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A tanker docked at Cheniere Energy’s Texas terminal by the Sabine Pass in February 2016 to ship LNG to Brazil for the start of US shale exports © Bloomberg Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Save to myFT

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The latest short-term outlook for US oil production published by the Energy Information Administration shows output rising to 13.2m barrels a day by the end of 2020. If this is achieved (and the EIA is traditionally cautious), the US will be the largest producer in the world, by a clear margin over Saudi Arabia and Russia.

Two-thirds of that production will come from “tight oil” — that produced by fracking shale rocks. Ten years after the shale business began, the revolution is as dynamic as ever.

Commentators who said shale was a marginal short-term phenomenon that would be killed off by falling prices, or rapid reservoir depletion, have been proved wrong. What began as a gas play now supplies the US with the bulk of its oil and gas needs.

Threatened by the downturn in prices after 2014, the shale industry has achieved a remarkable reduction in costs. The current outlook is for output to continue to rise until at least the mid 2020s even at current oil prices.

The impact on the global market and trade has been profound. The US is now a net exporter of both oil and gas, and recent figures from the International Energy Agency suggest that exports will continue to grow steadily.

That means US production growth is absorbing most of the annual increases in global oil demand (around 1m b/d), leaving Opec and Russia little or no scope to increase their own exports or revenue.

US export growth is the main reason why, despite the falls in production in Venezuela and Iran as a result of sanctions and social disintegration, the oil price at just over $60 for a barrel of Brent crude is below what it was 40 years ago in real terms.

US exports are also reshaping the world market for natural gas. The latest surge in gas exports, built on the growing volumes of that produced as a byproduct of oil extraction, is adding to a global glut. Prices can only fall further and expectations of a price surge in the early 2020s now look misplaced.

The past year has seen something of a pause in shale development because the infrastructure necessary to move additional volumes, particularly from the giant Permian field in Texas and New Mexico, had to be put in place. Nevertheless, US output rose by over 1m b/d last year.

Shale gas has taken market share from coal in the US and despite the best efforts of the Trump administration the gradual decline of coal will continue. Shale gas has also undermined the US nuclear business.

Oil from shale has removed the US dependence on oil imports. Last year only some 1.5m b/d of oil was traded into the US from the Middle East, clearly reducing the strategic importance of an area that was once a priority for American foreign policy.

The revolution is live but has not yet been exported. The potential exists. There are shale rocks in China, southern Africa, Russia and many other places around the world. But progress has been slow, not least because additional supplies are simply not needed in a saturated market.

Now, however, the situation is beginning to change. Shale development in Argentina and Canada is growing and the big energy companies, including BP and Chevron, are investing at a material level for the first time.

The lesson of the US experience is that once a new industry is in place with the necessary skills and infrastructure, output from identified basins can grow beyond all initial expectations. The global shale revolution has barely begun, and the changes to the pattern of trade that we have seen so far are no more than a hint of the disruption to come.

The writer is an energy commentator for the FT and chair of the King’s Policy Institute at King’s College London

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