TORONTO: The US would continue to be less and less dependent on imported energy in the decades to come, the Annual Energy Outlook 2016 (AEO2016) of the US Energy Information Agency underlines.
In the AEO2016 Reference case, the United States is now projected to become a net exporter of natural gas before 2020. This is earlier than anticipated.
In AEO2015, the EIA had said it expected the United States to become a net exporter of energy by 2030. The transition now seems coming sooner.
“US net energy imports, including petroleum and other liquids, natural gas and coal, decline and ultimately end in the reference case, a first since the 1950s,” the EIA said.
“The net import share of total US energy consumption was 11 per cent in 2015 and 30pc as recently as 2005.”
The AEO2016 crude oil price scenario is lower than in AEO2015, particularly in the near term. But it looks healthier in comparatively longer term.
In the Reference case, the Brent crude oil price averages $37 per barrels in 2016, climbing to $77 per barrel in 2020 and then continues to rise.
Though the EIA admits that the total US oil production in its Reference case falls initially – from 9.4 million barrels per day (bpd) in 2015 to 8.6m bpd in 2017 – but after that, the total US production grows to 11.3m bpd in 2040 – as real (2016 dollars) crude oil prices recover, encouraging production.
By 2040, as per the AEO2016, Brent spot price averages $73/bbl in the Low Oil Price case, $136/bbl in the Reference case, and $230/bbl in the High Oil Price case.
Consumption remains critical to market health. Petroleum use, including natural gas liquids, rises 4pc, yet transportation use falls 10pc, primarily due to improved light-duty vehicle fuel efficiency. Global energy use is projected to increase an average 1.4pc per year, from 549 quadrillion Btu in 2010 to 815 quadrillion Btu in 2040. The EIA further emphasised that over the next three decades, though natural gas would turn out to be the dominant energy source, yet renewables will be the fastest-growing.
Tight oil is also helping shape the emerging global energy horizon. As per the EIA’s International Energy Outlook 2016 (IEO2016) and the AEO2016, the global tight oil production is expected to more than double between 2015 and 2040, increasing from 4.98m bpd in 2015 to 10.36m bpd in 2040.
Most of the projected increase will come from the United States, with much of the rest coming from countries such as Russia, Canada, and Argentina that have significant tight oil resources and existing, developed oil industries, Faouzi Aloulou of the DOE emphasised in a recent paper.
The United States tight oil production, which reached 4.6m bpd in March 2015 but fell to 4.1m bpd in June 2016, has proven more resilient to low oil prices than many analysts had anticipated. As per the AEO2016 Reference case, the US tight oil production is expected to reach 7.1m bpd in 2040.
In the Lower 48 states, offshore production (which is less sensitive to short-term price movements than onshore production), increases to 2.0m bpd in 2021. Afterwards, Lower 48 offshore crude oil production declines to roughly 1.6m barrels per day in 2030 and remains at about that level through 2040.
In the meantime, the Lower 48 onshore crude oil production using CO2-enhanced oil recovery increases from 0.3m bpd in 2015 to 0.7m bpd in 2040 as oil prices rise and affordable sources of CO2 become available. Both onshore and offshore production in Alaska meanwhile, continue to decline, from a total of nearly 0.5m bpd in 2015 to less than 0.2m bpd in 2040.
And not only the crude output is growing, the US gas output estimates too have also been revised upwards. The total US dry natural gas production in the Reference case goes up from 27.2 trillion cubic feet (Tcf) in 2015 to 42.1 Tcf in 2040. Production from shale gas and tight oil plays lead the increase in natural gas production in the Reference case from 13.6 Tcf in 2015 to 29.0 Tcf in 2040.
The growing energy independence of Washington has wider consequences. And this carries significant geopolitical connotations too, one needs to concede at this stage.
Published in Dawn September 25th, 2016