The US Energy Information Administration won’t present its 2007 Annual Energy Outlook (AEO) for a few more weeks. But the reference case that it released in early December provided at least one intriguing preview.
We’ll use EIA’s own words to explain: “The projections for US crude oil production in the AEO 2007 reference case are significantly different from those in the AEO 2006 reference case.” Different, as in higher.
In the 2007 reference case, EIA projected a US crude production increase from 5.2 million b/d in 2005 to 5.9 million b/d in 2017 as a result of more offshore production, primarily from the deepwater Gulf of Mexico, followed by a decline to 5.4 million b/d in 2030.
A year earlier, its reference case predicted “a much steeper decline in production from 2017 to 2030” (from 5.8 million to 4.6 million b/d).
The reasons for the 800,000 b/d difference? Primarily, says EIA, a slower decline for Lower 48 onshore production in the 2007 reference case, “mostly as a result of increased production from enhanced oil recovery technology and, to a lesser extent, significantly higher resource assumptions for the Bakken shale formation in the Williston basin.”
Behind more EOR
Ted McAllister, an economist in the oil and gas division of EIA’s Office of Integrated Analysis and Forecasting, said inferred reserves appreciation due to EOR from the Office of Oil and Gas led EIA to revise its forecast.
Wider EOR use, he told me, results primarily from higher oil prices. “We also looked more closely at our past assumptions. Given what we found in recent studies, we decided to increase our projections,” he said.
EIA raised its resource assumption for the Bakken formation on the basis of a study by Advance Resources International, McAllister said.
While the estimated future offshore volumes may have changed somewhat from 2006 to 2007, the trend essentially is the same in both years’ reference cases, according to Dana Van Wagner, another EIA analyst who handled that modeling. “Higher prices are contributing to more drilling offshore and in deeper waters. More cash flow is available,” she said.
Price sensitivity
Large discoveries expected to come on line in the next 2 years depend less on high world oil prices than those where development economics have not been determined, Van Wagner explained.
“Some fields have been delayed due to technical issues. A couple were supposed to start producing at the end of 2006 or the beginning of 2007. But they’re still expected to come on line. That’s why both years’ projections show a bump upward, followed by a flattening out,” she said.
In its 2007 AEO reference case, EIA incorporated new resource estimates which the US Minerals Management Service gathered as part of the offshore inventory required under the 2005 Energy Policy Act. “There are more smaller fields than what we assumed last year,” Van Wagner said.