The document summarizes a presentation given to the Lagos Oil Club about the shale gas boom in the United States. It discusses the dramatic growth of tight oil and shale gas production in the US in recent years. It presents EIA projections that US crude oil production will surpass imports by the end of 2013 for the first time since 1995. It also projects that natural gas production will continue to grow faster than consumption, making the US a net exporter of natural gas around 2020, with exports quadrupling by 2040.

1. The U.S. Shale Gale
Outlook and Implications
Presentation to the Lagos Oil Club
March 25, 2013
Rob Folley
Economic Officer
U.S. Consulate General Lagos

2. Outline
• Introduction to Unconventional Production
• U.S. Energy Outlook
• All-of-the-Above Energy Strategy
• Should the U.S. export LNG?
• State Department’s Energy Bureau
• What does this mean for Nigeria?

3. U.S. Shale Oil and Gas: The New Conventional?
A shale gas drilling operation in Pennsylvania’s Marcellus Shale

7. Domestic production of tight oil has grown dramatically over the past
few years
tight oil production for select plays
million barrels per day
Source: Drilling Info (formerly HPDI), Texas RRC, North Dakota department of mineral resources, and EIA, through October 2012.
7

8. North Dakota’s Bakken Shale seen at night
Source: National Geographic

10. U.S. Oil Production short term outlook
• EIA expects U.S. crude oil production to continue to grow rapidly over the
next two years, increasing from an average 6.5 million bbl/d in 2012 to
average 7.3 million bbl/d in 2013 and 7.9 million bbl/d in 2014
• Total net imports fell to 7.4 million bbl/d in 2012, and EIA expects imports
to continue declining to an average of 6.0 million bbl/d by 2014

11. EIA expects that U.S. crude oil production will exceed U.S. crude oil imports
as early as the end of 2013, the first time this will have occurred since
February 1995

12. U.S. tight oil production leads a growth in domestic production of 2.6
million barrels per day between 2008 and 2019
U.S. crude oil production
million barrels per day
History 2011 Projections
8
STEO Feb. 2013 U.S. crude oil projection
6
Tight oil
4
Other lower 48 onshore
2
Lower 48 offshore
Alaska
0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Source: EIA, Annual Energy Outlook 2013 Early Release and Short-Term Energy Outlook, February 2013
12

13. Global tight oil production comparisons
IEO2013 DRAFT BP Energy Outlook 2030
million barrels per day
Source: Preliminary International Energy Outlook 2013, BP Energy Outlook 2030
Adam Sieminski , FLAME March 13, 2013 13

14. Domestic production of shale gas has grown dramatically over the
past few years
Sources: LCI Energy Insight gross withdrawal estimates as of January 2013 and
shale gas production (dry) converted to dry production estimates with EIA-calculated average
gross-to-dry shrinkage factors by state and/or shale play.
billion cubic feet per day
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15. Shale gas leads growth in total gas production through 2040
U.S. dry natural gas production Source: EIA, Annual Energy Outlook 2013 Early
trillion cubic feet Release
History 2011 Projections
Shale gas
Non-associated offshore Tight gas
Alaska
Coalbed methane
Associated with oil
Non-associated onshore
15

16. Natural gas consumption is dispersed with electric power, industrial,
and transportation use driving future demand growth
U.S. dry gas consumption
trillion cubic feet
History Projections
*Includes combined heat-and-power and lease and plant fuel.
**Includes pipeline fuel.
Electric
32% power
31%
Industrial*
33%
33%
2% Gas to liquids
3% 6% Transportation**
13% 12% Commercial
19% 14% Residential
Source: EIA, Annual Energy Outlook 2013 Early Release
Adam Sieminski December 12,
16
2012

17. Electricity generation mix shifts toward natural gas and renewables,
but coal remains the largest fuel source
U.S. electricity net generation
trillion kilowatthours
1993 History 2011 Projections
30%
Natural gas
25%
16%
Renewables
13% 13%
11%
19% Nuclear 17%
19%
53% 42% 35%
Coal
Oil and other liquids
4% 1%
1%
Source: EIA, Annual Energy Outlook 2013 Early Release
17

18. Industrial natural gas use grows, especially before 2025
Industrial natural gas consumption
quadrillion Btu
Source: EIA, Annual Energy Outlook 2013 Early Release
18

