American Oil and Gas Reporter - June 2016 - 112

rules under the Administrative Procedures
Act, including requiring USFWS to disclose the legal authority on which the
draft policy is based.
"The public has not had a meaningful

opportunity to comment on the service's
mitigation strategy," IPAA and API say.
"The draft policy reflects only one part
of a larger mitigation strategy that USFWS
is unveiling in bits and pieces. The public

must have the opportunity to review the
entire strategy, assess how the draft policy
integrates with other elements of the mitigation strategy, and comment on the
strategy as a whole."
❒

Oil, Gas Dominate U.S. Energy To 2040
WASHINGTON-Petroleum and natural gas comprise 67 percent of U.S. primary energy consumption in 2040, up
from 65 percent in 2015, under the reference case in the Annual Energy Outlook
2016 (AEO2016) released in May by the
U.S. Energy Information Administration.
In the reference case, petroleum's market
share drops from 36 to 34 percent, but
natural gas grows from 29 to 33 percent.
AEO2016 contains two cases, according
to EIA: a business-as-usual reference
case that assumes compliance with the
Obama administration's Clean Power
Plan through mass-based standards that
establish caps on carbon dioxide emissions,
and a no-CPP case in which the CPP is
not implemented.
Those two cases mark the beginning
of the release process, which EIA says
will culminate in publication of the full
AEO2016 by July. Until then, the agency
says it will release several versions, including alternative implementation approaches for the CPP, proposed phase
two fuel economy standards for heavy
duty trucks, and an "extended policies"
case that extends tax credits for renewable
technologies, among others.
The AEO2016 reference case is not
intended as a "most likely" prediction of
the future, according to EIA Administrator
Adam Sieminski, who says, "EIA's approach to addressing the inherent uncertainty surrounding the country's energy
future is to develop multiple cases that
reflect different sets of internally consistent
assumptions about key sources of uncertainty such as future world oil prices,
macroeconomic growth, energy resources,
technology costs, and policies."
Crude Oil
Crude oil prices projected in AEO2016
are lower than those projected by EIA in
its 2015 Annual Energy Outlook, which
went from an estimated $56 a barrel for
Brent in 2015 to $80 a barrel by 2020
(AOGR, May 2015, pg. 41). In the
AEO2016 reference case, EIA says, Brent
averages $37 a barrel in 2016 and rises
to $77 a barrel in 2020. "After 2020,
prices continue to rise, as growing demand
results in the development of more costly
resources," the agency says.
AEO2016 projects a Brent price of

about $135 a barrel in 2040.
U.S. crude oil production, meanwhile,
drops from a peak of 9.4 million barrels
a day in 2015 to 8.6 MMbbl/d in 2017
under the AEO2016 reference case before
growing through 2040 to 11.3 MMbbl/d.
"Lower prices through 2017 have the
greatest impact on tight oil production,
which drops to 4.2 MMbbl/d in 2017 before increasing to 7.1 MMbbl/d in 2040,"
EIA observes.
The agency predicts lower-48 offshore
production, which is less sensitive to
short-term price movements, will continue
to increase to 2.0 MMbbl/d in 2021, after
which it declines to 1.6 MMbbl/d in
2030, where it remains through the forecast
period. Alaskan production-both onshore
and off-is projected to drop from 500,000
barrels a day in 2014 to a little less than
200,000 bbl/d in 2040.
EIA adds that natural gas liquids production in its reference case grows from
3.3 MMbbl/d in 2015 to 4.8 MMbbl/d in
2025 and 5.0 MMbbl/d in 2040.
AEO2016 predicts domestic petroleum
consumption, which includes NGLs, will
rise 4 percent from 2015 to 2040, even
though transportation use falls by 10 percent because of improved light-duty vehicle fuel efficiency. EIA adds that proposed phase two standards for heavyduty trucks or tighter light-duty vehicle
standards beyond 2025 would reduce
projected oil use in transportation even
further.
The agency notes that the projected
decline in transportation sector energy
consumption differs from history, which
saw 1.3 percent annual growth from 1973
to its peak in 2007. EIA adds that petroleum-based gasoline use is projected to
fall 26.3 percent from 2015 to 2040,
driven by improved light vehicle fuel
economy, even though the use of all other
transportation fuels grows, led by diesel
and compressed and liquefied natural
gas.
Natural Gas
U.S. natural gas production in the
AEO2016 reference case grows more
than 50 percent between 2015 and 2040
"as a result of abundant domestic resources
and improved production technologies,"
according to EIA.

112 THE AMERICAN OIL & GAS REPORTER

Gas prices, meanwhile, which EIA
notes averaged $2.62 an MMBtu in 2015-
the lowest annual average price since
1995-are projected to rise to about $4.40
an MMBtu by 2020 and to $5.00 an
MMBtu by the mid-2020s, where they
are expected to remain through 2040.
Again, this is lower than AEO2015, EIA
notes, which saw gas prices reaching
nearly $6 an MMBtu by 2025 and rising
to about $8 by 2040.
The AEO2016 reference case sees natural gas production increasing at an average annual rate of 1.8 percent from
2015 to 2040, reaching 42 trillion cubic
feet a year.
"Production from shale gas and tight
oil plays grows by more than 15 Tcf,
reaching 29 Tcf in 2040," EIA adds. "The
shale gas and tight oil play share of total
U.S. dry gas production increases from
50 percent in 2015 to 69 percent in 2040."
Natural gas consumption in the reference
case grows 0.9 percent a year, although it
drops between 2017 and 2021 because of
a 1.4 Tcf decline in gas used to generate
electricity. "In the early years, when prices
rise off their lows in 2015-16, the growth
in consumption slows and reverses for
several years, particularly in the electric
power sector," EIA observes. "After 2016,
natural gas-fired generation grows as coal
use continues to decline and natural gas
prices remain competitive."
Under its AEO2016 gas supply/demand
assumptions, EIA notes, the United States
transitions to being a net natural gas exporter by 2018. "Almost 50 percent (3.6
Tcf) of the growth in net exports that occurs by 2021 is LNG," the agency says.
"Net natural gas exports reach 7.5 Tcf in
2040, or 18 percent of production."
Power Generation
EIA says the combination of the Clean
Power Plan and relatively low natural
gas prices results in natural gas and renewables permanently surpassing coal in
electric power generation by the mid and
late 2020s, respectively.
The agency says, "The strong growth
in wind and solar generation spurred by
tax credits leads to a short-term decline
in natural gas-fired generation between
2015 and 2021. However, natural gas
generation then grows significantly under

American Oil and Gas Reporter - June 2016

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