Anyone saw this? LONDON--A shale oil boom means the U.S. will overtake Saudi Arabia as theworld's largest oil producer by 2020, a radical shift that could profoundlytransform not just the world's energy supplies, but also its geopolitics, theInternational Energy Agency said Monday. In its closely watched annual World Energy Outlook, the IEA, which advisesindustrialized nations on their energy policies, said the global energy map "isbeing redrawn by the resurgence in oil and gas production in the UnitedStates." The assessment is in stark contrast with last year, when it envisioned Russiaand Saudi Arabia vying for the top position. "By around 2020, the United States is projected to become the largest globaloil producer" and to overtake Saudi Arabia for a time, the agency said. "Theresult 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-expecteddevelopment of hydrocarbon resources locked in shale and other tight rockformations that have just started to be unlocked by a new combination of twotechnologies: hydraulic fracturing and horizontal drilling. Within a decade, the IEA forecasts U.S. oil imports will fall by more thanhalf, 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 toimprove 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 PetroleumExporting Countries, which last week acknowledged for the first time that shaleoil 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. Theorganization'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 redefinemilitary alliances, with Asian nations replacing the United States in securingoil shipping lanes from the Persian Gulf. According to the IEA, the U.S need for oil imports from the Middle East willfall to almost zero in the next 10 years, while almost 90% of Middle Easternoil exports will go to Asia by 2035, creating a new trade axis. "Asian countries should have much greater interest in the stability andsecurity of their suppliers in the Middle East," said Richard Jones, deputyexecutive 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 theU.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 CapitalManagement, was quoted as saying last week in U.S. magazine Parade. The IEA said, however, that U.S. primacy in world oil production could proveshort-lived. "If no new [U.S.] resources are discovered and if the [oil] prices are not ashigh as today, then we may see Saudi Arabia coming back as the first produceragain," said the IEA's chief economist, Fatih Birol. The IEA also warned that the emergence of shale gas as a game changer inglobal energy has a downside risk, contributing to increased competition forwater resources needed for energy projects. Shale oil and gas are extracted by pumping water, sand and chemicals into theground at high pressure to crack rocks open, a process known as hydraulicfracturing, or "fracking." But the intensive use of water, "will increasinglyimpose additional costs," and could "threaten the viability of projects" forshale oil and gas, and also biofuels, the agency said.
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