RIYADH: Washington’s reliance on imported energy supplies would continue to go down, underlines the just released Annual Energy Outlook 2015 (AEO), the shorter edition of the US Energy Information Administration’s (EIA) much-awaited outlook report.
In addition to the Reference case, the recently released Outlook also includes five alternative cases (Low and High Economic Growth, Low and High Oil Price, and High Oil and Gas Resource), highlighting how different assumptions regarding market, policy and technology drivers affect projections of energy production, consumption, technology, market trends and the direction they may take in the future.
Courtesy the US, energy output growth and only modest increment in demand, Washington’s energy imports and exports finally come into balance in 2028 as per the AEO2015 Reference case and in 2019 in the High Oil Price and High Oil and Gas Resource cases.
The AEO2015 focuses on the factors expected to shape US energy markets through 2040, providing a basis for examination and discussion of energy market trends, serving as a starting point for analysis of potential changes in US energy policies, rules, and regulations, as well as the potential role of advanced technologies.
Delineating the future of the US domestic energy markets, in the High Oil and Gas Resource case, the AEO2015 underlines increased crude production before 2020 resulting in increased processed condensate exports. Slowing growth in domestic production after 2020 is then offset by increased vehicle fuel economy standards.
The AEO2015 says the net US import share of crude oil and petroleum products falls from 33 per cent in 2013 to 17pc of total supply in 2040 in the Reference case.
In fact the Outlook says that the United States would become a net exporter of petroleum and other liquids after 2020 in the High Oil Price and High Oil and Gas Resource cases.
The elevated production levels are also aided by the modest consumption growth over the AEO2015 projection period, averaging 0.3pc per year from 2013 through 2040 in the Reference case.
Natural gas is the dominant US energy export. The United States transitions from being a modest net importer of natural gas to a net exporter by 2017. US export growth continues after 2017, with net exports in 2040 ranging from 3.0 trillion cubic feet (Tcf) in the Low Oil Price case to 13.1 Tcf in the High Oil and Gas Resource case.
Commenting on the future path of crude oil and natural gas prices, the AEO2015 highlights it could vary substantially, depending on assumptions about the size of the resource and growth in demand, particularly in non-Organisation for Economic Cooperation and Development (OCED) countries, levels of production, and supplies of other fuels.
In the AEO2015 Reference case, the continued growth in US crude oil production is projected to contribute to a 43pc decrease in the Brent crude oil price — to $56/bbl in 2015. Prices are then anticipated to rise steadily after 2015 in response to growth in demand from countries outside the OECD. However, downward pressure from continued increase in US crude oil production is projected to keep Brent below $80/bbl through 2020.
It goes on to add that though the US crude oil production starts to decline after 2020, yet increased production from the Organisation of the Petroleum Exporting Countries (Opec) and non-OECD countries ensures the Brent prices to remain below $100/bbl through 2028, limiting the rise of Brent to $141/bbl in 2040.
There is but a significant price variation in the alternative cases using different assumptions. In the Low Oil Price case, the Brent price drops to $52/bbl in 2015, 7pc lower than in the Reference case, and reaches $76/bbl in 2040, 47pc lower than in the Reference case, largely the result of lower non-OECD demand and higher upstream investment by Opec.
In the High Oil Price case, the Brent price increases to $122/bbl in 2015 and to $252/bbl in 2040, largely in response to significantly lower Opec production and higher non-OECD demand.
In the High Oil and Gas Resource case, since the US crude oil production growth is significantly greater, the Brent spot price is to average $129/bbl in 2040 — 8pc lower than in the Reference case.
The emergence of shale and tight oil have transformed the energy world. The Outlook confirms; the trend is to continue — and for decades — if not more.
Published in Dawn, April 19th, 2015
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