Annual Energy Outlook 2016 - Colorado State...

U.S. Energy Information Administration www.eia.govIndependent Statistics & Analysis

Annual Energy Outlook 2016

ForNational Committee on Oil and Gas for Air Quality ModelingOctober 13, 2016 | conference call

ByJohn Staub, Team Lead

Oil and gas supply modeling methodology

OverviewOil and Gas Supply Model (OGSM) in the National Energy Modeling System (NEMS)

• AEO 2016 Lower 48 onshore (OLOGSS) model overview• http://www.eia.gov/forecasts/documentation/workshops/#upstream

• http://www.eia.gov/forecasts/aeo/assumptions/

• http://www.eia.gov/forecasts/aeo/nems/documentation/ogsm/pdf/m063(2014).pdf

– Resources and technology (knowns and unknowns)

– Example of sub-county level analysis in the Marcellus play

• AEO 2016 crude oil and natural gas supply projections

John Staub, for National Oil & Gas Emissions Committee October 13, 2016 2

http://www.eia.gov/forecasts/documentation/workshops/#upstream

http://www.eia.gov/forecasts/aeo/assumptions/

http://www.eia.gov/forecasts/aeo/nems/documentation/ogsm/pdf/m063(2014).pdf

National Energy Modeling System (NEMS) – Oil and Gas Supply Model (OGSM)

3John Staub, for National Oil & Gas Emissions Committee October 13, 2016

John Staub, for National Oil & Gas Emissions Committee October 13, 2016

AEO 2016 Methodology – OGSM overview and interaction with NEMS

4

NEMSOGSM

Supply Functions

PMM

NGTDMGas Production Function

NEMS OGSMSupply Functions

Liquid Fuels Market Model

Natural Gas Markets ModelGas Production Function

Exogenous Input

Drilling, Price, Supply, Reserves

OGSM

Domestic Foreign

Onshore Offshore AlaskaThe new “OLOGSS”

OGSM

Domestic Foreign


OGSM

Domestic Foreign


OGSM

Domestic Foreign

Onshore Offshore Alaska

Oil

The new “OLOGSS”

Gas

Known Fields- Conventional- Unconventional

Undiscovered- Conventional- Unconventional



OGSM

Domestic Foreign


OGSM

Domestic Foreign


OGSM

Domestic Foreign


OGSM

Domestic Foreign

Onshore Offshore Alaska

Oil

The new “OLOGSS”

Gas









Lower 48 Onshore (OLOGSS)


OLOGSS – three phases of future production• Existing production

– from currently producing oil & gas fields

• Reserves growth– ASR / EOR

– infill drilling

• Undiscovered resource


History FutureReserves Growth

Existing Fields

Capabilities of OLOGSS• Model entire oil & gas resource in Lower 48

– Shale gas and tight oil– Tight sands– Coalbed methane– Other (a.k.a. Conventional)

• Ability to model– technology change / improvements– land access issues– legislative policy issues (royalty relief, tax credits, etc…)

• Ability to address more policy and financial issues that affect the profitability of oil and natural gas drilling than with current module


Role of OLOGSS within NEMS• Projects future domestic oil & gas supply

– Production from existing fields/reservoirs– Reserves growth in existing fields/reservoirs– Exploration in undiscovered fields/reservoirs

• Development of resources is subject to the following constraints– Access to resource– Technology– Economics– Infrastructure

• Drilling• CO2 availability• Pipeline• Others


OLOGSS overview


Development –Production Decline Curve

Project Ranking

Reports

Input Data

Economics

Exploration – Discovery Order

Secondary/Tertiary Recovery Analysis

Aggregation

Inputs to other Models

yes

Eligible for Secondary/Tertiary?

