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February 2018

Vol. 23, No.8 Week of February 25, 2018

EIA: US to be net energy exporter by 2022

Energy Information Administration ‘Annual Energy Outlook 2018’; liquids, gas continue to grow through 2042, 2050, respectively

Kristen Nelson

Petroleum News

The U.S. is projected to become a net energy exporter by 2022, the Energy Information Administration said Feb. 6 in presenting the agency’s “Annual Energy Outlook 2018,” which looks out to 2050. That estimate is a change from last year’s outlook, officials said, which projected the country would be come a net energy exporter by 2026.

The 2022 date is based on EIA’s reference case, which assumes trend improvement in known technologies, an economic view reflecting leading economic forecasters and demographers and current laws and regulations.

In addition to the reference case, EIA evaluates high and low economic growth cases, high and low oil and gas resource and technology cases and high and low oil price cases. The U.S. becomes a net energy exporter in all but two cases - the low oil and gas resource and technology case and the low oil price case.

The U.S. became a net energy importer in 1953, EIA said in the outlook, “but declining energy imports and growing energy exports make the United States a net energy exporter by the early 2020s in the Reference Case.”

What is the U.S. exporting and importing?

EIA said most U.S. energy trade historically has been in crude oil and petroleum products, with the U.S. remaining both an importer and exporter of petroleum liquids through 2050 in the reference case - primarily importing crude oil and exporting petroleum products such as gasoline and diesel. In the reference case the U.S. remains a net importer of petroleum and other liquids, while U.S. natural gas trade - historically receiving natural gas by pipeline from Canada and sending it by pipeline to Mexico - becomes increasingly dominated by liquefied natural gas exports to more distant locations.

Energy production

With energy production growth dependent on technology, resources and market conditions, production is more sensitive than consumption to assumptions in the side cases, EIA said.

The reference case projects total U.S. energy production to increase by some 31 percent from 2017 through 2050. This increase is led by renewables, natural gas and crude oil, with crude oil production increasing only during the first 15 years of the projection period, EIA said.

Total production is bounded by resources, with, for example, the high oil and gas resource and technology case assuming higher estimates than the reference case for unproved Alaska resources, offshore Lower 48 resources and onshore Lower 48 tight oil, tight gas and shale gas. EIA said that side case “also assumes lower costs of producing these resources and faster technology improvement,” with the low oil and gas resource and technology case assuming the opposite.

In the high oil price case assumptions include higher world petroleum products demand, lower Organization of the Petroleum Exporting Countries’ upstream investment and higher non-OPEC costs for exploration and development, with the low oil price case assuming the opposite.

Natural gas

Natural gas accounts for the largest share of total energy production in the reference case, EIA said, with renewables other than hydropower growing the most on a percentage basis.

In the reference case natural gas production accounts for nearly 39 percent of U.S. energy production by 2050, EIA said, with production from shale gas and tight oil playa as a share of U.S. natural gas production expected to continue to grow because the assumed resource size is so large.

“Natural gas prices are highly sensitive to domestic resource and technology assumptions explored in the side cases,” EIA said, with the growing demand for natural gas pushing production into more expensive-to-produce areas in all cases, “putting upward pressure on production costs and prices.”

The agency said growth in the domestic and export markets drives an increase in U.S. natural gas prices at benchmark Henry Hub in the reference case, with crude oil prices affecting natural gas changes in global natural gas consumption, U.S. exports and associated gas - natural gas produced from oil formations.

In the reference case domestic natural gas production grows 6 percent per year from 2017 to 2020, then slows to less than 1 percent per year through 2050.

The 2018 annual outlook reference case has Henry Hub prices 14 percent lower on average through 2050 than the 2017 outlook, EIA said, citing an estimated increase in lower-cost resources, primarily in the Permian and Appalachian basins, supporting higher production levels at lower prices over the projection period. Increased natural gas production comes from both shale gas and tight oil plays, which account for more than three-quarters of natural gas production in the U.S. by 2050.

Crude oil

U.S. crude oil production in the reference case is projected to surpass the 1970 record of 9.6 million barrels per day this year, and EIA said that production volume “will continue to grow as upstream producers increase output because of the combined effects of rising prices and production cost reductions.”

Lower 48 onshore tight oil continues to be the main driver of U.S. crude oil output, accounting for some 65 percent of cumulative domestic production in the reference case through 2050.

EIA said that despite higher oil prices, in the reference case “U.S. crude oil production levels off between 11 million and 12 million barrels per day as tight oil development moves into less productive areas and as well productivity declines.”

North Sea Brent oil prices in 2016, in real terms, “were at their lowest level since 2004,” EIA said, and increased modestly in 2017, a trend which EIA said is expected to continue through 2050 in the reference case, reaching $114 per barrel in 2017 dollars in 2050 - compared to $229 in the high oil price case and $52 in the low oil price case.

Outlook changes

EIA said U.S. Geological Survey assessments of the Wolfcamp and Sprayberry formations were incorporated into the current update, mainly affecting regional oil and natural gas production and related markets.

On the technology side, EIA said oil and natural gas technology and operation improvements were revised “by increasing rates of technological progress during the early development of currently undeveloped resources to reflect industry-wide identification of the most productive areas and to select the best technologies for particular geologies.”






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