US Energy Outlook 2017

Projections for US energy consumption as well as energy production through 2040 are obviously shrouded in uncertainty because of the interplay of multiple factors – oil prices, economic growth, energy technological advances and government policies – over such extended time frames

But the EIA reference model is a valuable framework to interpret the strategies of oil & gas majors and to evaluate the potential of US domestic production,

The projected US domestic energy consumption 2016*2040 highlights significant trends in the reference case

• Two segments are growing – natural gas, while remaining n°2 energy provider, is expected to close in on  petroleum by 2040, petroleum which stay fairly stable
• From a much lower base, solar and wind renewables double in thermal units by 2040 and replace coal which drops by a third, as 3d energy source
• Nuclear, hydro and liquid biofuels remain stable at a low level  

Production assumptions rely on wide ranging scenarios, dependent on

• economic growth trends
• technological advance in exploration
• oil prices

Natural gas, increasing by 30% from current levels, is expected to dominate with 40% of US energy production in 2040

Anticipating the importance of natural gas in the energy mix, the acquisition of XTO Energy by Exxon in 2010 positioned the company as the largest producer of natural gas in the US and the beneficiary of XTO expertise in hydraulic fracturing : it is an example of such – at the time amply criticized in a short term perspective – forward thinking; the resource portfolio of XTO has tripled since 2010 through various additional acquisitions. And the 2016 acquisition of BG Group by Royal Dutch [RDS_A] to form the wolld's largest liquefied natural gas company follows a similar playbook...

Crude oil production are projected to stabilize around 2025 as oil development moves into less productive areas, but the assumptions again rely on access to resources and technological developments

US coal production is expected to drop because of competitively priced natural gas, export limitations and domestic regulations

In summary, the US is primed to become a net energy exporter, within a time frame dependent on oil prices / technological advance / domestic growth. Low prices, weak technology and high domestic demand would slow the trend for US exports and delay their occurrence but would not reverse this profound transformation

Globally, sticking to the reference case, the US is expected to be

• an energy exporter, globally, as early as 2026
• a natural gas exporter as of 2018 – with growing LNG sales to distant destinations, adding to traditional export markets (Canada and Mexico)
• dramatically reduced petroleum imports – dropping by 80% in volume in 2030 from a highpoint around 2005

The present summary is based on data and analysis of the annual energy outlook 2017 of the US Energy Information Administration (EIA)