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Shale Oil Industry Analysis

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statistics_1 April 25, 2014 (Chinavestor) Energy demand in coming decades are forecasted to increase along with the world population. The total world population is set to increase to over 9 billion by 2050, with a large portion forecast to originate from developing nations. Populations in developing countries are anticipated to grow from 5.9 billion in 2013 to 8.2 billion by 2050, including Africa, India, Pakistan and Indonesia. With the additional number of people and the rapid economic development in some economies, the demand for energy is only set to continue its upward trend.

Due to China’s rapid rate of economic growth and urbanisation, it leads the way in the current decade for growth in energy demand. India is anticipated to overtake China in energy demand in the following decade, which is a partial reflection of its rapid population growth. This presents opportunities for companies to export their energy supplies.

World energy growth and demand in coming decades are anticipated to be met by a diverse range of energy sources. The key areas for growth are from technological advances, and include shale gas extraction technologies and renewable energy technology.

energy_dem_SL

As can be observed from the chart, the mix of energy supplies is predominantly from gas and renewables. The middle east remains critical in the long term supply outlook for the global energy industry. The US is anticipated to produce light tight oil and shale and Brazil is set to produce from deepwater oil until 2025. This is where shale producers such as Continental Resources (NYSE:CLR), Whiting Petroleum (NYSE:WLL) and other in the US are well positioned to produce in the next decade.

The increase in shale oil production can be observed graphically below.

energy_dem_US_SL

http://www.eia.gov/forecasts/archive/aeo13/er/pdf/0383er(2013).pdf


Oil – refinery capacity. Net exporters, net importers

energy_dem_SL_table

http://www.iea.org/publications/freepublications/publication/KeyWorld2013.pdf

The US has traditionally been a net importer of crude oil, as shown by the chart from the IEA. This status may change as extraction technologies for shale oil and gas have now become viable. Domestic supply of oil is projected to continue to grow as a result of new extraction technology. The level of oil production in the US in the coming decade will depend on further enhancements to extraction technologies. By current estimates, the US is set to increase oil production to 7.5 million bpd by 2019. The growth is anticipated to come from onshore shale formations. Production is anticipated to decline after 2020 due to drillers producing in less extractable areas. This increase in domestic production may lead to less reliance on imports. By 2040, tight oil production in the US will account for 33% of total US oil production, at 2 million barrels per day.



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