Bloomberg News

U.S. to Become Largest Liquid-Fuels Producer in 2013, BP Says

January 16, 2013

The U.S. will surpass Russia and Saudi Arabia this year to become the largest producer of liquid fuels, BP Plc (BP/) said.

Liquids output, which includes oil, natural gas liquids and biofuels, will be boosted in the U.S. by tight oil extracted by the same technology that sparked a boom in shale gas, BP said today in its Energy Outlook 2030. Tight oil will account for 9 percent of global supplies by 2030, with North America dominating.

“The speed with which tight oil is following shale gas has surprised us,” BP Chief Economist Christof Ruehl said on a conference call with journalists. “It’s also surprising how fuel intensity and fuel efficiency have improved so rapidly.”

BP maintained its projections for world energy demand growth in the next two decades of about 1.6 percent a year, with most of the increase coming from developing countries outside the Organization for Economic Cooperation and Development. The rate of increase in global consumption is declining as fuel efficiency rises.

The U.S. will become the biggest oil producer for about five years starting in 2020, the International Energy Agency said in November. While Russia and Saudi Arabia will overtake the U.S. again by 2030 as shale oil production slows, the U.S. will be 99 percent self-sufficient by then, BP said today.

OPEC Output

The scenario in which the U.S. becomes the largest liquids producer depends in part on whether Saudi Arabia reins in output to prevent oversupplying the market. Crude output from the Organization of Petroleum Exporting Countries won’t return to the 2013 level of 30 million barrels a day until 2020, Ruehl said.

The group’s spare production capacity will exceed 6 million barrels a day by 2015, the highest since the late 1980s. If OPEC producers maintain their output at current levels, the oil market will experience an “unsustainably large” increase in inventories, BP said.

So-called unconventional sources of oil such as tight oil, oil sands and biofuels will provide all the growth in global supply to 2020 and 70 percent of growth to 2030, BP said. Energy intensity, defined as the amount of energy consumed per unit of gross domestic product, will be 31 percent lower in 2030. Without those gains, energy supply would have to double by 2030 to meet demand, rather than the 36 percent increase in supply predicted by BP.

The fastest-growing fuels are renewables, which will expand on average 7.6 percent a year from 2011 to 2030, BP said. Among fossil fuels, gas is increasing the quickest at 2 percent a year, followed by coal at 1.2 percent and oil at 0.8 percent.

While fossil fuels will still make up about 80 percent of the energy mix in 2030, oil, gas and coal will all have roughly the same market share, meaning that there won’t be a single dominant source of energy for the first time, Ruehl said.

Tight oil and shale gas are produced by grinding underground rocks with chemicals, sand and water. The technique unlocked reserves and turned the U.S. into the biggest gas producer.

To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Lananh Nguyen in London at lnguyen35@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Stephen Voss at sev@bloomberg.net


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