The US to become worlds bigest Oil Gas producer, Shift in the world order...

[General Duke]

the US can shed its longstanding dependence on Saudi Arabian oil within the next decade, redrawing the world's political systems and potentially leading to runaway global warming.

 

In a report released on Monday, the world's foremost energy watchdog, the International Energy Agency (IEA), said the US would benefit from so-called unconventional sources of oil and gas, including shale gas and shale oil, derived from fracking – blasting dense rocks apart to release the fossil fuels trapped within.

 

These sources could fuel the US's energy independence, and make the country the world's biggest oil producer by 2017. But, if pursued with vigour, they would also lead to huge increases in greenhouse gas emissions that would put hopes of curbing dangerous climate change beyond reach.

 

If this happens, more than 90% of oil and gas from the Middle East could be sold to Asia, and chiefly to rapidly developing countries such as China, within the same timeframe, the IEA predicted.

 

Fatih Birol, chief economist at the IEA and one of the world's foremost authorities on energy and emissions, said the outlook for action on climate change was bleak unless the US changed direction rapidly. "Climate change has been slipping down the agenda," he said. "It is not having a significant impact on energy investors."

 

Companies were excited by the prospect of shale gas, which has been subject to widespread development in the US in the past decade, and shale oil, which relies on newer technology but is set for its own boom, according to the IEA's analysis.

 

Birol said the outlook for cutting emissions was doubtful. "I don't see much reason to be hopeful that we will see reductions in carbon dioxide," he told the Guardian. "We have seen more carbon dioxide emitted this year."

 

He pointed out that subsidies to fossil fuels had increased while government assistance for renewable energy around the world had been cut or thrown into doubt. But he said that if countries outside the US wanted to make their industries more competitive, they should invest in energy efficiency and renewables. He also called for progress at the United Nations climate change talks in Doha at the end of this month.

 

Europe could remain shackled to fossil fuel imports if it fails to develop its natural resources in the form of renewable energy, the IEA found in its World Energy Outlook, the definitive annual examination of the world's energy sources.

 

Gas prices in the US are at present about a fifth of those in the EU, but that is unlikely to change in the short term because of the difficulty for the US in exporting gas. Instead, most of the US gas glut will be used domestically, which could drive down costs for industry and allow US manufacturers to undercut international competitors. Birol said the EU should exploit its potential for energy efficiency and renewable energy sources, in order to stay competitive.

 

The IEA said the result of new technology allowing the exploitation of new sources of fossil fuels would be a redrawing of the international energy map. In the past five decades the US has relied increasingly on the Middle East for its oil. But if it were self-sufficient in energy, as it could be by 2035, that would mark a huge shift in world politics. The relationships between the US and the Middle East have for decades been defined by America's thirst for oil for its automobile-driven economy.

 

George W Bush tried to redraw this relationship after September 11 2001 by encouraging the use of biofuels in the US, made from turning maize into car fuel. But this endeavour has run into serious problems, as this year's drought pushed up grain prices and focused attention on the question of how far food crops could be turned into fuel without raising prices and compromising food production.

 

Birol said the exploitation of "unconventional" fossil fuels represented the biggest redrawing of the energy map for decades. "This makes a huge difference," he said. But he said there was still hope of avoiding disastrous levels of climate change if companies pursued energy efficiency, which could yield immediate benefits in cutting energy bills.

 

Ed Matthew, director of the thinktank Transform UK, warned: "Energy independence will not increase national security in the US if it leads to runaway climate change. Ultimately the majority of fossil fuel reserves will need to be left in the ground. The US is a hotbed of technological innovation. It must use this creative muscle to develop a low-cost, clean energy revolution. It will only achieve this if the massive vested interests of the American oil industry are brought under democratic control."

 

Rolf Wuestenhagen, director of the institute for economy and the environment at the University of St Gallen in Switzerland, questioned whether the boom in shale gas in the US could continue in line with the predictions: "It seems surprising that IEA still expects half of the increase in global gas production by 2035 to come from unconventional gas. Is this wishful thinking?"

 

Niall Stuart, chief executive of Scottish Renewables, said that the report showed that renewable energy was still being disadvantaged by subsidies poured into fossil fuels, in the UK, Europe and around the world. He said: "This puts into context the level of financial support given to fossil fuel-based electricity generators such as coal and gas compared to renewable energy. We hope these figures will silence the vocal minority of naysayers who repeatedly claim renewable technologies such as wind power are too expensive."

 

The IEA also said that renewable energy had become an "indispensable part of the global energy mix" and could become the world's second biggest source of power generation by 2015.

