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US And Iraq 'Winners From Energy Revolution'

(c) Sky News 2012

The United States is to become virtually self-sufficient in energy in the coming decades while Iraq is set to be the leading oil supplier to China, the world's leading energy authority has said.

The predictions have been made by the Paris-based International Energy Authority (IEA), in its annual World Energy Outlook report.

In recent years the US has reaped an energy windfall as new technology allowed access to previously unrecoverable shale gas and so-called light tight oil reserves.

So dramatic is the US shale gas boom, now seen as a "game changer", that recently planned harbour gas import plants have been redesigned for export.

"By around 2020, the US is projected to become the largest global oil producer  - overtaking Saudi Arabia until the mid-2020s," the IEA said.

"The result is a continued fall in US oil imports, to the extent that North America becomes a net oil exporter around 2030."

The IEA said the cost saving for gas and electricity in the US will help improve its competitiveness and "spur economic activity".

Meanwhile, the big global winner in oil supply is expected to be Iraq, which should see oil production more than triple from the 2012 rate of 2.5 million barrels per day (2.5mb/d).

In 2000, Iraq exported over 3mb/d but it has failed to replicate the output since US and UK forces led an invasion in 2003.

US architects of the war had planned to use Iraqi oil exports to pay for reconstruction. However, ancient process infrastructure hampered quick development.

"In our projections, oil output in Iraq exceeds 6mb/d in 2020 and rises to more than 8mb/d in 2035," the IEA said.

"Iraq becomes a key supplier to fast-growing Asian markets, mainly China, and the second-largest global exporter by the 2030s, overtaking Russia."

Without Iraqi oil in the global market, the IEA predicts that oil would be $15 (£9) a barrel more.

But geopolitical concerns over Iran, and strategic security of oil routes through the constricted Strait of Hormuz to Asia, will also be factors in coming years.

The shift occurs as China reconfigures its naval forces from a brownwater fleet to a bluewater force, gaining experience with its first aircraft carrier and expanding submarine capabilities.

The US has planned to balance growing Chinese defence expenditure by building a new base for Marines in Australia's Northern Territory and elsewhere, building bonds with India and using so-called smart power techniques.

The IEA said Iraq stands to make $5trn (£3.14trn) in revenues - giving it some $200bn (£125bn) annually - but warns against falling victim to the so-called resource curse.

"It is an opportunity to transform the country's prospects," the agency said.

"Translating oil export receipts into greater prosperity will require strengthened institutions, both to ensure efficient, transparent management of revenues and spending, to set the course necessary to encourage more diverse economic activity."

Gas 'fracking' has been trialled in Britain and the technology may allow further extraction from previously unviable or seemingly exhausted fields.

Deepwater drilling techniques continue to develop quickly, with Brazil attempting to recover oil offshore - and Ireland (Xetra: A0Q8L3 - news) may soon follow suit.

:: On Monday, prospector Petrel Resources (LSE: PET.L - news) saw a 300% increase in its share price after announcing it had found up to a billion barrels of oil 120 miles offshore from Kerry at a drill depth of 2.5 miles from the sea surface.