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February 25, 2014

'Energy Self Sufficient' Beyond Shale

Washington, 24 February 2014
The United States will be "energy self-sufficient" by 2035 thanks to the domestic shale-drilling boom, flat or declining demand and other factors, according to Mark Finley, general manager of global energy markets at London-based BP plc, one of the world's leading oil and natural gas companies. The BP executive made his comments Sunday on Platts Energy Week, an all-energy news and talk show program.
Finley appeared on the show to highlight the 2014 edition of BP's annual energy outlook, a forecast that is closely watched by industry officials and government policymakers alike. BP's model tries to anticipate changes in global economic growth and population, as well as likely developments in energy-related technologies and government regulations.
"That's a key differentiating aspect of our outlook," Finley said.
Finley said that while surging U.S. oil and gas production is the leading driver of his company's forecast, America's fast-growing renewable-energy sector and big gains in energy efficiency are also propelling the U.S. towards that long-sought milestone.
"With the growth of domestic production of oil and natural gas but also renewable energy, combined with essentially flat energy consumption over the next 20-plus years of our outlook, … we believe that the U.S. will achieve self-sufficiency" by 2035," Finley said on the Platts Energy Week television program.
Finley did not say much Sunday about the kinds of government policies that BP believes are contributing to the U.S. becoming "energy self-sufficient" by 2035. But some of those policies are discussed in BP's recently released 96-page energy outlook, such as increasingly stringent fuel economy standards for motor vehicles in the U.S. and elsewhere.
"Fuel economy has been improving in recent years at rates not seen since the period after the first oil price shock in 1973," the outlook says, adding that the growing popularity of hybrid and electric-powered vehicles is also contributing to the trend.
On that note, Finley said that oil is the "slowest-growing form of energy" in BP's most recent global forecast, withbiofuels and other sources gaining market share at faster rates. In fact, that has been the case for decades, he said.
"Oil structurally has been losing market share in terms of its portion of the world's energy mix since 1973, and we see a continuation of that," Finley said. "Among different forms of energy, oil tends to be relatively expensive, and not surprisingly, people try to use less of the expensive fuel."
However, the upside is that high oil prices have also spawned "a lot of innovation" that has led to game-changers such as the shale-drilling boom, Finley said. On that front, BP's outlook predicts that U.S. shale-gas production will more than double to 65 billion cubic feet per day (Bcf/d) by 2035, and that U.S. tight oil output will triple to 4.5 million barrels per day by the same year, accounting for a third of America's liquids production.
Finley on Sunday did not address the thorny issue of whether the U.S. will start exporting crude oil in the coming years, as some experts have called for given that domestic production is now surging. But he did say that BP has forecasted that the U.S. will remain a "small net importer of oil," while exporting more coal and natural gas, as is already occurring.
Specifically, BP's outlook predicts that the U.S. will shift from being a net importer of gas to a net exporter in 2018, with net exports reaching 10.6 Bcf/d by 2035. The forecast also addresses the hot-button issue of US liquefied natural gas (LNG) exports, saying they will reach 11.2 Bcf/d by 2035.
"The arrival of U.S. LNG exports at scale has a profound impact on global LNG markets, contributing to a shake-up in the structure of [global] LNG supplies," the outlook says.
Exporting LNG has sparked some controversy in the U.S., as critics fear that sending too much gas abroad will cause domestic prices to spike, hurting the manufacturing sector and other aspects of the U.S. economy.
But for all of the debate over energy exports in the U.S., Finley said other parts of the world – specifically, Asian countries such as China and India – will face far greater challenges regarding the security of their energy supplies. China, for example, will soon surpass the U.S. as "the world's biggest importer of oil," Finley said.
"In terms of import dependence, where China is heading is a degree of import dependence that is well beyond anything the United States has ever experienced," Finley said.
Ends --
Courtesy Commodites Now (EconMatters author archive here)  

Platts Energy Week is produced by Platts, the world’s leading source of information and intelligence on energy and related commodities and a division of McGraw Hill Financial [NYSE: MHFI] and W*USA-TV, the Washington, D.C., CBS affiliate and flagship television station of Gannett Company. [NYSE: GCI]. While the program is U.S. focused and produced in Washington, it reflects the global vantage point of Platts, whose correspondents are stationed in such major capitals as London, Dubai, Singapore, Tokyo and Moscow.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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