US will always remain crude oil importer

Shale oil production isn’t enough to eliminate US oil imports.

Summary: The boom in shale oil production across the US has fuelled expectations that the country could one day become self-sufficient. But the US remains heavily dependent on oil imports – from the Persian Gulf and OPEC – and that’s not going to change. Without drilling of new wells, shale oil production will peak.
Key take-out: While oil import levels are likely to reduce over time, forecasts show the US will still have a crude import requirement of around 6 million barrels a day.
Key beneficiaries: General investors. Category: Commodities.

US shale oil has so far replaced 2 million barrels a day of its crude oil imports, which peaked at around 10 mb/d in 2005. If this effort can be doubled, the US would still need to import around 6 mb/d.

US crude oil imports vs production

History: US crude imports skyrocketed in the early 1970s after the US peak. High oil prices as a result of the first and second oil crises in 1973 and 1979 triggered a recession, and therefore a drop in oil demand and a reduction in crude oil imports. After, Alaska’s peak crude imports increased again until the third oil crisis, which started in 2005.

Despite the shale oil boom, which began in serious in 2011, the US still imports around 2 mb/d (25%) from the Persian Gulf and 3.5 mb/d (44%) from OPEC. So there would be a long way to go for the US to become independent of crude oil imports.

The reduction in crude exports more or less corresponds to the increase in shale oil production so that refinery input basically remains on the same level.

See the data are from here:

crude production: http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm

crude imports: http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epc0_im0_mbblpd_m.htm

Outlook for shale oil

This graph shows three crude oil production scenarios of EIA’s Annual Energy Outlook published in May 2013. Actual production appears to follow the “high resource scenario”.

Only another 2.5 mb/d can be expected by the mid 2020s, which would reduce imports to 5.5 mb/d. This shows that the US will always be dependent on crude oil imports.

But it could also be that actual production reflects a fast extraction path resulting in an earlier peak.

The following graph shows the permanent battle in shale oil fields to grow production. As an example in Bakken, decline in old wells has now reached 60 kb/d every month, which is 6.3% of production (red columns), up from 5.5 % two years ago.

For November 2013, it is expected that new wells (blue columns) will yield 85 kb/d so the net increase is only 85-60=25 Kb/d. As the monthly decline is increasing with the number of old wells, drilling of new wells has to ever increase. Once this is no longer possible, production will peak.

Data from: AEO 2013 http://www.eia.gov/forecasts/aeo/pdf/0383(2013).pdf

Short term energy outlook http://www.eia.gov/forecasts/steo/report/

and Drilling Report Oct 2013 http://www.eia.gov/todayinenergy/detail.cfm?id=13471

This typical production profile of a shale oil play shows the steep declines experienced in such an oil supply system. If, for argument sake, drilling were to stop (e.g. in another credit crunch) total production would follow these declining lines.

US crude and product imports by country of origin

US crude and product imports peaked in 2005 at 13.7 mb/d and are now running at around 10 mb/d.

Imports from Canada have increased steadily (syncrude from tar sands) but imports from Mexico have declined because of peak oil in this country. Imports from Europe are also in decline, somehow offset by imports from Russia.

Oil imports from OPEC have declined from around 6 Mb/d in 2008 to 3.7 mb/d in 2013, which is mostly crude. Only 240 kb/d were petroleum products.

Oil imports were reduced over a wide range of countries, especially vulnerable suppliers like Nigeria, Iraq, Algeria, Saudi Arabia and Venezuela (56% of the total reduction).

Conclusion

US shale oil has replaced around 2 mb/d of crude oil imports. If EIA’s projections are correct, crude imports could be reduced by another 2-2.5 mb/d. That would leave the US still with a crude import requirement around the 6 mb/d mark. To call this energy independency is more than an exaggeration.


This article first published at CrudeOilPeak.com, a ‘peak oil monitoring’ service run by Matt Mushalik (MEAust, CPEng).