Energizing America: Facts for Addressing Energy Policy Rayola Dougher API Senior Economic Advisor, dougherr@api.org
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 U.S. oil and natural gas production is increasing as a result of technological innovations U.S. Crude Oil Production (millions of barrels per day) U.S. Natural Gas Marketed Production (billions of cubic feet per day) 10 9 8 7 6 5 80 75 70 65 60 55 50 45 40 35 4 30 Note: Bars in red show EIA s Short-term Energy Outlook forecast. Source: Energy Information Administration.
Shale resources are widely dispersed across the U.S.
Trillion cubic feet U.S. shale gas proved reserves increased more than five fold in as many years 140 120 100 80 60 40 20 0 2007 2008 2009 2010 2011 Source: EIA
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Billions cubic feet per day (dry) U.S. shale gas production has increased rapidly in recent years 35 30 25 20 15 10 5 0 Marcellus (PA & WV) Haynesville (LA & TX) Eagle Ford (TX) Fayetteville (AR) Barnett (TX) Woodford (OK) Bakken (ND) Antrim (MI, IN, & OH) Rest of US Source: EIA
The Potential of the Utica Shale Play in Ohio Estimates range from 3.8 tcf to 15.7 tcf gas and1.31 to 5.5 billion barrels of oil according to Ohio Department of Natural Resources. Source: Ohio Department of Natural Resources
Trillion Btu Ohio uses three and a half times more energy than it produces 4500 4000 3500 Consumption Production 3000 2500 2000 1500 1000 500 0 Electricity imports Renewables Nuclear Coal Natural Gas Oil Source: EIA, State Energy Profiles, 2012
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 Ohio s production has fallen sharply in recent years Ohio Crude Oil Production (thousands of barrels per day) 45 40 35 30 25 20 15 10 5 0 Ohio Natural Gas Marketed Production (millions of cubic feet per day) 600 500 400 300 200 100 0 Source: Energy Information Administration.
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Ohio Natural Gas Gross Withdrawals fromshale Gas Million cubic feet 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Source: EIA
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Ohio and Pennsylvania: Natural Gas Gross Withdrawals from Shale Gas Million cubic feet 250000 200000 Pennsylvania 150000 100000 50000 0 Ohio Source: EIA
Shale production is offsetting declining production from other U.S. oil and natural gas resources
Price Index: January 2007 = 1.0 The price of natural gas has fallen relative to crude oil Changes in the price of crude oil and natural gas 3.0 2.5 Crude Oil (WTI) Natural Gas (Henry Hub) 2.0 1.5 1.0 0.5 0.0 Source: EIA
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 Henry Hub $/MMBTU EIA forecasts relatively low natural gas prices for decades Forecast 10 9 8 7 6 5 4 3 2 1 0 Source: EIA
Expenditures on natural gas have fallen sharply (billions $) Residential Commercial Industrial $68.0 $64.4 $51.0 $38.6 $26.8 $34.8 2008 2013 Source: EIA
Industrial production expands in response to competitive advantage of low natural gas prices Industrial production benefits from strong growth in shale gas production Lower natural gas prices lower costs of both raw material and energy Chemical and fertilizer facilities are seeing increased utilization with lower natural gas prices Energy-intensive industry can be more competitive in the global market
More energy can lead to American prosperity American consumers annual savings due to lower gas prices resulting from shale energy development (IHS Global Insight)
Shale development equals more jobs Construction Industry Drilling Industry Chemical Industry Trucking Industry Hospitality Industry Steel Industry
Employment contribution of unconventional oil and gas development in Ohio (number of workers) Industry 2012 2020 2035 Administrative & Support Services 2,616 7,591 13,412 Professional, Scientific, & Technical Services 2,578 10,130 19,553 Food Services & Drinking Places 2,016 7,100 13,581 Fabricated Metal Product Manufacturing 1,976 3,863 6,361 Machinery Manufacturing 1,846 4,126 8,476 Primary Metal Manufacturing 1,596 2,916 4,380 Wholesalers 1,546 4,327 8,032 Management of Companies & Enterprises 1,190 3,419 5,724 Real Estate 1,132 3,630 6,663 Oil and Gas Extraction 1,064 20,789 39,049 Construction 1,009 8,387 17,670 Insurance Carriers & Related Activities 703 2,396 4,505 All Other Industries 19,560 64,923 119,218 State Total 38,830 143,595 266,624 Source: IHS Global, America s New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy, December 2012
Ohio Jobs Supported by Shale Development Direct Jobs Indirect Jobs 120 New Jobs Ken Miller Supply Wooster, Ohio CHK correspondence with company 160 New Jobs 508 Jobs Saved US Steel Lorain, Ohio http://www.cleveland.com/business/index.ssf/2011/02/us_steel_investing_in_lorain_l.ht ml 449 New Jobs 489 Jobs Saved Republic Steel Lorain, Ohio http://www.cleveland.com/business/index.ssf/2011/11/republic_steel_to_add_449_new.ht ml 100 New Jobs BP Warren, Ohio CHK correspondence with company 120 New Jobs TMK IPSCO Brookfield, Ohio http://www.wytv.com/content/news/local/story/brookfield-getting-new-company-new- Jobs/LEcE8PoD3UeQAJABgGhFKQ.cspx 700 New Jobs Baker Hughes Massillon, Ohio http://www.cleveland.com/shalegas/index.ssf/2012/02/baker_huges_to_hire_700_people.html 350 New Jobs 100 Jobs Saved V&M Star Youngstown, Ohio http://www.vindy.com/news/2010/feb/16/vampm-delivers-plant-350-jobssflb/ 300 New Jobs Ariel Corp Mt. Vernon, Ohio http://www.dispatch.com/content/stories/busines s/2013/02/10/well-positioned.html 150 New Jobs Weatherford Youngstown, Ohio http://www.vindy.com/news/2012/may/08/new-jobs-slated-mahoning-valley/ 70 New jobs State of Ohio: Ohio Dept. of Natural Resources (ODNR) Columbus, Ohio http://www.wkbn.com/content/news/local/story/ohio-puts-more-gas-and-oil-inspectors-in-the- Field/Pv3k_rZXskm-N2tnJw9VMA.cspx 500+ New Jobs Chesapeake Energy Louisville, Ohio 100 New Jobs Kelchner Dayton, Ohio CHK correspondence with company 45 New Jobs CESO Dayton, Ohio CHK correspondence with company 300 New Jobs Halliburton Zanesville, Ohio http://www.zanesvilletimesrecorder.com/article/20120429/news01/204290301?gcheck =1&nclick_check=1 145 New Jobs 55 Jobs Saved Tremcar Dover, Ohio http://www.timesreporter.com/opinion/editorials/x1569735116/our-opinion-insidertrading-in-congress-needs-to-stop 250 New Jobs Schlumberger New Philadelphia, Ohio http://www.timesreporter.com/features/x1112928591/strasburg-oil-and-gas-venture-is-biggest-jobsopportunity-in-decade
Oil and natural gas jobs pay well (average annual wages) Oil and natural gas extraction $155,062 Pipeline transportation $129,549 Drilling oil and gas wells Support activities for oil and gas Oil and gas pipeline construction $80,222 $69,193 $92,266 Ohio $43,601 Source: U.S. Quarterly Census of Employment and Wages, 2012.
