EIA Projections of Oil Production Rates in a New Price Environment For API San Joaquin Chapter March 17, 2015 Bakersfield, CA By Troy Cook U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov
EIA mission: independent statistics and analysis EIA was created by the U.S. Congress in 1977 EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment EIA is the Nation's premier source of energy information and, by law, its data, analyses, and forecasts are independent of approval by any other officer or employee of the U.S. Government EIA does not propose or advocate any policy positions March 17, 2015 2
EIA produces data series, analyses, and energy projections Weekly, monthly, and annual data Displays U.S. and regional production, stocks, blender inputs, imports, and exports Real-time analyses Digests important developments in Today in Energy, This Week in Petroleum, Issues & Trends, Country Analysis Briefs, Drilling Productivity Report Short-Term Energy Outlook (STEO) Forecasts U.S. supplies, demands, imports, stocks, and prices of energy with a horizon of 12 to 24 months Annual Energy Outlook (AEO) Presents 25- to 30-year projection and analysis of U.S. energy supply, demand, and prices International Energy Outlook (IEO) Assesses international energy production and consumption March 17, 2015 3
International Price March 17, 2015 4
Brent crude oil prices were relatively stable through the first half of 2014; increased oil supply and lower global economic growth expectations lowered prices from July 2014 to January 2015 dollars per barrel 120 110 100 90 80 Stable demand and supply outlooks Potential disruption in Russian oil/gas exports Lowered risk of oil supply outages in Iraq Lowered global economic growth expectations for 2014 and 2015 Potential disruption in Iraq oil production Higher, sustained Libyan oil production 70 60 50 Brent front month futures price Increased U.S. production and uncertainty over OPEC future production quotas November OPEC meeting resulted in no production quota changes 40 Jan-2014 Apr-2014 Jul-2014 Oct-2014 Jan-2015 Source: EIA, Bloomberg March 17, 2015 5
API - San Joaquin Basin Chapter Bakersfield California March 17, 2015 6
Oil prices rise from mid-2015 through mid-2016 in EIA s forecast however, the market-implied confidence band is very wide WTI price dollars per barrel 150 2015 2016 WTI $52 $70 Brent $60 $75 125 100 75 50 25 0 Historical Spot Price STEO Forecast NYMEX Futures Price Current 95% NYMEX futures price confidence interval Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct 2013 2014 2015 2016 Source: EIA, Short-Term Energy Outlook, March 2015 March 17, 2015 7
International Supply March 17, 2015 8
Inventory builds contribute to crude oil prices that are lower in 2015 than 2014; however, EIA expects prices to rise in 2016 as inventories level off World liquid fuels production and consumption balance million barrels per day 96 94 92 90 Implied stock change and balance (right axis) World production (left axis) World consumption (left axis) annual change million barrels per day 6 5 4 3 88 86 84 82 80 78 2010-Q1 2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1 2 1 0-1 -2-3 Source: EIA, Short-Term Energy Outlook, March 2015 March 17, 2015 9
Various events could lead to changes in global supply or demand that could push future crude oil prices higher or lower than the STEO forecast ISIL disrupts Iraqi exports Event Increase Prices Iranian sanctions are tightened Social unrest in oil-dependent countries leads to supply disruptions OPEC cuts output more than projected World economic growth is lower than projected (e.g., China) Decrease Prices OPEC keeps production at 2015 levels in 2016 Reduction in unplanned production outages Iranian sanctions are lifted March 17, 2015 10
Domestic Supply March 17, 2015 11
North American oil production growth slows with lower oil prices but remains the main driver of global production growth World crude oil and liquid fuels production growth million barrels per day 2.0 1.5 Forecast 1.0 0.5 0.0-0.5 2014 2015 2016 OPEC countries North America Russia and Caspian Sea Latin America North Sea Other Non-OPEC Source: EIA, Short-Term Energy Outlook, March 2015 March 17, 2015 12
Shale gas and tight oil plays March 17, 2015 13
