December 5, 2012 / 6:40 PM / 5 years ago

UPDATE 3-US shale production to push oil, gas output higher-EIA

* US crude production forecast to reach 7.5 mbd by 2019
    * Imports as share of energy production seen sliding
    * US seen as net LNG exporter by 2016

    By Ayesha Rascoe
    WASHINGTON, Dec 5 (Reuters) - U.S. oil and gas production
over the next two decades will be higher than previously
expected, the government said on Wednesday, underscoring the
push toward greater energy self-sufficiency and more exports of
natural gas.
    In its annual outlook, including the first forecasts through
2040, the U.S. Energy Information Administration said imports as
a share of total U.S. energy production, including oil, gas and
renewables, would be 9 percent by 2040 against 19 percent in
2011 and 29 percent as recently as 2007. 
    For crude oil specifically imports were forecast at 34
percent of U.S. liquid fuels consumption by 2019 from 45 percent
in 2011.   
    The agency said that U.S. crude oil production would hit a
peak of 7.5 million barrels per day in 2019 before falling to
6.1 million bpd in 2040. It had previously forecast a peak of
6.7 million bpd in 2020.
    "The growth results largely from a significant increase in
onshore crude oil production, particularly from shale and other
tight formations," the agency said.  
    Those so-called "tight oil" fields in places like North
Dakota were almost a nonfactor in U.S. crude production just a
few years ago. 
    Offshore crude oil production will also creep higher as
deepwater and ultra-deepwater portions of the Gulf of Mexico are
brought into production.
    "After about 2020, production begins declining gradually ...
as producers develop sweet spots first and then move to less
productive or less profitable drilling areas," the EIA said.
    "The growth results largely from a significant increase in
onshore crude oil production, particularly from shale and other
tight formations," the agency said.  
    U.S. natural gas output is expected to be strong, with gas
production seen rising to 31.41 trillion cubic feet in 2035 from
27.99 tcf forecast last year. 
    Natural gas production is expected to hit 33.21 tcf by 2040,
the EIA said. 
    "That is a pretty significant increase," said Gordon
Pickering, director with Navigant Energy, whose production
estimates for 2035 are still higher than the EIA's. "I think it
is very likely that the EIA will revise that again."
     The surge in production will allow the United States to
become a larger exporter of natural gas than projected a year
ago and a net exporter as early as 2016, the agency said. 
    "This is close to what we expect, but it is conservative in
terms of timing," said Pickering, adding that he looks for three
projects to be exporting LNG by 2020. The company expects 4.8
billion cubic feet per day (bcfd) of LNG exports by 2020,
compared to the EIA's 4.4 bcfd by 2027. 
    U.S. natural gas exports to all but a handful of countries
require approval from the Energy Department. It is a contentious
issue in Washington because of the potential impact on domestic
prices if unbridled exports move ahead.
    A study commissioned by the Energy Department was released
on Wednesday and put a stamp of approval on expanded exports.
    "Benefits that come from export expansion more than outweigh
the losses from reduced capital and wage income to U.S.
consumers," said the report by NERA Economic Consulting.     
    EIA said that U.S. production of LNG would likely outpace
domestic consumption by 2020, and U.S. LNG exports would rise to
about 1.6 tcf in 2027, double the 0.8 tcf projected a year ago.
     Looking at potential crude oil production, analysts said
the long-running ban on U.S. exports of most crude oil could act
as a limit on oil production, and noted that the U.S. agency's
forecast was lower than a recent projection by the International
Energy Agency.  
    "There is such a range out there (on U.S. oil production) -
the assumptions about cost inflation and deflation, takeaway
capacity, U.S. exports policy changes," said Katherine Spector,
a commodity strategist at the Canadian Imperial Bank of Commerce
in New York.
    Renewable fuel use for electricity generation was forecast
to grow slowly over the next few decades, reaching a 16-percent
share of electricity generation by 2040 from 13 percent in 2011.
    But the outlook biofuel production was said to be not as
bright. EIA forecast biomass use at 4.2 quadrillion Btu in 2035,
below the 5.4 quadrillion Btu forecast made a year ago. 
    "EIA has a history of grossly underestimating the ingenuity
and productivity of the American renewable fuels industry," Bob
Dinneed, president of the Renewable Fuels Association, said in
    Improving energy efficiency, including tighter standards for
new home appliances and automobiles, will help per-capita energy
use fall by 15 percent by 2040, the agency said.

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