US OIL & GAS OUTLOOK

1. U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov
Oil and Gas Outlook
For
Independent Petroleum Association of America
November 13, 2014 | Palm Beach, FL
By
Adam Sieminski, Administrator
U.S. Energy Information Administration

2. Recent research
•
Growth in light sweet crude oil production
–
U.S. supply of lighter API gravity crude will continue to outpace that of medium and heavier crudes; more than 60% of EIA’s forecast of production growth for 2014 and 2015 consists of sweet grades with API gravity 40+ oil; 28% of production growth in 2015 is Gulf of Mexico API gravity 27-35 medium sour oil
•
Updated LNG Study
–
EIA was asked to assess how significantly increased exports of LNG could affect domestic energy markets, focusing on consumption, production, and prices. The scenarios reach as high as 20 Bcf/d, with these exports phased in at a rate of 2 Bcf/d each year beginning in 2015, sourced from the lower 48 states
•
Study of the relationship of gasoline and crude oil prices
–
EIA looked into the determinants of gasoline prices in the United States, and whether a change in current limitations on crude oil exports would have an effect on those prices, and the magnitude of that effect
Independent Petroleum Association of America
November 13, 2014 2

3. 3
Independent Petroleum Association of America
November 13, 2014
These seven regions accounted for 95% of U.S. oil production growth and all U.S. natural gas production growth from 2011-2013
Source: EIA, Drilling Productivity Report

4. The U.S. has experienced a rapid increase in natural gas and oil production from shale and other tight resources
4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2000
2002
2004
2006
2008
2010
2012
2014
Eagle Ford (TX)
Bakken (MT & ND)
Spraberry (TX & NM Permian)
Bonespring (TX & NM Permian)
Wolfcamp (TX & NM Permian)
Delaware (TX & NM Permian)
Yeso-Glorieta (TX & NM Permian)
Niobrara-Codell (CO, WY)
Haynesville
Utica (OH, PA & WV)
Marcellus
Woodford (OK)
Granite Wash (OK & TX)
Austin Chalk (LA & TX)
Monterey (CA)
U.S. tight oil production
million barrels of oil per day
0
5
10
15
20
25
30
35
40
2000
2002
2004
2006
2008
2010
2012
2014
Marcellus (PA & WV)
Haynesville (LA & TX)
Eagle Ford (TX)
Fayetteville (AR)
Barnett (TX)
Woodford (OK)
Bakken (ND)
Antrim (MI, IN, & OH)
Utica (OH, PA & WV)
Rest of US 'shale'
U.S. dry shale gas production
billion cubic feet per day
Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through August 2014 and represent EIA’s official tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s).
Independent Petroleum Association of America
November 13, 2014

5. U.S. shale gas leads growth in total gas production through 2040, when production exceeds 100 billion cubic feet per day
5
U.S. dry natural gas production
trillion cubic feet
Source: EIA, Annual Energy Outlook 2014, Reference case
0
10
20
30
40
50
60
70
80
90
100
0
5
10
15
20
25
30
35
40
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
Associated with oil
Coalbed methane
Tight gas
Shale gas
Alaska
Non-associated offshore
Non-associated onshore
projections
history
2012
Independent Petroleum Association of America
November 13, 2014
billion cubic feet per day

6. 6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2005
2012
2020
2025
2030
2035
2040
U.S. dry gas consumption
trillion cubic feet
Source: EIA, Annual Energy Outlook 2014, Reference case
projections
history
industrial*
electric
power
commercial
residential
transportation**
11.2
4.1
1.7
11.0
3.6
9.1
4.2
0.7
8.5
2.9
*Includes combined heat-and-power and lease and plant fuel
**Includes pipeline fuel
Natural gas consumption growth is driven by electric power, industrial, and transportation use
Independent Petroleum Association of America
November 13, 2014

7. U.S. becomes a net exporter of natural gas in the near future
7
U.S. dry natural gas
trillion cubic feet per year
Source: EIA, Annual Energy Outlook 2014 Reference case
Independent Petroleum Association of America
November 13, 2014
-10
0
10
20
30
40
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
projections
history
2012
Consumption
Domestic supply
Net exports
100
75
50
25
0
-25
billion cubic feet per day

