The following is an introductory passage extracted from a whitepaper written by David F. Nicklin in late 2006:
Each year, the Energy Information Administration (EIA) of the US Government gathers, reviews and then reports on data it has collected from a variety of sources including industry and State or national regulatory bodies that govern the conduct of the US and international energy related industries, including oil and gas. Their objective is to provide the US Government and the public at large, an annual snap-shot of trends that may be emerging in the demand for and supply of energy to the World’s population and economies, the US economy in particular.
The benefit to the public is having access to a large and relatively well organized database of facts and figures that document historical production of oil and gas resources, the balance of reserves and supply, and predictions about oil and gas commodity prices.
This particular synopsis has been prepared in an effort to compress and re-organize the large volumes of data that the EIA produces into a more usable and “browse-able” overview format that might be helpful to individuals who are considering making personal investments in the oil and gas industry in some form or another. It is intended as a reference resource.
The preparer of this synopsis has made very few editorial corrections to either the text or diagrams and has simply transposed them from the original on-line EIA reports in an organization that made sense to him. As a result the figure numbers are in places out of sequence, but the references to them in the text are all correct.
It is no surprise that crystal-ball gazing exercises such as these involve wide ranges of uncertainty and the EIA has chosen to manage that consistent with industry norms. Their “reference” case represents a conservative escalation of today’s supply, demand and prices. It is not necessarily a “best guess”, or even a “most likely” case, but simply a least perturbed gradual escalation from today’s situation. The EIA have of course played “what if” games and have developed upside and downside scenarios based on a variety of eventualities mainly developed from perturbations in supply of new reserves to replace production.
In this regard the EIA has been conspicuously conservative in avoiding any significant portrayal of consequences and shifts in trends as a result of socio-political pressure related to climate change. Assuming no emergence of scientific data that upsets what now appears to be accepted scientific consensus that carbon emissions are indeed affecting climate, it would appear to be inevitable that some form of carbon taxation and carbon emissions trading market will be introduced in the fairly near future. Furthermore there will be an increasing public demand for lighter weight and more fuel efficient means of transportation and more energy efficient environments in which the population both lives and works. These factors must affect the energy supply picture as currently being presented by the EIA. For example, if coal is to become the main fuel for generating electricity, then significant investments will be required in carbon sequestration at the point of emission. This may change the economics of coal use in favor of a cleaner burning more efficient fuel such as natural gas and thus the supply-demand picture for natural gas may require a significant re-evaluation.
In summary, the first order observations presented herein are these:
- World energy consumption predicted to rise by 71 per cent by 2030, 2.0 per cent per year.
- Fossil fuels will continue to supply most of this requirement, oil remains dominant because of its role in the transportation and industrial end-use sectors, but higher oil prices will limit oil’s market share.
- Oil price is determined to rise from $31 per barrel in real 2004 dollars to $57 by 2030. (Author’s note: given the price rise since late-2005 to around $60-70 it will be interesting to see the next issue of the EIA Annual Energy Outlook and how higher prices factor in to future demand scenarios!)
- World net electricity consumption more than doubles from 2003 to 2030, going from 14.78 billion kilowatthours to 30,116 billion kilowatthours. Most of the growth comes from non-OECD nations.
- World oil reserves are currently estimated at 1,293 billion barrels of which almost 60 per cent lie in the Middle East. World consumption currently stands at 80 million barrels per day and is projected to rise to 118 million barrels per day by 2030 – an additional 38 million barrels per day and an average annual growth rate of 1.4 per cent. (Author’s note: In other words, in the absence of any further reserve additions a remaining supply of 30 or so years.)
- China’s oil consumption has been rising by 0.4-0.9 percent per day since early 2004. (Author’s note: the rate of increase in China’s consumption is a subject of considerable speculation. Potentially, all estimates to date could be conservative by substantial amounts!)
- To meet the increasing demand for oil it is anticipated that 23.7 million barrels per day (62% of the increase) will be added by non-OPEC countries with OPEC producers expected to contribute 14.6 million barrels.
- Natural gas consumption is expected to rise from 93 trillion cubic feet in 2003 to 182 trillion in 2030, an average increase rate of 2.4 per cent annually. On a BTU basis, the natural gas share of total world energy consumption grows from 24 per cent in 2003 to 26 per cent in 2030. (Author’s note: the likelihood of this projection seriously falling short of actuality is in our opinion very high.)
- In the United States, total petroleum consumption is anticipated to grow from 20.8 million barrels per day in 2004 to 26.1 million barrels per day by 2025. Note that US domestic oil industry produces about 5.1 million barrels per day – a deficit of some 15 million barrels per day. Hence 75 percent of the US daily requirement is fulfilled by imported crude oil.
- The US has a “Proven” oil reserve of around 22 billion barrels, but its total oil resources could be as high as 430 billion barrels if all of the “technological reserves” can be materialized.
- In the US total consumption of natural gas is projected to increase from 22.4 trillion cubic feet per year in 2004 to 27 trillion cubic feet per year in 2025. US gas reserves currently stand at around 200 trillion cubic feet (a ten-year supply) but the reserves to production ration of around ten is expected to rise due to continued success in the commercial definition of unconventional gas resources in the US. The US generally also holds an additional 4.0 trillion cubic feet in underground storage at any one time.
- Oil prices are projected to reach as high as $100/barrel by 2030 in the upside case or as low as $37/barrel in the downside case. The reference case predicts $57/barrel in 2030.
- Gas prices are projected to be as high as $8/thousand cubic feet by 2030 in the upside case or as low as $4.50/thousand cubic feet of gas in the down-side. The reference case predicts $5.90.
(Authors note: very little was factored into these price scenarios by way of international political instability and tension. Our feeling is that one can anticipate considerably more price volatility than the EIA data implies.)