Nobody – absolutely nobody – was able to predict what was about to happen. In just three years, oil production from tight* reservoirs in the US tripled from 1 MMbopd in 2010 to more than 3 MMbopd in 2013. This year, production has increased to 4 MMbopd.
This dramatic increase from tight formations is all the more interesting when you take into account the fact that US oil production dropped to an all-time low of 6.8 MMbopd in 2008. By 2013, output was 10.0 MMbopd due to the technological revolution involving horizontal wells and fracking. The International Energy Agency (IEA) has made projections that suggest that US domestic crude oil production could increase to nearly 13 MMbopd before 2035. Such an optimistic view depends on both technical improvements and geological presumptions about oil resources.
Many analysts claim that this increased production from tight oil reservoirs in the US is to blame for the lowered oil price. How the predicted increase will affect the oil price remains to be seen.
Tight oil is also a viable option in many other countries, like Russia, Canada, China, Argentina and Mexico, all of which have unexploited resources. BP has made projections that production from such reservoirs may contribute up to 9% of total world oil production by 2030. In its Energy Outlook 2030, it says that “growing production from unconventional sources of oil – tight oil, oil sands and biofuels – is expected to provide all of the net growth in global oil supply to 2020, and over 70% of growth to 2030”.
BP Group Chief Economist Christof Rühl is of the opinion that “vast unconventional… delivery has been made possible not only by the resources and technology, but also by ‘above-ground’ factors such as a strong and competitive service sector, land access facilitated by private ownership, liquid markets and favourable regulatory terms”.
“No country outside the US and Canada has yet succeeded in combining these factors to support production growth,” continues the economist.
North America will therefore still dominate production of tight oil in years to come.
*According to the IEA, “tight oil is an industry convention that generally refers to oil produced from very low-permeability shale, sandstone, and carbonate formations”.
