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ASPO Commentary: US DOE/EIA Forecast Estimates Face Reality

In mid-November of 2012, the International Energy Agency (IEA) released a statement claiming that the United States (U.S.) would surpass Saudi Arabia in oil production by 2017 (to be clear, they mean liquid hydrocarbons, not crude oil or crude + condensate). I assume the IEA obtained its U.S. oil production forecast from the U.S. Department of Energy/Energy Information Administration (US DOE/EIA). The statement was carried extensively by the U.S. media.

Also, in that same vein, in early December National Public Radio’s Morning Edition News had a segment in which the same claim was made based upon the oil production forecast from the US DOE/EIA.

How valid are those claims? Is there any evidence to suggest that possibly the forecast could be flawed?

Among the many assumptions of the US DOE/EIA in their recent U.S. forecasts, there is the major assumption that U.S. 48 States offshore oil production will increase over time. The production increase would come mostly, if not totally, from the deep-water Gulf of Mexico (GOM).

The US DOE/EIA assumption that deep-water GOM oil production will increase over time has existed for quite a while. Figure 1 is a graph of the US DOE/EIA forecast for deep-water GOM oil production based upon their Annual Energy Outlook 2003.


Figure 1-US DOE/EIA production forecast for the deep-water GOM
Historical [1985-2001] and forecast [2002-2025] oil production

For a long time I have been stating that deep-water GOM oil production would reach a maximum around 2010. Here is a 2007 commentary in Energy Bulletin in which I specifically stated that I expected a peak around 2010. Here is the last sentence of that commentary:

“Deepwater GOM production should peak around 2010 in spite of future exploration and production developments.”

I had actually been making the claim about an approximate 2010 peak for years preceding 2007.

Prior to the rearrangement of the Minerals Management Service (MMS) to form the Bureau of Ocean Energy Management (BOEM) a few years ago due to problems at MMS, MMS provided oil production data for both the shallow-water and deep-water GOM. Unfortunately the BOEM doesn’t provide separate data now but they and the US DOE/EIA do provide total GOM oil production. From that, the general trend in deep-water production can be deduced because production in the shallow-water GOM is mature and has been in general decline for years (see Figure 2).

Figure 2-Shallow-water GOM oil production (Data from the Minerals Management Service)

Total GOM oil production achieved its highest level in 2009 and has declined every year since then (see Table I).

Year

GOM Production Rate (mb/d)

Production Change (b/d)

2009

1.562

 

2010

1.551

-11,000

2011

1.317

-234,000

2012

1.245**

-72,000

Table I*

*Data is from the US DOE/EIA
**Data through October 2012

The production declines for 2011 and 2012, in Table I, would only be possible if there were major declines in deep-water production.

Most of the U.S 48 States offshore oil production comes from the Gulf of Mexico, specifically 96.5% in 2012 through October. The remainder comes from offshore California. What happens in the GOM is what’s important for future U.S. 48 States offshore oil production. I personally don’t expect significant production in any other U.S. 48 States offshore areas even if presently closed areas are opened to oil development.

In their Annual Energy Outlook 2010 (AEO2010), the US DOE/EIA made the estimates of future U.S. 48 States offshore oil production listed in Table II. Also in Table II are actual production values, through October 2012, and the difference between the AEO2010 values and actual production.


 

Year

AEO2010 Estimated Production (mb/d)

Actual Production (mb/d)

Difference Between AEO2010 Estimates and Actual Production (b/d)

2009

 

1.62

 

2010

1.67

1.61

60,000

2011

1.77

1.37

400,000

2012

1.82

1.29**

530,000

2013

1.97

   

2014

1.95

   

2015

1.94

   

2020

2.08

   

2025

2.14

   

2030

2.19

   

2035

2.36

   

Table II*

* Data from the US DOE/EIA
**Data through October 2012

The only significant new deep-water GOM project in 2012 was Caesar/Tonga, which started up in early 2012. There are no major offshore projects expected to come on-line in 2013 so I expect a continuing decline in U.S. 48 States offshore oil production through 2013.

In 2014, or beyond, several fields are expected to come on-line including Jack, Tubular Bells, Puma and St. Malo. These projects will not bring offshore oil production up to the level of 2009, not even close. In coming years I expect to see some increases in U.S. 48 States offshore production, due to the introduction of the fields mentioned above, but the general future trend in production will be down. I further expect that from 2020 on, U.S. 48 States offshore oil production will continuously be below 1 million barrels/day. That would be quite a departure from the AEO2010 estimates given in Table II.

Will the U.S. overtake Saudi Arabia in what I view as oil production, crude oil + condensate, in the future? I don’t see that as in the realm of possibility. In 2011, Saudi Arabia’s crude + condensate production was ~3.8 mb/d higher than that for the U.S (9.458 mb/d versus 5.647 mb/d). In assuming that U.S. oil production will continue to rise for many years to come, the US DOE/EIA assumes that production from tight oil production, mostly from Bakken and Eagle Ford, will continue increasing. Could it be that that assumption is incorrect, like the assumption for U.S. 48 States offshore production? I am firmly convinced that Bakken and Eagle Ford will have production peaks in 2014 +/- 1 year. I recently made the case for Bakken oil production peaking around 2014 here. If I’m correct, the U.S. will not be overtaking Saudi Arabia in crude + condensate production in 2017 or any time after that.

Roger Blanchard teaches chemistry at Lake Superior State University and authored the book “The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region,” McFarland & Company (2005).

Image credit: Offshore oil rig at sunset - arbyreed/flickr

 

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