19. Natural gas use in transportation rises as motor gasoline demand
declines… overall transportation use is largely unchanged
Transportation energy consumption by fuel
quadrillion Btu
History 2011 Projections
22%
Diesel 29%
CNG/LNG
11%
4% 4%
2% Jet fuel 13%
E85
Other 1%
4%
Pipeline fuel 3%
60% Motor gasoline 47%
Source: EIA, Annual Energy Outlook 2013 Early Release
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20. Domestic natural gas production grows faster than consumption and
the U.S. becomes a net exporter of natural gas around 2020
U.S. dry gas Source: EIA, Annual Energy Outlook 2013 Early
trillion cubic feet Release
History 2011 Projections
Consumption
Domestic supply
Net imports
20

21. Total natural gas exports nearly quadruple by 2040
U.S. natural gas exports Source: EIA, Annual Energy Outlook 2013 Early
trillion cubic feet Release
Exports to Mexico
Exports to Canada
Lower 48 LNG exports
Alaska LNG exports
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22. How will this benefit the U.S. economy?
•Lowered input costs for manufacturing sector
•Will contribute to “reverse out-sourcing” trend; job growth
•Will benefit consumers with cheaper electricity and heat

23. U.S. EIA Annual Energy Outlook 2013
• Growth in energy production outstrips consumption
growth
• Crude oil production rises sharply over the next decade
• Motor gasoline consumption reflects more stringent fuel
economy standards
• The U.S. becomes a net exporter of natural gas in the
early 2020s
• U.S. energy-related carbon dioxide emissions remain
below their 2005 level through 2040

24. U.S. energy use grows slowly over the projection reflecting improving
energy efficiency and slow, extended economic recovery
U.S. primary energy consumption
quadrillion Btu Shares of total U.S. energy
History 2000 2011 Projections
28%
24% Natural gas
26%
6% 8% Renewables (excluding liquid biofuels) 11%
8% 8% Nuclear 9%
1% 2%
23% Liquid biofuels
20% Coal 19%
39% 36% 32%
Oil and other liquids
Source: EIA, Annual Energy Outlook 2013 Early Release
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25. Light-duty vehicle liquids consumption is lower primarily due to
more stringent CAFE standards
light-duty vehicle liquids consumption
million barrels per day
AEO2012
AEO2013
Source: EIA, Annual Energy Outlook 2013 Early Release
Adam Sieminski, IEA Bilateral Meetings,
25
March 14, 2013

26. Energy and CO2 per dollar of GDP continue to decline; per-capita
energy use also declines
Energy and emission intensity
index, 2005=1
History 2005 2011 Projections
Energy use per capita
Energy use per 2005
dollar of GDP
Carbon dioxide emissions
per 2005 dollar of GDP
Source: EIA, Annual Energy Outlook 2013 Early Release
26 Adam Sieminski
AEO2013, December 5, 2012

27. World Shale resources (TRR) estimated at 6,600 TCF
Source: EIA 2011 study

28. All-of-the-Above Energy Strategy
• “We’ve got to invest in a serious, sustained, all-of-the-above energy
strategy that develops every resource available for the 21st century.”
– President Barack Obama, March 15, 2012

30. Will the U.S. Export LNG?
Source: EIA

31. Regulations for LNG export licenses
Two key federal agencies are involved in LNG export licenses. The Federal
Energy Regulatory Commission (FERC) licenses the export facilities (LNG plants
and terminals). The Department of Energy’s Office of Fossil Energy is
responsible for a public interest determination.
• Federal law generally requires approval of natural gas exports to countries that have a free
trade agreement (FTA) with the United States.
• For countries that do not have an FTA, the DOE is required to grant applications for export
authorizations unless the proposed exports "will not be consistent with the public
interest." Factors for consideration include economic, energy security, and environmental
impacts.
• To date, DOE has granted one long-term export license at Sabine Pass, Louisiana. On
December 5, 2012, the DOE released a consultant study (NERA) on the economic impact of
LNG exports, and invited comments.
• DOE/FE expects to act on the applications on a case-by-case basis, starting with applicants
which have already commenced the pre-filing process at FERC. As of March 7, 2012, there
were 19 applications pending.
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34. How will the U.S. “shale gale” effect global markets and energy
geopolitics?

