The International Energy Agency (IEA) predicts that the domestic oil and gas boom will lead to a transformation of the global energy map and make the United States the world's largest producer of crude oil by 2020. These predictions and others regarding global supply and demand trends for crude oil and natural gas were contained in the latest edition of the World Energy Outlook (WEO), released in Nov. 2012.
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World Energy Outlook
The IEA estimates that the production of commodities like crude oil and liquids in the U.S. will peak at 11.1 million barrels per day in 2020, up from 8.1 million barrels per day in 2011. This growth will be led by the development of numerous domestic tight oil and shale oil formations. Oil demand in the U.S. is also expected to fall over that time frame and beyond due to increased fuel efficiency in the transportation sector.
The combination of these two factors will lead to a dramatic decrease in the need for imported crude oil. The IEA estimates that North America will become a net oil exporter by 2030, helped by the development of the oil sands deposits in Canada. The U.S. currently imports 20% of its total energy requirements, but is projected to become energy self-sufficient by 2035 on a net basis, according to the IEA.
Independent Oil and Gas Sector
The exploration and production industry has been the leader in exploring and developing oil and gas fields in the U.S., through the application of horizontal drilling and hydraulic fracturing. These techniques allow the recovery of resources from formations once thought uneconomic to produce.
Most of the recent growth in domestic oil production has come from the development of the Bakken in the Williston Basin and Eagle Ford Shale in Texas, with these two plays accounting for 82% of the growth of horizontal crude oil production.
Continental Resources (NYSE:CLR) is one of the fastest-growing operators and was an early mover in the development of the Bakken petroleum system in Montana and North Dakota. The company is the largest leaseholder and will have 1.1 million acres after a recently-announced acquisition closes. The company expects oil and gas production in 2013 to grow from 30 to 35% over last year as it continues to exploit this prolific play.
Another rapidly-growing operator in the Bakken play is Kodiak Oil and Gas (NYSE:KOG), which has 153,000 net acres under lease. The company reported production of approximately 3,900 barrels of oil equivalent (BOE) per day in 2011 and expects to exit 2012 with production of 27,000 BOE per day.
Eagle Ford Shale
EOG Resources (NYSE:EOG) has 644,000 net acres exposed to the Eagle Ford Shale, with about 90% of the leasehold in the oil window of the play. The company reported net production of 109,000 BOE per day from the Eagle Ford Shale in the third quarter of 2012 and estimates that it has 1.6 billion BOE of potential oil and gas resources on its properties.
Chesapeake Energy (NYSE:CHK) is also active in the Eagle Ford Shale and has 490,000 net acres under lease here. The company reported net production of 52,200 BOE per day from the Eagle Ford Shale in the third quarter of 2012, with approximately 68% of this production stream composed of crude oil.
The Bottom Line
The frenzy over peak oil reached a crescendo a few years back with advocates of this theory dismissing anyone who didn't agree with the prediction that global production of oil was close to reaching a peak. The energy industry wisely ignored this nonsense and one can only hope that one day we can bury M. King Hubbert once and for all.
At the time of writing, Eric Fox did not own any shares in any company mentioned in this article.