EIA Projections of Oil Production Rates in a New Price...

www.eia.gov U.S. Energy Information Administration Independent Statistics & Analysis

EIA Projections of Oil Production Rates

in a New Price Environment

For

API San Joaquin Chapter

March 17, 2015 | Bakersfield, CA

By

Troy Cook

EIA mission: independent statistics and analysis

• EIA was created by the U.S. Congress in 1977

• EIA collects, analyzes, and disseminates independent and

impartial energy information to promote sound policymaking,

efficient markets, and public understanding of energy and its

interaction with the economy and the environment

• EIA is the Nation's premier source of energy information and,

by law, its data, analyses, and forecasts are independent of

approval by any other officer or employee of the U.S.

Government

• EIA does not propose or advocate any policy positions

API - San Joaquin Basin Chapter Bakersfield California

March 17, 2015 2

EIA produces data series, analyses, and energy projections

• Weekly, monthly, and annual data

– Displays U.S. and regional production, stocks, blender inputs, imports, and exports

• Real-time analyses

– Digests important developments in Today in Energy, This Week in Petroleum, Issues & Trends, Country Analysis Briefs, Drilling Productivity Report

• Short-Term Energy Outlook (STEO)

– Forecasts U.S. supplies, demands, imports, stocks, and prices of energy with a horizon of 12 to 24 months

• Annual Energy Outlook (AEO)

– Presents 25- to 30-year projection and analysis of U.S. energy supply, demand, and prices

• International Energy Outlook (IEO)

– Assesses international energy production and consumption


March 17, 2015 3 3


March 17, 2015 4

International Price

Brent crude oil prices were relatively stable through the first half of

2014; increased oil supply and lower global economic growth

expectations lowered prices from July 2014 to January 2015


March 17, 2015

dollars per barrel

Source: EIA, Bloomberg

5

40

50

60

70

80

90

100

110

120

Jan-2014 Apr-2014 Jul-2014 Oct-2014 Jan-2015

Brent front month futures price

Potential disruption in

Russian oil/gas

exports

Potential disruption in

Iraq oil production

Lowered global economic growth

expectations for 2014 and 2015

Increased U.S. production and

uncertainty over OPEC future

production quotas

November OPEC meeting

resulted in no production quota

changes

Lowered risk of oil

supply outages in

Iraq

Stable demand and

supply outlooks

Higher, sustained

Libyan oil production

API - San Joaquin Basin Chapter

Bakersfield California

March 17, 2015 6

0

25

50

75

100

125

150

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

Historical Spot Price

STEO Forecast

NYMEX Futures Price

Current 95% NYMEX futures price confidence interval

2013 2014 2015 2016

WTI price

dollars per barrel

Source: EIA, Short-Term Energy Outlook, March 2015


March 17, 2015 7

Oil prices rise from mid-2015 through mid-2016 in EIA’s forecast

– however, the market-implied confidence band is very wide

2015 2016

WTI $52 $70

Brent $60 $75


March 17, 2015 8

International Supply

Inventory builds contribute to crude oil prices that are lower in

2015 than 2014; however, EIA expects prices to rise in 2016 as

inventories level off


March 17, 2015 9

World liquid fuels production and consumption balance

million barrels per day


annual change


-3

-2

-1

0

1

2

3

4

5

6

78

80

82

84

86

88

90

92

94

96

2010-Q1 2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1

Implied stock change and balance (right axis)

World production (left axis)

World consumption (left axis)

Various events could lead to changes in global supply or demand

that could push future crude oil prices higher or lower than the

STEO forecast


March 17, 2015 10

Increase Prices

Decrease Prices

Event

ISIL disrupts Iraqi exports

Iranian sanctions are tightened

Social unrest in oil-dependent countries leads to supply disruptions

OPEC cuts output more than projected

World economic growth is lower than projected (e.g., China)

OPEC keeps production at 2015 levels in 2016

Reduction in unplanned production outages

Iranian sanctions are lifted


March 17, 2015 11

Domestic Supply

World crude oil and liquid fuels production growth




March 17, 2015 12

North American oil production growth slows with lower oil

prices but remains the main driver of global production growth

-0.5

0.0

0.5

1.0

1.5

2.0

2014 2015 2016

OPEC countries North America Russia and Caspian Sea

Latin America North Sea Other Non-OPEC

Forecast


March 17, 2015 13

Shale gas and tight oil plays

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

1

2

3

4

5

6

7

8

9

2000 2002 2004 2006 2008 2010 2012 2014

Rest of U.S. Oil Production

Eagle Ford (TX)

Bakken (MT & ND)

Spraberry (TX & NM Permian)

Bonespring (TX & NM Permian)

Wolfcamp (TX & NM Permian)

Delaware (TX & NM Permian)

Yeso-Glorieta (TX & NM Permian)

Niobrara-Codell (CO, WY)

Haynesville

Utica (OH, PA & WV)

Marcellus

Woodford (OK)

Granite Wash (OK & TX)

Austin Chalk (LA & TX)

Monterey (CA)

Tight oil % of total

Tight oil production

million barrels of oil per day

Tight oil production as a

percent of total oil production

Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through December 2014 and

represent EIA’s official tight oil estimates, but are not survey data. State abbreviations indicate primary state(s).


