‹ Analysis & Projections

AEO2013 Early Release Overview

Release Date: December 5, 2012   |  Report Release Schedule: April 15 - May 2, 2013   |   Report Number: DOE/EIA-0383ER(2013)

Energy Productions and Imports


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Net imports of energy decline both in absolute terms and as a share of total U.S. energy consumption in the AEO2013 Reference case (Figure 9). The decline in energy imports reflects increased domestic petroleum and natural gas production, increased use of biofuels (much of which are produced domestically), and demand reductions resulting from rising energy prices and the adoption of new efficiency standards for vehicles. The net import share of total U.S. energy consumption is 9 percent in 2040, compared with 19 percent in 2011 (the share was 30 percent in 2005).

Liquids


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U.S. production of crude oil in the AEO2013 Reference case increases from 5.7 million bpd in 2011 to 7.5 million bpd in 2019, 13 percent higher than in AEO2012 (Figure 10). Despite a decline after 2019, U.S. crude oil production remains above 6.0 million bpd through 2040. Higher production volumes result mainly from increased onshore oil production, predominantly from tight (very low permeability) formations.

In AEO2013, onshore tight oil production accounts for 51 percent of total lower 48 onshore oil production in 2040, up from 33 percent in 2011. As with shale gas, the application of horizontal drilling and hydraulic fracturing significantly increases the development of tight oil resources. Offshore crude oil production trends upward over time, fluctuating between 1.4 and 1.8 million bpd, as the pace of development activity quickens and new large development projects, predominantly in the deepwater and ultradeepwater portions of the Gulf of Mexico, are brought into production.

The faster growth of tight oil production through 2020 in AEO2013 results in higher domestic crude oil production than in AEO2012 throughout most of the projection. Tight oil production declines after 2020 as more development moves into lower-productivity areas (with lower initial production rates and flatter decline curves), resulting in flattening of production after 2030. Total U.S. liquids production in AEO2013 is higher than in AEO2012 due to increased tight oil production through 2025; however, lower production of biofuels and natural gas plant liquids, as well as the decline in tight oil production beginning in 2021, results in lower levels of total domestic liquids production after 2025 in AEO2013 than in AEO2012.


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U.S. dependence on imported liquid fuels continues to decline in the AEO2013 Reference case, primarily as a result of increased domestic oil production. Imported liquid fuels as a share of total U.S. liquid fuel use reached 60 percent in 2005 before dipping below 50 percent in 2010 and falling further to 45 percent in 2011. The import share continues to decline to 34 percent in 2019 and then rises to about 37 percent in 2040, due to a decline in domestic production of tight oil that begins in about 2021 (Figure 11).

Natural Gas

Cumulative production of dry natural gas from 2011 through 2035 in the AEO2013 Reference case is about 8 percent higher than in AEO2012, primarily reflecting continued increases in shale gas production that result from the dual application of horizontal drilling and hydraulic fracturing. Another contributing factor is ongoing drilling in shale and other plays with high concentrations of natural gas liquids and crude oil, which, in energy-equivalent terms, have a higher value than dry natural gas. Cumulative production levels for tight gas and coalbed methane exceed those in the AEO2012 Reference case through 2035 by 3 percent and make material contributions to the overall increase in production. Lower 48 offshore natural gas production fluctuates between 1.8 and 2.8 trillion cubic feet per year, about the same as in AEO2012. New, larger-volume development projects, particularly in the deepwater Gulf of Mexico, remain directed principally toward liquids rather than natural gas. Offshore natural gas production is expected to reverse a years-long overall decline in about 2015, however, after which annual volumes generally increase to 2.8 trillion cubic feet in 2035 and remain at about that level through the balance of the projection period.

