Power & Politics Navigating the Changing Vision of Our Energy Future Rayola Dougher, API Senior Economic Advisor, [email protected]
Power & PoliticsNavigating the Changing Vision of Our Energy Future
Rayola Dougher, API Senior Economic Advisor, [email protected]
U.S. Crude Oil Production(millions of barrels per day)
4
5
6
7
8
9
10
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
U.S. Natural Gas Marketed Production (billions of cubic feet per day)
30
35
40
45
50
55
60
65
70
75
80
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
U.S. oil and natural gas production is increasingas a result of technological innovations
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.
Shale production is offsetting declining production from other U.S. oil and natural gas resources
0
1
2
3
4
5
6
7
8
9
10
1990 2000 2010 2020 2030 2040
Alaska
Lower 48 Offshore
Lower 48 Onshore Conventional
Tight Oil
0
5
10
15
20
25
30
35
40
1990 2000 2010 2020 2030 2040
Tight Gas
Coalbed methane
Shale Gas
Lower 48OnshoreConventional
Lower 48 OffshoreAlaska
U.S. Crude Oil Production by Source(millions of barrels per day)
U.S. Natural Gas Production by Source(trillion cubic feet per year)
Source: EIA, Annual Energy Outlook 2014
0
20
40
60
80
100
120
1974
1980
1986
1992
1998
2004
2010
2016
2022
2028
2034
2040
HydroRenewablesNuclearCoalNatural GasOil
8.1%
30.4%
17.6%
9.1%2.7%
36.5%43.8%
27.6%25.9%
18.2%19.7%
8.5%
The U.S. will require 12 percent more energy in 2040 and more than 60 percent of it will be met by oil and natural gas
Source: EIA
Qua
drilli
on B
TU
31.9%
2012
2.8%6.0%
1974
3.3%3.7%3.5%
2040
4,000
4,500
5,000
5,500
6,000
6,500
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020
2024
2028
2032
2036
2040
The EIA projects U.S. energy-related CO2 emissions will be lower in 2040 than when they peaked in 2007
(Mill
ion
met
ric to
ns o
f car
bon
diox
ide)
Source: EIA
50
55
60
65
70
125
130
135
140
145
150
155
160
1990 2005 2008 2009 2010 2011 2012
Natural gas production Methane emissions
Source: EPA and EIA
Methane emissions are falling even as natural gas production is increasing
Bill
ions
of c
ubic
feet
per
day
U.S
. Ch4
Em
issi
ons
from
Nat
ural
Gas
Sys
tem
s (T
erag
ram
sof
CO
2 eq
uiva
lent
)
0.0
0.5
1.0
1.5
2.0
2.5
3.0Crude Oil (WTI) Natural Gas (Henry Hub)
The price of natural gas has fallen relative to crude oil
Pric
e In
dex:
Jan
uary
200
7 =
1.0
Source: EIA
Changes in the price of crude oil and natural gas
1.3%
0.4%
1.0%
1.2%
1.2%
1.4%
1.5%
1.5%
1.7%
2.2%
3.5%
3.3%
5.8%
3.5%
6.9%
3.2%
4.1%
7.1%
6.0%
6.7%
3.9%
4.0%
6.5%
4.1%
7.7%
4.8%
4.6%
9.5%
8.1%
7.4%
Total Manufacturing
Machinery
Petroleum & Coal
Nonmetallic Mineral
Agricultural Chemical
Fabricated Metal
Plastics and Rubber
Basic Organic Chemicals
Resins & Synthetic Material
Iron & Steel
2012 2020 2025
Shale energy revolution has pronounced impact on energy-intensive industries
Source: IHS Global, “America’s New Energy Future, Volume 3: A Manufacturing Renaissance.”
Percent Increase to Industrial Production Indices due to the Unconventional Activity Value Chain
American consumers’ annual savings due to lower gas prices resulting from shale energy development
(IHS Global Insight)
More energy can lead to American prosperity
Construction Industry Drilling Industry Chemical Industry
Trucking Industry Hospitality Industry Steel Industry
Oil and natural gas development equals more jobs
$49,700
$72,667
$81,696
$94,115
$116,425
$154,317
U.S. average
Oil and gas pipelineconstruction
Support activities for oil andgas
Drilling oil and gas wells
Pipeline transportation
Oil and natural gas extraction
Oil and natural gas jobs pay well(average annual wages)
Source: U.S. Quarterly Census of Employment and Wages, 2013.
