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IHS CERAWeek: Energy industry entering transformation period, speakers say

IHS CERAWeek speakers generally agree the energy industry is entering a transformation period that likely will reshape traditional oil and natural gas supply-demand scenarios worldwide.

Some 2,200 participants from more than 50 countries were expected to attend the 32nd IHS CERAWeek energy conference, which is called “Drivers of Change: Geopolitics, Markets & the New Map of Energy.”

IHS analysts on Mar. 4 discussed how new technologies, sources of energy, and global demand shifts are remaking traditional oil and gas supply scenarios. Surging US unconventional production is spurring the changes. Questions remain as to how fast unconventional development might progress worldwide.

“One big takeaway is the scale of this unfolding oil and gas revolution in the US,” said Daniel Yergin, IHS CERAWeek chairman. Unconventional liquids plays helped boost US oil production, which grew by 40% since 2008—the highest growth in oil output of any country during that period.

“All this is leading to a vigorous discussion of how the energy needs of a growing world economy will be met over the next 2 decades and what the mix will be,” said Yergin. “Will an energy transition unfold over years or over decades?”

Emerging global trends and potential surprises in 2013 and beyond were topics addressed during an energy market outlook panel discussion that opened the conference on Mar. 4.

The US is expected to average 7.3 million b/d of oil production during 2013, up from 6.4 million b/d in 2012, the US Energy Information Administration has said.

Consequently, US crude oil imports are declining since their peak in 2005, said James Burkhard, IHS vice-president and head of oil market research and scenarios.

US oil imports averaged an estimated 7.7 million b/d during February 2013, down 1.2 million b/d from February 2012, EIA statistics showed.

Burkhard believes tight oil development outside North America will be much slower than it has been in the US and Canada.

“There are tight oil resources all around the world. The question is the pace” at which they might be developed and produced, he said.

Michael Stoppard, IHS managing director of global gas, believes “2013 is going to be the start of a rebalancing of imbalances in gas pricing.” He said US gas prices are at unsustainably low levels.

“The world demand for gas will continue to grow strongly for the next 2-3 years,” Stoppard said, forecasting it will be 2015 before substantial volumes of LNG exports from the US are available to the world market.

Discussing what he calls “a redrawing” of the global gas map, Stoppard said he sees three supply drivers: unconventional gas, deepwater gas discoveries, and associated gas linked to tight oil.

China gradually moving away from coal

Xizhou Zhou, IHS China energy director, outlined a trend of diversification in the world’s biggest energy consuming nation. China accounted for 40% of global oil demand growth last year.

Half of China’s new power plants are coal-fired plants with an obvious shift to other fuels, primarily nuclear and gas, he said.

“We are not going to do away with coal for many decades,” Zhou said. Coal today accounts for 80% of China’s power generation but it is expected to drop to 50-60% by 2025. “We believe the diversification away from coal already has begun.”

Thane Gustafson, IHS senior director for Russian and Caspian energy, said Russia has seen “nothing but surprises” in energy for 20 years.

“In 2013, the most surprising thing might be that there are no surprises,” Gustafson said. He anticipates a stable political environment accompanied by satisfactory economic growth for Russia this year. “2013 looks like an unusually quiet year.”

Beyond 2013, he believes surprises could be the pace of tight oil development in Russia. He added that other countries are beginning to adopt the US definition of tight oil, which he said includes difficult conventional oil.

Contact Paula Dittrick at paulad@ogjonline.com.


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