The U.S. Energy Information Administration (EIA) offered a preview of its 2014 Annual Energy Outlook that will come out next spring, and the second slide in Administrator Adam Sieminski’s presentation is an attention grabber, charting how expanding domestic oil production will reach historic levels in 2016 – 9.6 million barrels per day, a mark set in 1970:
It’s hard to overstate the impact of that projection. As Sieminski’s chart clearly shows, the United States has reversed energy course in less than five years – from production decline and rising imports to relative abundance and shrinking imports. EIA:
Higher production volumes result mainly from increased onshore oil production, predominantly from tight (very-low-permeability) formations. Offshore crude oil provides a steady supply of domestic crude oil production, ranging between 1.6 and 2.0 MMbbl/d from 2015 through 2040, as the pace of development activity quickens and new, large development projects, predominantly in the deepwater and ultra-deepwater portions of the Gulf of Mexico, are brought into production.
The faster growth of tight oil production through 2020 in the AEO2014 Reference case results in higher domestic crude oil production than in AEO2013 throughout the projection. The pace of oil-directed drilling in the near term is much stronger than in AEO2013, as producers locate and target the sweet spots of plays currently under development and find additional tight formations that can be developed with the latest technologies.
We’ll fill in the narrative. Thanks to advances in hydraulic fracturing and horizontal drilling, the United States is unlocking vast oil and natural gas reserves found in shale and other tight rock formations. As Sieminski often acknowledges, the combination of natural reserves, innovation and technology has made energy prognostication a pretty tricky business. (Earlier this year he basically said that with the advent of the shale revolution, energy forecasts exist to make astrology look good.)
Yet, the real-world impacts are tangible: the approach of 9.6 million barrels per day in oil production and skyrocketing natural gas output. On natural gas, Sieminski said production in the Marcellus shale play is nearing 13 billion cubic feet (bcf) per day – compared to just 2 bcf/day in 2010. Sieminski:
“On shale gas … we don’t see any peaking at all in the ability of industry in the United States to produce shale gases. We’re seeing expansion in tight gas production as well as shale gas production. By 2040 we’ll be over 100 billion cubic feet per day of natural gas production. … Shale gas alone … will be half of U.S. natural gas production. This is a remarkable development.”
Two more charts that show impacts of America’s energy revolution. First, EIA shows that the growth in U.S. energy production is outstripping energy use, resulting in a reduction in net imports. Where the gap between domestic production and consumption was 16 percent in 2012, EIA sees a narrowing to single digits over the next couple of decades, reaching just 3 percent in 2035:
Now a second chart, this one showing the amazing change in U.S. dependence on imported liquids. In 2005, the gap between domestic liquids supply and consumption was 60 percent – with imports making up the difference. That shrank to 40 percent last year, and EIA projects the gap will close to 25 percent in 2016:
The turnaround is remarkable – but it’s not a mystery. Innovation, technology, investment, risk-taking and resource opportunities, largely on private and state lands, launched this revolution. America is gaining more control over its energy future and in the process is becoming more energy secure.
The importance of robust domestic oil and natural gas production is seen in one last chart, EIA’s projections for energy use by source out to 2040. Because of their availability, reliability and desirability as fuels, oil and natural gas will continue to be America’s leading energies for the foreseeable future, together supplying 62 percent of the energy we need for our economy and modern lifestyles.
This is why the United States continues to need pro-energy development policies that provide increased access to oil and natural gas reserves, common-sense regulation and an overall approach that encourages future energy investment.