Timing/Selection

Undiscovered Discovered

Exploration Economics

AEO 2016 Methodology – OGSM OLOGSS system logic and flow


Master Database

Resource Description Module

Process Module

Economic/Timing Module

ReportsOther Input• Costs• Fiscal Data

Model Option Files

In NEMS

Preprocessor

Rank and Select Resources based on Constraints

• Production and Reserves• Wells – Active and Drilled• Economic results• Aggregated at:

– Play– Basin– State/Regional– National

OGSM OLOGSS preprocessor system logic and flow


• Estimates Production Profile for Each Resource Type Based on Production Profile Functions

• Screens Technically Viable Process for Each Resource

• Compiles Raw Data to Create Input Files For Use in the Model• Check for Quality, Consistency, Completeness• Aggregate and Process Data Based on “Unit of Analysis”• Allocate Resources per OLOGSS Regions

• “Data Warehouse” - Master Database of Oil and Gas Resources in Lower 48 Onshore

– Discovered (NRG Associates, DrillingInfo, etc)– Undiscovered (USGS, MMS)– Secondary Sources (COGAM, EIA, Others)

Master Database

Resource Description Module

Process Module

Model Option Files

User defined– Resource Development Constraints– Technology Options/ Levers– Economic Options/ Levers– Resource Access Parameters

Processes modeled


• Water flooding

• Polymer flooding

• Steam flooding

• CO2 flooding

• Infill drilling

• Profile modification

• Horizontal drilling

• Conventional/water drive

• Tight gas

• Coalbed methane

• Shale gas

Natural gasCrude oil

Primary model levers• Technology levers

– value of all levers

– implementation & market penetration curves

– interaction of technologies

• Economic levers– ROR

– Risk

• Resource access parameters


Resource development constraints• Constraints will be used for future development of various resources

– drilling

• number of rigs

• depth rating

– capital constraints

• E&P capital

• others

– co2 availability – natural and industrial sources

– access to land – federal/state

– natural gas demand

– others to be defined


Resources and technology– knowns and unknowns –


1. Actively developing area in plays like the Barnett, Marcellus, etc. will be called “Tier 1” and the EUR given a 1% annual growth rate

2. Area not yet at prime time will be called “Tier 2” and the EUR given a 3% annual growth rate until development begins then converts to “Tier 1”

– Large areas of the Marcellus, Utica, etc.

– Devonian has been produced with tiny vertical wells for 100+ years


There are two tiers of resource-technology plays which we assume will have different technology change rates

Crude Oil and Natural Gas

Resource Type Drilling CostLease Equipment & Operating Cost EUR-Tier 1 EUR-Tier 2

Tight oil -1.00% -0.50% 1.00% 3.00%Tight gas -1.00% -0.50% 1.00% 3.00%Shale gas -1.00% -0.50% 1.00% 3.00%All other -0.25% -0.25% 0.25% 0.25%

Source: U.S. Energy Information Administration, Office of Energy Analysis.

Natural gas Technically Recoverable Resources by AEO Year Trillion cubic feet

Natural gas resources plus cumulative production has exhibited an AAGR of 3.3% between AEO1990 and AEO2015, and…

17

1990 2005 2015 1990 - 2015 % change

1990-2005 AAGR %

1990-2015 AAGR %

2005-2015 AAGR %

Proved Reserves 187 187 308 65% 0.0% 2.0% 5.1%Unproved Resources 1,040 1,407 1,968 89% 2.0% 2.6% 3.4%

Shale Gas 12 86 596 4685% 13.7% 16.7% 21.4%Tight Gas 354

Coalbed Methane 47 80 120 157% 3.7% 3.8% 4.1%Other 323

Conventional Unproved 691 952L-48 offshore NA 305

Alaska 291 289 271 -7% 0.0% -0.3% -0.6%

Subtotal Resources 1,228 1,594 2,277 85% 1.8% 2.5% 3.6%

Production 18 18 27 53% 0.1% 1.7% 4.2%Cumulative Production 18 298 522

TRR + Production 1,245 1,612 2,798 125% 1.7% 3.3% 5.7%

y/y Change in TRR + Production, % 3.6% 1.4%


Example of sub-county level analysis in the Marcellus play



Adding geology improves EUR estimate quality, offers higher resolution

EUR: Estimated ultimate recovery per wellSource: Energy Information Administration analysis, July 2014

19

County Average EUR(bcf)

Average EUR weighted by GIP tier (bcf)