$74 billion in 2012
$126 billion by 2020
$1.6 trillion 2012-2025
Shale development equals more government revenue
Source: IHS Global Insight, August 2013
13
98
43
2 2 2 21 1 1
There are 48 federal agency activities relating to upstream oil and natural gas operations
Source: API
45
3328
2218 18 16
117
3 1
There are 202 hydraulic fracturing bills/regulations under consideration in 34 API states this year
Source: API
Where the money is going
$0
$50
$100
$150
$200
$250
$300
$350
$400
*PlannedSource: Oil & Gas Journal, various issues.
The oil and natural gas industry has invested over $3 trillion in U.S. capital projects since 2000
Billions $
2014 Million $
% Change 2014-2013
2013million $
% Change 2013-2012
2012 Million $
Exploration-productionDrilling-explorationProductionOCS lease bonus
Subtotal
250,20247,5381,600
299,340
9.39.3
23.19.3
228,94843,5001,300
273,748
-4.3-4.3
-28.4-4.4
239,20545,4491,815
286,469
OtherRefining and marketingPetrochemicalsCrude and product pipelinesNatural gas pipelinesOther transportationMiscellaneous
Subtotal
12,9005,6009,2073,6602,7504,800
38,917
0.851.0
-41.7-60.152.84.3
-18.7
12,8003,709
15,8049,1691,8004,600
47,882
-1.554.5
421.9158.050.09.5
74.9
13,0002,4003,0283,5541,2004,200
27,382
TOTAL 338,257 5.2 321,630 2.5 313,851
Source: Oil & Gas Journal, March 4, 2014
Where the funds will go for US projects
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Natural Gas Rail & Marine Crude Oil Refineries Common Infrastructure
Cumulative spending on oil and natural gasinfrastructure to reach $890 billion over next eleven years
Source: IHS Global Inc, “Oil & Natural Gas Transportation & Storage Infrastructure,” December 2013.
(2012 dollars)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
0
50
100
150
200
250
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Operable Capacity* Number of Refineries
U.S. refining capacity continues to expand even as the number of refineries contracts
*Operable as of January 1st of each year.Source: EIA
-5000
-4000
-3000
-2000
-1000
0
1000
2000
3000
4000
For the first time since 1949, the U.S. became a net exporter of petroleum products in 2011
Source: EIA
(thou
sand
s of
bar
rels
per
day
)
Expanding alternative fuels for transportation: current laws
NERA predicts the cost of manufacturing gasoline could be 30% great AND the cost for diesel 300% greater by 2015.
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
Crude Oil $2.17 Gasoline $3.32 Diesel $3.73
Changes in gasoline and diesel prices mirror changes in crude oil prices
Average prices as of October 2, 2014
Sources: NYMEX (WTI crude oil) and AAA (gasoline and diesel)
Many factors affect the price of oil, but in the endit comes down to supply and demand
Source: EIA
0
0.5
1
1.5
2
2.5
3
Aug
201
2
Feb
2013
Aug
201
3
Feb
2014
Aug
201
4
Iran Libya Nigeria Iraq
Estimated unplanned OPEC crude oil production outages
Thou
sand
s ba
rrels
per
day
Source: EIA, Short-term Energy Outlook, September 2014
Growth in Global Supply Disruptions (mmb/d)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan 2011 Jan 2012 Jan 2013 Jan 2014
OPEC
Non-OPEC
Growth in U.S. Oil Production* (mmb/d)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Crude oil
Other liquids
Growth in U.S. oil production has largely offset the growth in global supply disruptions
Source: EIA* Light blue represents production of hydrocarbon gas liquids, biofuels, and refinery processing gains.
-1.5
-1
-0.5
0
0.5
1
1.5
2
2013 2014 2015OPEC North America Russia and Caspaian SeaLatin America North Sea Other Non-OPEC
World crude oil and liquid fuels production growthM
illion
bar
rels
per
day
Source: EIA, Short-term Energy Outlook, September 2014
-1
0
1
2
3
4
5U
nite
d S
tate
sC
anad
aR
ussi
aC
hina
Kaz
akhs
tan
Sud
anO
man
Bra
zil
Col
ombi
aO
ther
Nor
th S
eaM
alay
sia
Indi
aV
ietn
amG
abon
Aus
tralia
Egy
ptN
orw
ayM
exic
oA
zerb
aija
nS
yria
Uni
ted
Kin
gdom
201520142013
Non-OPEC crude oil and liquid fuels production growth
(milli
on b
arre
ls p
er d
ay)
Source: EIA, Short-term Energy Outlook, September 2014
0%
10%
20%
30%
40%
50%
60%
70%
Crude oil and petroleum product imports have declined as a share of consumption
Source: EIA
Save consumers up to $5.8 billion a year in lower fuel costs
Add 300,000 jobs to U.S. economy in 2020
Reduce America’s trade deficit by $22 billion in 2020
Why export crude oil?