[General Duke]

How cheap energy from shale will reshape America's role in the world

 

US self-sufficiency in energy is likely to end American reliance on despotic Gulf regimes but biggest loser of all may be Russia

 

Julian Borger and Larry Elliott

The Guardian, Thursday 15 November 2012 14.09 EST

Jump to comments (23)

 

An Iraqi policeman shouts instructions at the scene following an attack on an oil pipeline

An attack on a pipeline during the Iraq war. American foreign policy has been shaped by its need to secure oil supplies in the Middle East but that reliance is likely to end. Photograph: Jamal Nasrallah/EPA

 

After the fall of the Berlin Wall, the rise of China and the Arab spring, American energy independence looks likely to trigger the next great geopolitical shift in the modern world.

 

US reliance on the Gulf for its oil – and its consequent need to maintain a dominant presence in the Middle East to keep the oil flowing – has been one of the constants of the post-1945 status quo. That could be turned on its head.

 

It's been dubbed "the homecoming". After decades in which the hollowing out of American manufacturing has been chronicled in Bruce Springsteen's blue-collar laments, cheap energy is being seen as the dawn of a new golden age for the world's biggest economy.

 

The reason is simple. The US is the home to vast shale oil and gas deposits made commercially viable by improvements to a 200-year-old technique called fracking and by the relentlessly high cost of crude.

 

Exploitation of fields in Appalachian states such as West Virginia and Pennsylvania, and further west in North Dakota, have transformed the US's energy outlook pretty much overnight. Professor Dieter Helm, an energy expert at Oxford University, said: "In the US, shale gas didn't exist in 2004. Now it represents 30% of the market."

 

If all the known shale gas resources were developed to their commercial potential in North America and other new fields, production could more than quadruple over the next two decades, and account for more than half of US natural gas production by the early 2030s, according to recent study by the Harvard Kennedy School Belfer Centre.

 

Pennsylvania – where the first oil well was drilled in 1859 – produced about 30m cubic metres (1bn cubic ft) of natural gas in 2008. By 2010, the state was producing 11bn cubic metres, helping to put the US on course to be the world's biggest supplier of oil and gas within a decade.

 

Looming self-sufficiency in energy has three economic benefits to the US. The first is the direct impact on production and employment in the sector, with Barack Obama noting in this year's state of the union speech that fracking was likely to support 600,000 jobs by the end of the decade and that the US now had enough gas to keep it supplied for the next 100 years if current consumption patterns were maintained.

[General Duke]

Regime stress

 

Long-term consequences for the rest of the world are hard to predict but it is probably safe to say that many of the regimes whose global role rests on hydrocarbons alone are likely to be significantly weakened, if not swept away.

 

That includes the monarchies that have thus far withstood the Arab spring. Their persistence has depended on a historically high oil price and unquestioning western backing. Both those conditions are now in question.

 

Shashank Joshi, a fellow of the Royal United Services Institute, said: "The Gulf Arab political order for almost the entire post-war period has depended on US interest in the region.

 

"The monarchies endured for so long not because of any sort of popular legitimacy but because they could depend on enormous external support. Those regimes, which have already had to deal with a high degree of domestic mobilisation will come under unbearable stress and they cannot survive without the technical advantage of western weapons."

 

Few are expecting the US Fifth Fleet to pack up and sail home in the immediate future, just because America has found enough oil and gas for its needs in its own back garden. Geopolitical change tends to lag a decade or two behind economic change, but as the US finds itself less reliant on regimes with which it has little in common there will be powerful pressure on the Pentagon to begin to bring home its troops and hardware.

 

The speed of US disengagement will depend to a large extent on whether the alternative is a vacuum and instability, as a variety of religious and tribal forces vie to inherit the Gulf kingdoms. The role of Iran, an economy largely dependent on oil sales that already faces severe budget shortfalls from sanctions, is likely to be critical. Whether it responds to crisis by collaboration or confrontation with its traditional Gulf adversaries will shape the region's future.

 

A lot depends, too, on whether the new biggest customers for Gulf oil are ready to take America's place in patrolling the tanker routes.

 

Joshi said: "There is a mismatch between China and India's reliance on Middle East energy and their provisions for its security. India will have three carriers and both China and India are building blue-water [ocean-going] navies. They may be compelled to engage if the US pulls away."

 

Nicholas Redman, senior fellow for geopolitical risk and economic security at the International Institute for Strategic Studies, doubts that the US, even if freed of Gulf oil dependence, would want to cede the space to Indian or Chinese rivals.

 

"If the Gulf goes haywire, there is a transmission effect on the economy, whether or not it gets its oil from there," Redman said.

