OIL AND GAS

Deepwater Gulf, not shale, will drive long-term expansion of U.S. crude production -- EIA chief

HOUSTON -- The deepwater Gulf of Mexico will likely be more important to long-term U.S. oil production than shale formations, the chief of the Department of Energy's statistics branch said today.

The views of Howard Gruenspecht, acting administrator of the U.S. Energy Information Administration, contrast with rosy projections of oil production from U.S. shale formations.

Many analysts see the United States becoming the world's largest crude producer within a few decades as new technologies open up oil fields. And the petroleum industry predicts that output from just two shale fields -- the Bakken in North Dakota and the Eagle Ford in Texas -- could boost domestic oil production by 30 percent or more.

But Gruenspecht told a gathering of energy executives here that his agency's shale-oil projections fall short of what the most optimist analysts are forecasting.

"One can certainly imagine higher amounts" from shale fields, Gruenspecht said during an overview at the annual Argus Americas Crude Summit. But overall, he said, EIA estimates of shale oil production fall short of other predictions, most notably that of the National Petroleum Council.

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U.S. crude oil production will reach around 6.8 million barrels per day or so at around 2014, but onshore production won't expand significantly beyond that, he said. Land-based U.S. production, he said, will flatten in later years.

Meanwhile, Gulf output, now in decline, "turns around after 2012 and goes up from there," he said.

EIA expects the deepwater Gulf to be the driving force in growing U.S. oil production. As new projects come online, Gulf output could expand from 1.3 million barrels per day in 2011 to as much as 2 million barrels a day by 2020, depending on market conditions, Gruenspecht said.

In an interview, Gruenspecht said the U.S.will continue to get most of its domestic crude from onshore sources. Output from shale fields could expand far beyond EIA estimates, he said, but eventually shale field output is projected to peak and then decline, while the Gulf gradually increases its share.

EIA forecasts also show production from the Middle East and the Organization of Petroleum Exporting Countries will continue to dominate the global crude market to 2035, despite some expectations that the Western Hemisphere will become a more important crude supplier.

Global oil production should increase by 25 percent by 2035, but OPEC will still control 42 percent of global output, he said.

North American output "retains its current 19 percent market share in 2035," Gruenspecht said.

Oil and gas executives say Gulf drilling is picking up quickly as rigs that had been chased by last year's temporary drilling moratorium return. Shallow-water drilling is robust, while deepwater exploration is approaching the level it was at just prior to the Deepwater Horizon rig disaster in 2010 and the record oil spill that followed.

The Gulf will also see the introduction of floating storage infrastructure this year, with crude from deepwater fields being offloaded from one storage tanker to smaller shuttle tankers that will deliver oil to coastal refineries.

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