WASHINGTON, October 3 (RIA Novosti) - The United States is expected to leapfrog Russia as the world’s largest producer of oil and natural gas this year thanks to a surge in US fuel production driven by technology that allows energy companies to tap into oil and gas in underground shale rock formations, according to media reports and an independent energy agency.
A report in the Wall Street Journal (WSJ) Wednesday said that the United States is “on track to pass Russia as the world’s largest producer of oil and gas combined this year – if it hasn’t already.”
And the International Energy Agency (IEA) said in its Oil Market Report (OMR) for September that “the US is set to become the leading non-OPEC liquids producer” in the world as of the third quarter of this year, if biofuels are included in the calculations.
Even if biofuels – which Russia produces in very small amounts while US production has risen sharply – are taken out of the equation, the United States is still nipping at Russia’s heels in terms of total production of oil and gas, the IEA said.
The third quarter forecast for US oil and gas production was 10.3 million barrels per day or just 500,000 barrels a day less than Russia’s.
According to the IEA’s Key Energy Statistics report, the United States was the world’s largest producer of natural gas last year, producing 681 billion cubic meters compared to 656 billion produced by Russia.
Part of the reason why Russia is likely to be surpassed by the United States in total oil and gas production is because technologies like hydraulic fracturing, or fracking, which has allowed the United States to tap into shale rock to extract gas, have not been rolled out on a large scale in Russia.
Fracking – which involves injecting water and chemicals into underground shale to release trapped gas – has also brought down the price of US natural gas by boosting supply.
As US energy extraction and production have gone up, imports of natural gas and crude oil have fallen by 32 percent and 15 percent, respectively, in the last five years, the Wall Street Journal said.
At the same time, however, the United States, which is a voracious consumer of energy, didn’t make it onto the top 10 of natural gas exporters in 2012, while Russia topped the list, selling 185 billion cubic meters of its natural gas production to other countries.
“Since the US is such a big consumer of energy, the shift to producing more of its own oil and gas has left substantial fuel supplies available for other buyers,” the WSJ wrote.
Lower US gas prices and increased availability give countries that import fuel another viable source for gas supplies.
According to a report in the International Business Times (IBT), the US Department of Energy is reviewing “at least two dozen” applications to build export terminals for liquid natural gas (LNG), and Britain has already expressed strong interest in buying its gas from the United States, according to the IBT.
The big loser in the story is expected to be Russia, which is currently the second biggest natural gas supplier to Europe after Norway.
The Russian Academy of Sciences' Energy Research Institute has predicted that Russian exports of oil and gas could fall as much as 25 to 30 percent by 2015, which would reduce GDP by $100 billion and slash oil and gas-related duties and taxes, which currently make up more than 40 percent of Russian revenues, the WSJ report said.
The United States is also narrowing the gap with Russia in crude oil production, lagging behind Russia by just 900,000 barrels a day in the first half of this year, compared to three million barrels a day a few years ago, according to the IEA.
But not everyone in Russia is worried about being elbowed out of its dominant fuel market position by the United States, the WSJ said.
The country is thought to have “one of the world's largest, untapped oil-bearing shale formations, creating the potential for a surge in production,” and the head of Russian energy giant Gazprom has said the US shale output boom is "a bubble that will soon burst," the newspaper said.