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Congressional Testimony
May 24, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 8627 words
HEADLINE:
TESTIMONY May 24, 2000 JAY HAKES ADMINISTRATOR ENERGY INFORMATION ADMINISTRATION
HOUSE COMMERCE ENERGY AND POWER NATIONAL ENERGY POLICY
BODY:
MAY 24,2000 STATEMENT OF JAY HAKES
ADMINISTRATOR, ENERGY INFORMATION ADMINISTRATION DEPARTMENT OF ENERGY BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER COMMITTEE OF COMMERCE U.S. HOUSE OF
REPRESENTATIVES Mr. Chairman and Members of the Committee: I appreciate the
opportunity to appear before you today to discuss the views of the Energy
Information Administration (EIA) on prospects for oil and natural gas supply and
demand. EIA is an independent statistical and analytical agency within the
Department of Energy. We are charged with providing objective, timely, and
relevant data, analysis, and projections for the use of the Energy Department,
other agencies, the Congress, and the public. We do not take positions on policy
issues, but we do produce data and analysis reports that are meant to help
policy makers decide energy policy. Because we have an element of statutory
independence with respect to the analyses that we publish, our views are
strictly those of EIA. We do not speak for the Department, nor for any
particular point of view with respect to energy policy, and our views should not
be construed as representing those of the Department or the Administration.
Today's analysis is based on EIA's Annual Energy Outlook, which provides
projections and analysis of domestic energy consumption, supply, prices, and
carbon emissions through 2020. These projections are not meant to be exact
predictions of the future but represent a likely future, assuming known trends
in demographics and technology improvements, and also assuming no change in
current law, regulation, and policy. EIA does not propose, advocate, or
speculate on changes in laws and regulations. So, one of our key assumptions is
that all current laws and regulations remain as they were on July 1, 1999. That
means, for example, that the Tier 2 vehicle emission and gasoline
sulfur standards are not included in the reference case because the
regulation was not finalized until December 1999. Oil Petroleum consumption in
the United States increased sharply in the 1970's (Figure 1). From an average of
14.7 million barrels per day in 1970, petroleum consumption rose to 18.9 million
barrels per day in 1978, a level that would not be reached again for the next 20
years. More than half (57 percent) of the increase was in the transportation
sector and nearly 40 percent of the growth was attributable to motor
gasoline. Distillate and residual fuel consumption grew by 0.9
and 0.8 million barrels per day, respectively, between 1970 and 1978. Figure 1.
Petroleum Supply, Consumption, and Imports, 1970-1998 (million barrels per day)
Found on hard copy only Domestic oil supply (including crude oil, lease
condensate, natural gas liquids, other liquids and processing gains) peaked in
1972 at 1 1.9 million barrels per day then declined slowly in part because of
price controls and aging fields in the Lower 48 States. Completion of the
Trans-Alaska Pipeline System brought about a 1.0 million barrel per day increase
in domestic oil production in 1978. The rising consumption combined with
relatively flat supply resulted in a dramatic increase in net petroleum imports,
from 3.1 million barrels per day in 1970 to 8.5 million barrels per day in 1977.
Ninety percent of the increase in net imports from 1970 to 1977 came from OPEC
countries, as OPEC's share of U. S. imports rose from 42 percent to 72 percent.
