oil and natural gas: market outlook and drivers · 2016-06-08 · 2016 intellectual capital...

www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis

Oil and natural gas: market outlook and drivers

for

2016 Intellectual Capital Conference

May 25, 2016 | Baltimore, MD

by

Howard Gruenspecht, Deputy Administrator

world supply and demand

million barrels per day

implied stock change


2016 Intellectual Capital Conference | Oil and natural gas: market outlook and drivers

May 25, 2016

Global supply has consistently exceeded demand since the start of 2014;

EIA forecasts a return to market balance in the second half of 2017

Source: EIA, Short-Term Energy Outlook, May 2016

2

Forecast

-3

-2

-1

0

1

2

3

4

5

6

82

84

86

88

90

92

94

96

98

100

2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1 2017-Q1

Implied stock change and balance (right axis)

World production (left axis)

World consumption (left axis)

0

20

40

60

80

100

120

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

Historical Spot Price

STEO Forecast

NYMEX Futures Price

Current 95% NYMEX futures price confidence interval

2013 2014 2015 2016 2017

WTI price

dollars per barrel

EIA expects WTI oil prices to remain low compared to recent history,

but the market-implied confidence band is very wide



May 25, 2016

U.S. tight oil production

million barrels of oil per day

U.S. dry shale gas production

billion cubic feet per day

The U.S. has experienced a rapid increase in natural gas and oil

production from shale and other tight resources

Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through February 2016 and represent EIA’s official

tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s).


May 25, 2016

-2

-1.5

-1

-0.5

0

0.5

1

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016 2017

Total U.S. Production

Lower 48

Alaska

Federal Gulf of Mexico

U.S. crude oil production growth by area

change from fourth quarter, 2014 (million barrels per day)

Long lead times and past investment are contributing to growth from

the Gulf of Mexico as Lower 48 production declines



May 25, 2016

Source: EIA, Short-Term Energy Outlook and Drilling Productivity Report, May 2016; International Energy Agency

Crude supply trends outside the United States (red areas below) are key to future

oil market balance: geopolitical developments, exporter decisions, and the timing

and magnitude of supply effects stemming from reduced investment all matter


May 25, 2016

Shale Regions

5.60

Other Lower 480.87

AK0.47GOM

1.66

2016 oil production, million barrels per day

REST OF WORLD

= 72.72

Shale Regions

5.10

Other Lower 480.79

AK0.45GOM

1.85

2017 oil production, million barrels per day

REST OF WORLD

= 72.88

Forecast

-2

-1

0

1

2

3

4

5

6

7

8

9

76

78

80

82

84

86

88

90

92

94

96

98

2009 2010 2011 2012 2013 2014 2015 2016 2017

Change in U.S. consumption (right axis)

Change in China consumption (right axis)

Change in other consumption (right axis)

Total world consumption (left axis)

world liquid fuels consumption


annual change


EIA forecasts global liquids consumption growth at 1.4 million b/d in

2016 and 1.5 million b/d in 2017



May 25, 2016

0

1

2

3

4

5

6

7

Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16

2013 2014 2015 2016 2017

GDP growth in non-OECD countries

annual expectations by date of forecast

Non-OECD economic growth projections, a key driver of oil demand,

have been reduced over the course of recent STEO forecasts



May 25, 2016

U.S. Outlook


May 25, 20169

0

20

40

60

80

100

120

1980 1990 2000 2010 2020 2030 2040 2020 2030 2040

U.S. primary energy consumption

quadrillion Btu


May 25, 2016

Reductions in energy intensity largely offset effects of economic and

population growth, leading to slow projected growth in energy use

Source: EIA, Annual Energy Outlook 2016

10

29%

9%

16%

36%

8%

Coal

ProjectionsHistory 2015

1%Liquid biofuels

32% of

U.S. total

8%

14%

33%

12%

1%

Projections2015

AEO2016 Reference No CPP

Natural gas

Renewables

Nuclear

Petroleum and other liquids

33%

8%

10%

34%

14%

1%

(excluding biofuels)

Combination of increased tight oil production and higher fuel

efficiency drives projected decline in oil imports

11

0

5

10

15

20

25

1970 1980 1990 2000 2010 2020 2030 2040

U.S. liquid fuels supply


Note: “Other” includes refinery gain, biofuels production, all stock withdrawals, and other domestic sources of liquid fuels



May 25, 2016

History

Natural gas

plant liquids

Other crude oil production

(excluding tight oil starting in

2000)

Net petroleum and other liquids

imports

23%

25%

24%

Other

17%

Tight oil

production

10%

25%

19%

2020

23%

12%

21%

2015

7%

21%

12%

25%

35%

2040

AEO2016 Reference

In the transportation sector, motor gasoline use declines; diesel fuel, jet

fuel, and natural gas use all grow

12

0

5

10

15

20

25

30

1990 2000 2010 2020 2030 2040

transportation energy consumption by fuel

quadrillion Btu



May 25, 2016

History 2015

58%

Motor gasoline

Jet fuel

CNG/LNG

10%

2%

2%

3%

Other*

Diesel

24%

2030

49%

13%

3%

30%

1%

2040

Ethanol

4%

4%

*Includes aviation gasoline, propane, residual fuel oil,

lubricants, electricity, and liquid hydrogen

14%

44%

31%

5%

AEO2016 Reference

Takeaways – Natural gas

• North American natural gas production is more likely to be limited by demand than

supply

• U.S. natural gas demand growth is likely to be concentrated in electricity and industrial

uses; natural gas exports and use in the transportation sector, where little natural gas

is used today, are also likely to grow

• Potential challenges to natural gas demand growth include

– Slow growth in U.S. electricity demand

– Competition from offshore “stranded” gas for global LNG exports and siting of gas-intensive

industries.