8. Source: EIA, Annual Energy Outlook 2014, Reference case and High Oil and Gas Resource case
8
Independent Petroleum Association of America
November 13, 2014
-4
-2
0
2
4
6
8
2010
2015
2020
2025
-4
-2
0
2
4
6
8
2010
2015
2020
2025
Projected U.S. natural gas trade depends on assumptions regarding resources and future technology advances
Reference case
trillion cubic feet per year
exports to Mexico
exports to Canada
lower 48
LNG exports
imports from Canada
LNG imports
High Oil and Gas Resource case
trillion cubic feet per year
billion cubic
feet per day
0
5
20
15
10
-5
-10

9. Key Takeaways from Updated EIA Study of added LNG exports
Prices: Projected average natural gas prices at the producer level average 4% to 11% above the Reference case projection across export scenarios over 2015-40, while residential natural gas prices in the export scenarios average 2% to 5% above their base projection
Natural gas production: With the exception of one baseline/scenario pairing, higher natural gas production satisfies 60% to 80% of the increase in natural gas demand from LNG exports over 2015-40
Natural gas consumption: The electric power sector accounts for most of the decrease in delivered natural gas. The electric generation mix shifts towards other generation sources, including coal and renewables, with some decrease in total generation as electricity prices rise
CO2 emissions: Higher coal use leads to higher carbon dioxide output
Expenditures: On average, from 2015 to 2040, natural gas bills paid by end-use consumers in the residential, commercial and industrial sectors combined increase 1% to 8% across pairings of export scenarios and baselines. Increases in electricity bills paid by end-use customers range from 0% to 3%
Economic gains: Changes in the level of GDP relative to baseline range from 0.05% to 0.17% and generally increase with the amount of added LNG exports required to fulfill an export scenario; EIA’s NEMS model may understate the economic benefits
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November 13, 2014 9

10. Resource and technology assumptions have major implications for projected U.S. crude oil production beyond the next few years
0
2
4
6
8
10
12
14
1990
2000
2010
2020
0
2
4
6
8
10
12
14
1990
2000
2010
2020
10
Source: EIA, Annual Energy Outlook 2014; Short Term Energy Outlook, October 2014
Alaska
tight oil
other lower 48 states onshore
lower 48 states offshore
STEO October 2014 U.S. crude oil projection
2012
projections
history
projections
history
2012
Alaska
tight oil
other lower 48 states onshore
Reference case
million barrels per day
High Oil and Gas Resource case
million barrels per day
lower 48 states offshore
Independent Petroleum Association of America
November 13, 2014

11. 0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-2012
Jul-2012
Jan-2013
Jul-2013
Jan-2014
Jul-2014
Other Non-OPEC
Syria
Sudan / S. Sudan
Iraq
Nigeria
Libya
Iran
U.S. oil production growth helping to offset unplanned outages
11
estimated unplanned crude oil production outages
million barrels per day
Source: EIA, Short-Term Energy Outlook, November 2014
*monthly production delta versus Jan. 2011 production level
Non-
OPEC
OPEC
Independent Petroleum Association of America
November 13, 2014
U.S. Production growth*

12. U.S. rail carloads of crude oil and petroleum products exceed 1.5 million b/d in 2014
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November 13, 2014 12
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2006
2007
2008
2009
2010
2011
2012
2013
2014
number of rail carloads per week
Source: U.S. Energy Information Administration, based on Association of American Railroads
million barrels per day

13. Growing U.S. oil production and rising demand in China have together made China the world’s largest net oil importer
Independent Petroleum Association of America
November 13, 2014 13
0
1
2
3
4
5
6
7
8
9
10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
U.S. net imports
China net imports
net imports for China and the United States
million barrels per day
Note: Net oil imports are defined as total liquid fuels consumption less domestic production
Source: EIA, Short-Term Energy Outlook, October 2014
projections
history
Aug-14

14. 0
5
10
15
20
25
30
0.0
10.0
20.0
30.0
40.0
50.0
60.0
U.S. is the largest producer of petroleum and natural gas in the world
Independent Petroleum Association of America
November 13, 2014 14
estimated U.S., Russia, and Saudi Arabia petroleum and natural gas production
quadrillion Btu
million barrels per day of oil equivalent
United States
Russia
Saudi Arabia
petro- leum
natural
gas
2008
2009
2010
2011
2012
2013
2014e
Source: U.S. Energy Information Administration
Note: Petroleum production includes crude oil, natural gas liquids, condensates, refinery processing gain, and other liquids, including biofuels; barrels per day oil equivalent were calculated using a conversion factor of 1 barrel oil equivalent=5.55 million British thermal units (Btu)

