By Bruce Kennedy Jul 18, 2013 9:40AM
The U.S. is at a historic crossroads when it comes to domestic oil production, which could surpass even some of the most optimistic forecasts.
In testimony this week before the Senate Committee on Energy and Natural Resources, Adam Sieminski, the head of the U.S. Energy Information Administration, reported domestic oil production was at 7.4 million barrels per day as of April -- its highest level since October 1992.
Leonardo Maugeri, a former senior executive at Italian oil giant Eni (ENI -0.39%), is a fellow at the Belfer Center for Science and International Affairs at Harvard's Kennedy School of Government. Last month he issued a paper on the U.S. oil shale boom after analyzing data from more than 4,000 shale wells and from about 100 oil companies involved in shale oil exploration.
According to his findings, the U.S. may end up producing 5 million barrels of shale oil daily by 2017, becoming the world's largest oil producer as it churns out up to 16 million barrels of oil per day, including shale, conventional, liquefied natural gas and biofuels.
"The nature of shale oil production makes it particularly suited for the United States' industrial, financial, demographic, and geologic landscape," notes a Belfer Center policy brief on Maugeri's paper. "These same characteristics make the expansion of the shale phenomenon to other parts of the world improbable -- at least in the short term."
Indeed, Sieminski noted in his recent testimony that the rate of onshore oil production in the lower 48 states has been remarkable, rising to more than 2 million barrels a day, an increase of 64%, just between February 2010 and February 2013. During that period, Texas more than doubled its oil production, while North Dakota nearly tripled its output.
But Maugeri acknowledges that oil production will always depend on oil prices and that his forecast assumes the price will hold steady or perhaps decrease slightly. "If the oil price drops to below $65 per barrel," the brief says, "production could drop off substantially."
And, whether consciously or not, the brief's comparison of conventional and shale oil production seems to bring up questions about whether this boom in production is just that -- a boom, perhaps to be followed by a bust.
"Conventional oil production requires a high upfront cost, and wells have a long production life" of 30 years, it notes. "Shale oil is quick and relatively cheap to start up and has continual costs and a short production life (1 year). New wells come on line all the time and can be brought off line if the price of oil falls."
keyboard shortcuts: V vote up article J next comment K previous comment