From 1978 to 1980, world oil prices nearly doubled (Figure 2), resulting in a
sharp decline in consumption. From the 1978 peak of 18.9 million barrels per
day, consumption fell to 15.2 million barrels per day in 1983, a decline of 20
percent. Residual fuel led the decline as industrial users and electric
utilities switched to alternative fuel sources. Residual fuel use fell 1.6
million barrels per day over the 5-year period, followed by
gasoline (0.8 million barrels per day) and distillate fuel (0.7
million barrels per day.) By 1983, petroleum consumption in the United States
had returned to the level of 197 1. Figure 2. World Oil Prices in Three Cases,
1970-2020 Found on hard copy Domestic supply remained fairly stable from 1978 to
1983, with rising Alaskan production making up for production declines in the
Lower 48 States. Reduced consumption, along with steady supply levels, resulted
in a decline in net imports from the 1977 peak of 8.5 million barrels per day to
4.3 million barrels per day in 1983. The decline in petroleum net imports from
OPEC countries fell by slightly more than the total decrease as non- OPEC net
imports increased slightly during this period. OPEC's share of U. S. petroleum
net imports declined to 43 percent in 1983. The sharp decline in U. S. and world
petroleum consumption resulted in lower demand for OPEC oil, which in turn led
to reductions in the world oil prices. From the 1980 peak of $63.30 per barrel,
the average world oil price fell to $19.57 per barrel in 1986 (measured in 1998
dollars). The lower prices and growing economy stimulated petroleum consumption
growth. With the exception of 199 1, petroleum consumption has remained the same
or increased each year since 1983. In 1998, petroleum consumption reached 18.9
million barrels per day, slightly exceeding the previous peak in 1978. In
contrast to the increase in the 1970's, the rise in consumption from 1983 to
1998 was almost exclusively among the lighter petroleum products
(gasoline, distillate, jet fuel, etc). Residual fuel
consumption continued to decline during this period. After remaining stable from
1978 to 1985, domestic supply again started to decline in 1985 due in part to
the much lower oil prices. By 1998, supply had fallen to 9.2 million barrels per
day from 1 1.4 million barrels per day in 1985. Increasing petroleum consumption
and declining supply led to rising net import levels that, in 1996, surpassed
the 1977 peak. By 1998, petroleum net imports reached 9.8 million barrels per
day, comprising 52 percent of domestic petroleum consumption. Net imports from
OPEC countries contributed 56 percent of the rise in total net imports from 1983
to 1998, in contrast to the 1970's when they contributed 90 percent of the
increase. Net imports from Canada and Mexico made up 24 percent of the increase
from 1983 to 1998, and in 1998, these two countries provided 26 percent of U. S.
petroleum net imports compared to 50 percent from OPEC countries. Projected
Prices Just as the historical record shows substantial variability in world oil
prices, there is considerable uncertainty about future prices. Three AE02000
cases with different price paths allow an assessment of alternative views on the
course of future oil prices. For the reference case, prices are projected to
rise by about 2.8 percent a year, reaching $22.04 in 2020 (all prices in 1998
dollars unless otherwise noted). In nominal dollars, the reference case price
exceeds $36 in 2020. The low price case has prices declining, after the current
price rise, to $14.90 by 2005 and remaining at about that level out to 2020. The
high price case has prices reaching $28 by 2015 before leveling off. The
leveling off in the high price case is due to the market penetration of
alternative energy supplies that could become economically viable at that price,
if it is sustained. The AE02000 price paths do not attempt to predict
volatility. Oil prices have been quite volatile in the past, principally as a
result of unforeseen political and social circumstances. The oil market
volatility over the past 2 years has been the result of oil market fundamentals
that are reasonably well understood but nearly impossible to predict. OPEC and
some other producers responded to the low prices of 1998 by cutting back on
production in the spring of 1999. This occurred just as several countries in
Asia began to recover from their financial crisis and to increase oil
consumption. The combination of lower production and higher consumption brought
inventories down rapidly and, as inventories got to very low levels, prices rose
sharply. All three price cases reflect considerable optimism about the potential
for worldwide petroleum supply, even in the face of the substantial expected
increase in demand. Production from countries outside OPEC is expected to show a
steady increase, exceeding 45 million barrels per day by the turn of the century
and increasing gradually thereafter to more than 56 million barrels per day by
2020. Petroleum Consumption Expected to Increase Steadily Petroleum consumption
in the United States is projected to increase 6.2 million barrels per day, from
18.9 million barrels per day in 1998 to 25.1 million barrels per day in 2020, an
annual average rate of 1.3 percent (Figure 3). This compares to the average
growth rates of 1.5 percent per year from 1983 to 1998 and 3.2 percent per year
from 1970 to 1978. Most of the increase in petroleum consumption occurs in the
transportation sector, which accounted for two-thirds of U.S. petroleum use in
1998. Petroleum use for transportation is projected to increase by 5.4 million
barrels per day in the reference case between 1998 and 2020. Figure 3. Petroleum
Supply, Consumption, and Imports, Found on hard copy only In the industrial
sector, which accounts for more than a fifth of U.S. petroleum use, consumption
in 2020 is projected to be higher than the 1998 level by 1.2 million barrels per
day in the reference case. More than half the growth is expected in the
petrochemical, construction, and refining sectors. Petroleum use is expected to
decline in the residential, commercial, and electricity generator sectors, where
oil gives ground to natural gas. For electricity generation, our projections
show oil-fired steam plants being retired in favor of natural gas combined-cycle
units. More than 90 percent of the projected growth in petroleum consumption
stems from increased consumption of "light products," including
gasoline, diesel, heating oil, jet fuel, and liquefied
petroleum gases, which are more difficult and costly to produce than heavy
products. Although refinery investments and enhancements are expected to
increase the ability of domestic refineries to produce light products, they are
projected to compensate for less than half the additional demand; the remainder
will be imported. In the forecast, gasoline continues to
account for about 45 percent of all the petroleum used in the United States.