Shale development equals more government revenue Contributed $74 billion in 2012 and expected to grow to $126 billion by 2020. On cumulative basis, estimated to generate $1.6 trillion in tax revenue between 2012-2025.
Economic impact of unconventional oil and gas development on Ohio 2012 2020 2035 Employment 38,830 143,595 266,624 Value Added (millions $) Federal Taxes State & Local Taxes (millions $) $4,103 $17,960 $35,292 $537 $911 $2,150 $4,594 $4,218 $8,453 Source: IHS Global Insight, America s New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy, December 2012.
Power and Politics
Million barrels per day World crude oil and liquid fuels production growth 1.5 1 0.5 0-0.5-1 2013 2014 2015 OPEC North America Russia and Caspaian Sea Latin America North Sea Other Non-OPEC Source: EIA, Short-term Energy Outlook, April 2014
United States Canada Brazil Kazakhstan Russia Sudan China Oman Colombia Malaysia Other North Sea Vietnam India Gabon Australia Egypt Norway Mexico Azerbaijan Syria United Kingdom (million barrels per day) Non-OPEC crude oil and liquid fuels production growth 3.5 3 2.5 2 1.5 1 0.5 0-0.5 2015 2014 2013 Source: EIA, Short-term Energy Outlook, April 2014
May-2007 Oct-2007 Mar-2008 Aug-2008 Jan-2009 Jun-2009 Nov-2009 Apr-2010 Sep-2010 Feb-2011 Jul-2011 Dec-2011 May-2012 Oct-2012 Mar-2013 Aug-2013 Jan-2014 Crude oil and petroleum product imports have declined as a share of consumption 70% 60% 50% 40% 30% 20% 10% 0% Source: EIA
EIA projects U.S. will be net exporter of natural gas by 2017 Natural gas (quadrillion Btu) 45 40 35 30 25 20 15 10 5 0 2011 2017 2023 2029 2035 2040 Production Consumption Source: EIA, AEO 2014
Seven US facilities have been approved to export LNG, over 20 are awaiting approval and there are more than 60 competing sites planned or under construction in foreign nations Source: API LNG Export Facility Map
LNG exports result in employment and GDP gains Impact (2016-2035 averages)* Key Economic Impacts (relative to zero LNG exports case ICF Base Exports Case (up to ~4 Bcfd) Middle Exports Case (up to ~8 Bcfd) High Exports Case (up to ~16 Bcfd) Employment Change (No.) 73,100-145,100 112,800-230,200 220,100-452,300 GDP Change (2010$ Billion) $15.6 - $22.8 $25.4 - $37.2 $50.3 - $73.6 Henry Hub Price (2010$/Mmbtu) $5.03 $5.30 $5.73 Henry Hub Price Change ($2010$/Mmbtu) $0.32 $0.59 $1.02 *Includes direct, indirect, and induced impacts Source: ICF International, U.S. LNG Exports, November 13, 2013.
87% of federal offshore acreage is off-limits to development
Development of Canadian oil sands would benefit the U.S. economy
Filling America s tank Within 10 years Canada and U.S. can provide all our liquid fuel needs Sources of liquid fuel supply in 2024 24% 10% 13% 53% Oil from Rest of World Biofuels Oil from Canada U.S. Oil Production 10% 18% 72% EIA Forecast Sources: EIA; Wood Mackenzie Potential
U.S. oil and natural gas companies pay their fair share of taxes and are a great source of public revenue Income Tax Expenses as a Share of Net Income Before Income Taxes (2013) 40.2% 25.2% Oil and Natural Gas Companies S&P Industrials Excluding Oil and Natural Gas Companies Source: Compustat North America Database (March 2014 update).
Source: Wood Mackenzie, U.S. Supply Forecasts and Potential Jobs and Economic Impacts, September 7, 2011.
Voters voice strong support for increased domestic oil and natural gas development Harris Poll Results on Increased U.S. Oil and Natural Gas Development 94% 91% 86% 75% 73% 69% 68% Importance of energy security Lead to more jobs Help lower energy costs Support building Keystone XL pipeline Support O&NG development Support offshore development Increasing energy taxes may hurt consumers Source: Harris Interactive telephone poll, November 6, 2012
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