According to a new report released yesterday by the International Energy Agency (IEA) titled “World Energy Outlook 2012”, the United States is on its way to becoming the world’s largest oil producer. Based on new estimates, the IEA projects that America will surpass the world’s longstanding top oil producer, Saudi Arabia, by the year 2020.
What’s behind the surging domestic oil production that has the United States on track to become “Saudi America,” as the Wall Street described it today? Advanced drilling technologies that are tapping into unconventional shale oil deposits get the credit.
From the IEA report: “The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity – with less expensive gas and electricity prices giving industry a competitive edge – and steadily changing the role of North America in global energy trade.”
From the Wall Street Journal: “The key to this U.S. energy boom has been technological innovation and risk-taking funded by private capital.”
When the U.S. does overtake Saudi Arabia as the world’s No. 1 oil producer in the next eight years, a lot of the credit for the increased domestic oil production will have to go to the “Economic Miracle State” of North Dakota. New oil production data released today by the state’s Department of Mineral Resources show that the Peace Garden State set more new monthly records for oil production in September. For the second month in a row, the state produced more than 700,000 barrels of oil per day (bpd), and the 728,494 barrels of daily North Dakota oil in September was another all-time record high (see top chart above).
What’s especially impressive is the incredible exponential increase in North Dakota’s oil production over such a short period of time. The state’s oil production has doubled in just the last 16 months, from 364,160 bpd in May of last year to 728,494 in September of this year. Oil coming out of the state’s Bakken Formation is behind the huge increase, as that oil field in western North Dakota now supplies 91% of the state’s oil, up from only 78% of the state’s oil two years ago. Bakken oil output has doubled in just the last 15 months, from 320,435 bpd last June to 662,428 bpd in September (see bottom chart above). At the current pace of production increases, North Dakota’s oil production will surpass one million bpd by the end of next year. And it’s the exponential increases in shale oil production in the Bakken region of North Dakota and the Eagle Ford Shale region of Texas that have the United States on a trajectory to become the world’s largest oil producer in the next eight years.
Equally impressive is the fact that the state of North Dakota is now producing more oil for the first time than both the entire national production of Egypt (719,000 bpd) and Argentina (723,000 bpd), based on international oil production data from the Department of Energy for the month of June.
Along with the gusher of shale oil in North Dakota has come a gusher of shovel ready jobs and widespread oil-related prosperity. The “Economic Miracle State” continues to lead the nation with the lowest state unemployment rate at 3% in September, at almost five percentage points below the national average of 7.8%. There were 11 North Dakota counties with jobless rates below 2.0% in September, and Williams County, which is at the epicenter of the Bakken oil boom, continues to boast the lowest county jobless rate in the country at just 0.7%. The exponential growth in North Dakota oil production has fueled exponential growth in the state’s oil and gas jobs, which have more than tripled over the last three years. Overall employment throughout the entire state increased 5.6% over the twelve month period through September; four times the tepid 1.4% pace of job growth nationally during that period.
Bottom Line: September marked another month in a long string of record-setting months for oil production in North Dakota, and the energy-related boom there continues to make it the most economically prosperous state in America, with the lowest state jobless rate in the country and jobless rates in 11 of the state’s counties below 2.0%. North Dakota’s economic success, job creation, and energy-based prosperity is being driven by advanced drilling technologies that are now able to successfully access the state’s vast energy resources, especially the ocean of shale oil in the state’s Bakken region. At the current pace of production increases, North Dakota’s oil production will surpass one million bpd by the end of 2013, and the state could reach two million bpd within the next five years. As the U.S. becomes “Saudi America,” a lot of the credit goes to “Saudi Dakota” and especially “Saudi Bakken,” as today’s record-setting production data indicate.