Record-breaking oil and gas production in the United States was one of the focal points of President Trump’s State of the Union Address this week, with an emphasis placed on the rollback of industry regulation that made this possible.
“We have unleashed a revolution in American energy -- the United States is now the number one producer of oil and natural gas in the world. And now, for the first time in 65 years, we are a net exporter of energy,” Trump said.
Energy analysts were quick to question the latter, if not the former, part of this statement, with data showing the U.S. only became a net exporter of energy for a short while last year, the overall ratio between production and consumption of hydrocarbons still makes the United States a net importer. Nevertheless, imports have fallen sharply in the last two years.
Local crude oil production is close to touching 12 million bpd. The latest weekly estimate from the Energy Information Administration has it at 11.9 million bpd. The agency last year forecast that if the pace of production increase continues, the United States could become a net energy exporter by 2020.
The United States has indeed increased its natural gas production, overtaking Iran and Russia to secure the title of the world’s largest producer of natural gas. Exports of that commodity are growing, too. A new report from Rystad Energy said, “With increasing export capacity, US LNG might be in a position to pose a serious challenge to Russian gas on the European market this year. Prices will come under pressure due to the healthy supply situation but the market is expected to tighten again after 2022, meaning that investment decisions for new liquefaction projects are needed this year in order to satiate future demand.”
The author of the report, Rystad’s head of gas market research, Carlos Torres Diaz, also said U.S. projects coming on stream will be the biggest contributors to global LNG production growth, which will hit 11 percent this year, to a total 350 million tons.
By Irina Slav for Oilprice.com
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While it is true that the United States is the world’s largest natural gas producer, it is not the world’s largest crude oil producer. Russia is the world’s top oil producer with 11.43 million barrels a day (mbd) to its name compared with 10.9 mbd for the US.
Also the claim that the United States is a net energy exporter doesn’t stand scrutiny. While the US exported some 14 million cubic metres of LNG in 2018, it imported 9.6 mbd of crude oil in the same year based on the US Energy Information Administration’s (EIA’s) figures of US oil consumption of 20.5 mbd and a production of 10.9 mbd. Therefore, the US is still and will remain for the foreseeable future a net importer of energy.
And despite the fact that hardly a day passes nowadays without new pessimistic reports about a slowdown in US shale oil production, the EIA never stopped hyping about rising US oil production. The latest claim is that US oil production for the week ending January 25 averaged 11.9 mbd. It also claimed that US production averaged 11.7 mbd in 2018 but changed it later to 10.9 mbd.
Claims by President Trump in his State of the Union Address are as much hype as the claims by the International Energy Agency (IEA) and Rystad Energy that US oil production will be bigger than the combined production of Russia and Saudi Arabia by 2025 at 25 mbd.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Anyone wondering what is sustainable in energy production, beyond tomorrow's setting sun?