Feature Report: The Geopolitics of Oil and Gas

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United States: The World’s Leading Oil and Gas Producer

The U.S. shale “revolution”, which began in the early 2000s, has seen the country become the leading producer of oil and gas in the world and an exporter of both resources, reducing its reliance on countries in the Middle East and strengthening its geopolitical position.

La « révolution » américaine des hydrocarbures de schiste
The development of shale gas in the United States has profoundly altered the world energy landscape. © GONZALEZ THIERRY - TOTAL

 

The United States has been producing shale gasShale gas is found in deeply buried clayey sedimentary rock that is both the source rock and the reservoir for the gas... on an enormous scale since 2007 and extracting an increasing amount of shale oilRefers to liquid hydrocarbons extracted from oil shale (see definition) by heating, pyrolysis or hydrogenation. since 2010, considerably boosting its hydrocarbonOrganic compound consisting of carbon and hydrogen. Hydrocarbons are the principal constituents of crude oil, natural gas and petroleum products. output. In 2014, the country overtook both Saudi Arabia and Russia to become the leading producer of crude oilOil that has not been refined. and natural gas.

This trend is set to continue and will ensure that the United States is energy self-sufficient in the coming years. The country already produces more gas than it consumes and has built gas liquefactionConversion of a gas to a liquid. In industrial applications, gas is liquefied by cooling and/or pressurization... facilities enabling it to export an increasing amount around the world. In terms of oil, the United States long produced as much as it consumed. But the country became increasingly dependent from the 1970s onwards, importing up to two-thirds of consumption in 2005. Today, consumption and production figures are almost equal (see tables).

Shale Oil and Gas Production

This revolution was made possible through the production of “shale”, unconventional oilOil that cannot be extracted using current technology or that entails additional technology or costs to produce... and gas trapped in source rock that has not been able to migrate toward the surface and accumulate in standard deposits. (See Close-Up: “What is ‘Unconventional’ Oil and Gas?) Horizontal drillingA type of directional drilling across a formation, at a 90-degree angle... and hydraulic fracturingMethod of enhancing the productivity of oil or gas reservoirs with low permeability... (or “fracking”) must be used to release these resources. These techniques involve injecting large quantities of water and chemicals at high pressure into the ground to “break” the rock.

DrillingThe process of boring a hole into the ground using special equipment... first focused on natural gas trapped in the source rock Sedimentary rock containing large amounts of organic matter and found in deep sea... (shale gas) before extending to oil (shale oil). Two major production zones have gradually emerged: the Appalachian Basin in the north east, straddling Pennsylvania and Ohio; and the Great Plains in the center, spanning parts of Texas, Oklahoma, Colorado and Louisiana.

These techniques have attracted strong opposition from environmentalists, who say that fracking makes the ground unstable and that the chemicals used cause pollution. Horizontal drilling involves neutralizing vast expanses of land and providing access to fleets of trucks to bring in water and other necessary products. However, greater gas production has reduced the use of coalCoal is ranked by its degree of transformation or maturity, increasing in carbon content from... in powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... generation, thereby curbing CO2See Carbon Dioxid  emissions.

Impacts on Gas Markets

The United States is the world’s leading producer of oil and gas.

Initially, major oil and gas producers such as Russia and the Gulf states paid little heed to rising U.S. outputs. They reasoned that the cost of extracting the unconventional hydrocarbon deposits would quickly outweigh the benefits. But American producers, often small companies, were able to adapt and reap the benefits of the technological advances that any new type of operation brings. In the petroleum industry, the cost of extracting shale oil was soon comparable to that of offshoreRefers to sea-based oil exploration and production operations, as in "offshore license" or "offshore drilling". or hard-to-access oil production. 

In 2019, the United States was responsible for 13% of the world’s oil output. Vying for market share is the Organization of the Petroleum Exporting Countries (OPECCreated in 1960, OPEC currently has 12 members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia... ), a cartel of 13 oil-producing countries which, working in collaboration with Russia, represents around 30% of global production.

One consequence of the shale gas boom has been lower gas prices on the North American market and, as a result, greater disparities with the other two major regional markets, Europe and Asia. Unlike the oil industry, the gas market is not yet globalized due to transportation difficulties. This secures U.S. industry access to extremely cheap natural gas, strengthening its competitiveness.