United States is not the only country ramping up production. Canadian oil sands, natural gas liquids, and a rise in Brazilian deepwater production would raise non-OPEC production up to 53 million bpd by 2015 from under 49 million bpd in 2011.
Not surprisingly, Saudi Arabia itself is trying to get a handle on the shale phenomenon.In fact, Saudi Arabia Basic Industries Corp. is eyeing investments in U.S. companies focused on shale gas, according to Mohamed Al-Mady, the company's chief executive officer.Saudi Arabia is also reportedly looking at exploring for shale oil and gas reserves offshore near its own borders.
Meanwhile, the kingdom's 900,000 bpd Manifa offshore field is expected to come on line by 2014. Saudi Aramco is also upgrading the Safaniyah field. And Chevron is working on testing steam injection in the Wafra oilfield in the Neural zone, which could turn into the largest largest steam-injection project in the world - if approved. OPEC WILL BE BACKHowever, OPEC production would surge again as non-OPEC production plateaus post-2020.
The IEA says Middle East demand could slow to 1.4% but will depend heavily on governments reducing subsidies and switching from oil to other energy sources to generate electricity."Failure to do so would have far-reaching implications for the key producers' capacity to export oil and fuel regional development and social programmes - not least in Saudi Arabia," said the IEA.
IRAQ TO THE RESCUEMuch of OPEC's production renaissance will depend on Iraq.
Asia will come to Middle East's rescue, with China accounting for 50% of global crude demand.China's oil demand will rise from 9 million bpd in 2011 to 15.1 million bpd by 2035, while India will more than double demand from 3.4 million bpd last year to 7.5 million by 2035. Both forecasts take into account the two countries efforts to diversify their energy sources and make extensive use of alternative energies.OPEC-IEA RESERVE ESTIMATES DIVERGEOne crucial difference between the OPEC and IEA reports is the reserve estimates.OPEC believes 81% of the crude reserves are located in OPEC countries and seems to underplay unconventional oils such as shale."It is important to understand the potential infrastructure challenges for shale oil, particularly with regard to transportation and the specific capital needs to develop these resources, both human and physical," OPEC stated. "Moreover, environmental concerns are a further constraint to the future development of shale oil. For example, hydraulic fracturing, required for the development of shale oil, involves large volumes of water, and associated concerns about possible pollution, as well as a number of other environmental impacts, such as heavy equipment traffic, noise and air pollution."Meanwhile, the IEA notes that unconventional oil which is primarily located in Americas stands at 3.19 trillion, exceeding Middle East dominated conventional oil of 2.67 trillion.
Worryingly for OPEC countries, the IEA believes that the unconventional reserve figures could be revised upwards.CONCLUSION
OPEC countries need to do some hard thinking and accelerate their economic reform agenda to meet the challenges in the face of a changing global energy map.
It could be a blessing in disguise for Middle East oil producers as they wrestle with domestic unrest. The American resurgence could help fast-track domestic reform and help OPEC countries transform into more nimble oil and gas exporters.
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