In the AEO2013 Reference case, the United States becomes a net exporter of LNG starting in 2016, as it did in the AEO2012 Reference case, and an overall net exporter of natural gas in 2020, two years earlier than in AEO2012. U.S. exports of LNG from new liquefaction capacity are assumed to start at a level of 0.6 billion cubic feet per day in 2016 and increase to 4.5 billion cubic feet per day in 2027, as peak export volumes are shipped out of facilities in the Gulf Coast and Alaska. Over the projection period, cumulative net pipeline imports of natural gas from Canada and Mexico in the AEO2013 Reference case are considerably lower than those projected in the AEO2012 Reference case, with the United States becoming a net pipeline exporter of natural gas in 2021, or three years earlier than in AEO2012. In the AEO2013 Reference case, net pipeline imports from Canada fall steadily over most of the projection period, and net pipeline exports to Mexico grow by 387 percent. U.S. cumulative net LNG exports from 2011 through 2035 are up by 69 percent in AEO2013 compared with AEO2012, due in part to increased use of LNG in markets outside North America, strong domestic production, and low U.S. natural gas prices relative to other global markets. As in the AEO2012 Reference case, the Alaska natural gas pipeline is not constructed in the AEO2013 Reference case, because assumed high capital costs and low natural gas prices in the lower 48 states make it uneconomical to proceed with the pipeline project over the projection period.

Coal

While coal remains the leading fuel for U.S. electricity generation, its share of total generation in all years is slightly lower in the AEO2013 Reference case than was projected in the AEO2012 Reference case, and coal consumption in the electricity sector is lower than in AEO2012 in most years of the projection period. While still growing in most years after 2016, coal consumption in the power sector and for the production of coal-based synthetic liquids increases more slowly than in AEO2012; however, higher coal exports combined with lower imports keep the differences in coal production between the AEO2013 and AEO2012 Reference cases relatively small.

In the AEO2013 Reference case, domestic coal production increases at an average rate of only 0.2 percent per year, from 22.2 quadrillion Btu (1,096 million short tons) in 2011 to 23.5 quadrillion Btu (1,167 million short tons) in 2040. Over the projection period, however, production growth is uneven. From 2011 to 2016, low natural gas prices and the retirement of a sizable amount of coal-fired generating capacity lead to a substantial decline in electricity sector coal consumption, which, in turn, contributes to a 2.0-quadrillion-Btu decline in coal production over those years. After 2016, increases in coal use for electricity generation and exports lead to a gradual recovery in U.S. coal production. From 2016 to 2040, coal production grows at an average rate of 0.6 percent per year, from 20.2 quadrillion Btu to 23.5 quadrillion Btu. Regionally, coal producers in both the Interior and Western regions see their shares of total U.S. coal production increase over the projection period, while Appalachia's share declines. From 2011 to 2040, the Appalachian region's share of total coal production (on a Btu basis) falls from 38 percent to 32 percent.

Electricity generation in 2011 accounts for 91 percent of total U.S. coal consumption on a Btu basis. In the AEO2013 Reference case, projected coal consumption in the electric power sector in 2035 (18.5 quadrillion Btu) is 0.6 quadrillion Btu lower than in the AEO2012 Reference case (19.0 quadrillion Btu). The reduced outlook for coal consumption in this sector is generally attributable to lower natural gas prices and higher coal prices that, taken together, support increased generation from natural gas in the AEO2013 Reference case. More generation from nonhydroelectric renewables also contributes to the reduced outlook for electricity sector coal consumption in AEO2013. Coal consumed at CTL plants is lower in this year's outlook, reaching 0.2 quadrillion Btu in 2035 as compared with 1.2 quadrillion Btu in AEO2012. With a more robust outlook for coal imports by Asian countries, AEO2013 shows higher U.S. coal exports than AEO2012.

Total U.S. coal consumption increases from 19.7 quadrillion Btu in 2011 to 20.4 quadrillion Btu in 2040, reflecting average growth of 0.1 percent per year. As with production, growth rates for coal consumption are uneven over the projection, with consumption declining by 2.7 percent per year from 2011 to 2016, but then increasing by 0.7 percent per year from 2016 to 2040.