BP’s Energy Outlook projects that the so-called ‘shale revolution’ will continue, with shale gas more than doubling its share of the market. Technological innovation and productivity gains have unlocked vast resources of tight oil and shale gas, causing us to revise the outlook for US production successively higher.
In the 2013 Energy Outlook, US tight oil was projected to reach 3.6 million barrels a day (Mb/d) by 2030 but in fact, that level was surpassed in 2014. After a brief retrenchment due to low prices and falling investment, US tight oil production is now expected to plateau in the 2030s at nearly 8 Mb/d, accounting for almost 40% of total US oil production.
US shale gas is now expected to grow by around 4% p.a. between 2014 and 2035. This means US shale gas will account for around three-quarters of total US gas production in 2035, almost 20% of global output.
Shale gas worldwide
Globally, shale gas is expected to grow by 5.6% p.a. between 2014 and 2035, well in excess of the growth of total gas production. As a result, the share of shale gas in global gas production more than doubles from 11% in 2014 to 24% by 2035.
As with the past 10 years, the growth of shale gas supply is dominated by North American production, which accounts for around two-thirds of the increase in global shale gas supplies. But over the Outlook period, we expect shale gas to expand outside of North America, most notably in Asia Pacific and particularly in China, where shale gas production reaches 13 Bcf/d by 2035.
“For US shale gas, the resources look far bigger based on current estimates and so we see rapid growth of US shale gas over the next 20 years, pretty much throughout that period of time” Spencer Dale, group chief economist commented
The growth in global tight oil slows
Global tight oil production increases by 5.7 Mb/d between 2014 and 2035 to around 10 Mb/d. Despite this sizeable growth, tight oil accounts for less than 10% of all liquids production in 2035.
Growth in North American tight oil – which has been the dominant source of growth over the past 10 years – slows gradually, constrained by the size of the resource base. North American production is expected to grow by 2.5 Mb/d between 2015 and 2025, and by just 1 Mb/d between 2025-2035, compared with 4.5 Mb/d during the past 10 years.
This slowing is partially offset by increased production in the rest of the world. During the final ten years of the Outlook, almost half (0.9 Mb/d) of the increase in tight oil production is from outside of North America.
Exploring alternative scenarios
The base case in the Outlook presents the single “most likely” path for energy demand and different fuels over the next 20 years. But there are of course many risks and uncertainties surrounding the base case. It is possible to explore some of these uncertainties by varying a few of the key assumptions and judgements underpinning the base case and assessing their impact.
Tight oil and shale gas having even greater potential
The “Stronger Shale” case assumes global shale resources are significantly bigger than in the base case (in the US by 50% for oil and 30% for gas; elsewhere by 100% and 50%), and productivity is 20% higher by 2035.
As a result, global supplies of tight oil and shale gas are much greater than in the base case. The higher weight of shale gas within global gas supplies, and the greater ability of gas to substitute for other fuels, means the impact is more marked for shale gas than for tight oil.
Shale gas production is around 76 Bcf/d higher by 2035, with shale gas accounting for more than a third of global gas supplies.
Global tight oil output increases to 20 Mb/d by 2035, twice its level in the base case, with its share of total liquids output reaching 18%.
Crowding out conventional production
The stronger growth in shale oil and gas crowds out both conventional supplies of oil and gas as well as other fuels. Fuel substitution is most pronounced in the power sector where gas competes with all other fuels. The main casualty is coal, which is 260 Mtoe lower by 2035 than in the base case; renewables are 110 Mtoe lower.