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Bentek: North America Will Be Soaking in Crude

Crude oil production in the United States and Canada will grow by 3.1 million b/d, or about 38%, over the next five years thanks to technologies and development practices honed in the U.S. shale gas patch, according to a new analysis by Bentek Energy LLC. The United States alone will grow oil production by 2.2 million b/d, most of it light or intermediate grades, the firm said.

Oil production will surpass levels not seen since 1973, according to the analysis.

Bentek said the significant increase in crude oil supply will outpace demand growth, leading to downward pressure on U.S. oil prices relative to West Texas Intermediate (WTI) and a continuation of deep discounts to international prices. The WTI-Brent spread will average a negative $13 from 2012 to 2016, Bentek predicted, with WTI discounts of $3 in 2013 and 2014 after pipeline expansions link Cushing, OK, to the U.S Gulf Coast.

Bentek and Turner Mason & Co. foreshadowed Bentek's latest projections for oil supply in a report issued last year (see Shale Daily, Sept. 29, 2011).

"The U.S. oil market is beginning a transformation similar to what happened in U.S. natural gas during the past several years," Bentek said its latest Market Alert, titled "Crude Awakening: Shale Boom Hits Oil" and issued Thursday. "A technological revolution altered the U.S. natural gas industry from expectations of a chronic undersupply to perennial surplus, and now these new technologies and process improvements are being applied to oil.

"After decades of declining production, the U.S. experienced its third consecutive year of crude oil production growth in 2011, and Bentek estimates that by 2016 U.S. crude oil production will be 38% higher than it was in 2011." According to the latest figures available from the Energy Information Administration, the U.S. produced 5.5 million b/d of oil in 2010 and imported 9.2 million b/d.

The Market Alert is an advance of a Bentek multi-part series on the outlook for crude supply. The reports, to be issued through March, will be broken into segments by Petroleum Administration for Defense District in the United States with a separate report for Canada.

Foreign suppliers of light crude to the United States in the future will peddle the commodity elsewhere, according to Bentek, which expects total U.S. imports of foreign oil to fall 41% or more than 2.8 million b/d by 2016. U.S. imports of crude from Canada are expected by Bentek to rise 900,000 b/d during the period.

"At the same time this U.S. oil resurgence is taking place, production from Canada's oilsands in Alberta also is increasing significantly, and new pipelines are being built to bring that oil to U.S. markets," Bentek said.

By Bentek's tally, more than 75 pipeline expansions, 25 rail transport projects and seven refinery expansions are targeted to alleviate oversupply. One of these projects, TransCanada Corp.'s Keystone XL pipeline has hit a snag with the Obama administration failing to approve the project (see related story).

"Taken together, U.S. and Canadian oil production is projected to reach a record high in 2016 of about 12.1 million b/d, surpassing the previous record of 11.2 million b/d in 1973," Bentek said.

"This supply growth will have a profound impact on the U.S. oil market and energy policy," said Bentek's Adam Bedard. "The resurgence of U.S. oil production should greatly reduce the need for foreign oil over the next five years. Combined with the recent surge in natural gas and natural gas liquids production, the U.S. has been propelled back to the forefront of the global energy producers and innovators."

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