– Long-term cheap oil would be another significant challenge to LNG exports

– Extent and nature of global price convergence in natural gas markets

• Future policies that target particular sources or uses of energy or energy-related

emissions can really matter for future natural gas demand


May 25, 201613


May 25, 2016

Natural gas prices are projected to remain below $5 per million British

thermal units through most of the projection period with or without the Clean

Power Planaverage Henry Hub spot prices for natural gas

2015 dollars per million Btu

14


0

3

6

9

12

2005 2010 2015 2020 2025 2030 2035 2040

AEO2016 Reference

No CPP

AEO2015 Reference

History Projections2015

0

10

20

30

40

50

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

U.S. energy production and consumption

quadrillion Btu


May 25, 2016

U.S. natural gas production exceeds consumption, making the United

States a net exporter of natural gas in the very near future


15


Net exports

Reference

-22%

No CPP

-23%

Consumption

Domestic supply

Net imports: 3%

2020

2040

Reference

No CPP

Shale resources remain the dominant source of U.S. natural gas

production growth

16

0

20

40

60

80

100

120

0

5

10

15

20

25

30

35

40

45

1990 2000 2010 2020 2030 2040

U.S. dry natural gas production

trillion cubic feet



May 25, 2016

Tight gas

Coalbed methane

Other lower 48

onshore

Shale gas and

tight oil plays

AlaskaLower 48 offshore

History2015

Projections

AEO2016 Reference


May 25, 2016

Natural gas generation falls through 2021; both gas and renewable

generation surpass coal by 2030 in the Reference case, but only natural

gas does so without the Clean Power Plan

17

0

500

1,000

1,500

2,000

2,500

1990 2000 2010 2020 2030 2040 2020 2030 2040

AEO2016 Reference No CPP

2015History 2015

Nuclear

Petroleum

Natural gas

Coal

Renewables

net electricity generation

billion kilowatthours


Natural gas consumption growth is led by electricity generation and

industrial uses; natural gas use rises in all sectors except residential

18

0

10

20

30

40

50

60

70

80

90

100

0

5

10

15

20

25

30

35

40

2005 2015 Reference No CPP Reference No CPP Reference No CPP

U.S. dry gas consumption

trillion cubic feet billion cubic feet per day



May 25, 2016

ProjectionsHistory

Electric powerIndustrial*Residential Transportation**

12.6

4.6

1.7

11.2

3.7

9.1

4.6

0.9

9.6

3.2

*Includes combined heat-and-power and lease, plant, and export liquefaction fuel

Commercial

12.5

4.6

1.7

12.0

3.7

20402020 2030

**Includes pipeline fuel

Global crude oil prices

Nominal dollars per barrel, monthly average


May 25, 2016

World oil prices move together due to arbitrage

Sources: Bloomberg, Thomson Reuters

19

select global natural gas and crude oil prices with average monthly LNG prices in Japan

U.S. dollars per million British thermal unit


May 25, 2016

North American natural gas prices are low compared to prices in the

rest of the world, although spreads have narrowed recently

Source: EIA, Bloomberg L.P.

20

Global Energy Outlook


May 25, 201621

Key findings in the IEO2016 Reference case

• World energy consumption increases 48% increase (1.4% compound annual growth rate) between 2012 and 2040. Non-OECD Asia (including China and India) account for more than half of the increase.

• The industrial sector continues to account for the largest share of delivered energy consumption; the world industrial sector still consumes over half of global delivered energy in 2040.

• Renewable energy is the world’s fastest-growing energy source, increasing by 2.6%/year; nuclear energy grows by 2.3%/year, from 4% of the global total in 2012 to 6% in 2040.

• Fossil fuels continue to supply more than three-fourths of world energy use in 2040.


