The Outlook for Oil and Natural Gas Production in the ... · 4/25/2017 · 2016 dollars, compared...

www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis

The Outlook for Oil and Natural Gas Production in the United States: Short- and Long-term Perspectives

44th Annual International Energy Conference The International Research Center for Energy and Economic Development April 25, 2017 | Boulder, CO

ByHoward Gruenspecht, Acting Administrator

Short-term view

Howard Gruenspecht, ICEED April 25, 2017 2


Global crude oil balances are expected to tighten through 2018world liquid fuels production and consumption balance million barrels per day (MMb/d) MMb/d

Source: Short-Term Energy Outlook, April 2017

forecast

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-2

-1

0

1

2

3

4

5

6

84

86

88

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92

94

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100

102

2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1 2017-Q1 2018-Q1

Implied stock change and balance (right axis)

World production (left axis)

World consumption (left axis)


WTI is forecast to average $52/barrel in 2017 and $55/barrel in 2018; Brent averages $2/barrel above WTI in both years WTI crude oil pricesdollars per barrel

Note: Confidence interval derived from options market information for the 5 trading days ending Apr 6, 2017. Intervals not calculated for months with sparse trading in near-the-money options contracts.Source: Short-Term Energy Outlook, April 2017

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20

40

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120

140

Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018

Historical spot priceSTEO price forecastNYMEX futures price95% NYMEX futures upper confidence interval95% NYMEX futures lower confidence interval


Total U.S. crude oil production is forecast to return to its pre-price-decline level by late 2017U.S. quarterly average crude oil productionmillion barrels per day (change from 4Q14)


-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016 2017 2018

U.S. TotalLower 48AlaskaGulf of Mexico


Crude oil production in the Permian is expected to lead the recovery in U.S. tight oil productioncrude oil production in major tight oil regionsmillion barrels per day


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1.0

1.5

2.0

2.5

3.0

3.5

2015 2016 2017 2018

Permian

Eagle Ford

Bakken

Niobrara

forecast


Non-OECD Asia is the main contributor to expected oil consumption growth in the next two yearsglobal liquid fuels consumption growthmillion barrels per day

Note: * Countries belonging to the Organization for Economic Cooperation and DevelopmentSource: Short-Term Energy Outlook, April 2017

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2016 2017 2018

OECD* Non-OECD Asia Former Soviet Union Other

forecast


EIA’s views of non-OECD GDP growth were frequently reduced during 2014 and 2015, but have been relatively stable over the past yearnon-OECD GDP growth by STEO forecastpercent change year-over-year


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2014

2015

2016

2017

2018


U.S. natural gas production and tradebillion cubic feet per day (Bcf/d)


U.S. natural gas exports are forecast to overtake imports in 2018

billion cubic feet per day (Bcf/d)

-2

0

2

4

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2015 2016 2017 201874

76

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80

82

84

86

Annual Change Federal Gulf of Mexico production (right axis) Annual Change U.S. non-Gulf of Mexico production (right axis)

U.S. imports (right axis) U.S. Exports (right axis)

Total marketed production (left axis) Marketed production forecast (left axis)


Henry hub natural gas pricedollars per million BTU

Note: Confidence interval derived from options market information for the 5 trading days ending Apr 6, 2017. Intervals not calculated for months with sparse trading in near-the-money options contracts.Source: Short-Term Energy Outlook, April 2017

Natural gas prices are forecast below $4 per million BTU through 2018, but weather and other factors contribute to wide uncertainty

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Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018

Historical spot priceSTEO forecast priceNYMEX futures price95% NYMEX futures upper confidence interval95% NYMEX futures lower confidence interval

Long-term U.S. projections



Key takeaways from AEO2017

• With strong domestic production and relatively flat demand, the United States becomes a net energy exporter over the projection period in most cases

• U.S. crude oil production rebounds from recent lows, driven by continued development of tight oil resources; with consumption flat to down compared to recent history, net crude oil and petroleum product imports as a percentage of U.S. product supplied decline across most cases

• Across most cases, natural gas production increases despite relatively low and stable prices, supporting higher levels of domestic consumption and natural gas exports

• With modest electricity demand growth, the primary driver for new electricity generation capacity in the Reference case is the retirement of fossil fuel units, largely spurred by the Clean Power Plan (CPP), the near-term availability of renewable tax credits, state-level policies to promote renewables, and nuclear retirements; even if the CPP is not implemented natural gas and renewables are the primary sources of new generation capacity; the future generation mix is sensitive to the price of natural gas and the growth in electricity demand


Key takeaways from AEO2017 (continued)

• Transportation energy consumption peaks in 2018 in the Reference case because rising fuel efficiency outweighs increases in total travel and freight movements throughout the projection period

