The People of America's Oil and Natural Gas Indusry

U.S. Energy Self-Sufficiency Comes Into View

Mark Green

Mark Green
Posted April 7, 2014

Take a good look at the chart below – brand-new from the U.S. Energy Information Administration (EIA). The green line disappearing into the horizontal axis between the years 2030 and 2040 is what U.S. energy self-sufficiency looks like:

net_imports

This is a big, big deal – a goal of every U.S. president since Richard Nixon more than 40 years ago: the point where domestic production exceeds imports, which EIA never included in any of its projections. Until now.

Because of surging tight-oil production – oil from shale and other tight-rock formations, developed with advanced hydraulic fracturing and horizontal drilling – the agency is including in its 2014 Annual Energy Outlook a high-production scenario under which net imports would reach near-zero between 2030 and 2040.

Under such a scenario U.S. crude production would reach 8.92 million barrels per day (mbd) this year, 9.84 mbd next year – topping the all-time output mark of 9.6 mbd set in 1970 – and 10.31 mbd in 2016. It keeps going up from there: 11.41 mbd in 2020, 12.51 mbd in 2025, 12.85 mbd in 2030, 13.11 mbd in 2035 and 13.22 mbd in 2040. EIA’s chart:

high_production_scenario

Meanwhile, the net import share of U.S. petroleum and other liquids consumption would shrink under the scenario, from 32.8 percent last year to 15.66 percent in 2020, 5.48 percent in 2030 and -0.44 percent in 2040. Those numbers are graphed in the chart we led off with above.

So, how do we get there? What will it take for EIA’s “best case” scenario to come true in terms of oil and natural gas development? A number of things:  access to additional energy reserves onshore and offshore, particularly in Alaska (though EIA didn’t include production from the Arctic National Wildlife Refuge in its scenario); long-term technology improvements and more. EIA:

The High Oil and Gas Resource case assumes a broad-based future increase in crude oil and natural gas resources, not limited to production of oil and natural gas in tight sands and shales. However, optimism about increased supply has been buoyed by recent advances in the production of crude oil and natural gas from tight and shale formations. With the adjusted resource and technology advance assumptions in the High Oil and Gas Resource case, domestic crude oil production continues to increase to more than 13 MMbbl/d before 2035.

EIA goes on to explain the difference between its high-case projection and its reference or base projection:

In the High Oil and Gas Resource case, higher well productivity reduces development and production costs per unit, which results in more and earlier development of tight oil resources than in the Reference case. The greater abundance of tight oil resources in the High Oil and Gas Resource case causes tight oil production to peak later in the projections, at 8.5 MMbbl/d in 2035, compared to the Reference case peak production rate of 4.8 MMbbl/d in 2021. From 2012 through 2040, cumulative tight oil production in the High Oil and Gas Resource case amounts to 75 billion barrels, compared with 44 billion barrels in the Reference case.

Worth noting is the way technology is improving efficiency and overall productivity. The shale energy revolution is built on technological advances that have dramatically expanded the size of U.S. reserves from a practical standpoint. In other words, because of advanced fracking, more oil and natural gas is accessible from shale and other tight-rock reserves. As a result, the revolution is rewriting government projections and production curves. For example, this EIA chart compares last year’s projection for oil production in Texas’ Eagle Ford shale play (light blue) with its 2014 projection (dark blue):

eagle_ford

One more EIA projection. Under its high-production scenario, EIA estimates impact on the global market for crude:

As a result of higher levels of U.S. crude oil production in the High Oil and Gas Resource case, North Sea Brent crude oil prices are lower than in the Reference case: $125 per barrel (2012 dollars) in 2040, compared with $141 per barrel in 2040 in the Reference case.

In short, increased U.S. domestic crude production will increase global supply, putting downward pressure on the cost of crude.

This energy dream is just a fantasy without the right policies in place: increased access to domestic reserves, including the outer continental shelf, and access to open markets. That means allowing U.S. energy to reach the global marketplace, which analysis shows will help spur domestic production, create jobs and stimulate broader economic growth.

EIA’s high-resource case scenario is just that, a scenario. But it’s one that couldn’t have been imagined even a decade ago. Thanks to vast shale reserves, unlocked by advanced fracking, other technology and investments by U.S. energy companies, U.S. energy abundance leading to self-sufficiency not only is imaginable, it’s reasonably possible. The energy is ours. The choice is ours.  

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.