03 January 2013 17:17 [Source: ICIS news]
WASHINGTON (ICIS)--It is as if government energy agencies and think tanks are vying with each other to trumpet wildly optimistic, even spectacular forecasts for US oil and natural gas production in the years ahead.
These extravagant expectations and predictions come from entities not given to hyperbole, and yet running through the ordinarily bureaucratic discourse over US energy prospects is an unmistakable sense of optimism.
Just a few years ago, the expectation was that the US would forever be addicted to its high-dollar habit for Middle Eastern oil and other foreign energy supplies.
But now, the talk is of US energy independence – not just “energy security” but actual energy independence within a decade or two.
In its November 2012 World Energy Outlook (WEO), the International Energy Agency (IEA) declared that “the global energy map is changing in dramatic fashion” and that North America is “at the forefront of a sweeping transformation in oil and natural gas production that will affect all regions of the world”.
No cautious, conditional phrasing there.
“The WEO finds that the extraordinary growth in oil and natural gas output in the US will mean a sea-change in global energy flows,” the IEA said.
In its middle-of-the-road long-term outlook – neither its most optimistic nor its most pessimistic forecast scenario – the IEA sees the US becoming “a net exporter of natural gas by 2020 and is almost self-sufficient in energy, in net terms, by 2035”.
That means that while the US likely will be importing some energy resources or products in 2035, it will nonetheless be exporting more energy than it consumes and imports.
The US Energy Department’s own Energy Information Administration (EIA) followed the IEA outlook with its own prediction that US “crude oil production, particularly from tight oil plays, rises sharply over the next decade”.
In its 5 December analysis, the EIA said that “Domestic production of crude oil increases sharply [in the EIA 2013 forecast], with an annual growth averaging 234,000 bbl per day (bpd) from 2011 through 2019, when production reaches 7.5m bpd”.
For natural gas – the lifeblood of the US chemicals industry – the EIA sees production increasing exponentially in the near years, “outpacing domestic consumption by 2020 and spurring net exports of natural gas”.
Thanks chiefly to shale gas development, the EIA said, the US becomes a net exporter of natural gas in just three years, in 2016, and the nation’s exports of liquefied natural gas (LNG) reaches around 1,600bn cubic feet (bcf) by 2027, a pace that is double what the EIA forecast just a year ago.
In another estimate, the US National Intelligence Council (NIC) said on 10 December that “energy independence for the US is an achievable goal by about 2030, brought on by higher levels of domestic production in the fossil fuel sector”.
“In a tectonic shift,” NIC’s report said, “energy independence is not unrealistic for the US in as short a period as 10-20 years.”
“Increased oil production and the shale gas revolution could yield such independence,” NIC added, noting that “US production of shale gas has exploded, with a nearly 50% annual increase between 2007 and 2011, and natural gas prices in the US have collapsed.”
NIC, the US intelligence community’s top research and analysis body, said that the US “has sufficient natural gas to meet domestic needs for decades to come and potentially [for] substantial global exports”.
In addition, NIC said, US energy production companies “are developing new ‘super fracking’ technologies that could dramatically increase recovery rates still further”.
Separately from shale gas development, NIC said that shale oil production in the US “is still in its early stages and its full potential remains uncertain”. But developments in shale oil production are “happening at a faster pace than shale gas”.
“By 2020,” said NIC, “the US could emerge as a major energy exporter.”
Beyond shale gas and shale oil, still another new production development positions the US on the cusp of energy independence.
In a study issued by the US Chamber of Commerce’s Institute for 21st Energy, there is an increasing use of carbon dioxide (CO2) to recover known domestic crude oil resources that otherwise could not be brought to the surface. The process is known as CO2 enhanced oil recovery or CO2 EOR.
“An analysis commissioned by the US Department of Energy (DOE) projects potential oil resources recoverable with CO2 EOR of up to 137bn barrels, with 67bn barrels economically recoverable at a price of $85/bbl,” the Chamber said.
“This represents more than three times the current US proven reserves,” the Chamber said, citing US Interior Department data.
These newly abundant supplies of natural gas from shale formations will revive the slumbering US manufacturing sector, boosting exports and spurring more domestic investment, growth and employment, according to the American Chemistry Council (ACC).
In its year-end situation and outlook report, the council said that those shale gas supplies also will help accelerate the thus far mediocre US economic recovery, with the chemicals sector perhaps benefitting the most.
US petrochemicals producers and downstream chemical makers are heavily dependent on natural gas as both a feedstock and power fuel. Chemicals producers outside of North America typically rely on oil-based naphtha for feedstock.
With domestic US natural gas prices low and crude oil high, US chemicals manufacturers are now enjoying a major cost advantage that has not been seen for more than a decade.
ACC chief economist Kevin Swift noted that a period of high and volatile natural gas prices in 2001-2008 “destroyed industrial demand and lead to the closure of many gas-intensive manufacturers”.
But the advent of shale gas “offers a new era of American competitiveness that will lead to greater investment, industry growth and employment”, he said.
He said that “aided by a favourable oil-to-gas ratio, chemical exports grew 1.8% to $191bn [€145bn] in 2012, helping to turn a trade deficit into a modest surplus”.
Swift said that ACC is projecting chemicals exports to grow, reaching $209bn in 2014.
Overall US chemical shipments could reach $833bn in 2014, Swift said.
But the impact of shale gas will be felt well beyond the chemicals sector, he added.
“Other natural gas and energy intensive manufacturing industries also will realise renewed competitiveness and increased output, potentially creating 662,000 direct and related jobs and generating $342bn in economic expansion,” the council said.
($1 = €0.76)
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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