The US will “dramatically” reduce its oil import dependency between now and 2035, with imports declining from 49% today to 36%, Energy Information Administration Acting Administrator Howard Gruenspecht said Monday in Washington, DC.
In 2005-6, imports reached their record, 60% of US consumption.
Presenting EIA’s preliminary update of its Annual Energy Outlook for 2012, Gruenspecht said the declining trend will be abetted by new domestic production, primarily in the Gulf of Mexico and shales, and by decreasing consumption from tighter vehicle efficiency standards and increased use of petroleum substitutes like biofuels and natural gas liquids.
And none too soon: EIA projects the average barrel of oil will cost $230 in 2035 dollars – in constant dollars, that’s nearly 50% more than today. The price rise will come as world oil demand in emerging economies continues to rise, increasing from 87.1 million barrels a da(b/d) in 2010 to 109.7 million b/d in 2035, EIA – part of the Department of Energy – forecasts.
Slashing Shale Estimates
For natural gas, EIA scaled back a controversial estimate it used in the 2011 AEO for technically recoverable resources of “unproved shale gas,” from 827 trillion cubic feet to 482 Tcf.
Gruenspecht said the change came in response to a decennial update by the US Geological Survey, with the reduction mainly in estimates for the Marcellus Shale, from 410 Tcf to 141 Tcf. EIA was criticized by shale gas opponents for adopting the higher figure last year.
Gruenspecht cautioned the estimates are all uncertain and subject to continuous updating as more is learned about shales, but said overall there’s enough gas that it’s not a major factor in the trends to 2035, the window the AEO looks at. EIA estimates that by 2035 just under half of US natural gas will come from shales, from 23% now, with a 10% increase in gas consumption driven by continuing low prices and reductions in drilling costs.
EIA expects the shales to be sufficiently productive that after 2020 the US will become a net gas exporter, as producers seek higher prices abroad.
EIA reduced its estimate of US gas prices over the entire forecast period, given the last several years’ persistent low prices in the face of unexpectedly productive shale wells. The forecast sees the average US price staying below $5 per mmBtu until after 2020 and not reaching $7 (in 2010 dollars) until the 2030s. Gas has recently been trading at $2.50/mmBtu.
Renewables To Power More As Demand Growth Resumes
Electricity consumption will grow at an average 0.8% annually, or 23% for the period, Gruenspecht said, with non-hydro renewables more than doubling in the period, led by wind and biomass. However, renewables and hydro together will still account for only 16% of US electricity, up from 10% today.
He said coal’s share of generation will drop from 45% today to 39%, but that won’t be much change in coal actually used because of the increased total electricity. Coal will still be the largest single contributor to generation.
Gruenspecht said EIA foresees about 33 gigawatts of old coal capacity being retired in the period, independent of the Environmental Protection Agency’s new Mercury & Air Toxics Standards. He said analysts will factor in that new law before finalizing the AEO this spring.
But, he said, retirements are rarely due to a single factor, and reflect a combination of issues like coal prices rising as natural gas prices drop, state renewable portfolio standards, and federal clean air rules.
Asked about the impact of the administration’s denial of the Keystone XL pipeline, Gruenspecht said EIA does not model at the level of individual pipelines. But he said given the high price of oil, producers will find ways – in fact, are finding ways – to get more oil to market, including repurposing existing pipelines and shipping by rail.
Overall, efficiency of energy usage is projected to increase, reducing energy consumed per capita and per unit of GDP. Gruenspecht said that means energy-related carbon emissions will stay below the 6 billion metric tons emitted in 2005, the current record. Emissions dropped dramatically with the recession, but even with economic recovery, EIA expects them to reach only 5.55 billion metric tons in 2020 and 5.81 billion metric tons in 2035.
Photo Caption: Oil products being offloaded from a tanker.