PWC on the Global Shale Oil Revolution
Further to a previous post on China’s shale gas prospects, PWC’s latest report Shale Oil: The Next Energy Revolution has something to say about implications for global geopolitics and major oil and gas producers such as Canada. So, Canadians should get off their high horse and get serious about building pipelines to export its crude.
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Thanks to such innovations as horizontal drilling and fracking (hydraulic fracturing), the U.S. is currently producing more oil than it has in 20 years. U.S. output now exceeds seven million barrels a day, and that has enabled the world’s biggest oil consuming nation to cut its imports to the lowest level in 16 years.
Since Canada’s crude oil exports are a critical driver of well-paid jobs, royalties, taxes — and ultimately, federal equalization transfers — that’s something that should alarm all Canadians.
Indeed, if current trends continue, the U.S. will overtake Saudi Arabia as the world’s top oil producer by 2017, the International Energy Agency has predicted.
As dramatic as that sounds, we may still be in the early innings of a worldwide shale oil revolution, says a new report by a team of energy analysts at PwC (PricewaterhouseCoopers) in London.
If it spreads, it could have huge implications not only for the North American oil industry and for Canada-U.S. trade, but for the entire global economy. Among the report’s key findings:
Global shale oil output could reach 14 million barrels a day by 2035, accounting for fully 12 per cent of the world’s total oil supplies. (By comparison, Saudi Arabia produces about nine million barrels of oil a day at present.)
The surge in shale oil supplies could lead to lower — not higher — global oil prices down the road. While the U.S. Energy Information Administration (EIA) expects oil to hit $133 US a barrel in real, inflation-adjusted terms by 2035, PwC says the price could be as low as $83 a barrel. That’s about $35 below the current price of Brent crude, the international grade.
Although lower oil prices would hurt major exporters like Russia, OPEC (the Organization of Petroleum Exporting Countries) and yes, Canada (which gets but a passing mention from PwC’s analysts), the net impact on the global economy would be very positive, the report says.
PwC estimates lower crude prices would boost global GDP (Gross Domestic Product) in 2035 by between 2.3 per cent and 3.7 per cent — or roughly $1.7 trillion to $2.7 trillion, in current terms.
The biggest beneficiaries would be major net oil importers such as India and Japan, which could get a GDP boost of up to seven per cent by 2035. The U.S., China, the Eurozone and the U.K. would also see GDP gains of up to five per cent, PwC says.
“The potential emergence of shale oil presents major strategic opportunities and challenges for the oil and gas industry and for governments worldwide,” the PwC report concludes. “It could also influence the dynamics of geopolitics as it increases energy independence for many countries and reduces the influence of OPEC.”
– Edmonton Journal