ALLEGHENY 3.74 4.09

ARMSTRONG 0.91 2.72

BEAVER 2.74 2.44

BEDFORD 1.16 0.85

BLAIR 1.34 1.23

BRADFORD 5.70 3.94

BUTLER 1.74 2.72

CAMBRIA 1.46 2.43

CAMERON 0.33 2.69

County Average EUR(bcf)

Average EUR weighted by GIP tier (bcf)

SUSQUEHANNA 6.14 4.92

TIOGA 2.98 2.49

UNION 2.80 0.30

VENANGO 0.83 2.49

WARREN 1.84 2.28

WASHINGTON 2.45 3.69

WAYNE 7.49 1.34

WESTMORELAND 1.85 2.84

WYOMING 8.85 3.42


Pennsylvania Marcellus – dry gas in the Northeast, wet gas in the Southwest

Source: Range Resources, Marcellus extent and Range Resources gas in-place outlines

20

SUSQUEHANNA

WYOMING

WASHINGTON

Contour (Bcf / sq mi)

Wells

0

500

1,000

1,500

2,000

2,500

0 5 10 15 20

SUSQUEHANNA_175 (8.0)SUSQUEHANNA_150 (6.5)SUSQUEHANNA_125 (3.8)SUSQUEHANNA_100 (3.2)SUSQUEHANNA_50 (2.5)SUSQUEHANNA_75 (2.5)Marcellus avg. (AEO2015) (1.9)Marcellus avg. (AEO2012) (1.6)

Dry natural gas production from average well over 20 yearsmillion cubic feet per year

Susquehanna, PA EURs by vintagebillion cubic feet


Two additional years of data show increase in productivity of wells, and sub-county detail captures economic drivers

Source: EIA, Annual Energy Outlook 2015

21

1

EUR (Bcf/well)


Assumption to the Annual Energy Outlook 2016

continued…

Source: http://www.eia.gov/forecasts/aeo/assumptions/pdf/oilgas.pdf

22

Bradford-Venango-Elk 18,128 8.1 0.003 0.063 0.5 9.2 0.0

Clinton-Medina-Tuscarora 26,549 8.0 0.002 0.118 0.4 25.0 0.0

Devonian 51,387 6.3 0.000 0.101 0.1 32.6 0.9

Marcellus Foldbelt 869 4.3 0.000 0.168 0.0 0.6 0.0

Marcellus Interior 25,200 4.3 0.007 1.934 0.8 209.4 11.6

Marcellus Western 2,688 5.5 0.000 0.287 0.0 4.2 0.2

Utica-Gas Zone Core 12,988 5.0 0.005 2.263 0.3 146.9 3.8

Utica-Gas Zone Extension 20,019 3.0 0.006 0.624 0.3 37.6 1.8

Utica-Oil Zone Core 2,161 5.0 0.062 0.109 0.7 1.2 0.0

Utica-Oil Zone Extension 7,389 3.0 0.031 0.129 0.7 2.9 0.0Illinois New Albany 3,058 8.0 0.000 0.117 0.0 2.9 0.2

Antrim Shale 13,177 8.0 0.000 0.106 0.0 11.1 0.9

Berea Sand 7,473 8.0 0.000 0.105 0.0 6.3 0.1

Appalachian

Michigan

Table 9.3 Unproved Technically Recoverable Tight/Shale Oil and Gas Resources b

Region Basin Play

Area with Potential1

(mi2)

Average Well Spacing

(wells/mi2)

Average EUR

Crude Oil2

(MMbls/well)Natural Gas

(Bcf/well)Natural Gas

(Tcf)

Technically Recoverable Resources

NGPL (Bbls)

1-East

Crude Oil (Bbls)

http://www.eia.gov/forecasts/aeo/assumptions/pdf/oilgas.pdf

Oil price assumptions


Brent crude oil spot price2015 dollars per barrel


Near-term crude oil price scenario is lower in AEO2016

Source: EIA, Annual Energy Outlook 2016 Reference case and Annual Energy Outlook 2015 Reference case

