Shale oil production to shake up global oil and gas markets

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A recent report has indicated that Shale oil production has the potential to reach up to 12 per cent of global oil production, equivalent to almost 14 million barrels a day. This extra supply could push global oil prices down by around 25-40 per cent in 2035 relative to an EIA baseline projection of $133 per barrel in that year (in real terms).

The report titled “Shale oil – the next energy revolution” According to Price Water House Presents significant strategic opportunities and challenges for the oil & gas industry and governments.  As a result PwC is to convene stakeholder meeting in April to discuss the implications of the report on Nigeria.

Shale oil, according to energy experts is unconventional oil, produced from oil shale by pyrolysis, hydrogenation or thermal dissolution. These processes convert kerogen into synthetic oil and gas, which can be used as a fuel or upgraded to meet refinery feedstock specifications. The refined product can be used for the same purposes as those derived from crude oil.

The global impact of shale oil could revolutionise the world’s energy markets over the next couple of decades, resulting in significantly lower oil prices, shifts in GDP, changing geopolitics and new business models for oil and gas companies, according to new analysis from PwC.

The report, Shale oil – the next energy revolution, examines scenarios that consider the potential impact of future growth in shale oil production on global oil prices and assesses how these changes could impact the wider economy and the oil and gas industry over the period to 2035.

John Hawksworth, chief economist at PwC and co-author of the report, said: “Lower global oil prices due to increased shale oil supply could have a major impact on the future evolution of the world economy by allowing more output to be produced at the same cost.

These effects could build up gradually as shale oil production rolls out across the world to produce an estimated rise in global GDP of around 2.3-3.7 per cent in 2035. This would be roughly equivalent to adding an economy the size of the UK to total global GDP in that year.

The PwC analysis suggests that shale oil production has the potential to spread gradually from its current US base, increasing to almost 12 per cent of the world’s total oil supply by 2035. Given the relative insensitivity of oil demand to price changes, PwC scenario analysis suggests that oil price falls (relative to the reference case EIA projection of as much as 40 per cent could be needed by 2035 to increase demand sufficiently to absorb this additional supply.

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