Wood Mackenzie’s Global Trends Service has said that the US will achieve energy independence by 2025, which will mark the first time since 1952 that the US will export more energy than it imports. A new outlook from Wood Mackenzie underscores that higher production and lower demand are the forces driving US energy independence.
James Brick, Senior Analyst said, ‘a country can achieve energy independence through two channels, it can either produce more or consume less, and the US is doing both. Over the last seven years, the US has added 3 million bpd of tight oil and 27.5 billion ft3/d of share gas to the global energy mix, a spectacular 42% increase in US oil and gas production.’ However, oil demand is decreasing, mainly due to efficiency gains in the transport sector.
Wood Mackenzie has said that the uncertainties facing the US energy market fall into two categories; those that make it more likely the US will achieve energy independence before 2025, and those that delay it. The key uncertainties that can speed up US energy independence include a lifting of the US crude oil export ban, higher tight oil production and lower demand in the transport sector.
Lifting the crude export ban, Wood Mackenzie says, would meant that the price realised by US upstream producers would increase as they would be able to access higher priced international markets. If crude oil exports resulted in US producers receiving an additional US$ 5/bbl, production could increase by 350 000 – 450 000 bpd. In order to produce this additional oil, an investment of approximately US$ 5 billion is required.
Brick said, ‘not all companies would actually benefit from lifting the crude oil export ban. It’s likely that upstream producers would generally benefit the most via increased volumes and higher prices. Oilfield service companies and rig manufacturers would also benefit from the additional investment.’
Even if the ban is not lifted, the US could producer more tight oil than is currently expected, Brick explained, ‘tight oil and shale gas plays are still evolving and there are many opportunities for the application of new production techniques. Production could be up to 3 million bpd higher than our view of 10.3 million bpd by 2030 as a result of the application of technologies such as enhanced oil recovery and refracturing. EOR techniques currently being tested are especially promising and early indicators suggest recovery rates could double.’
Wood Mackenzie forecasts the US vehicle fleet to become over 40% more efficient by 2030, however there is still potential for efficiency to improve faster, or for a more pronounced shift to cars away from less efficient light trucks and SUVs. Any improvement in vehicle efficiency or lower vehicle miles travelled per capita would reduce US oil demand and, consequently, net oil imports. Also, the three key uncertainties that would stall US energy independence include delays in developing critical export facilities, environmental regulations and energy policies that would encourage more gas to be used in the power sector.
Brick said, ‘if local or national regulation that discourages fracking is passed, oil and gas production will be lower. Also, if US energy policy is enacted to reduce carbon dioxide emissions, it is likely gas used by the power sector will increase.’
The investments driving the US toward energy independence will have substantial direct and indirect benefits for the US economy, according to Wood Mackenzie, whereas any direct benefits from energy independence in itself are more muted. Furthermore, US energy independence will not isolate the US energy markets from international risk but it will change how these risks are considered.
Brick concluded, ‘irrespective of the timing of independence, the US has started its transformation from energy consuming giant to prominent exporter. With this role shift comes obvious economic benefits but also shifting risks and new responsibilities.’
Edited from press release by Claira Lloyd
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