24

0

50

100

150

200

250

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

History Projections2015

AEO2015 Reference

AEO2016 Reference

Low Oil Price

High Oil Price

AEO 2016 Results


0

5

10

15

20

1990 2000 2010 2020 2030 2040 2020 2030 2040 2020 2030 2040

Projections

U.S. crude oil productionmillion barrels per day


U.S. crude oil production rises above previous historical high before 2030; alternative price and resource/technology cases can differ


26

Tight oil

Alaska

Lower 48 offshore

History2015 2015 2015

U.S. maximum production level of9.6 million barrels per day in 1970

Other lower 48 onshore

Reference

Reference

Low Oil and Gas Resourceand Technology

Low Oil Price

High Oil and GasResource andTechnology

High Oil Price

High Oil and Gas Resource and TechnologyProjections Projections

0

20

40

60

80

100

120

140

160

0

10

20

30

40

50

60

1990 2000 2010 2020 2030 20400

10

20

30

40

50

60

2015 2020 2025 2030 2035 2040

U.S. dry natural gas productiontrillion cubic feet

U.S. dry natural gas productiontrillion cubic feet


U.S. natural gas production dominated by shale resources; alternative price and resource /technology assumptions could be quite different


27

billion cubic feet per day

Low Oil and Gas Resource and Technology

Low Oil Price

High Oil and Gas Resource and Technology

High Oil Price2016 Reference

2015 Reference

Tight gasCoalbed methane

Other lower 48

Shale gas andtight oil plays

AlaskaLower 48 offshore

History Projections Projections2015

Alaskaonshore

0

1

2

3

4

5

6

7

8

9

1990 2000 2010 2020 2030 20400

5

10

15

20

25

30

1990 2000 2010 2020 2030 2040

energy spot prices under Reference case2015 dollars per million Btu Oil-to-gas price ratio

The price relationship between crude oil and natural gas impacts producer economics and production levels for both commodities


28

2015

Henry Hub spot price

Brent crude oilspot price

High Oil Price

Low Oil Price

Reference

2015History Projections

High Oil and Gas Resourceand Technology

Low Oil and GasResource and Technology

History Projections


0

2

4

6

8

10

2000 2005 2010 2015 2020 2025 2030 2035 2040

average Henry Hub spot prices for natural gas2015 dollars per million Btu

Future domestic natural gas prices depend on both domestic resource availability and world energy prices


29

History Projections2015

Reference

Low Oil and GasResource/Technology

Low Oil Price

High Oil and Gas Resource/Technology

High Oil Price


-8

-4

0

4

8

12

16

2000 2010 2020 2030 2040 2020 2030 2040 2020 2030 2040

Projections Projections Projections

U.S. natural gas imports and exportstrillion cubic feet billion cubic feet per day


Projected U.S. natural gas exports reflect the spread between domestic natural gas prices and world energy prices


30

LNG imports

History2015 2015

402015 Low Oil Price

Pipeline exports to Mexico

Pipeline exports to Canada Pipeline imports from Canada

Alaska LNG exports

30

20

10

0

-10

-20

High Oil and Gas Resource and Technology

Lower 48 states LNG exports

Reference

For more informationU.S. Energy Information Administration home page | www.eia.gov

Annual Energy Outlook | www.eia.gov/aeo

Short-Term Energy Outlook | www.eia.gov/steo

International Energy Outlook | www.eia.gov/ieo

Monthly Energy Review | www.eia.gov/mer

Today in Energy | www.eia.gov/todayinenergy

State Energy Profiles | www.eia.gov/state

Drilling Productivity Report | www.eia.gov/petroleum/drilling/

International Energy Portal | www.eia.gov/beta/international/?src=home-b1


http://www.eia.gov/

http://www.eia.gov/aeo

http://www.eia.gov/steo

http://www.eia.gov/ieo

http://www.eia.gov/mer

http://www.eia.gov/todayinenergy

http://www.eia.gov/state

http://www.eia.gov/petroleum/drilling/

http://www.eia.gov/beta/international/?src=home-b1

Supplemental Slides



Maps of shale and tight formations

Source: http://www.eia.gov/maps/maps.htm Drilling Productivity Report http://www.eia.gov/petroleum/drilling/

