Monday, 26 September 2016

The implications of US energy independence

In Oil & Companies News 26/09/2016

oil and gas 02.jpg
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.


Source: Dawn

US growing oil capacity could alter geopolitics

In Oil & Companies News 26/09/2016

usa_crude_oil
While the energy world remained focused on Algiers and its possible outcomes, the Energy Information Agency (EIA), the statistical arm of the US Department of Energy (DOE), came out with early warning shots – the US would continue to be less and less dependent on imported energy in the decades to come.
In the latest Annual Energy Outlook for the year, AEO2016 Reference case, the United States is now projected to become a net exporter of natural gas before 2020, largely because of growth in liquefied natural gas exports. 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% in 2015 and 30% as recently as 2005.
The crude oil price scenario presented in AEO2016’s reference case is lower than in AEO2015, particularly in the near term. But this looks healthier, in the comparatively longer term. In the Reference case, the Brent crude oil price averages $37/barrels in 2016, climbing to $77/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 8.6 million bpd in 2017. But after that, the total US production grows to 11.3 million bpd in 2040 – as real (2016 dollars) crude oil prices recover from an annual average of less than $50/barrel in 2017, 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 four percent, yet transportation use falls 10 percent, primarily due to improved light-duty vehicle fuel efficiency. Global energy use is projected to increase an average 1.4% per year, from 549 quadrillion Btu in 2010 to 815 quadrillion Btu in 2040. The EIA further emphasized that over the next three decades, though natural gas would turn out to be the dominant energy source, yet renewables will turn out to 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 4.98 million bpd in 2015 to 10.36 million 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 emphasized in a recent paper.
The United States tight oil production, which reached 4.6 million bpd in March 2015 but fell to 4.1 million 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 7.1 million bpd in 2040.
Highlighting, the US output growth, the EIA points to the Lower 48 states as leading the way. Higher oil prices, continued advances in industry practices, and further development of technologies that reduce costs and allow for increased recovery of tight oil resources are cited as reasons for this euphoria.
As per the hypothesis, the Bakken, Western Gulf Basin (including the Eagle Ford play), and Permian Basin would lead the continued development of tight oil resources in the Lower 48 states in the Reference case. With the recent decline in oil prices, tight oil production has suffered, going down from 4.9 million bpd in 2015 to 4.2 million bpd in 2017. But this seems set for a reversal. Tight output from the Lower 48 states in now projected to go up to 7.1 million bpd by 2040. After 2017, higher oil prices, as well as ongoing exploration, appraisal, and development programs that expand operator knowledge about producing reservoirs could also result in the identification of additional tight oil resources and the development of technologies that reduce costs and increase oil recovery, the EIA underlined.
In the Lower 48 states, offshore production (which is less sensitive to short-term price movements than onshore production), increases to 2.0 million bpd in 2021. This is led by new deep-water projects in the Gulf of Mexico, including the Heidelberg and Appomattox fields that are scheduled to begin operations in 2016 and 2017, respectively. After 2021, Lower 48 offshore crude oil production declines to roughly 1.6 million b/d in 2030 and remains at about that level through 2040, as production from newly developed fields is offset by declines in legacy fields.
In the meantime, the Lower 48 onshore crude oil production using CO2-enhanced oil recovery increases from 0.3 million b/d in 2015 to 0.7 million b/d 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 0.5 million b/d in 2015 to less than 0.2 million b/d in 2040.
And not only the crude output is growing, the US gas output estimates have also been revised upwards. Although natural gas prices remain relatively low and stable, projected development of natural gas resources in shale gas and tight oil plays, tight gas, and offshore increases as a result of abundant domestic resources and technology improvements.
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, while average annual US natural gas prices at the Henry Hub (in 2015 dollars) remain at about $5.00/million British thermal units (Btu).

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, as their share of total US dry natural gas production grows from 50 percent in 2015 to 69 percent in 2040. Shale gas production that accounted for more than half of US natural gas production in 2015, is now projected to more than double from 37 Bcf/d in 2015 to 79 Bcf/d by 2040, which is 70 percent of total US natural gas production in 2040.
The growing energy independence of Washington has wider consequences, one needs to concede at this stage. And this carries significant geopolitical connotations too.


Source: Saudi Gazette