35. Crude oil prices react to a variety of geopolitical and economic
events
price per barrel
(real 2010 dollars, quarterly average)
140 Global financial collapse
imported refiner acquisition cost of crude oil
WTI crude oil price
120
Iran-Iraq War
100 Low spare capacity
80 Saudis abandon 9-11 attacks
U.S. spare swing producer role
capacity
60exhausted Asian financial crisis
40 OPEC cuts targets
4.2 mmbpd
Iranian revolution
20
OPEC cuts targets 1.7
Arab Oil Embargo Iraq invades Kuwait
mmbpd
0
1970 1975 1980 1985 1990 1995 2000 2005 2010
Sources: U.S. Energy Information Administration, Thomson Reuters

36. Estimated unplanned production disruptions among non-OPEC
producers, through August 2012
thousand barrels per day
Source: U.S. Energy Information Administration Availability and Price of Petroleum and Petroleum Products Produced in
Countries Other Than Iran Report, August 2012

37. U.S. dependence on imported liquids depends on both supply and
demand
U.S. liquid fuel supply
million barrels per day
History 2005 2011 Projections
Consumption
37%
60% 45%
Net imports
Domestic supply
Source: EIA, Annual Energy Outlook 2013 Early Release
Adam Sieminski, IEA Bilateral Meetings,
37
March 14, 2013

38. Composition and volume of U.S. crude oil imports is shifting

40. Bureau of Energy Resources
Three core objectives:
• Energy Diplomacy: To manage the geopolitics of today’s energy
economy through reinvigorated energy diplomacy with major
producers and consumers.
• Energy Transformation: To stimulate the market forces that will
sustain transformational energy policies in terms of alternative
energy, electricity, development, and reconstruction.
• Energy Transparency and Access: To expand good governance,
increase transparency, and improve commercially viable and
environmentally sustainable access to the 1.3 billion people without
energy services.

41. What does this mean for Nigeria?

42. Oil is a fungible, global commodity…
• Declining crude oil imports from the U.S. will be replaced by growing
demand from emerging markets like China and India
• It’s difficult to predict where oil prices are headed, but Nigeria remains
vulnerable to crude oil price declines

43. … and Nigeria must take steps to remains competitive
• Pass an investment-friendly Petroleum Industry Bill
• Commercialize the natural gas sector
• Increase transparency and good governance
• Address insecurity
• Diversify the economy to shield against oil price shocks
• Invest in public goods -- infrastructure, education, and health -- to create
an enabling environment for economic growth

44. U.S. Trade and Investment Promotion Agencies
• U.S. Commercial Service – promoting SME exports
• U.S. Trade and Development Agency – feasibility studies, reverse trade
missions
• U.S. Export-Import Bank – export financing
• Overseas Private Investment Corporation – loans, guarantees, political risk
insurance

45. U.S. Commercial Service
• The CS is a program of the U.S. Department of Commerce’s International
Trade Administration with the aim of promoting the export of goods and
services from the United States, particularly by small and medium-sized
businesses
• International Buyer Programs – An official Nigerian delegation is recruited
and escorted (by the Ambassador or Commercial Counselor) to attend
selected trade shows in the U.S
• Trade Missions – U.S. business owners are brought to Nigeria to have B2B
meetings with invited Nigerian counterparts to pursue business
opportunities
• Gold Key Service – CS Nigeria arranges appointments for American
investors with pre-screened potential buyers, sales reps and business
partners
• Networking with the USA – the keystone for Nigerian businesses aspiring
to enter the U.S. market. NUSA companies are vetted by CS Nigeria and
added to a list that is supplied to U.S. exporters and investors that are
looking for Nigerian partners

46. For more information
U.S. Energy Information Administration home page | www.eia.gov
Annual Energy Outlook | www.eia.gov/forecasts/aeo
Short-Term Energy Outlook | www.eia.gov/forecasts/steo
International Energy Outlook | www.eia.gov/forecasts/ieo
Today In Energy | www.eia.gov/todayinenergy
Monthly Energy Review | www.eia.gov/totalenergy/data/monthly
Annual Energy Review | www.eia.gov/totalenergy/data/annual
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