• Despite growth in the number of households and the amount of commercial floorspace, improved equipment and efficiency standards contribute to residential and commercial energy consumption remaining relatively flat or declining slightly from 2016 to 2040 in the Reference case

• With economic growth and relatively low energy prices, industrial energy consumption increases during the projection period across all cases; energy intensity declines in the Reference case and most side cases as a result of technological improvements


Why long-term projections might/could/will be wrong

• Different relative fuel prices

• Faster / slower economic and energy demand growth

• Changing policies and regulations

• Changing consumer preferences

• Faster / slower technology progress

• Technology breakthroughs


AEO2017 includes side cases with different assumptions of macroeconomic growth, world oil prices, technological progress, and energy policies• Oil prices are primarily driven by global market balances that are mainly influenced by

factors external to the NEMS model; in the Reference case, oil prices reach $109/b in 2016 dollars, compared to $43/b in the Low Oil Price case and $228/b in the High Oil Price case

• In the High Oil and Gas Resource and Technology case, lower costs and higher resource availability than in the Reference case allow for higher production at lower prices; in the Low Oil and Gas Resource and Technology case, more pessimistic assumptions about resources and costs are applied

• The effects of economic assumptions on energy consumption are addressed in the High and Low Economic Growth cases, which assume compound annual growth rates for U.S. gross domestic product of 2.6% and 1.6%, respectively, from 2016–40, compared with 2.2% annual growth in the Reference case

• A case assuming that the Clean Power Plan (CPP) is not implemented can be compared to the Reference case to show how that policy could affect energy markets and emissions


Energy consumption varies modestly across the AEO cases, bounded by the High and Low Economic Growth cases total energy consumptionquadrillion British thermal units

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1980 1990 2000 2010 2020 2030 2040

2016history projections High Economic

GrowthLow Oil PriceHigh Oil PriceHigh Oil and Gas Resource and TechnologyReference Low Oil and Gas Resource and Technology Low Economic Growth

Source: EIA, Annual Energy Outlook 2017


Energy production varies more substantially across AEO cases, bounded by the Oil and Gas Resource and Technology casestotal energy productionquadrillion British thermal units

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40

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140

1980 1990 2000 2010 2020 2030 2040

High Oil and Gas Resource and Technology High Oil PriceHigh Economic GrowthReference Low Economic GrowthLow Oil PriceLow Oil and Gas Resource and Technology

2016history projections



The United States becomes a net energy exporter in most cases as petroleum liquid imports fall and natural gas exports rise net energy trade quadrillion British thermal units

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1980 1990 2000 2010 2020 2030 2040

Low Oil PriceLow Oil and Gas Resource and TechnologyHigh Economic GrowthReference caseLow Economic GrowthHigh Oil PriceHigh Oil and Gas Resource and Technology


net imports

net exports



Although population and economic output per capita are assumed to continue rising, energy intensity and carbon intensity are projected to continue falling in the Reference case

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1980 2010 2040

2016history

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1980 2010 2040

2016history

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1980 2010 2040

2016history

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1980 2010 2040

2016history

Reference


U.S. population million people

gross domestic product per capitathousand dollars per person

energy intensitythousand British thermal units per dollar

carbon intensity metric tons CO2 per billion British thermal units

Transportation



Transportation energy use declines between 2018 and 2034 in the Reference case, driven by improvements in fuel economy

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2000 2010 2020 2030 2040

transportation sector consumption quadrillion British thermal units


motorgasoline

distillatefuel oil

jet fuelelectricityother


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35

2000 2010 2020 2030 2040

transportation sector consumptionquadrillion British thermal units


light-dutyvehicles

commercialtrucksairrailmarineother


Average light-duty fuel economy improves in the Reference case, even as the share of light-duty trucks increases

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2000 2010 2020 2030 2040

car

fleetaverage

truck


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40%

50%

60%

70%

2000 2010 2020 2030 2040

truck

car

0%



light-duty stock fleet fuel economymiles per gallon

light-duty vehicle sales sharespercent


Sales of battery electric, plug-in electric hybrid, and fuel cell vehicles increase in the Reference case because of lower projected battery costs and existing state policies

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800

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1,200

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2010 2015 2020 2025 2030 2035 2040

batteryelectric

plug-in hybrid


fuel cell

new light-duty vehicle sales thousands of vehicles



With the second phase of fuel efficiency regulations, medium- and heavy-duty vehicle energy consumption declines over 2027-33 despite continued growth in miles traveled

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2000 2020 2040


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2000 2020 2040


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2000 2020 2040



travel indicatorbillion vehicle-miles traveled

stock fuel economymiles per gallon

energy consumptionquadrillion British thermal units


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2000 2020 2040


air transportation metricstravel indicatortrillion seat-miles available

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2000 2020 2040


stock fuel economyseat-miles per gallon

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2000 2020 2040


jet fuel consumptionquadrillion British thermal units

Even with improving commercial aircraft efficiency, jet fuel use rises in the Reference case with increased travel