Crude oil exports yield economic benefit across all 50 states
Source: ICF International and EnSys Energy,
05
1015202530354045
2011 2017 2023 2029 2035
ProductionConsumption
2040
Natural gas(quadrillion Btu)
EIA projects U.S. will be net exporter of natural gas by 2017
Source: EIA, AEO 2014
Eight US facilities have been approved to export LNG, over 20 are awaiting approval and there are more than 60 competing sites planned or under construction in foreign nations
Source: API LNG Export Facility Map
Why export natural gas?
Source: ICF International
Impact (2016-2035 averages)*
Key Economic Impacts(relative to zero LNG exports caseICF Base Exports Case(up to ~4 Bcfd)
Middle Exports Case(up to ~8 Bcfd)
High Exports Case(up to ~16 Bcfd)
Employment Change (No.) 73,100 - 145,100 112,800 - 230,200 220,100 - 452,300GDP Change (2010$ Billion) $15.6 - $22.8 $25.4 - $37.2 $50.3 - $73.6Henry Hub Price (2010$/Mmbtu) $5.03 $5.30 $5.73Henry Hub Price Change ($2010$/Mmbtu) $0.32 $0.59 $1.02
LNG exports result in employment and GDP gains
*Includes direct, indirect, and induced impactsSource: ICF International, “U.S. LNG Exports,” November 13, 2013.
87% of federal offshore acreage is off-limits to development
U.S. Crude Oil Production(million barrels per day)
0
1
2
3
4
5
6
U.S. Natural Gas Production(trillion cubic feet)
0
5
10
15
20
25
Oil and natural gas production are down on federal lands and waters
Source: CRS, “U.S. Crude Oil and Natural Gas Production in Fede3ral and Non-Federal Areas,” April 10, 2014 and February 28, 2013.
Non-Federal Non-Federal
Federal
Federal
Development of Canadian oil sands would benefit the U.S. economy
Filling America’s tankWithin 10 years Canada and U.S. can provide all our liquid fuel needs
U.S. Oil Production
Oil from Canada
Biofuels
Oil fromRest of World
Sources of liquid fuel supply
in 2024
53%
13%10%
24%
72%
18%10%
EIA Forecast PotentialSources: EIA; Wood Mackenzie
$3.1
$10.4
$11.6
$13.0
$14.2
$14.4
$29.0
Increase G&G Amortization Period
Modifications of Duel Capacity
Reinstate Superfund Taxes*
Repeal Percentage Depletion
Repeal Sec 199 for O & G Companies
Repeal Expensing Intangible DrillingCosts
Repeal LIFO*
President’s FY 2015 calls for nearly $97 billion in targeted tax increases on America’s oil and natural gas producers
*Approximate industry share of broad industry tax increaseSource: Office of Management and Budget and API calculations. All amounts encompass a 10-year period
40.2%
25.2%
Oil and Natural Gas Companies S&P IndustrialsExcluding Oil and Natural Gas
Companies
U.S. oil and natural gas companies pay their fair share of taxes and are a great source of public revenue
Source: Compustat North America Database (March 2014 update).
Income Tax Expenses as a Share of Net Income Before Income Taxes (2013)
Source: Wood Mackenzie,” “U.S. Supply Forecasts and Potential Jobs and Economic Impacts,” September 7, 2011.
94% 91% 86%75% 73% 69% 68%
Importanceof energysecurity
Lead to morejobs
Help lowerenergy costs
Supportbuilding
Keystone XLpipeline
SupportO&NG
development
Support off-shore
development
Increasingenergy taxes
may hurtconsumers
Harris Poll Results on Increased U.S. Oil and Natural Gas Development
Voters voice strong support for increased domestic oil and natural gas development
Source: Harris Interactive telephone poll, November 6, 2012
For more information visit:www.api.orgwww.energytomorrow.orgwww.energynation.org