U.S. hits the world’s top spot in natural gas and oil production

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Source: DollarPhotoClub

The U.S. has reached a new all-time high gas production of 328 billion cubic feet per day (BCPD), making it the world’s leading gas producer – according to the BP 2014 statistical world energy review. This revelation comes two months after the U.S. was announced the world top oil producer in July.

Over the course of five years, U.S. natural gas production has grown over 20%, achieving 20.5% of the global natural gas supply – a clear leader in gas production, followed by Russia, Iran, Canada, and Qatar. At the same time, U.S. was the biggest producer of oil and natural gas liquids with daily output exceeding 11 million barrels in the first quarter of 2014.

Natural Gas

In terms of proven natural gas reserves, America places fourth (308 trillion cubic feet) after Iran (1,187 tcf), Russia (1,688 tcf), Qatar (885 tcf), and before Turkmenistan (265 tcf). World usage of natural gas is about 24% of all primary energy consumed, behind oil’s 33% and coal’s 30%.

Currently, U.S. and Iran consume the majority of natural gas produced, while Russian gas is the country’s main export with consumption reaching only 50% of the total amount of extracted gas. Russia is the main supplier of gas to Europe, with some countries – such as Lithuania – relying 100% on imports from Russia. Russia has also signed an agreement with China that will see it supply China with gas for the next thirty years.

America’s aspirations to become a global player in natural gas are hindered by the lack of infrastructure that would allow the U.S. to export its gas to energy-hungry countries in Europe and Asia. A lot hinges on the planned construction of LNG export terminals that would allow the U.S. to become a global exporter of liquefied natural gas. The first such terminal – Sabine Pass owned by Cheniere – is scheduled to be completed early in 2015.

Oil

According to the Paris-based International Energy Agency (IEA), U.S. oil output will surge to 13.1 million barrels a day in 2019, after which date it will plateau. The country will lose its top-producer ranking at the start of the 2030s, the agency said in its World Energy Outlook in November.

“It’s very likely the U.S. stays as No. 1 producer for the rest of the year” as output is set to increase in the second half, Francisco Blanch, the Band of America’s head of commodities research told Bloomberg in July. Production growth outside the U.S. has been lower than the bank anticipated, keeping global oil prices high, he said.

Despite the prodigious growth of oil industry in the U.S., crude oil prices have been kept high due to volatile situation in the Middle East. The successes of the fanatic Islamic State group in Iraq, civil unrest and protests in Libya and the unreliability of Nigerian production hampered by theft and sabotage fuels concerns about disruptions in supply.

“The shale production story is bigger than Iraqi production, but it hasn’t made the impact on prices you would expect,” said Blanch. “Typically such a large energy supply growth should bring prices lower, but in fact we’re not seeing that because the whole geopolitical situation outside the U.S. is dreadful.”

Also, the ban on crude exports which has been in place since 1970′s limits America’s involvement in the global oil market, although admittedly there are signs of change in policy with The Commerce Department making a special ruling to allow the export of ultra-light condensate on the grounds that it has been processed enough to qualify it for export, even if it has not been refined.

Bank of America, in a report on June 27, called the decision “a positive step” towards dispersing the build-up of crude supply in North America. Bloomberg reports that the U.S. could potentially have daily exports of 1 million barrels of crude, including 300,000 of condensate, by the end of the year, quoting a June 25 report from Citigroup Inc.

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