Since U.S. oil production started recovering at the end of 2016, coinciding with a pro-oil administration entering the White House, industry bodies and analysts have been projecting that the U.S. shale patch output will continue to rise.
Earlier this week, the American Petroleum Institute (API) released a study it had commissioned which claims that not only will production grow, but investment in oil and gas infrastructure will contribute between US$1.5 trillion and US$1.89 trillion to U.S. GDP by 2035, or between US$79 billion and US$100 billion annually.
Energy infrastructure is a leading catalyst for economic growth, said the oil industry association in the study commissioned to ICF.
The study also sees rapid oil infrastructure development likely to continue for a prolonged period, with total capital expenditures (capex) for oil and gas infrastructure development between 2017 and 2035 ranging from US$1.06 trillion in the base case to US$1.34 trillion in the high case. The investments under consideration include existing and new infrastructure for surface and lease equipment; gathering and processing facilities; oil, gas, and natural gas liquids (NGL) pipelines; oil and gas storage facilities; refineries and oil products pipelines; and export terminals.
Infrastructure development is expected to employ an average of 828,000 to 1,047,000 individuals annually across the U.S., not only in the states where infrastructure development takes place, and including indirect and induced labor impacts, the study finds. The projections are only for employment associated with oil and gas infrastructure development, “and do not include jobs more broadly across the upstream and downstream segments of the industry, nor do they include jobs related to operating and maintaining oil and gas infrastructure, each of which would add millions to the U.S. labor pool,” the study notes.Related: Big Oil Is Making Enormous Efficiency Gains
In January this year, U.S. government data showed the first rise of oil and gas extraction and support services employment in two years. Employment in oil and gas extraction and support services went up by 3,300 for November 2016, rising to 384,300. That rise came after the industry had lost over 150,000 jobs during the downturn. The trend of job additions in the extraction sector has continued so far this year.
As far as U.S. crude oil production is concerned, the high case in the study contains a 12 million bpd projection by 2035.
“While the Base Case shows fairly constant U.S. oil production in aggregate, tight oil supplies will continue to grow to offset declines in conventional production. In the High Case, oil production growth is robust with U.S. production rising to upwards of 12 million barrels per day by 2035,” according to the study.
U.S. crude oil production is forecast to average 9.2 million bpd this year, compared to 8.9 million bpd in 2016, the EIA said in its latest Short-Term Energy Outlook from April 11. For 2018, output is seen at further growing to 9.9 million bpd.
Regarding investment, private equity raised an estimated US$19.8 billion in funds for energy investment in the first quarter of 2017, or about three times as much as the same period last year.Related: Oil Prices Turn Corner After WTI Dips Below $45
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Oil investors also expect U.S. crude production to rise significantly in the future. Veteran businessman and currently Centennial CEO Mark Papa told Reuters that he expects the new capital injected into U.S. shale to boost production by 23 percent to 11.3 million bpd by 2020.
The API’s study was released just a few days after President Donald Trump signed an executive order that could open offshore areas for drilling that are currently off limits. Secretary of the Department of the Interior Ryan Zinke then directed the Bureau of Ocean Energy Management (BOEM) to develop a new five-year plan for oil and gas exploration in offshore waters, and reconsider a number of regulations governing those activities.
The API welcomed the Administration’s latest orders concerning offshore areas.
The projections in the study commissioned by the API are echoing the current administration’s An America First Energy Plan. The question is - will global and U.S. demand for oil in 2035 be as high as to sustain profitable production and investment growth?