US oil and gas production hits all-time high with more growth expected
What’s happening? US oil and gas extraction is poised to reach an unprecedented peak in 2023, heightening concerns amidst the global push for fossil fuel phase-out at COP28 in Dubai. Despite President Joe Biden’s climate initiatives, the US is projected to double its crude oil production to 12.9 million barrels, alongside a simultaneous surge in gas production, contradicting UN Secretary-General Antonio Guterres’ call to end the fossil fuel era. This surge raises environmental alarms, challenging the US’s credibility in leading climate initiatives and posing potential adverse impacts on marginalised communities and young voters (The Guardian).
Why does this matter? Since overtaking Russia and Saudi Arabia in 2018, the US has been the world’s number one producer of oil and gas, contributing 11.8 million barrels a day of crude oil and 1,027 billion cubic metres of natural gas per annum. Due to a surge in oil and gas investment, this trend is forecast to continue.
Record growth – The US is currently witnessing an unprecedented expansion of gas infrastructure in the Gulf of Mexico, with five liquefied natural gas (LNG) production facilities under construction. Consequently, the country is set to double its LNG exports by 2026, reaching 24 billion cubic feet per day. Meanwhile, Canada is also undergoing a substantial LNG investment, with the approval of 18 terminals costing over $133bn, boosting production capacity to over 29 billion cubic feet per day.
M&As – Amidst the surge in production, the US faces both market risks and opportunities. Notably, Chevron’s landmark $53bn all-stock acquisition of US oil and gas producer Hess underscores confidence in ongoing fossil fuel demand. This move follows ExxonMobil’s $64 billion acquisition of Pioneer Natural Resources, marking a trend in mergers and acquisitions within the US energy sector.
Challenges – Despite recent growth, the US market has experienced setbacks, including a reported slowdown in the shale oil and gas industry due to declining commodity prices. The Federal Reserve Bank of Dallas reported a standstill in business activity growth among around 150 oil and gas groups in its region, signalling potential short-term output challenges despite increasing production.
Efficiency drive – Technological advancements have played a crucial role in supporting US production, with record-breaking output of 13.1 million barrels per day in August. Despite a decline in drilling rigs, efficiency improvements have offset the impact of lower prices, maintaining an upward production trend. The growth rate has slowed, but increased efficiency continues to drive production, showcasing the resilience of the US oil and gas industry.
While boosting production, President Biden chose not to attend COP28 in Dubai, citing the demands of a Middle East war and an upcoming presidential campaign.