Estimated U.S. tight oil production was 4.6 MMbbl/d in January 2015 about 49% of total U.S. oil production (9.1 MMbbl/d) Tight oil production million barrels of oil per day Tight oil production as a percent of total oil production 9 8 7 6 5 4 3 2 1 Rest of U.S. Oil Production Eagle Ford (TX) Bakken (MT & ND) Spraberry (TX & NM Permian) Bonespring (TX & NM Permian) Wolfcamp (TX & NM Permian) Delaware (TX & NM Permian) Yeso-Glorieta (TX & NM Permian) Niobrara-Codell (CO, WY) Haynesville Utica (OH, PA & WV) Marcellus Woodford (OK) Granite Wash (OK & TX) Austin Chalk (LA & TX) Monterey (CA) Tight oil % of total 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 2000 2002 2004 2006 2008 2010 2012 2014 0% Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through December 2014 and represent EIA s official tight oil estimates, but are not survey data. State abbreviations indicate primary state(s). March 17, 2015 14
Growing tight oil and offshore crude oil production drive U.S. output close to historical high U.S. crude oil production million barrels per day 10 History 2012 Projections 8 U.S. maximum production level of 9.6 million barrels per day in 1970 6 Tight oil 4 2 Lower 48 offshore Alaska Other lower 48 onshore 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 Source: EIA, Annual Energy Outlook 2014 Early Release March 17, 2015 15
U.S. crude oil production is expected to increase 700,000 bbl/d in 2015 and 140,000 in 2016; if prices do not recover to the mid- $70s by mid-2016 as forecast by EIA, production would be lower U.S. crude oil and liquid fuels production million barrels per day 15 annual change million barrels per day 1.6 14 13 12 11 10 9 8 7 6 2013 Crude oil (right axis) 2014 2015 2016 Natural gas plant liquids (right axis) Fuel ethanol (right axis) Biodiesel (right axis) Total production (left axis) Production forecast (left axis) 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0-0.2 Source: EIA, Short-Term Energy Outlook, March 2015 March 17, 2015 16
Lower-48 production in 4Q2015 and 1Q2016 is only slightly above its 4Q2014 level; offshore production continues to grow U.S. crude oil production growth by area cumulative growth compared with 4Q14 0.7 0.6 0.5 0.4 Alaska Federal Gulf of Mexico Lower 48 Total U.S. Production 0.3 0.2 0.1 0-0.1-0.2 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016 Source: EIA, Short-Term Energy Outlook, March 2015 March 17, 2015 17
Rigs drilling for oil will decrease, but a backlog of oil wells awaiting completion will add to oil production US oil production million barrels per day rig count L48 production vintages 10 2,500 2016Q4 9 8 7 2,000 2016Q3 2016Q2 2016Q1 2015Q4 6 5 4 3 2 1 0 1,500 1,000 500 0 2015Q3 2015Q2 2015Q1 2014Q4 2014Q3 2014Q2 2014Q1 Pre-2014 federal GOM Alaska Rig Count (RHS) Source: EIA, Short-Term Energy Outlook, January 2015 March 17, 2015 18
California Supply March 17, 2015 19
References US Oil Production Oil Inventory Crude Stock Projections California Field Production - Crude Oil March 17, 2015 20
Monterey oil production includes comingled conventional oil tight oil production thousand barrels of oil per day 80 70 60 50 40 30 20 10 0 2000 2002 2004 2006 2008 2010 2012 2014 Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through April 2014 and represent EIA s official tight oil estimates, but are not survey data. March 17, 2015 21
West Coast Region and Monterey Shale oil production is not growing Crude oil production million barrels per day 0.8 0.7 0.6 West Coast History West Coast Projection Monterey History Monterey AEO 2014 Projection Monterey AEO 2013 Projection 0.5 0.4 0.3 0.2 0.1 0.0 2000 2005 2010 2015 2020 2025 2030 2035 2040 Source: EIA website, West Coast Region, and AEO 2013 and 2014 Projections from Reference Case March 17, 2015 22
So where does California potential reside? Mature Monterey source rock is relatively small in size, but certainly has been wildly prolific in migration into reservoir rock (including immature Monterey) Well level results in mature source rock to date have not been promising, but this doesn t discount changes in price or technology unlocking some amount of oil resource California has already proven to be wildly prolific in reserve growth in existing conventional fields March 17, 2015 23
Field growth magnitudes, Midway-Sunset Source: Tennyson, M.E.,Growth History of Oil Reserves in Major California Oil Fields During the Twentieth Century, Chapter H of U.S. Geological Survey Bulletin 2172-H, Geologic, Engineering and Assessment Studies in Reserve Growth, Figure 3A March 17, 2015 24
Source: USGS Factsheet 2012-3050 Mean=6.478 Billion Barrels March 17, 2015 25
For more information U.S. Energy Information Administration home page www.eia.gov Short-Term Energy Outlook www.eia.gov/steo Annual Energy Outlook www.eia.gov/aeo International Energy Outlook www.eia.gov/ieo Monthly Energy Review www.eia.gov/mer State Energy Portal www.eia.gov/state Today in Energy www.eia.gov/todayinenergy Drilling Productivity Report http://www.eia.gov/petroleum/drilling March 17, 2015 26