US hydrocarbon production has steadily increased over the past couple of decades, driven by more sophisticated technology, an expansion of oil and gas infrastructure and a favourable regulatory environment.
The Permian Basin remains the largest oil-producing shale play in the US, with global demand and geopolitical shifts continuing to support growth and competitiveness in the region, according to recent research from Offshore Technology’s parent company, GlobalData.
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The region’s crude oil production averaged 5.6 million barrels per day (mbbl/d) during the first quarter of 2024 (Q1 2024), accruing benefits from a dense pipeline network and Gulf Coast infrastructure.
GlobalData oil and gas analyst Ravindra Puranik said: “Europe’s strategic shift away from Russian energy exports has resulted in key changes to the global energy supplies. This is anticipated to benefit the US shale oil and gas drillers, as well as LNG [liquefied natural gas] producers who are positioned to reap from these evolving supply chain dynamics.”
With this revolution in hydrocarbons, the US has been the world’s biggest producer (as well as a substantial importer) for almost a decade, now extracting well over 13mbbl/d of crude oil.
How will it maintain that position and what longer-term strategic issues does the country face? Mason Hamilton, vice-president of economics and research at the American Petroleum Institute (API), shares his insights with Offshore Technology.
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By GlobalDataEd Pearcey (EP): How has the US overtaken nations such as Saudi Arabia and Russia to become the world’s largest oil and gas producer?
Mason Hamilton (MH): This has been decades in the making. This goes back to the start of fracking technology, which was pioneered in the early 1950s by the US Department of Energy. Then, there was horizontal drilling technology. Those two were separate technologies and had separate pathways.
In the past 20 years, those two technologies have been combined to give us a revolution and unlock a lot more of the resources already underneath our feet.
Gas exports, particularly to Europe, have gone up quite substantially over the past five years. Collectively, Europe is the top destination for our LNG exports, particularly Germany, [which] has turned away from Russian gas. [The volume of US LNG exports to Germany reached 28.17 billion cubic feet in April, up from zero in 2022].
I believe in Q1 2025, [the US] also set a record high in the amount of LNG exports to places other than Europe, such as Asia and South America.
EP: Are there any areas in the US that are primed for exploitation?
MH: With acquiring resources, three main questions crop up: what’s the available resource out there? Is there access to it? And, at what price can we get it?
Alaska has a lot of potential. We saw the Willow project [an oil drilling initiative on the plain of the North Slope of Alaska in the state’s National Petroleum Reserve, situated entirely on wetlands] with ConocoPhillips not too long ago. That was a big development there.
There is also a lot of activity going on in federal lands. One of the of underlying themes that people are not aware of is that, since 2019, it is actually New Mexico that has seen the largest oil and gas production growth, not Texas. A huge chunk of the New Mexico production comes from federal lands in just three different counties.
In fact, there is one county in the south-eastern corner of New Mexico, Lea County, that produces more crude oil than the five smallest OPEC [Organization of the Petroleum Exporting Countries] members. It produces over a million barrels a day. That growth was driven by access to and use of federal lands.
If you look at the trends since the pandemic, the driving force that was really apparent post-Covid is increasing hydrocarbons production on federal lands. So, I would definitely say federal lands can be exploited further, because that is seen in the data.
EP: Is the US nearing full energy independence? Doesn’t the US still import certain types of crude oil?
MH: Under Biden, there was a period of confusion and contention for us. Not only do we need continued certainty on access, but it is written into the law – that both onshore and offshore quarterly or yearly lease sales must be held – but in some years, they [the Biden administration] just didn’t do it.
We need to be clear – the term ‘energy independence’ is more or less a political slogan. From my perspective, the US is an active importer and exporter of energy, and an active trading partner when it comes to energy resources, whether that is electrons, petroleum, coal or so on.
I think the terms ‘energy security’ and ‘energy independence’ are being used interchangeably. What we are really talking about is increased imports. I think between six and seven million barrels a day [we import], and I think 70% of that comes from Canada, while the second-largest imports origin point is Mexico.
It is not like the US is going far afield to get access to imported barrels – they are coming from North America. The marginal barrel, yes, probably does come from the Middle East, but far less than it did in the early 2000s or the 1980s or even 1970s, when we saw big gas lines during the energy crisis.
In terms of energy security, yes, we are probably more energy secure now than in the past, but the term energy independence is just confusing – a misnomer.
EP: Is there enough refinery capacity in the US? It needs to build more infrastructure such as refineries and storage facilities, so is that being worked on?
MH: The US has not built any new major transportation, fuel-producing refineries since the late 1970s – but despite that, and despite many refineries closing over the past 30 years, the US has more refining capacity today than it did in the 1980s.
That is because the refineries that we do have left have been heavily invested in, modernised and are equipped with the latest technology, meaning we can squeeze out every extra molecule. The US refinery fleet is one of the most modern in the world. Only last year, China managed to reach the same amount of refining capacity that we currently operate.
research at the API. Credit: API.
The refining crown of the world is currently split between the US and China. China may have slightly more capacity, but US refineries run at a higher utilisation rate, typically in the 80% range, and sometimes even 90%. China simply does not achieve those kinds of run rates.
The question of whether we need more refining capacity is not the right one. It should be ‘Are we maximising the existing kit in the fleet that we have available?’
I would flag one issue: we are losing refineries on the West Coast of the US, particularly in California, because of a very harsh regulatory environment, a harsh market environment and other economic challenges, such as refineries consuming a lot of electricity at a time when electricity prices in California are very high.
With refinery closures in California, that market has become tight to the point where all of a sudden they must call up somewhere far away to get replacement supplies of gasoline.
Could we build another refinery? Well, that depends on where it is, as the US is not one unified market for petroleum products, but five separate regions, namely the East Coast, Midwest, Gulf Coast, Rocky Mountain and West Coast.
Nobody, as far as I know, is proposing a new greenfield refinery, but more refineries are being invested in, expanded upon and improved constantly.
However, building a new refinery poses another question: do you build a refinery next to the source of demand, or do you build it next to the source of supply?
EP: Are there any other markets, apart from Europe, to whom the US is looking to export its hydrocarbons?
MH: It really depends on the product you are talking about. For LNG, Europe is a wide-open market. Increasingly, natural gas is going towards Europe.
Then there are places such as India and South East Asia that are of interest. Some countries in South East Asia are on the cusp of needing to import energy rather than export, as their economies are growing, and their traditional fossil fuel resources and reserves have been depleted.
Countries that come to mind are Malaysia, Indonesia, Thailand and Vietnam. They have significant energy resources; their production is now maybe on a downturn, but they have vibrant economies and still need power.
Closer to home, South America is always a big market for us. In terms of Central and South America, a large portion of US petroleum product exports such as transportation fuels, gasoline and diesel go to Central and South American countries. In fact, over 50% of US gasoline exports go to one country: Mexico.
Diesel is the most diverse US export product across all the energy commodities, because it goes to a long list of countries. So yes, the US is always looking to develop new markets in different places.
