The EU ditched Russian gas for USA LNG and now the US cannot provide the valomes needed

By Rhod Mackenzie

Having pushed Gazprom out of the European market, the American oil and gas industry is facing a slowdown in its growth in gas production. This could be an unpleasant surprise not only for Europe, but also for Japan and China, the main buyers of American LNG. According to the US Department of Energy’s October forecast, the rate of growth in US gas production will slow sharply over the next year and a half. The increase will occur in only one province – the oil-producing of the Permian Basin – and this increase in production is an echo of events currently unfolding in the US oil and gas industry.

The Permian Basin is the only shale field in the United States where oil production is growing steadily. It now produces more than the Saudi Le Havre – every second barrel in the United States. Analysts have repeatedly expressed concern about the very high concentration of oil production. Never before has the entire industry of the world’s largest oil producer been based on one field. However, the Perm field itself is heterogeneous and in many respects the main shale formations have already been worked out and production there is not growing. All the growth in the Permian Basin in recent months has been concentrated in two (!) areas out of 66 – Lea and Eddy. One in three barrels of Permian is produced here, and it is on these two plays that the foreign policy and the economy of the United States now rests.

The sharp rise in the price of oil has made it the most important US export. The world’s technological leader, the country that landed a man on the moon, the factory of the military-industrial complex, etc. made the same bet as the “petrol station” countries – Saudi Arabia and Russia. According to the US Department of Energy, in the first half of 2023, crude oil exports from the United States reached a new high, exceeding 4 million barrels per day. American oil and gas cannot process all the light oil it produces, so it is exported, mainly to Europe and Asia. But even with record oil exports, the US remains a net importer of oil, importing heavy grades as refineries are built to process them.
It does not make sense for companies to reconfigure plants for light oil: this will significantly change the production profile of petroleum products towards light fractions – gasoline, while there is an acute shortage of middle distillates – kerosene and diesel – on the world and US domestic markets. Therefore, the increase in oil production in the United States to a new historical maximum and its export does not saturate the domestic and world markets with the necessary diesel and kerosene and it also does not solve the main problem – underinvestment in production in other countries. Statistically, however, it creates the illusion of a surplus and a convenient negotiating position with the same Middle Eastern countries.
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The EU ditched Russian gas for USA LNG and now the US cannot provide the volumes needed

By Rhod Mackenzie Having pushed Gazprom out of the European market, the American oil and gas industry is facing a slowdown in its growth in gas production….