33

http://www.eia.gov/maps/maps.htm

http://www.eia.gov/petroleum/drilling/

0

10

20

30

40

50

60

70

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2004 2006 2008 2010 2012 2014 2016

Rest of US gas productionMarcellus (PA, WV, OH & NY)Haynesville (LA & TX)Eagle Ford (TX)Fayetteville (AR)Barnett (TX)Woodford (OK)Bakken (ND)Antrim (MI, IN, & OH)Utica (OH, PA & WV)Other US 'shale'Shale gas % of total

Shale gas production as a percent of total gas production

Natural gas production (dry)billion cubic feet per day

Estimated U.S. shale gas production was 41.9 Bcf/d in August 2016 about 57% of total U.S. dry production (73.9 Bcf/d)

Sources: EIA Natural Gas Monthly, STEO through August 2016 and DrillingInfo. http://www.eia.gov/energy_in_brief/article/shale_in_the_united_states.cfm


http://www.eia.gov/energy_in_brief/article/shale_in_the_united_states.cfm

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

1

2

3

4

5

6

7

8

9

2002 2004 2006 2008 2010 2012 2014 2016

Rest of U.S. Oil ProductionEagle Ford (TX)Bakken (MT & ND)Spraberry (TX & NM Permian)Bonespring (TX & NM Permian)Delaware (TX & NM Permian)Yeso-Glorieta (TX & NM Permian)Niobrara-Codell (CO, WY)HaynesvilleUtica (OH, PA & WV)Marcellus (PA, WV, OH & NY)Woodford (OK)Granite Wash (OK & TX)Austin Chalk (LA & TX)Monterey (CA)Tight oil % of total

Tight oil productionmillion barrels of oil per day

Tight oil production as apercent of total oil production

Estimated U.S. tight oil production was 3.9 MMb/d in August 2016 about 47% of total U.S. oil production (8.5 MMb/d)

Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through August 2016 and represent EIA’s official tight oil estimates, but are not survey data. State abbreviations indicate primary state(s).


Offshore and Alaska


AEO 2016 Methodology – Lower 48 offshore OOGSS• Offshore crude oil and natural gas resources are divided into three

categories:– Undiscovered

– Discovered, undeveloped (i.e., announced discoveries)

– Producing

• Resource and economic calculations performed at an evaluation unit level– Evaluation unit is defined as an area within a planning area (e.g., Western Gulf of Mexico,

Eastern Gulf of Mexico, Central Gulf of Mexico, Pacific, and Atlantic) that falls into a specific water depth category

• Supply curves are generated for three offshore regions: Pacific, Atlantic, and Gulf of Mexico


AEO 2016 Methodology – Alaska Oil and Gas Supply Model flowchart


Estimate transportation costs

NEW FIELDS Determine DCF for next discovery size

False: No new fields added and move to development projects

True

For each period t: Economic & Physical Data

Determine outcome for allowable number of New Field WildcatsAdd any successes to inventory of development projectsRecord

- Drilling- Reserve additions

- Financial expenditures

DCF > 0

Compute DCF for project

Add project to producing fields

For all fields, compute production (PROD)

Record production

PRODUCING FIELDS

Shut down, remove field

Go to next project

False

False

False

False

True

True

True

True

DEVELOPMENTPROJECTS

All projects evaluated

Continue project, record- Drilling- Financial expenditures

PROD>QMIN

Project complete

DCF > 0 Suspend operation

Lower 48 offshore announced discoveries


Field name Field nickname

Water Depth (Feet)

Year of Discovery

Start Year of

Production

Resource size

(MMBoe)

AC865 GOTCHA 7844 2006 2019 80DC353 VICKSBURG 7457 2009 2019 325

GB427CARDAMOM

DEEP 2720 2009 2015 182

GB506 BUSHWOOD 2700 2009 2019 65GC432 SAMURAI 3400 2009 2017 60

GC468STAMPEDE-

PONY 3497 2006 2018 372

GC512

STAMPEDE-KNOTTY

HEAD 3557 2005 2018 372

GC903 HEIDELBERG 5271 2009 2016 400KC102 TIBER 4132 2009 2017 692KC292 KASKIDA 5894 2006 2020 691KC736 MOCCASIN 6759 2011 2021 350KC872 BUCKSKIN 6978 2009 2018 200

