In a new report, Breaking Good: The Outlook for Oil and Natural Gas, by Manufacturers Alliance for Productivity and Innovation (MAPI) released today, the industry group says that prospects are bright for the U.S. oil and natural gas sectors.
“The surprising turnaround in the U.S. energy outlook is due in large part to the coupling of hydraulic fracturing with directional drilling as well as declined petroleum consumption resulting from increased energy and automobile efficiency,” said MAPI Senior Economist Don Norman.
“Renewable energy in the form of wind, solar, and biofuels has also contributed to the improved energy outlook, although the importance of renewable energy will become more apparent over time,” Norman added.
Norman noted that the energy revolution has resulted in lower natural gas prices, an easing in the upward pressure on the global price of crude oil, a reduced trade deficit, a competitive advantage for industries using natural gas, and increased demand for manufactured products.
As recently as 2005, net petroleum imports were expected to rise from 60% of total petroleum consumption to 77% in 2025, and net natural gas imports were anticipated to increase from 16% to 28%.
It was widely assumed that as U.S. consumption grew, so would dependence on foreign oil and natural gas. Instead, U.S. oil and gas production have risen dramatically. Consumption of petroleum products declined from 19.2 million barrels per day (mm b/d) in 2010 to an average of 18.7 mm b/d in the first nine months of 2013.
While U.S. crude oil production plummeted from 8.97 mm b/d in 1985 to 5.00 mm b/d in 2008, it has since shown a remarkable resurgence, averaging 7.35 mm b/d for the first nine months of 2013. The U.S. Energy Information Administration projects a rise to 8.49 mm b/d in 2014, the highest level since 1986.
A similar story surrounds natural gas. Production declined between 2001 and 2005, and the prevailing theory was that imports for liquefied natural gas (LNG) would be necessary to maintain sufficient supply. Production of natural gas rose from 18.1 trillion cubic feet in 2005 to 24.1 trillion cubic feet in 2012, thanks partly to three large LNG terminals coming online and an increase in hydraulic fracturing methods.
As a result, natural gas prices experienced a significant decline, averaging $6.68 per thousand cubic feet (Mcf) between 2004 and 2008 but decreasing to an average of $3.69 per Mcf between 2009 and 2012.
“Crude oil production is expected to continue increasing over the next few years before slowly declining,” Norman said. “The current outlook for natural gas is also positive, as production is anticipated to grow by 1.3% annually between 2011 and 2040. Therefore, rather than relying on increased imports, the U.S. will become a significant exporter of natural gas.”