US Oil and Natural Gas Perspective

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1 Presentation to the WEC-Mexican Committee 31 January 2018 US Oil and Natural Gas Perspective Guy Caruso Senior Advisor 1

2 Source: EIA 2

3 US Perspective: from Resource Scarcity to. - US is heading towards 90% Energy Self-Sufficiency But Still Part of a Global Market - Demand Growth Shift To Asia - New Emerging Players but Old Institutions - US Policies Based on Resource Scarcity and Rising Demand Being Revisited - Environmental Issues Uncertain Under Trump - Renewables Likely to Slow Growth

4 Net energy imports on BTU basis near 20-year low Source: EIA 4

5 U.S. shale gas resources are widespread but production is concentrated in key plays 5

6 95% of recent US oil/gas production increases from 7 basins U.S. tight oil production million barrels of oil per day U.S. dry shale gas production billion cubic feet per day Source: EIA 6

7 95% of recent US oil/gas production increases from 7 basins Source: EIA 7

8 95% of recent US oil/gas production increases from 7 basins Source: EIA 8

9 Source: RBN Energy 9

10 Rig counts and price are related Source: Platts 10

11 Brent Crude Monthly Average Spot Price USD/bbl Center for Strategic and International Studies Energy and National Security Program Source: Adapted from EIA data (January 2018) 11

12 USD/bbl Brent and WTI Crude Daily Average Spot Price May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 WTI Brent Center for Strategic and International Studies Energy and National Security Program Source: Adapted from EIA data (January 2018) 12

13 Wide confidence interval of WTI crude oil price from options market data West Texas Intermediate (WTI) crude oil price USD/bbl Source: EIA, Short-Term Outlook, January

14 U.S. crude oil, refined products, NGL exports continue to grow Thousands of barrels per day Petroleum Product Exports Crude Oil Exports Natural Gas Liquids Exports Center for Strategic and International Studies Energy and National Security Program Source: Adapted from EIA data (January 2018) 14

15 2016 U.S. Crude Oil Exports Center for Strategic and International Studies Energy and National Security Program Source: Created using data from EIA 15

16 2016 U.S. Product Exports Center for Strategic and International Studies Energy and National Security Program Source: Created using data from EIA 16

17 U.S. Natural Gas Exports and Imports Center for Strategic and International Studies Energy and National Security Program Source: Adapted from U.S. Energy Information Administration data (October 2017). 17

18 3,256 kb/d 2.9 tcf Gross North America Energy Flows by Commodity, kb/d 68.5 twh 0.77 tcf 301 kb/d 564 kb/d 8.7 twh tcf Natural Gas 879 kb/d 0.4 twh 582 kb/d 87 kb/d Crude Oil Petroleum Products Electricity (2015) 7.3 twh Center for Strategic and International Studies Energy and National Security Program Source: Adapted from Energy Information Administration Data (July 2017)

19 The America First Energy Plan: Energy Dominance Recognize integral role energy plays in American life and the global economy Maximize the use of domestic energy resources and lower energy costs Eliminate burdensome and intrusive regulations and policies Deploy revenues from energy production to rebuild America s infrastructure Energy Dominance as a strategic economic and foreign policy goal Government should not pick winners and losers; pursue all forms of energy Energy development linked to environmental stewardship but framed in terms of protecting clean air, water and habitats not climate change 19

20 Benefits & Challenges of Low Oil Prices Obvious benefit lower prices for consumers and the economy, improved profitability for refiners, and gas replaced coal (climate), but Downside has been a loss of production, jobs, and new investment which eventually means lower output, increased import reliance, and higher prices Globally, lower oil prices have strained producer nations budgets, helped eliminate subsidies but challenge outlays and stability Impacts have been uneven and demand growth may lead to new supplier-purchaser alignments Climate change policies undergoing major change 20

21 SUMMING UP US Oil and Gas resurgence has been based on improved technology. Cost cutting has enabled US producers to be resilient in a lower price market. Rebalancing of the crude oil market underway. Large inventory overhang is being worked off putting upward pressure on price Iran, Iraq and Libya expected to add significant new supplies to the market during the next months making OPEC attempts to restrain supply more difficult. Crude oil production will increase gradually under the current higher price environment. Demand weakness in China and other emerging economies slows the upside potential for price increases. 21

22 Price Outlook US WTI expected in 2018 to average$60-$65 /barrel. Mid to Longer-term (3-10 years) crude oil prices likely to trend toward $70-80/barrel assuming US light tight oil productivity increases steadily. 22

23 For more information on CSIS The CSIS Energy and National Security Program is a recognized and respected leader in understanding the shifting global and domestic energy landscape Analyzing and explaining the intersection of policy, market, and technological developments Collaborating with government, industry, academia and nonprofits leaders Assisting decision makers to craft smart energy policies that balance economic, environmental, and security priorities Guy Caruso Senior Advisor, energy and National Security Program Center for Strategic and International Studies 1616 Rhode Island Avenue NW Washington, DC