Field name

Field nickname Water Depth (Feet)

Year of Discovery

Start Year of

Production

Resource size

(MMBoe)

KC919 HADRIAN NORTH 7000 2010 2020 372

KC964 HADRIAN SOUTH 7983 2009 2015 182LL370 DIAMOND 9975 2008 2018 75

LL400 CHEYENNE EAST 9187 2011 2020 12MC199 MANDY 2478 2010 2020 20

MC392 APPOMATTOX 7290 2009 2017 325

MC762 DEIMOS SOUTH 3122 2010 2015 75MC771 KODIAK 5006 2008 2018 182

MC792 WEST BOREAS 3094 2009 2015 182MC984 VITO 4038 2009 2020 365SM217 FLATROCK 10 2007 2017 200MC768 KAIKIAS 4575 2014 2024 100WR029 BIG FOOT 5235 2006 2018 200

Lower 48 offshore announced discoveries (cont.)


Field name


Year of Discovery

Start Year of

Production

Resource size

(MMBoe)

WR052 SHENANDOAH 5750 2009 2017 182

WR508 STONES 9556 2005 2018 250

WR627 JULIA 7087 2007 2018 600

MC948 GUNFLINT 6138 2008 2016 90

KC093 GILA 4900 2013 2017 692

MC782 DANTZLER 6580 2013 2017 75

MC698 BIG BEND 7273 2012 2020 65

MC026 AMETHYST 1200 2014 2017 60

MC525 RYDBERG 7500 2014 2019 100

AC815 SILVERTIP 9280 2004 2015 89

MC300 MARMALARD 6148 2012 2015 60

MC431 SON OF BLUTO 2 6461 2012 2017 100

Field name


Year of Discovery

Start Year of

Production

Resource size

(MMBoe)

GB959 NORTH PLATTE 4400 2012 2022 693GC823 PARMER 3821 2012 2022 44SE039 PHOBOS 8500 2013 2018 100

WR095YUCATAN

NORTH 5860 2013 2020 90

MC126

HORN MOUNTAIN

DEEP 5400 2015 2017 90GC807 ANCHOR 5183 2015 2025 1392

KC010 GUADALUPE 4000 2014 2024 450GC040 KATMAI 2100 2014 2024 100WR160 YETI 5895 2015 2025 175

DC398 GETTYSBURG 5000 2014 2024 100MC079 OTIS 3800 2014 2018 44KC642 LEON 1865 2014 2024 357

GC643HOLSTEIN

DEEP 4326 2014 2016 250

Representation of offshore Gulf of Mexico production profiles for announced discoveries


Time

Rat

e

Start year of production

Ramp-up period: 3 years

Peak production period: Until a specified fraction of resource has been produced

Decline period

Crude oil Technically Recoverable Resources by AEO Year billion barrels

Oil has exhibited a nearly identical AAGR of 3.2%. This is a combination of discoveries and technology advancement.

Note: AEO1990 values highlighted in yellow are AEO2000 values as place holder estimates.


1990 2005 2015 1990 - 2015 % change

1990-2005 AAGR %

1990-2015 AAGR %

2005-2015 AAGR %

Proved Reserves 27 22 33 24% -1.3% 0.9% 4.3%Unproved Resources 116 119 226 95% 0.2% 2.7% 6.7%

Unproved Other L48 Onshore 71 56 67

Unproved L48 Offshore (1) 34 39 48 39% 0.8% 1.3% 2.1%

Unproved Alaska 11 24 34 223% 5.7% 4.8% 3.4%

Unproved Tight Oil (reclassified from onshore)

Unproved Tight Oil (2) 78

Subtotal Resources 143 141 260 82% -0.1% 2.4% 6.3%

Production 2.7 1.9 3.4 28% -2.3% 1.0% 6.2%Cumulative Production 3 37 60

TRR + Production 145 177 320 120% 1.3% 3.2% 6.1%

Change in TRR + Production, % -5.2% 7.8%

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