While analysts are bullish on the growth of oil production from the Canadian oil sands, it is likely that some of this future supply may be partially displaced by rapidly growing production from the United States.

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Canadian Oil Production
The Canadian Association of Petroleum Producers released its annual Crude Oil Forecast for 2012, and predicts that oil production from Canada will reach 6.2 million barrels per day by 2030. This would be more than double the 3 million barrels per day produced in 2011. Most of this growth will come from the development of oil sands projects in Alberta, where production is expected to increase from 1.6 million barrels per day in 2011, to 5 million barrels per day in 2030.

U.S. Oil Production
While the conventional wisdom is that the U.S. is a mature area with declining production, the application of horizontal drilling and hydraulic fracturing has led to a significant increase in production from here over the last few years.

The U.S. Energy Information Administration (EIA) recently reported that oil production in March 2012 averaged 6.26 million barrels per day. This was the highest level of domestic oil production since June 1998. The EIA noted that the increase in oil production came mostly from North Dakota, Texas and the Gulf of Mexico.

Oil production growth in Texas was due to the development of the Eagle Ford Shale, where operators started drilling 856 wells in the first quarter of 2012. Chesapeake Energy (NYSE:CHK) is active in the Eagle Ford Shale and has 475,000 net acres under lease. The company reported that it put 60 wells onto production in the second quarter of 2012.

The Eagle Ford Shale is only one of many areas in Texas seeing increased development. Devon Energy (NYSE:DVN) is involved in the Permian Basin in West Texas and plans to drill more than 300 wells here at a cost of approximately $1.4 billion in 2012.

SEE: Oil And Gas Industry Primer

North Dakota
North Dakota's production growth was powered by the development of the Bakken formation, where there is so much activity that there is a shortage of oil services capacity. The North Dakota's Department of Mineral Resources reports that there is a backlog of 350 wells waiting for completion services.

Continental Resources (NYSE:CLR) is active in the Bakken and has drilled 1,220 gross wells here since entering the play. EOG Resources (NYSE:EOG) is also involved with the Bakken and reported average daily gross production of about 56,400 barrels of oil equivalent from here at the end of 2011.

Just how high U.S. oil production can reach is a matter of contention. On a monthly basis, it peaked at just over 10 million barrels per day in November 1970, and it would take an incremental 3.8 million barrels per day for the U.S. to reach that level of production.

The Bottom Line
Some observers claim that our dependence on foreign sources of oil can be eliminated entirely through reduced consumption as well as higher domestic production. Although this seems unlikely, any reduction in dependence on imported oil through either method would be beneficial.

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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