[General Duke]

Oil powers

 

The US alliance with Israel is also likely to be highly resistant to change. As the presidential elections have just demonstrated, it has become an article of faith in security policy for both American parties – a fact that is largely independent of the geopolitics of oil.

 

The Gulf is not the only area where the established oil powers are in danger of crumbling. The biggest single loser of all will most likely be Vladimir Putin's Russia, a regime largely dependent on high energy prices and a captive market with no real alternative plan.

 

Russia is already feeling the direct impact of the new gas age. Development of its Shtokman field – believed to be one of the largest gas fields in the world – deep under the Barents Sea, has been shelved, because its intended customer, the US, now has its own home-grown source of natural gas.

 

Russia is the most vulnerable of the current petro-states because of the central role of gas to its international standing. Moscow's sway over eastern and central Europe is dependent on Gazprom, which has used its dominance to set favourable terms, selling long-term contracts linked to the oil price.

 

Now, as more and more of the liquefied natural gas (LNG) formerly intended for the US finds its way on to the western market, the spot gas price is coming adrift of the oil price and the Europeans have new options, which will lessen their dependence on a single dominant seller.

 

"Russia has just seen its aspiration market disappear. The US is already a bigger gas producer than Russia," Redman said.

 

He pointed out that there were deep obstacles – environmental and economic – to large-scale European exploitation of its own oil shale resources, but imports from the US and elsewhere could still transform the continent's uneasy relationship with Moscow.

 

"Europe doesn't want to get into deeper reliance on Russia. They are looking at other options like: can you bring gas in from places like Turkmenistan? If the import of American LNG becomes a serious option in northern Europe, it could have very interesting implications."

 

Russia has tried to look east, but China prefers to keep its energy sources spread around the world – emerging LNG producers such as Qatar, Australia and west African states, for example.

 

The Putin government has talked a lot about diversifying the Russian economy, but very little has happened in that direction. It remains essentially a petro-state dependent on an oil price of $120 to balance its budget. With a current price of $109, Moscow already faces a serious shortfall, which is only likely to grow in an age of energy abundance, deepening its long-term problems and narrowing its capacity to diversify.

 

David Clark, chairman of the Russia Foundation, said: "Russia needs $200bn [£125bn] a year in investment over the next 20 years, to open new fields and modernise its infrastructure. But it faces $60bn-$80bn capital flight a year. It cannot meets its requirements."

 

The consequences are a greatly weakened Kremlin, both in relation with Russia's own regions and the rest of the world. If Moscow manages its decline well, that could have positive impacts in multipolar collaboration. Obama could find he has a partner in his bid to make deep cuts in the world's two biggest nuclear arsenals, and there could be a more collaborative atmosphere in the UN security council over issues such as Syria.

 

The geopolitics of an energy surplus world will be quite unfamiliar. Australia is tipped to emerge as a major player, rivalling Qatar as the world's largest LNG exporter by 2030. As a region, west Africa is likely to emerge as a major hub, alongside Argentina. It will also, arguably, be a more interesting, more multipolar planet.

 

Whether it will also be a better one will depend largely on how the shift is managed from the old world to the new.

[General Duke]

Why now?

 

• Shale gas is natural gas – methane – that was generated from the rotting of forests millions of years ago, and is now held close within deep geological formations of dense rock.

 

• Blasting open this rock requires vast force – the jetting of water, sand and chemicals against rock formations at extreme pressure – and the technology to do so has been developed only very slowly since the 1950s.

 

• More importantly, conventional drilling for oil and gas has involved vertical wells that open up oilfields, which then spew their contents to the surface, where it can be captured.

 

Shale gas release is entirely different, requiring the blasting open of rocks across vast distances at close quarters, making vertical wells useless.

 

It was only in the early 2000s that the necessary horizontal drilling techniques were perfected.

 

• Wells can now be drilled down 5,000ft-7,000ft, then diverted at right angles to produce tunnels 5,000ft-8,000ft long. These allow rocks to be blasted apart across huge distances.

[Mario B]

Good, now it means United States will stop attacking Middle-Eastern countries with oil reserves. if only Iran could stop recreating it's Sassanid Empire using Shia Islam then the region would be peaceful.

 

P.s As Israel doen't want to give up the occupied territories, then these two semitic cousins should be forced to share one country in a one man one vote basis, always!

[walaalkis]

To get all that oil going they would need the ocean water, no regular water can get that much oil.

 

Now this is next stage dry up the oceans for oil

[xiinfaniin]

A little hype there , in either way this will take time. And producer does not necessarily mean exporter.

[GaraadMon]

walaalkis;889408 wrote:

To get all that oil going they would need the ocean water, no regular water can get that much oil.

 

Now this is next stage dry up the oceans for oil

That was a joke right?