circa 1935: A view of oil wells in California, near Los Angeles.
The US, which currently imports around 20% of its energy needs, will surpass Saudi Arabia’s oil production by 2017 and will become a net oil exporter by around 2030 and a net exporter of natural gas by 2020, according to the IEA’s World Energy Outlook 2012 released in London. By 2035, the US will be almost self-sufficient energy.
Maria van der Hoeven, the IEA executive director, said: “North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world, yet the potential also exists for a similarly transformative shift in global energy efficiency.”
By 2035, Saudi Arabia will reclaim its position as number one crude exporter – 90% of Middle Eastern oil exports will fuel growing energy demand in Asia. Also from 2035, Iraq will be producing 45% of the world’s oil, usurping Russia from its number two export position.
Projected US domestic crude oil production will increase to 6.8 million bbl/d in 2013, the highest level of production since 1993. Natural gas production is predicted to increase 29% by 2035 almost exclusively because of the growth in shale gas production thanks to innovations in hydraulic fracturing.
Fatih Birol, the IEA’s chief economist and the WEO’s lead author, said that the US will begin exporting natural gas from around 2018, a controversial decision that could increase the costs of domestic supplies. In terms of production, the US will overtake Saudi Arabia’s production by 2017, and in 2015, the US will overtake Russia to become the world’s largest producer of natural gas.
The report also assumes that the price of oil will stay around $100/barrel through 2035 in order for oil and gas companies to pay for exploration and development costs.
Energy Efficiency More Important than Ever
Birol also said that the IEA predicted another “unconventional energy revolution in energy efficiency.” Last year, the US implemented new fuel efficiency standards of 54.5mpg by 2020, which would reduce demand just as oil production increases, he noted.
Of the $37 trillion investment required in the world’s energy supply system between 2012 and 2035, $19 trillion would be needed for the oil and gas industry and $17 trillion for the power sector, according to the report.
Global fossilÃ¢Â€Âfuel subsidies reached $523 billion in 2011, almost 30% higher than in 2010, the report noted. Financial support to renewable energy, by comparison, amounted to $88 billion in 2011.
If the US government permits exports, shipments could reach 19 billion cubic meters in 2020, according to the report.
Emerging economies will drive global energy markets, with the share of nonÃ¢Â€ÂOECD energy demand rising from 55% in 2010 to 65% in 2035, said the report. China’s demand will rise 60% by 2035 and demand in India will more than double. OECD energy demand in 2035 will be just 3% higher than in 2010, but natural gas nearly overtakes coal in the global energy supply mix by 2035.
However, the IEA warned that global CO2 emissions have rebounded to a record high and energy efficiency worldwide worsened for second straight year.
Increasing use of fossil fuels would result in a long-term average temperature increase of 3.6 °C as energy-related CO2 emissions rise to 37 gigatonnes in 2035, up from 31.2 gigatonnes in 2011, said the report.
Economic concerns had diverted attention from energy policy and limited the means of intervention, but countries would need to redouble their efforts with energy efficiency as consumption rises to curb emissions, said Birol.
“Our analysis shows that in the absence of a concerted policy push, two-thirds of the economically viable potential to improve energy efficiency will remain unrealized through to 2035,” said Birol.”
“Action to improve energy efficiency could delay the complete ‘lock-in’ of the allowable emissions of carbon dioxide under a 2°C trajectory – which is currently set to happen in 2017 – until 2022, buying time to secure a much-needed global climate agreement. It would also bring substantial energy security and economic benefits, including cutting fuel bills by 20% on average.”