APR
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What to Know: Annual Energy Outlook 2015

 
For the first time in several decades, the United States will become a net energy exporter, the U.S. Energy Information Administration (EIA) announced this week, as energy sent abroad begins to exceed consumption at home. Net natural gas exports could begin as soon as 2017, Administrator Adam Sieminski told a gathering of industry experts, regulators, and journalists Tuesday, with net petroleum exports starting as soon as 2030. Fueled by energy efficient technologies, as well as the recent boom in domestic production, slowing demand and increasing supply will cause the U.S. economy to gradually reduce its dependence on imported oil, he said. EIA’s 2015 Annual Energy Outlook (AEO)—a widely referenced forecast for U.S. energy markets—projects increased oil and gas production through 2040, as well as slow demand growth. From 2035 to 2040, EIA says energy exports will account for about 23 percent of total annual U.S. energy production, depending on the rate of economic growth. If the economy grows faster-than-expected, the U.S. will not become a net energy exporter until 2040, as the country consumes more than the 2015 Reference Case forecasts. If the economy grows slower-than-expected, according to projections, the U.S. will become a net energy exporter much sooner, in 2022. Many of these new resources will come from tight oil formations, the agency says, which will trim the share of net petroleum imports from 26 percent of product supplied to 15 percent by 2025. One decade ago, petroleum imports accounted for over 60 percent of U.S. crude oil supplies, or 12.5 mbd. Five years into the future, in 2020, tight oil could ramp up total U.S. supply to 10.6 million barrels per day (mbd)—a figure that could be pushed still higher if oil prices sharply increase. Oil drilled from tight formations, frequently shale rock, will account for 29 percent of U.S. liquids by 2020, but EIA’s Reference Case has these supplies falling to 22 percent at the end of the forecast period. If oil and gas resources prove to be more prolific than these forecasts, U.S. exports could reach 16.6 mbd by 2039. The AEO also includes many price forecasts, with several caveats that highlight global oil market price volatility. The agency’s base case scenario has Brent crude, the international benchmark, rising to $56 per barrel in 2015 and recovering around $76 per barrel next year. EIA says Brent prices will average $141 at the end of the forecast period. But predicting crude oil prices can be tricky, Sieminski cautioned. For one, oil prices vary considerably given any number of social, political, or economic developments. “You could come up with any number of geopolitical scenarios where oil prices go up in a hurry,” he said, adding, “This is more of a stress test.” Crude oil could cost $75 per barrel if prices stay on a lower-than-expected price trajectory, or jump above $250 per barrel in the agency’s high-oil-price forecast. For its part, the EIA’s international analogue, the International Energy Agency, said the near-term oil price outlook is “only getting murkier.” The growth in domestic supplies will place new burdens on existing infrastructure, EIA said, as 1 mbd of additional supply could come to market by 2040. The strongest growth will come from the Dakotas and Rocky Mountain region, which includes the immense Bakken formation in Western North Dakota. Shifts in energy flows out of these regions will require investment in and realignment of pipelines and other midstream infrastructure, like railways and boats, Sieminski said. Up to 4 mbd could be brought to market if drilling technologies continue to improve and significant new resources are found. “I think it’s impossible to predict the kinds of changes that can take place,” Sieminski said on the pace of technological advancement. There will also be a major shift away from motor gasoline use in the transportation sector, Sieminski said. The AEO projects gasoline consumption to fall from 58 percent of liquid fuels consumed today to 44 percent by 2040. Diesel fuel, jet fuel, and natural gas (CNG and LNG), meanwhile, will increase to 31 percent, 14 percent, and 3 percent of liquid fuels in the next 25 years, respectively. Most of gasoline’s decline in the share of transportation fuels consumed will occur before 2030 due to heightened fuel economy standards, as well as continued economic and behavioral changes that are expected to contribute to declining gasoline demand, according to the report. The AEO also notes that light-duty vehicles, which consumed 58 percent of all transportation sector oil consumption in 2013, will fall to 48 percent by 2040. Heavy-duty trucks, alternatively, will grow from 21 percent of all transportation sector-related oil consumption, to 28 percent by 2040. Among the EIA’s other important projections:
  • Total U.S. primary energy consumption will increase from 97.1 quadrillion British thermal units (Btu) in 2013 to 105.7 quadrillion Btu in 2040. AEO’s Reference Case has most of that growth occurring in natural gas and renewable energy use.
  • Energy use per dollar of gross domestic product declines at an annual rate of two percent from 2013 through 2040, as per capita energy use falls at an annual rate of 0.4 percent.
  • Decreases in energy consumption in the transportation and residential sectors will partially offset growth in other sectors.
EIA’s International Energy Outlook, which applies these forecasts to global markets, will be available later this year.