years before any substantial amounts hit the market, “it would have an immediate effect on the global political situation and it would certainly have a tempering affect on Russia,” Bernard Weinstein, associate director of the Maguire Energy Institute and business economist, said this week during the Pipeline Opportunities Conference in Houston.

North America is becoming an energy superpower, he added, with the U.S. already ranking among the highest in the world in terms of natural gas production and on track to rise to the top within two or three years in oil production.

Led by bountiful supplies in Texas and North Dakota, U.S. crude production increased by about 1 MMbbl/d in 2012 and 2013, according to statistics presented at the conference.

The U.S. Energy Information Administration announced this week that U.S. tight oil production averaged 3.22 MMbbl/d in fourth-quarter 2013, pushing the country’s overall crude oil production average to 7.84 MMbb/d. That’s more than 10% of the world’s production.

“If you look at North America and you combine production in Mexico, the U.S. and Canada, we are way ahead of everybody else, and I’m hoping that as a result of the energy reforms going on in Mexico, we will over the next decade see the emergence of kind of a common market in energy that will clearly input the stamp of North America being the world’s energy superpower on the map,” Weinstein said. “Last year, we had record exports of refined products. … The potential is there.”

And more potential could exist offshore the U.S. Data from the Department of Interior shows that 10.37 Bbbl and 510 Bcm (18.02 Tcf) of potentially recoverable federal oil and gas resources could be offshore Washington, Oregon and southern California; while 3.82 Bbbl and 1.1 Tcm (36.98 Tcf) of potentially recoverable oil and gas resources could be in the Atlantic.

The conference took place March 25 as legislative hearings on natural gas exports started and the debate continued on whether to lift the ban on oil exports.

“Essentially since the OPEC embargo 40 years ago crude oil exports have been prohibited except to Canada or national emergency,” Weinstein explained. “With production increasing a million barrels per day, now some think that maybe we should get into the business of exporting crude oil.” With crude oil consumption down and production up, coastal refineries geared up and a surplus of light crude, “maybe we should export it. It’s going to be a tough political sale, but I think it will happen.”

Already, dozens have lined up to get federal approval to export LNG. The Department of Energy has cleared seven facilities to export domestically produced LNG to countries that do not have a Free Trade Agreement with the U.S.

“It’s a shame that we aren’t building these LNG facilities as fast as we can. These are multibillion dollar projects that create hundreds of new hires for employment,” said Gary Evans, CEO of Magnum Hunter Resources Corp., which has been active in the Eagle Ford, Marcellus, Bakken and Utica shale plays. He questioned why the U.S. isn’t exporting natural gas to other regions of the world.

Today, Japan and China are paying between $18 and $20/Mcf to get gas from Qatar, while the U.S. is selling gas for $4.50, he said. But he pointed out that while the U.S. is ahead of others in terms of production, other countries – specifically Australia – are five to seven years ahead of the U.S. with respect to infrastructure.

“They are looking for our technology to help them onshore discover this gas,” Evans said. “We need to take this abundant resource and do something with it.”

Unconventional gas is changing the dynamics of the entire global gas structure, he continued, before mentioning how the situation in Russia and Ukraine has left Europe thinking about getting gas from the U.S. instead of Russia.

Gas production continues to rise in the U.S., with some areas even flaring gas because there isn’t enough storage capacity. But resistance to exports exists.

“Some of the resistance to exports is coming from domestic manufacturers who use natural gas as a boiler fuel or a feedstock, and they think we are better off keeping that stuff at home because it holds down our cost for production and makes us more competitive,” Weinstein said. “My response to that is we need to export more than anything to get the gas price up because there is a difference between cheap gas and dirt cheap gas. … We need to capture a lot of this flaring that is occurring and capitalize on its economic value.”

However, the boom in unconventional resources is not without problems, said Joseph Dancy, adjunct professor of energy and environmental law, SMU Dedman School of Law.

“Because we have produced so much oil and natural gas we’re having a tremendous issue with regard to transportation,” he said. Other issues involve sustainability of production because the decline curves for some of the shale fields are large. “You can make money and get a return on these shale wells. The question is ‘What is the ultimate recovery from these wells?’”

In addition, capex for oil production have “gone through the roof” for some unconventional plays. “It’s getting more and more expensive to develop energy unconventional reserves,” Dancy said. A report from the International Energy Agency show capex increased globally from $250 billion in 2000 to $700 billion in 2012.

But production from the U.S. has helped bring stability to the world’s energy market, given offline issues in places such as Libya, Algeria, Venezuela, Syria and Egypt. “If we didn’t have domestic production and unconventional reserves and production increases, the offline issues with regard to the Arab states and the OPEC states would’ve caused some substantial spikes,” Dancy continued.

Evans added, “Everything we’re talking about with these shale plays is all due to new technology our industry has learned and bred on its own whether it’s horizontal drilling technology, hydraulic fracturing, all the things we do to make these shales produce oil and gas in huge quantities. …

“Every country around the world is here trying to figure out what in the world are we doing because they want to take this technology back to their own countries and do the same thing,” he continued. “We’re a solid five to seven years ahead of the rest of the world and continue to take these shale plays and make them better and better.”

Contact the author, Velda Addison, at vaddison@hartenergy.com.