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January 2017

Vol. 22, No. 3 Week of January 15, 2017

EIA: US could be net exporter by 2026, based on natural gas sales

The United States is going to have fairly strong domestic production and relatively flat demand and could become a net energy exporter through the period covered by the Energy Information Administration’s Annual Energy Outlook 2017, EIA Administrator Adam Sieminski said Jan. 5 in introducing the projections. This year’s outlook is the first to have projections through 2050, EIA said in a press release.

The agency said that in most cases in the outlook “petroleum liquid imports fall and natural gas exports rise.”

In addition to a reference case, the outlook considers six paired scenarios: low and high oil price cases; low and high oil and gas resource and technology cases; and low and high economic growth cases. EIA also considered a case where the Clean Power Plan is not implemented; the reference case assumes CPP is implemented.

Speaking to key takeaways from the outlook, Sieminski said EIA believes crude oil production will rebound and with consumption projected to be flat, imports as a percentage of U.S. demand will decline in most cases.

Across most cases the outlook projections show natural gas production increasing despite relatively low and stable prices, supporting both higher domestic use and exports.

The outlook provides modeled projections of what may happen given certain assumptions and methodologies, with the projections sensitive to resource and technology assumptions.

Reference case v. others

EIA said the reference case projections assume “trend improvement in known technologies, along with a view of economic and demographic trends reflecting the current central views of leading economic forecasters and demographers.”

Uncertainties are addressed in side cases.

The reference case uses a 2040 Brent crude oil price (in 2016 dollars) of $109 per barrel. In the high oil price Brent is assumed to reach $226 per barrel while in the low oil price case it is only $43 per barrel.

The oil and gas resource and technology cases assume, for the high case, lower costs and more resources available than in the reference case; the low resource and technology case uses “more pessimistic assumptions about resources and costs,” EIA said.

The high and low economic growth cases use, respectively compound annual growth rates for U.S. gross domestic product of 2.6 percent and 1.6 percent, from 2016-40; the reference case uses 2.2 percent annual growth.

Resources

In the high oil and gas resource and technology case EIA said it “assumes higher estimates of unproved Alaska resources, offshore Lower 48 resources, and onshore Lower 48 tight oil, tight gas, and shale gas resources” than the reference case.

U.S. energy production continues to increase in the reference case, with growth led by natural gas and renewables. EIA said natural gas accounts for nearly 40 percent of U.S. energy production in the reference case, with crude oil production increasing from current rates and then leveling off about 2025 “as tight oil development moves into less productive areas.”

In most cases the U.S. becomes a net energy exporter. In the reference case this occurs in 2026; in the low economic growth, high oil price and high oil and gas resource and technology cases that occurs earlier, with net exports highest in the high oil and gas resource and technology case “as favorable geology and technological developments combine to produce oil and natural gas at lower prices.”

In the high oil price case economic conditions are favorable for producers, but consumption is lower in response to higher prices.

“Without substantial improvements in technology and more favorable resource availability, U.S. energy production declines in the 2030s,” EIA said.

In the low oil price and low oil and gas resource and technology cases the U.S. remains a net importer over the analysis period.

Net energy exporter

In the reference case the U.S. becomes a net energy exporter “as natural gas exports increase and net petroleum imports decrease,” EIA said. The U.S. has been a net energy importer since 1953, the agency said, but in the reference case, driven by declining energy imports and growing exports, the U.S. becomes a net energy exporter by 2026.

With oil, the U.S. imports mostly crude oil and exports mostly petroleum products through the reference case projection, EIA said. In natural gas, trade has historically been by pipeline, with gas coming in from Canada and out to Mexico, but that trade is projected to be “increasingly dominated by liquefied natural gas exports to more distant destinations,” the agency said.

Prices, production

The reference case projects Brent crude oil prices and Henry Hub natural gas prices to increase over the projected period. Natural gas prices are projected to rise and then remain relatively flat at about $5 per million Btu over 2030-40, then rise again in the following decade.

Petroleum product consumption in the U.S. is projected to remain below 2005 through 2040 in most cases “while crude oil production rebounds from recent declines.” In the reference case U.S. crude oil production is projected to recover as upstream producers increase output in response to the rise in prices and cost reductions.

U.S. production, dominated by tight oil in the reference case, levels off between 10 million and 11 million barrels per day “as tight oil development moves into less productive areas and as well productivity gradually decreases.”

LNG exports

EIA said LNG exports from the U.S. vary across cases and reflect global demand and difference between domestic and global natural gas prices.

Most LNG is traded under oil price-linked contracts, the agency said, but that is expected to change as the LNG market expands. LNG from the U.S. “has the advantage of domestic spot prices that are less sensitive to global oil prices than supplies from other sources,” EIA said.

In the reference case, increased natural gas trade is dominated by LNG exports while pipeline imports continue to decline, with LNG projected to dominate U.S. natural gas exports by the early 2020s, growing modestly after 2020 as U.S.-sourced LNG becomes less competitive on the global market.

- KRISTEN NELSON






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