U.S. to overtake Saudi as top oil producer: IEA
[image: Photo]
Mon, Nov 12 2012

By Peg Mackey<http://blogs.reuters.com/search/journalist.php?edition=us&n=Peg.Mackey>

LONDON (Reuters) - The United States will overtake Saudi Arabia and Russia
as the world's top oil producer by 2017, the West's energy agency said on
Monday, predicting Washington will come very close to achieving a
previously unthinkable energy self-sufficiency.

The International Energy Agency (IEA) said it saw a continued fall in U.S.
oil imports with North America becoming a net oil exporter by around 2030
and the United States becoming almost self-sufficient in energy by 2035.

"The United States, which currently imports around 20 percent of its total
energy needs, becomes all but self-sufficient in net terms - a dramatic
reversal of the trend seen in most other energy importing countries," it
said.

The forecasts by the IEA, which advises large industrialized nations on
energy policy, were in sharp contrast to its previous reports, which saw
Saudi Arabia remaining the top producer until 2035.

"Energy developments in the United States are profound and their effect
will be felt well beyond North America - and the energy sector," the IEA
said in the annual long-term report, giving one of the most optimistic
forecasts for U.S. energy production growth to date.

"The recent rebound in U.S. oil and gas production, driven by upstream
technologies that are unlocking light tight oil and shale gas resources, is
spurring economic activity - with less expensive gas and electricity prices
giving industry a competitive edge," it added.

IEA Chief Economist Fatih Birol told a news conference in London he
believed the United States would overtake Russia as the biggest gas
producer by a significant margin by 2015. By 2017, it would become the
world's largest oil producer, he said.

This could have significant geopolitical implications, if Washington feels
its strategic interests are no longer as embedded in the Middle East and
other volatile oil producing regions.

Analysts ask whether an energy independent United States would still be
prepared to safeguard major trade routes around the world, such as the
Strait of Hormuz in the Middle East.

The United States will rely more on natural gas than either oil or coal by
2035 as cheap domestic supply boosts demand among industry and power
generators, the IEA said.

LIMITED KNOWLEDGE

Birol said he realized how optimistic the IEA forecasts were given that the
shale oil boom was a relatively new phenomenon.

"Light, tight oil resources are poorly known ... If no new resources are
discovered (after 2020) and plus, if the prices are not as high as today,
then we may see Saudi Arabia coming back and being the first producer
again," he said.

The IEA said it saw U.S. oil production rising to 10 million barrels per
day (bpd) by 2015 and 11.1 million bpd in 2020 before slipping to 9.2
million bpd by 2035.

Saudi Arabian oil output would be 10.9 million bpd by 2015, the IEA said,
10.6 million bpd in 2020 but would rise to 12.3 million bpd by 2035.

That would see the world relying increasingly on OPEC after 2020 as, in
addition to increases from Saudi Arabia, Iraq will account for 45 percent
of the growth in global oil production to 2035 and become the
second-largest exporter, overtaking Russia.

OPEC's share of world oil production will rise to 48 percent from 42
percent now.

Russian oil output, which over the past decade has been steadily above
Saudi Arabia, is predicted to stay flat at over 10 million bpd until 2020,
when it will start to decline to reach just above 9 million bpd by 2035.

"Russia, which remains the largest individual energy exporter throughout
the period, sees its revenues from oil, natural gas and coal exports rise
from $380 billion in 2011 to $410 billion in 2035," the IEA said.

The U.S. oil boom would accelerate a switch in the direction of
international oil trade, the IEA said, predicting that by 2035 almost 90
percent of oil from the Middle East would be drawn to Asia.

ENERGY DEMAND GROWS BY THIRD

The report assumes a huge expansion in the Chinese economy, which it saw
overtaking the United States in purchasing power parity soon after 2015 and
by 2020 using market exchange rates. Chinese real gross domestic product is
expected to increase by 5.7 percent annually between 2011 and 2035.

A rise of 1.8 billion in the world's population to 8.6 billion would lead
to a spike in global oil demand by more than a 10th to over 99 million bpd
by 2035, keeping pressure on oil prices, the IEA said.

The agency's central "New Policies" scenario, which assumes a range of
measures are taken to curb oil consumption in Europe, the United States,
China and elsewhere, sees the average import cost of oil rise to just over
$215 per barrel by 2035 in nominal terms, or $125 in 2011 terms.

If fewer steps are taken to promote renewable energy and curb carbon
dioxide emissions, oil was likely to exceed $250 per barrel in nominal
terms by 2035 and reach $145 in real terms -- almost level with the record
highs seen four years ago.

The share of coal in primary energy demand will fall only slightly by 2035.

Fossil fuels in general will remain dominant in the global energy mix,
supported by subsidies that, in 2011, jumped by almost 30 percent to $523
billion, due mainly to increases in the Middle East and North Africa.

(Reporting by Dmitry Zhdannikov, Peg Mackey and Christopher Johnson;
Writing by Dmitry Zhdannikov; Editing by Christopher Johnson and William
Hardy)

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