Related Articles
Forward article link
Share PDF with colleagues

Shale-oil output to hit 14 million b/d by 2035

Global shale-oil output will see a steep rise over the next 20 years, according to a new report, writes Helen Robertson

Global shale-oil output will soar over the next 20 years, possibly to as much as 14 million barrels a day (b/d), according to a new report by PricewaterhouseCoopers (PwC).

In its report, Shale oil: the next energy revolution, the consultancy said it expects shale-oil production could make up as much as 12% of expected total global crude oil supply in 2035. This increase could cause oil prices to fall by up to 40%, the equivalent of around $100/b in real terms. The US Energy Information Administration (EIA) says Brent prices could reach $163/b by 2040, up from an average of around $116/b last year.

“The potential emergence of shale oil presents major strategic opportunities and challenges for the oil and gas industry and for governments worldwide,” PwC said. “It could also influence the dynamics of geopolitics as it increases energy independence for many countries and reduces the influence of Opec.”

The report says the reduction in oil prices could also boost global gross domestic product (GDP) in 2035 by around up to 3.7%, the equivalent of around $2.7 trillion.

However, the consultancy believes the benefits of oil price reductions will vary significantly by country and that large net oil importers, such as India and Japan, could see their GDP boosted by between 4% and 7% by 2035. The US, China, continental Europe and the UK might gain between 2% and 5%. Major oil exporters, such as Russia and the Middle East, could, however, see their trade balances fall by as much as 10% of GDP if they fail to develop their own shale oil resources, the report said.

PwC said the shift would have “significant strategic implications” for oil producers who may have to reassess whether capital-intensive projects will be viable if lower oil prices materialise. As well as potentially pushing production away from higher-cost and more environmentally sensitive areas, such as the Arctic and Canadian oil sands, increased oil-shale output would also fuel innovation. Producers would need to develop the skills and technologies necessary for oil shale, rather than focusing on “complex frontier projects”, the report said.

US shale oil production has increased rapidly - from 111,000 b/d in 2004 to 553,000 b/d in 2011. Consultancy Wood Mackenzie said the US’ 2012 tight-oil output totalled 1.5m b/d.  The US Energy Information Administration believes the country’s shale oil resources could total 33bn barrels and sees domestic production rising to 1.2m b/d by 2035. 

According to International Energy Agency (IEA) calculations, the US could, by 2017, overtake Saudi Arabia to become the world’s largest oil producer on the back of soaring unconventional oil production. The IEA estimates US tight-oil production could reach 4m b/d by 2020, making the country a net oil exporter. This would accelerate a switch in the direction of international oil trade, with almost 90% of Middle Eastern oil exports being drawn to Asia by 2035.

In its report, PwC said shale oil could make “the largest single contribution” to US crude production growth by 2020, and could eventually displace up to 40% of waterborne crude oil imports to the US, increasing availability of supply to China, for example.

The reference case scenario PwC used in the report allows for Opec to respond to increases in shale-oil production and the drop in oil prices this would bring by limiting its own production to maintain an average price of around $100/b. This supply scenario will cause Opec to lose some market share, PwC says, although it expects the cartel will continue to increase total crude production to meet rising demand.

In its second low-case scenario PwC doesn’t include an Opec response, so the increased overall oil supply results in a greater impact on oil prices, which, it predicts, could fall by 2035 to around $83/b in real terms.

 In both these scenarios, PwC says it expects a real oil price between 25% and 40% lower than the EIA’s forecast of around $133/b in 2035. This would equate to a price drop of between $33/b and $50/b by 2035, PwC said.

The IEA estimates global shale oil resources are 3.2 trillion barrels, equal to more than half of all remaining crude oil resources. In the IEA’s new policies scenario, by 2035, global oil production will rise from 84m b/d to 97m b/d, with the increase coming entirely from natural gas liquids (NGLs) output and unconventional production.

However, the IEA said that outside the US, production of light, tight oil and NGLs from shale is unlikely to make a large contribution to global oil supply before 2020. Nevertheless several countries are looking to exploit their unconventional reserves. Canada has joined the light, tight oil boom with production reaching 190,000 b/d in 2011 from the Canadian sector of the Bakken and from other emerging plays. The IEA expects Canadian light, tight oil production to reach more than 500,000 b/d by 2035. 

China’s tight oil production could reach more 200,000 b/d after 2020, the IEA says, and  output from Argentina’s Neuquén basin could reach 150,000 b/d, also by 2020. Statoil farmed into four of Petrofrontier’s exploration permits in Australia’s Northern Territory last year to assess the shale oil resource potential there. In Europe, Wisent Oil and Gas have started a two-well shale oil drilling programme in Poland’s Baltic basin. The first well in the programme, the Rodele-1, spudded on 11 February this year, on the Ketrzyn concession in the Barciany Gmina, the company said. Russia is also thought to hold vast shale-oil reserves, particularly in the Bazhenov play in Western Siberia. The Bazhenov’s potential is being assessed. 

Also in this section
Gas breaks the oil price link
10 July 2020
The proportion of LNG priced on an oil-indexed basis fell to its lowest ever level in 2019
Letter from Houston: Energy hotspot hopes for a ‘bronze lining’
30 June 2020
The US oil capital may be battling both the oil price crash and a Covid-19 resurgence, but there are still reasons to be optimistic
Crude edges higher on Opec+ compliance promises
19 June 2020
Traders see the positives as producers commit to even greater respect for quotas