Saudi America, the latest buzzword has found ample space in media for its share to a sector already under limelight. Chanting the wildly optimistic renaissance in the world energy map, the US aficionados forget about the thorns that snag the rosy picture.
The recent global forecast by International Energy Agency, IEA stated that by around 2020, US will become the worlds largest oil producer overtaking the Kingdom, and will become a net oil exporter by 2030s. But things are wooly and not that simple.
Some straightening of the aggressive assumptions makes more sense. For one, the unknown about the shale reserves in the US is a mystery in itself.
The industry might just be too optimistic about the shale reservoirs that are the main source of forecasted production; conventional oil production is actually projected to fall and stabalise around 4-5mboe/d in US. Similarly the natural gas production from conventional sources is set to remain stunted around 4mboe/d.
Also, global oil prices can play their treacherous game, and a continued fall can turn shale oil production sour. Already, the break even for the oil companies producing from shale basins is much higher than the conventional production.
Its not wise to keep OPEC out of the loop. With the top position and power of OPEC over the oil market threatened, it is too dicey to assume that the cartel will sit silently. In an attempt to retain its power, the group can pump more oil using its spare capacity to bring down oil prices and throw US shale oil production in shambles.
A little bit of math also raises concerns over the pompous claims. Production during 2012 so for from conventional US reserves stands around 6mboe/d, while the tight oil production is around 1mboe/d, which is forecasted to grow by 2.2mboe/d till 2020s.
With current conventional production set to stabalise at the existing levels as per the projections, US production during mid 2020s will be around 8.2mboe/d, whereas IEA assumes that Saudi Arabias production will be roughly around their current average production of 9-10mboe/d.
The trick lies here: According to the Paris-based organisation, US will be producing around 11mboe/d which not only includes the oil but also other liquids and the refinery outputs.
Even if the official reasoning behind the figures comes clean, one thing is for sure: the incidence of rise in US oil is puffed up more than its magnitude and duration that require equal attention. In the long term, Saudi Arabia will rise again - back to being the leader - says no one else but IEA.
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