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EIA projects continued production growth Energy Information Administration says domestic increase in production from Bakken, Eagle Ford, Permian to continue through 2015 Kristen Nelson Petroleum News
The U.S. Energy Information Administration expects strong domestic crude production growth through 2015 primarily from the Bakken, Eagle Ford and Permian regions. In its Short-Term Energy Outlook, published March 11, EIA said domestic production was some 7.5 million barrels per day in 2013 and is estimated to grow to 8.4 million bpd this year and 9.2 million bpd in 2015. The agency said domestic production peaked at 9.6 million bpd in 1970.
Bakken production averaged 0.9 million bpd in 2013; the Eagle Ford formation in South Texas averaged 1.1 million bpd; and U.S. federal Gulf of Mexico production averaged 1.3 million bpd.
“Over the next two years U.S. refining capacity and crude oil inputs to refineries are expected to increase as companies expand and build capacity to process the light crude oil from rising domestic production,” EIA Administrator Adam Sieminski said in a March 11 statement. “Crude oil inputs to refineries should exceed the previous high in 2004 and reach 15.6 million barrels per day by 2015.”
EIA said Marathon and Kinder Morgan have announced plans to build condensate splitters in 2014 and 2015 to process production from the Utica and Eagle Ford formations, small topping refineries are being built in North Dakota to process Bakken crude and Valero is expanding its Gulf Coast refining capacity.
Brent projected to weaken Brent crude oil spot prices averaged from $108 to $112 a barrel in February for the eighth consecutive month, but EIA said it “expects the Brent crude oil price to weaken as non-OPEC supply growth exceeds growth in world consumption,” with average Brent prices of $105 this year and $101 in 2015 expected.
West Texas Intermediate fell to $95 a barrel in January and increased to an average of $101 per barrel in February “as a result of strong Midwestern refinery runs after cold-weather-related disruptions in January,” EIA said.
“EIA expects strong U.S. crude oil production growth will help reduce WTI prices to an average of $95 a barrel this year,” Sieminski said.
WTI is expected to average $90 per barrel in 2015.
The WTI discount to Brent averaged $8 per barrel in February after averaging more than $13 per barrel over the previous three months and EIA said it expects the discount to average $10 per barrel this year and $11 in 2015, “reflecting the economics of transporting and processing the growing production of light sweet crude oil in U.S. and Canadian refineries.”
Natural gas storage low More cold weather in February led to more draws on natural gas storage, EIA said, and to a downward revision of its projection for working natural gas inventories, which are now expected to end March at 965 billion cubic feet, ending the heating season below 1 trillion cubic feet for the first time since 2003.
EIA said data from Bentek Energy shows that three of the top five months for total natural gas demand over the last 8 years have occurred this heating season.
“The stage is now set for a record stock build over the injection season,” the agency said, with a build of almost 2.5 tcf projected by the end of October.
Domestic natural gas consumption is projected to average 71.3 bcf per day this year, down 0.1 bcf from 2013, with “projected year-over-year increases in natural gas prices” contributing to a drop in natural gas usage for electric power generation.
EIA expects natural gas marketed production to grow at an average rate of 2.5 percent in 2014 and 1.1 percent in 2015, with rapid production growth in the Marcellus formation “causing natural gas forward prices in the Northeast to fall even with or below Henry Hub prices outside of peak-demand winter months,” and possibly causing some drilling to shift “from the Marcellus back to Gulf Coast plays such as the Haynesville and Barnett, where prices are closer to the Henry Hub spot price.”
Natural gas spot prices averaged $6 million Btu at the Henry Hub in February, up $1.29 from January due to bitterly cold weather, the agency said.
EIA said it is projecting a March spot price averaging $4.48 per million Btu, down from February, and continuing to decline into the spring, with Henry Hub projected to average $4.44 per million Btu in 2014 and $4.14 in 2015.
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