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LONDON--A shale oil boom means the U.S. will overtake Saudi Arabia as the
world's largest oil producer by 2020, a radical shift that could profoundly
transform not just the world's energy supplies, but also its geopolitics, the
International Energy Agency said Monday.

In its closely watched annual World Energy Outlook, the IEA, which advises
industrialized nations on their energy policies, said the global energy map "is
being redrawn by the resurgence in oil and gas production in the United

The assessment is in stark contrast with last year, when it envisioned Russia
and Saudi Arabia vying for the top position.

"By around 2020, the United States is projected to become the largest global
oil producer" and to overtake Saudi Arabia for a time, the agency said. "The
result is a continued fall in U.S. oil imports [currently at 20% of its needs]
to the extent that North America becomes a net oil exporter around 2030."

This major shift will be driven primarily by the faster-than-expected
development of hydrocarbon resources locked in shale and other tight rock
formations that have just started to be unlocked by a new combination of two
technologies: hydraulic fracturing and horizontal drilling.

Within a decade, the IEA forecasts U.S. oil imports will fall by more than
half, to just 4 million barrels a day from 10 million barrels a day currently.
Much of this decline will be due to higher domestic production, but efforts to
improve energy efficiency in the transport sector will also prove significant,
the IEA said.

The IEA's conclusions are partly backed by the Organization of the Petroleum
Exporting Countries, which last week acknowledged for the first time that shale
oil would significantly diminish its share of the U.S. market.

OPEC said the U.S. would import less than 2 million barrels a day in 2035,
almost three-quarters less than it does today.

That's not to say OPEC's role will be marginalized globally. The
organization's share of global production will increase to 50% in 2035 from 42%
today, with much of it going to Asia, according to the IEA.

The IEA hinted that newly found U.S. energy independence could redefine
military alliances, with Asian nations replacing the United States in securing
oil shipping lanes from the Persian Gulf.

According to the IEA, the U.S need for oil imports from the Middle East will
fall to almost zero in the next 10 years, while almost 90% of Middle Eastern
oil exports will go to Asia by 2035, creating a new trade axis.

"Asian countries should have much greater interest in the stability and
security of their suppliers in the Middle East," said Richard Jones, deputy
executive director at the IEA.

Some in the U.S. are already questioning the reasons for keeping U.S.
warships in the Persian Gulf. "It's insane that we have the Fifth Fleet of the
U.S. Navy tied up there to protect oil that ends up in China and Europe," T.
Boone Pickens, chief executive of energy-focused hedge fund BP Capital
Management, was quoted as saying last week in U.S. magazine Parade.

The IEA said, however, that U.S. primacy in world oil production could prove

"If no new [U.S.] resources are discovered and if the [oil] prices are not as
high as today, then we may see Saudi Arabia coming back as the first producer
again," said the IEA's chief economist, Fatih Birol.

The IEA also warned that the emergence of shale gas as a game changer in
global energy has a downside risk, contributing to increased competition for
water resources needed for energy projects.

Shale oil and gas are extracted by pumping water, sand and chemicals into the
ground at high pressure to crack rocks open, a process known as hydraulic
fracturing, or "fracking." But the intensive use of water, "will increasingly
impose additional costs," and could "threaten the viability of projects" for
shale oil and gas, and also biofuels, the agency said.
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