Get ready for the Americas to pass OPEC as the dominant force in world oil production — and, yes, that includes the United States.
The Arab Spring has swept largely democratic sentiment throughout much of the Mideast this year. This, of course, is a great development for millions of people who have for far too long lived under oppression. But the upheavals are also reducing the region’s oil production.
The 12 mainly Middle Eastern nations of the Organization of the Petroleum Exporting Countries still hold more than 80 percent of the world’s proven conventional oil reserves. Pumping 30 million barrels a day (mb/d), OPEC is also now responsible for roughly 45 percent of global oil production.
But Mideast revolutions historically also have brought steep oil-production declines.
Before Moammar Khadafy overthrew Libya’s king in 1969, the nation was producing 3.5 mb/d; that output level has never recovered, and is down more in the wake of the war to depose Khadafy.
Iraq was producing roughly 3.5 mb/d before Saddam Hussein came to power in 1979; his wars, and the disorders since his 2003 fall, have kept output down. Iraq’s Oil Ministry just announced last week that output has climbed back to 2.9 mb/d.
The new revolutions will greatly impact the region’s production in general. OPEC output already dropped by about 1.6 mb/d from Libya and also by relatively minor amounts (about 0.3 mb/d) from Yemen and Syria; even if instability doesn’t spread much more, we can expect OPEC output to be relatively flat for the next five years.
Over that same period, America, Canada and Brazil will probably add about 3 mb/d to their current output of 15 mb/d. So, while China and Russia have made significant leaps in production, it appears the future’s oil powers-that-be will call the Americas home.
Brazil has quickly become a major oil power; its deep- and ultra-deep-water pre-salt oil fields contain billions of barrels of untapped reserves. Its Libra field alone, about 150 miles off the coast of Rio de Janeiro, holds up to 15 billion barrels of oil, making it the most important Latin American oil discovery in the last 30 years.
Canada’s huge reserves of bitumen, or oil sands, hold great promise. Estimates put the nation’s Alberta oil sands at a staggering 1.75 trillion barrels. The province’s government estimates that about 10 percent of these reserves can be produced with current prices and technology. Technological progress should make it feasible to extract many more billions of barrels.
But the real story might well be here in the United States. From blossoming shale production to large untapped resources off our shorelines, our nation arguably has the world’s most prolific oil reserves. Over the next five years, our current rate of 9.1 mb/d will grow as production in the Gulf of Mexico and Arctic increases by about 1.2 mb/d and output from shale rises a similar amount.
But most US potential remains locked behind regulatory red tape: The right public policies must be in place to make out-producing OPEC a reality. Washington needs to open access to our vast offshore resources. Our leaders should also ease the over-zealous regulatory regime that now targets US businesses and pull back on calls to single out our conventional energy producers for onerous tax hikes.
We can have the world’s largest oil supplies, but that amounts to very little if we can’t produce and use them. A recent Wood MacKenzie study found that opening US resources now “off limits” to development would boost domestic oil production by nearly 8 mb/d by 2030. And those forecasts are based on government estimates made back when Beta tapes were cutting-edge technology, so the actual production gains would likely be much greater.
Meanwhile, the estimates of some of the reserves OPEC has been pumping nonstop for 60-plus years are closely held secrets, so no one really knows how much longer it can sustain current rates of production.
Veteran journalist Andrés Oppenheimer opined recently, “The coming oil boom in the Americas is great news.” Hopefully, our nation’s leaders will soon recognize the full potential of this boom, just like Arabs from Tunisia to Syria have realized their own potential for political freedom.
Michael Lynch, former adviser to the OPEC Secretariat, is president of consultancy Strategic Energy and Economic Research.