Posted April 11, 2014
Earlier this week the U.S. Energy Information Administration (EIA) blew back a lot of folks’ hair with the high oil-production scenario in its 2014 Annual Energy Outlook – projecting for the first time ever that the net import share of U.S. petroleum and other liquids could reach zero. By 2037. That’s amazing considering that less than a decade ago the import share was nearly 60 percent.
Next from EIA: New data on growing U.S. crude oil and lease condensate reserves – more evidence of the ongoing U.S. energy revolution. Note the near-vertical tail in EIA’s chart below, showing the surge in U.S. proved reserves 2008-2012:
U.S. crude oil proved reserves rose for the fourth consecutive year in 2012, increasing by 15% to 33 billion barrels, according to the U.S. Crude Oil and Natural Gas Proved Reserves (2012) report released April 10 by the U.S. Energy Information Administration. U.S. crude oil and lease condensate proved reserves were the highest since 1976, and the 2012 increase of 4.5 billion barrels was the largest annual increase since 1970, when 10 billion barrels of Alaskan crude oil were added to U.S. proved reserves. Contributing factors to higher crude oil reserves include increased exploration for liquid hydrocarbons, improved technology for developing tight oil plays, and sustained high historical crude oil prices.
According to EIA, proved reserves are volumes of oil that engineering data indicate can reasonably be recovered from known reservoirs, given existing economic and operating conditions. In other words, reserves that likely could be developed. The fact that the red line on EIA’s chart turns sharply north reflects the game-changing trajectory of U.S. oil and natural gas development. Through advanced hydraulic fracturing and horizontal drilling, we’re gaining more and more access to America’s vast reserves of oil and natural gas found in shale and other tight-rock formations. The accessibility of these reserves no doubt is part of the reason why the high oil-production scenario in EIA’s 2014 outlook shows production reaching 13.22 million barrels per day in 2040. If realized, that would bring the U.S. to net zero imports. Put another way: U.S. energy self-sufficiency.
Not so fast, writes Brad Plumer at Vox. In this post, Plumer characterizes EIA’s high-production scenario as “wild-eyed”:
In this future, US companies extract an enormous amount of oil and gas in the coming decades — so much so that the United States is producing enough to satisfy its own needs by 2037. (Some private forecasters, such as Citigroup, have made similar predictions.) But how likely is this? As the EIA explains at length … you need to lay on a whole bunch of assumptions to get to zero net imports. Oil prices would have to stay high enough that companies find it profitable to seek out difficult deposits. Offshore fields in the Gulf Coast and elsewhere would need to have more recoverable oil than forecasters currently think — and these areas still haven't been explored very thoroughly. Drilling technology would also need to continue to improve, with companies able to pack more wells closer together in oil and gas fields.
While Plumer is correct that EIA’s high-production case is based on certain assumptions, “wild-eyed” might be a little bit skeptical considering the size and speed with which shale development reversed America’s energy narrative. Just how big and fast is seen in EIA’s new retrospective report that compares its past energy projections with actual production. Check the comparisons of actual domestic crude output (Table 5) and natural gas (Table 9). As the shale revolution began to take shape, the production projections simply didn’t see it coming.
To be fair, it wasn’t just EIA. The shale revolution surprised other forecasters as well, including some in industry. It was a ginormous energy wave that caught just about everyone by surprise. Against that backdrop, EIA’s new high-production scenario is hardly wild-eyed.
What we know is that thanks to technology, innovation and market demand, oil and natural gas companies are finding more reserves that are economical to develop. Yes, offshore areas in the Gulf, the mid-Atlantic and other places on the outer continental shelf should be opened for exploration, leasing and development. We will need continued improvements in technology. But again, given recent history, it looks like a bad bet to say that innovation won’t happen.
The United States is at the beginning of an era of energy abundance – especially relative to where we were just a decade ago, when the storyline was energy scarcity and limited choices. This new era can be one of opportunity to reach energy security, self-sufficiency and new influence in the world as an energy superpower. Deputy Energy Secretary Daniel Poneman, at an event this week hosted by CSIS (reported by The Hill):
“In our own case, the all-of-the-above strategy, with incredible, prodigious outcomes for oil and gas in recent years that we have witnessed, have really quite transformed our own energy security. And by the way, to the benefit of countries around the world. … We have seen that, in terms of the United States, our security has been very much enhanced by the diversification of our supplies. It brings us not only security benefits and the reduced vulnerability that our own production has permitted, but … it has brought serious security benefits to our allies and trading partners as well.”
And along the way, domestic job creation, economic growth and greater prosperity. America’s energy, America’s choice.
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.