The EIA has published the Early Release Report of its Annual Energy Outlook 2014 (AEO2014). The projections are based on the assumption that current laws and regulations remain generally unchanged throughout the projection period, including restrictions on crude exports.
The AEO2014 reference case sees US crude production rising from 6.5mmbb/d (or 13.9 quadrillion BTUs) in 2012 to 9.6mmb/d (or 20.5 quadrillion BTUs) in 2019, a 22% uplift from the previous year’s projections. Crude production is expected to level off and then slowly decline after 2020 (Figure 1). By 2040, US crude production is expected to have slid to 7.5mmb/d (or 16.0 quadrillion BTUs), similar to current levels of production.
The growth in domestic production means that the need for fuel imports drops sharply. Net use of imported energy sources, which reached 30% on total consumption in 2005, is forecast to drop from 16% of total consumption in 2012 to just 4% in 2040.
Natural gas production is seen to grow 56% between 2012 and 2040, when production is forecast to exceed 1,000 bcm (37.6 tcf). As a result of the rise in production, LNG and pipeline exports are expected to grow sharply (Figure 2). LNG exports are forecast to plateau at 100 bcm (3.5 tcf) in 2029, remaining at that level through to 2040. The EIA sees the US becoming a net exporter of LNG from 2016.
US gas prices are expected to remain low in the medium term. The EIA sees the Henry Hub spot natural gas price rising from USD 3.7/mmbtu YTD to USD 4.8/mmbtu in 2018 before settling around USD 4.4/mmbtu in 2020. Thereafter, increased domestic consumption and gas exports lead to US gas prices rising above USD 7.5/mmbtu. Such low gas prices are expected to continue to boost gas-intensive industries, with the EIA estimating industrial shipments growing at 3.0% p.a. annual rate over the first 10 years of the projection before slowing down.
Natural gas consumption for power generation is expected to continue to rise, overtaking coal for the largest share of the market by around 2040.
The GDP growth forecasts in the EIA report compare favourably with those in ExxonMobil’s recent Outlook for Energy (see Morning Comment of 17 December), though we note that the EIA is forecasting considerably greater energy demand than ExxonMobil for 2025 (+10%) and 2040 (+21%). The difference could result from ExxonMobil’s underlying assumption of more stringent climate change policies. ExxonMobil includes an implied cost of CO2 emissions which, for most OECD nations, approaches USD 80/t in 2040. Presumably, that would spur on a significantly stronger drive for energy efficiency than the EIA’s business-as-usual scenario.