15. Effect of low oil prices on U.S. shale oil production
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November 13, 2014 15
Source: Rystad Energy North America Quarterly Shale Report
US+CA, oil+NGLs from tight plays (kbbld)
Brent-indexed
breakeven prices:

16. U.S. petroleum product net exports
million barrels per day
-3
-2
-1
0
1
2
3
1950
1960
1970
1980
1990
2000
2010
Source: EIA, Annual Energy Outlook 2014 Reference case and Short Term Energy Outlook
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November 13, 2014 16
U.S. is already a major net exporter of petroleum products
2015(e)

17. Key observations from EIA’s analysis of the relationship between gasoline and crude oil prices
•
Prices of Brent crude oil, an international benchmark, are more important than the price of West Texas Intermediate (WTI), a domestic benchmark, for determining gasoline prices in all four U.S. regions studied
•
The effect that a relaxation of current limitations on U.S. crude oil exports would have on U.S. gasoline prices depends on its effect on international crude prices rather than its effect on domestic crude prices
•
Gasoline is a globally traded commodity, and prices are highly correlated across global spot markets
•
Gasoline supply, demand, and trade in various regions are changing; U.S. Gulf Coast and Chicago spot gasoline prices, which are closely linked, are now often the lowest in the world during fall and winter months
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18. Most of the growth in production between 2011 and 2015 consists of sweet grades with API gravity of 40 or above
0
1
2
3
4
5
6
7
8
9
10
2011
2012
2013
2014
2015
API 50+
API 40-50
API 35-40
API 27-35
API below 27
U.S. crude oil production by type
million barrels of oil per day
Source: EIA, DrillingInfo, Colorado DNR, Texas RRC. http://www.eia.gov/analysis/petroleum/crudetypes/
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November 13, 2014 18
forecast
history

19. 19
Independent Petroleum Association of America
November 13, 2014
Crude oil and associated liquids contain a wide variety of hydrocarbons
Source: EIA via Harvey Crude Assay Management System

20. mixed hydrocarbon wells
(gas, condensate, oil)
dry gas
(exportable with
order/authorization)
crude oil / lease condensate
(exportable under limited conditions)
wet gas
EIA Refinery Survey
plant
condensate
splitter
complex
distillation
stabilizer
finished product streams
processed products for domestic use or exportable without license
finished petroleum products and other processed hydrocarbon liquids
separation via temperature gradients
water
separation via pressure changes
field / lease separator
flash drum
heater treater
Distillation processes and resulting products
Independent Petroleum Association of America November 13, 2014
20
other
processed
gas liquids
fractionator separator
gas processing plant
processed
condensate

21. In the AEO reference case, annual carbon dioxide emissions rise slowly, but remain below levels reached in the 2000s
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November 13, 2014 21
Source: EIA Annual Energy Outlook 2014

22. EIA projects declines in carbon dioxide emissions for all sectors except industrial relative to 2005
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November 13, 2014 22
Source: EIA Annual Energy Outlook 2014

23. Coal continues to account for the largest share of global energy- related carbon dioxide emissions throughout the projection
23
0.0
10.0
20.0
30.0
40.0
50.0
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
world energy-related carbon dioxide emissions by fuel
billion metric tons
Coal
Natural gas
Liquid fuels
2010
History
Projections
Independent Petroleum Association of America
November 13, 2014
Source: EIA, International Energy Outlook 2013

24. Areas of uncertainty in the outlook
•
Oil prices
•
China’s energy demand growth; particularly in transportation
•
Increasing global trade of natural gas and hydrocarbon gas liquids in addition to oil
•
Global development of tight oil and shale gas resources
•
Policy decisions on crude oil exports
•
Impact of geopolitical tensions on energy supply
•
Constraints on CO2
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November 13, 2014 24

25. For more information
Independent Petroleum Association of America
November 13, 2014 25
U.S. Energy Information Administration home page | www.eia.gov
Annual Energy Outlook | www.eia.gov/aeo
Short-Term Energy Outlook | www.eia.gov/steo
International Energy Outlook | www.eia.gov/ieo
Monthly Energy Review | www.eia.gov/mer
Today in Energy | www.eia.gov/todayinenergy
State Energy Portal | www.eia.gov/state
Drilling Productivity Report | www.eia.gov/petroleum/drilling/