05 July 2007 16:27 [Source: ICIS news]
By Joe Kamalick
Or, maybe not.
Other soothsayers say advances in deepwater drilling in the US Gulf and sharp gains in global production and shipment of liquefied natural gas (LNG) will save the day - or at least keep the
First, the bad news.
Energy specialist Andrew Weissman of FTI Consulting paints a dire picture of declining North American oil production over the near term even as continuing economic growth will be demanding ever more hydrocarbon-based energy.
“There are several troubling developments under way that mean much higher oil energy costs for the
First, he cited the recent 2007 international energy outlook from the US Energy Information Administration (EIA) that forecasts much lower oil production from
“The EIA has forecast that by 2017 Mexican oil production will be 1m bbl/day less than EIA had anticipated as recently as last year in its 2006 outlook,” Weissman said, adding: “This is not good news from the number two foreign oil supplier to the
Indeed, the administration in 2006 had forecast that
However, in its recently released 2007 international outlook, the administration revised its forecast for Mexican oil output downward to only about 3m bbl/day by the end of the decade - meaning 1m bbl/day less oil for the
Second, when ExxonMobil CEO Rex Tillerson addressed reporters at the company’s annual meeting earlier this year, he strongly suggested that both the mammoth
Tillerson said the Mackenzie pipeline - which is to bring natural gas supplies to western
Gas deliveries to western
So just between Mexican and Canadian oil supply setbacks, within a few years the US is looking at a potential daily shortfall of as much as 3.5m bbl/day of oil supply that the EIA had been counting on as available for US consumption.
Tillerson said original cost estimates for both the Mackenzie and
He said the Alaska pipeline project, designed to bring vast stores of Alaskan natgas to the lower 48 US states and originally forecast as a $20bn (€16.6bn) undertaking, would probably cost twice that much.
Neither pipeline is economic at current cost estimates, Tillerson said, and could not be pursued without massive government subsidies - an unlikely development given monetary and political circumstances in both the US and Canada.
Third, Weissman cautions that exploration and production (E&P) plans by oil-rich Middle Eastern countries, particularly Saudi Arabia, remain uncertain more than three years out.
“That means that additional Mideast production, and particularly additional oil output by
In short, Weissman says, within very few years the
Aside from the negative impact that oil at more than $100/bbl would likely have on US and global economies, the price of oil generally affects natural gas prices and consequently could seriously erode the competitive position of US chemicals manufacturers, wholly dependent on natgas as a feedstock.
The relationship between oil and natgas prices is complicated, but EIA estimates that every permanent 20% increase in the price of West Texas Intermediate crude, the
However, the outlook is not nearly so dire, according to energy specialist Rehan Rashid of investment firm Friedman Billings Ramsey.
Rashid says oil majors have made breakthroughs in deepwater oil drilling - tapping into US Gulf reserves as much as 25,000 feet below the seabed - that could bring an additional 60bn bbl of oil to the
Development of those reserves, he said, could double
That additional 1.5m bbl/day of Gulf oil would not have all that much impact on global oil demand that by 2017 is expected to reach 100m bbls/day, Rashid said, but other deepwater developments elsewhere on the globe and advances in a wide range of energy resources also will be coming on stream.
“I encourage people to think not just in terms of oil production but in terms of total new Btus [British thermal units] that will be coming into the market over the next 10 years,” Rashid said.
He said that in addition to growing Btu contributions from coal, hydro-electric, nuclear and solar energy over the next 10 years, natural gas will achieve major gains.
“Over the next five years, we expect about 20bn cubic feet [bcf]/day of additional Btus from LNG [liquefied natural gas] resulting from major investments being made in Qatar, Algeria, Egypt and Norway, plus another 10 bcf/day in piped gas from Russia, Norway and Algeria,” Rashid said.
“That is equivalent to about 5m bbl/day of additional oil within the next five years,” he said.
Still, even Rashid is not wholly convinced of an energy-adequate future.
“The question is,” he said, “will those additional Btus be enough?”
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