March 17, 2015 14

Estimated U.S. tight oil production was 4.6 MMbbl/d in January

2015 about 49% of total U.S. oil production (9.1 MMbbl/d)

Growing tight oil and offshore crude oil production drive U.S.

output close to historical high

U.S. crude oil production


Source: EIA, Annual Energy Outlook 2014 Early Release

0

2

4

6

8

10

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Tight oil

Alaska

Other lower 48 onshore

Lower 48 offshore

Projections History 2012


March 17, 2015

U.S. maximum production level of

9.6 million barrels per day in 1970

15

U.S. crude oil and liquid fuels production




March 17, 2015 16

U.S. crude oil production is expected to increase 700,000 bbl/d in

2015 and 140,000 in 2016; if prices do not recover to the mid-

$70s by mid-2016 as forecast by EIA, production would be lower

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2013 2014 2015 2016

6

7

8

9

10

11

12

13

14

15

Crude oil (right axis) Natural gas plant liquids (right axis)Fuel ethanol (right axis) Biodiesel (right axis)Total production (left axis) Production forecast (left axis)

annual change


-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

Alaska

Federal Gulf of Mexico

Lower 48

Total U.S. Production

U.S. crude oil production growth by area

cumulative growth compared with 4Q14



March 17, 2015 17

Lower-48 production in 4Q2015 and 1Q2016 is only slightly

above its 4Q2014 level; offshore production continues to grow

US oil production

million barrels per day rig count L48 production vintages

Source: EIA, Short-Term Energy Outlook, January 2015


March 17, 2015 18

Rigs drilling for oil will decrease, but a backlog of oil wells

awaiting completion will add to oil production

0

500

1,000

1,500

2,000

2,500

0

1

2

3

4

5

6

7

8

9

10 2016Q4

2016Q3

2016Q2

2016Q1

2015Q4

2015Q3

2015Q2

2015Q1

2014Q4

2014Q3

2014Q2

2014Q1

Pre-2014

federal GOM

Alaska

Rig Count (RHS)


March 17, 2015 19

California Supply

References

• US Oil Production

• Oil Inventory

• Crude Stock Projections

• California Field Production - Crude Oil


March 17, 2015 20

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=M

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCESTUS1&f=W

http://www.eia.gov/forecasts/steo/report/us_oil.cfm

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPCA1&f=M




Monterey oil production includes comingled conventional oil


March 17, 2015 21

0

10

20

30

40

50

60

70

80

2000 2002 2004 2006 2008 2010 2012 2014

tight oil production

thousand barrels of oil per day

Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through April 2014 and

represent EIA’s official tight oil estimates, but are not survey data.

Crude oil production


Source: EIA website, West Coast Region, and AEO 2013 and 2014 Projections from Reference Case


March 17, 2015 22

West Coast Region and Monterey Shale oil production is not

growing

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2000 2005 2010 2015 2020 2025 2030 2035 2040

West Coast History

West Coast Projection

Monterey History

Monterey AEO 2014 Projection

Monterey AEO 2013 Projection

So where does California potential reside?

• Mature Monterey source rock is relatively small in size, but

certainly has been wildly prolific in migration into reservoir rock

(including immature Monterey)

• Well level results in mature source rock to date have not been

promising, but this doesn’t discount changes in price or

technology unlocking some amount of oil resource

• California has already proven to be wildly prolific in reserve

growth in existing conventional fields


March 17, 2015 23


March 17, 2015 24

Source: Tennyson, M.E.,Growth History of Oil Reserves in Major California Oil Fields During the Twentieth Century,

Chapter H of U.S. Geological Survey Bulletin 2172-H, Geologic, Engineering and Assessment Studies in Reserve

Growth, Figure 3A

Field growth magnitudes, Midway-Sunset


March 17, 2015 25

Source: USGS Factsheet 2012-3050 Mean=6.478 Billion Barrels

For more information

26

U.S. Energy Information Administration home page | www.eia.gov

Short-Term Energy Outlook | www.eia.gov/steo

Annual Energy Outlook | www.eia.gov/aeo

International Energy Outlook | www.eia.gov/ieo

Monthly Energy Review | www.eia.gov/mer

State Energy Portal | www.eia.gov/state

Today in Energy | www.eia.gov/todayinenergy

Drilling Productivity Report | http://www.eia.gov/petroleum/drilling


March 17, 2015

http://www.eia.gov/

http://www.eia.gov/steo

http://www.eia.gov/aeo

http://www.eia.gov/ieo

http://www.eia.gov/mer

http://www.eia.gov/todayinenergy

http://www.eia.gov/petroleum/drilling

http://www.eia.gov/petroleum/drilling

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