International Energy Agency: U.S. Shale Revolution Transforming Global Oil Markets

US Shale Production Karen Bleier AFP Getty Images
Karen Bleier/AFP/Getty Images
PENNY STARR

The Paris-based International Energy Agency’s (IEA) “Oil 2019 — Analysis and Forecasts to 2024” report  is out, revealing that the United States’s shale revolution is “triggering a rapid transformation of global oil markets.”

“The story of how the United States transformed itself into a major exporter within less than a decade is unprecedented,” the announcement about the report states. “It is due to the ability of the U.S. shale industry to respond quickly to price signals by ramping up production.”

“The United States accounts for 70 percent of the total increase in global capacity to 2024, adding a total of 4 mb/d (million barrels per day),” the announcement states. “This follows spectacular growth of 2.2 mb/d in 2018.”

The summary of the report states, in part:

As a result of its strong oil production growth, the United States will become a net oil exporter in 2021, as its crude and products exports exceed its imports. Towards the end of forecast, U.S. gross exports will reach nine mb/d, overtaking Russia and catching up on Saudi Arabia. The transformation of the United States into a major exporter is another consequence of its shale revolution.

Greater U.S. exports to global markets strengthen oil security around the world.

“Demand for Oil Increasing for the Foreseeable Future” is the headline for the analysis of upstream investment in the forecast.

“It is, therefore, reassuring that 2019 upstream investment is set to rise for the third straight year, according to preliminary plans announced by key oil and gas companies,” the report summary says. 

The report also notes that while gasoline “slows, petrochemicals and jet fuel are stalwarts of demand growth.”

“The second wave of the U.S. shale revolution is coming,” Fatih Birol, IEA’s executive director says of the report. “It will see the United States account for 70 percent of the rise in global oil production and some 75 percent of the expansion in LNG (liquid natural gas) trade over the next five years.

“This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy,” Birol said.

Some of the other key findings of the report include:

  • The U.S. is joined by Brazil, Iraq, Norway, the UAE and Guyana as the biggest sources of supply growth. Iran and Venezuela are forecast to post the deepest losses, though the outlook could change dramatically depending on political factors.
  • The U.S. shale revolution is also altering the picture for refiners. These barrels are generally lighter than the average crude barrel, which means they require less complex refining processes to turn them into final products.
  • Sulphur is another key issue. An average product barrel is allowed to contain only 0.34 percent of sulphur, and this percentage will fall even more with the IMO regulations, to 0.24 percent. However, an average crude barrel contains 1.2 percent sulphur, requiring refiners to use a lot of natural gas to produce hydrogen to use in desulphurization operations — a costly and CO2 intensive process. Shale crudes, on the other hand, have a significantly lower sulfur content, requiring less costly operations.

The full content of the report can be purchased online.

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