Food for thought – transportation

• Ride sharing

• Autonomous vehicle technology in both passenger and freight applications

• Actual uptake of vehicles fueled by electricity and/or hydrogen

• Teleworking and telepresence

• Possible pursuit of deep decarbonization

• Future vehicle efficiency and taxation policies

Hydrocarbon production and trade



Reference case oil prices and production rise from current levels, price paths and production levels in the side cases are very different from those in the Reference case

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2000 2010 2020 2030 2040

North Sea Brent oil price2016 dollars per barrel


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2000 2010 2020 2030 2040


crude oil productionmillion barrels per day

High Oil and Gas Resource and Technology

High Oil PriceReference case

Low Oil PriceLow Oil and Gas Resource and Technology



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2000 2010 2020 2030 2040

crude oil production million barrels per day

U.S. total

tight oil

non-tight oil


Reference

2020 2030 2040Low Oil and Gas

Resource & Technology

2016projections

2020 2030 2040

2016projections

High Oil and Gas Resource & Technology

Tight oil dominates U.S. production in the Reference case, but other types of oil production continue to yield significant volumes



In the High Oil Price and the High Oil and Gas Resource and Technology cases, the United States becomes a net petroleum exporterpetroleum net imports as a percentage of products suppliedpercent

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2000 2005 2010 2015 2020 2025 2030 2035 2040

Low Oil PriceLow Oil and GasResource and TechnologyReference

High Oil PriceHigh Oil and GasResource and Technology

net imports

net exports




U.S. dry natural gas production is the result of continued development of shale gas and tight oil plays, alternative assumptions cause significant differences

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1995 2005 2015 2025 2035

U.S. natural gas production by type trillion cubic feet

shale gas and tight oil plays

tight gasother Lower 48 onshoreLower 48 offshoreother


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2000 2010 2020 2030 2040

dry natural gas productiontrillion cubic feet

2016history projections High Oil Price

High Oil and Gas Resourceand Technology Reference case Low Oil PriceLow Oil and Gas Resource and Technology



Increasing demand from industrial and electric power markets drive rising domestic consumption of natural gas in the Reference case

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electric power

industrial

transportationcommercial

residential


natural gas consumption by sector trillion cubic feet

billion cubic feet per day



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1980 1990 2000 2010 2020 2030 2040

natural gas tradetrillion cubic feet


LNG imports

billion cubic feet per day22

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Increased natural gas trade is dominated by liquefied natural gas exports in the Reference case


liquefied natural gas (LNG) exports

to Canada (pipeline)

to Mexico (pipeline)

from Canada (pipeline)


U.S. LNG export levels vary across cases and reflect both the level of global demand, as well as by the difference between domestic and global natural gas prices

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liquefied natural gas exportstrillion cubic feet billion cubic feet per day


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2000 2010 2020 2030 2040

oil-to-natural gas price ratioenergy-equivalent terms



High Oil PriceHigh Oil and Gas Resource and TechnologyReferenceLow Oil and Gas Resource and TechnologyLow Oil Price


Future domestic natural gas prices depend on both domestic resource availability and world energy pricesHenry Hub natural gas price2016 dollars per million Btu

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2000 2010 2020 2030 2040


Low Oil and Gas Resource and TechnologyHigh Oil PriceReference case Low Oil PriceHigh Oil and Gas Resource and Technology



Food for thought – hydrocarbon production and trade

• Technology developments – to what extent will they continue to offset depletion of hydrocarbon resources

• Geopolitics in key producing regions – both internationally and within the United States

• Possible pursuit of deep decarbonization, particularly in transportation applications

• Technologies and policies affecting vehicle choice, given dominant role of transportation sector in oil demand


For more information

U.S. Energy Information Administration home page | www.eia.gov

Annual Energy Outlook | www.eia.gov/aeo

International Energy Outlook | www.eia.gov/ieo

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

Monthly Energy Review | www.eia.gov/mer

Today in Energy | www.eia.gov/todayinenergy

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

State Energy Portal | www.eia.gov/state/

North American Collaboration on Energy Information | www.nacei.org/

http://www.eia.gov/

http://www.eia.gov/aeo

http://www.eia.gov/ieo

http://www.eia.gov/steo

http://www.eia.gov/mer

http://www.eia.gov/todayinenergy

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

http://www.eia.gov/

https://www.eia.gov/state/

http://www.nacei.org/en/


billion cubic feet

Note: Colored band around storage levels represents the range between the minimum and maximum from Jan. 2012 -Dec. 2016.Source: Short-Term Energy Outlook, April 2017

U.S. working natural gas in storage

forecast

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Deviation from averageStorage level

deviation from average

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