Risks cloud bright future for oil and gas by Ed Crooks and Guy Chazan, November 12, 2012, The Financial Times
The industry’s resurrection, as described by the International Energy Agency, promises huge benefits for the US economy. Yet there are still risks that could cloud that bright future. … Before those chickens are counted, however, the industry needs to prove it can increase production the way the IEA expects. The American Petroleum Institute, the industry lobby group, talks about “an opportunity”, rather than a sure thing. “The shale boom in America is just beginning,” it said on Monday. Its concerns are focused on regulation. The Environmental Protection Agency and other government bodies are studying hydraulic fracturing and could come up with new rules next year that restrict the industry’s operations. There are other reasons why the potential of shale might not be realised. New health risks might emerge. A shortage of water might constrain its use for fracking.
Above all, the newness of the industry means that there is still only limited evidence of long-term production performance. Fatih Birol, the IEA’s chief economist, said the agency’s forecasts to 2017 were based on data about existing reserves and production, but warned that the geology and reservoir performance were “poorly known” and it was unclear whether new reserves would be found to sustain output into the future. In the 2020s, he added, Saudi Arabia could be the world’s largest oil producer once again. [Emphasis added]