May 25, 201622

Many global issues increase uncertainty…

• Economic growth in key economies (China, Brazil, Russia, among others)

• Implementation and strength of climate policies

• Technology improvement rates (both supply and demand)

• Unrest in oil producing countries

• OPEC production

• Future of nuclear generating capacity


May 25, 201623

-4

-2

0

2

4

6

U.S. OECDEurope

Japan SouthKorea

China India Brazil MiddleEast

Africa Russia

Energy Intensity GDP per capita Population

average annual percent change (2012–40)

percent per year


May 25, 2016

Economic activity and population drive increases in energy use; energy

intensity (E/GDP) improvements moderate this trend

Source: EIA, International Energy Outlook 2016

24

0

50

100

150

200

250

1990 2000 2010 2020 2030 2040

Coal

Petroleum and other liquid fuels

Natural gas Renewables

Nuclear

Coal with U.S. CPP

Renewables with

U.S. CPP

Share of

total energy

world energy consumption

quadrillion Btu


May 25, 2016

Renewables grow fastest, coal use plateaus, natural gas surpasses coal

by 2030, and oil maintains its leading share

Source: EIA, International Energy Outlook 2016 and EIA, Analysis of the Impacts of the Clean Power Plan (May 2015)

25


33%

30%

28%

22%

23%

26%

12%

17%

4%

6%

22%

16%

40

50

60

70

1990 2000 2010 2020 2030 2040

Non-OECD

OECD

carbon intensity of energy consumption, 1990-2040

kilograms CO2 per million Btu


May 25, 2016

Projected carbon intensity of energy use (CO2/E) declines through 2040

in both OECD and non-OECD; non-OECD CO2/E rose over 2000–12


26


-1

1

3

5

7

9

1990 2000 2010 2020 2030 2040

Non-OECD electricity

Non-OECD GDP

OECD GDP

OECD electricity

world GDP and net electricity generation

percent growth (rolling average of 3-year periods)


May 25, 2016

GDP drives electricity demand growth, but the electricity growth rate

compared to the GDP growth rate becomes smaller over time


27


0

10

20

30

40

2012 2020 2025 2030 2035 2040

world net electricity generation by source

trillion kilowatthours


May 25, 2016

Renewables, natural gas, and coal all contribute roughly the same

amount of global net electricity generation in 2040


28

Liquids

Other renewables

Natural gas

Coal

Nuclear

Hydropower

passenger-miles per capita (left-axis) and GDP per capita (horizontal-axis) for

selected country groupings 2010–40


May 25, 2016

Passenger-miles per person will rise as GDP per capita grows; travel

growth is largely outside the OECD


29

0

2,000

4,000

6,000

8,000

10,000

12,000

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

OECD

China

Other

non-OECD Asia

Africa

India

0 10 20 30 40

OECD Europe

OECD Asia

OECD Americas

Africa

Non-OECD Europe and Eurasia

Non-OECD Americas

Middle East

Non-OECD Asia

2012

2020

2040

world petroleum and other liquid fuels consumption



May 25, 2016

Most of the growth in world oil consumption occurs in the non-OECD

regions — especially Asia


30

0

10

20

30

40

50

60

2000 2010 2020 2030 2040

Non-OPEC crude and lease condensate

OPEC crude and lease condensate

Other liquids

world production of petroleum and other liquid fuels



May 25, 2016

Liquid fuels supplies from both OPEC and non-OPEC producers

increase through 2040

Source: Current thinking

31


Actual Current Thinking

1973–85 2000–12 2013–25

World Liquids Demand +3 +12 +9 to +13

OECD -4 -2 -2 to 0

Non-OECD +7 +15 +11 to +13

World Liquids Supply -1 +12 +9 to +13

Non-OPEC Supply +13 + 6 + 9 to +12

OPEC Production -14 + 6 -3 to +4

LONGER TERM PERSPECTIVE: Can OPEC cohere? – Change in

world liquid fuel balances for two 12-year historical periods with EIA

projections for 2013-25 (million barrels per day)


May 25, 2016

world natural gas consumption

trillion cubic feet


May 25, 2016

Non-OECD nations account for ¾ of projected growth in natural gas

consumption

Source: Current Thinking

33

0

30

60

90

120

150

2012 2020 2025 2030 2035 2040

OECD Non-OECD

0 5 10 15 20

Other OECD

Non-OECD Europe and Eurasia

Other non-OECD

OECD Americas

Middle East

Non-OECD Asia

China Other

Other

Other

Other

Iran Saudi Arabia

United States

Russia

world change in natural gas production, 2012–40

trillion cubic feet


May 25, 2016

Non-OECD Asia, Middle East, and OECD Americas account for the

largest increases in natural gas production


34

0

10

20

30

40

2012 2040 2012 2040 2012 2040

natural gas production by type

trillion cubic feet


May 25, 2016

Shale gas, tight gas, and coalbed methane become increasingly important

to gas supplies, not only for the U.S., but also China and Canada

Note: Other natural gas includes natural gas produced from structural and stratigraphic traps (e.g. reservoirs), historically referred to as

‘conventional’ production.

Source: Current thinking

35

China Canada

Shale gas

Other gas

United States

Coalbed methane

Tight gas

For more informationU.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

International Energy Portal | www.eia.gov/beta/international/?src=home-b1


May 25, 2016

http://www.eia.gov/

http://www.eia.gov/aeo

http://www.eia.gov/steo

http://www.eia.gov/ieo

http://www.eia.gov/mer

http://www.eia.gov/todayinenergy

http://www.eia.gov/beta/international/?src=home-b1

oil and natural gas: market outlook and drivers · 2016-06-08 · 2016 intellectual capital...

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