Some predictions of surging global production of light, tight oil from
unconventional source rocks may be overblown, with a of number of
environmental and political question marks still hanging over the industry,
delegates at a London oil conference heard Monday.
While some oil market forecasters have predicted tight oil production
jumping to 10 million b/d by 2030, many countries hoping to exploit their
shale and tight oil potential will find it difficult to replicate the pace of
success in the US, BP's chief economist Christof Ruhl said.
In particular, the competitive advantage of the US' open economy cannot
be matched by other big shale resource holders, such as China and Russia.
BP estimates that there are some 240 billion barrels of technically
recoverable tight oil globally. Asia has 50 billion barrels of tight oil,
versus 70 billion barrels in North America.
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"It's not just about resources...there is a huge role for policy and
politics in determining the speed for which these resources will come on
line," Ruhl told the oil conference.
Citing BP's 2030 oil market outlook, Ruhl said tight oil will likely
expand by 7.5 million b/d to reach around 9 million b/d by 2030, accounting
for nearly half of the 16.1 million b/d of global supply growth forecast for
North America will continue to dominate global tight oil output, with
limited growth outside the region and, by 2030, tight oil should reach 9% of
global supplies, he said.
But US tight oil growth is expected to slow after 2020 due to high costs
and drilling activity required to sustain output as well as environmental and
other issues, Ruhl said.
BP is forecasting US tight oil production of around 4.8 million b/d by
2020, when output growth will slow to reach some 6.5 million b/d. But some
forecasters have predicted US tight oil output soaring to almost 10 million
b/d by 2030, according to BP.
"We are at the bottom of the range [of tight oil production forecasts],"
Ruhl said. "A lot of that is irrational exuberance or hype, these are the
same consultants that three years ago were running around saying that we are
running out of oil. Now they are saying that we are drowning in it because
they have something to sell," he said.
Even the US, where tight oil will help the country become almost
self-sufficient in oil before 2030, some tight oil plays are untouched as yet
due to environmental concerns, Ruhl said.
Environment concerns, which have been heard more frequently dogging
shale projects in Europe, are expected to result in new US legislation on
fracking, gas flaring, and ground water in the near future, according to
David Fyfe, the head of market research at Gunvor.
The limitations of a local skilled work force and supply chain
constraints could also slow the expansion of light, tight oil in the US, he
"I think light, tight oil is a massive resource, but let's not get
carried away by about the growth potential," he said.
According to the Energy Information Administration, US net imports of
liquid fuels could end by 2035 and the country could become a net exporter by
But the sudden turnaround of US oil fortunes comes despite assumptions
that onshore tight oil plays would see a fall in production growth starting
in 2020 with other, mostly offshore, resources playing a more important role.
Globally, tight oil developments are also likely to be constrained by
the absence of geological data on tight plays, a contributing factor to the
US tight boom over the last decade, according to Amita Sen, the chief oil
analyst at Energy Aspects.
While source rock data from the US' Backen and Permian basin has been
acquired over hundreds of years, similar detailed understanding of source
rocks is simply "not available in any other part of the world," Sen said.
"There isn't that much new due to technology to shale...it's more like
brute force. But even the geologists cannot predict how tight reservoirs will
perform and deplete over the production life of tight plays," she said.
Another factor that US refiners are also having to come to terms with
due to fast growing volumes of tight oil is the "phenomenal" variability of
the oil quality from the developments, she said.
Some refiners in Texas and Louisiana are complaining that batches of
tight oil from Eagle Ford shale can differ so much in quality that they
"don't know the end products they are going to get" from processing the oil.
"That's raising a few questions about 'Is this necessarily a sustainable
source of production growth?'" she said.
"It is a good thing to be happening to the world, but let's not get
carried away with reports such as of the US becoming the next Middle East,"
The EIA said in December that total US oil production, including tight
oil, would grow to 7.5 million b/d or 7.6 million b/d by around 2019.
--Robert Perkins, firstname.lastname@example.org
--Edited by Jonathan Fox, email@example.com