Between 1998 and 2020, U.S. gasoline consumption is projected
to rise from 8.3 million barrels per day to 1 1.4 million barrels per day.
Increased air travel results in a near doubling of projected jet fuel
consumption from 1.6 million barrels per day in 1998 to 3.0 million barrels per
day in 2020. Consumption of liquefied petroleum gases (LPG's)-primarily in the
industrial sector-also increases in the projections, from 2.0 million barrels
per day in 1998 to 2.5 million barrels per day in 2020. Consumption of "other"
petroleum products, mostly petrochemical feedstocks, still gas used to fuel
refineries, and asphalt and road oil used in road construction, grows from 2.8
million to a projected 3.3 million barrels per day by 2020. Distillate fuel
consumption is projected to grow more slowly than other fuels, because of
increasing fuel efficiency. Residual fuel use, mainly for electricity
generation, is projected to decline by 250,000 barrels per day in the high oil
price case but projected to increase by 530,000 barrels per day in the low oil
price case. Crude Oil Production Declines then Stabilizes, Total Supplies Remain
Flat In the reference case, domestic petroleum supply is projected to decline
slightly from its 1998 level of 9.2 million barrels per day to 9.1 million
barrels per day in 2020. This is the result of two offsetting factors. As U.S.
crude oil production falls off, refinery gain and production of natural gas
plant liquids increase. In the low oil price case, domestic supply is projected
to drop to 8.3 million barrels per day in 2020. In the high oil price case,
domestic supply is projected to increase to 9.9 million barrels per day in 2020.
Projected domestic crude oil production continues its historic decline through
2005. After 2005, technological improvements and rising prices are projected to
arrest the decline, leading to relatively stable lower 48 production in the
remainder of the forecast. In 2020, the projected domestic production level of
5.3 million barrels per day is I million barrels per day less than the 1998
level. Conventional onshore production in the lower 48 States, which accounted
for 46 percent of total U.S crude oil production in 1998, is projected to
increase to a 49-percent share in 2020 because of declining Alaskan production.
Crude oil production from Alaska is expected to decline at an average annual
rate of 3.7 percent between 1998 and 2020. The overall decrease in Alaska's oil
production results from a continuing decline in production from most of its oil
fields and, in particular, from Prudhoe Bay, the largest producing field, which
historically has accounted for more than 60 percent of total Alaskan production.
Offshore production ranges from 1.4 to 1.6 million barrels per day throughout
the forecast. Technological advances and lower costs for deep exploration and
production in the Gulf of Mexico help to offset a decline in production from
shallow waters. Production from enhanced oil recovery (EOR), which becomes less
profitable as oil prices fall, slows through 2006 and then increases along with
projected world oil prices through the remainder of the forecast. The projected
EOR production in 2020 is close to the 1998 level. Although the number of
available drilling rigs has been declining since 1982, price increases are a
powerful incentive for increased drilling and the purchase of new drilling
equipment. The number of available drilling rigs increased by almost 16 percent
annually between 1974 and 1982--from 1,767 to 5,644--as natural gas prices more
than quadrupled in real terms and oil prices more than doubled. This number
dropped off as prices generally declined, and about 1,700 drilling rigs were
available in the United States in 1998. Given the historical response to rising
prices, even a modest increase in prices is likely to make additional drilling
rigs available, and the forecast shows the number of rigs increasing to 1994 by
2020. Both exploratory drilling and developmental drilling increase in the
forecast. With rising prices and declining drilling costs, successful crude oil
well completions increase on average by 0. I and 3.3 percent per year in the low
and high oil price cases, respectively, compared with a 1.7 percent projected
increase in annual well completions in the reference case. For most of the past
two decades lower 48 production of crude oil has exceeded reserve additions and
production is expected to exceed reserve additions over the forecast period in
all cases, meaning that projected U.S. oil reserves in 2020 will be below 1998
levels. Petroleum Imports Projected to Increase With consumption rising and
production nearly flat, net imports are expected to continue to rise throughout
the forecast period. Petroleum net imports are projected to increase to 16.0
million barrels per day in 2020 in the reference case from 9.8 million barrels
per day in 1998. In 1998, net imports of petroleum climbed to 52 percent of
domestic petroleum consumption and are projected to reach 64 percent in 2020 in
the reference case. OPEC's share of the U. S. import market is expected to
increase to 52 percent in 2020 while the North America and Caribbean share of
imports is projected to reach 33 percent. Total annual U.S. expenditures for
petroleum imports, which reached a historical peak of $133.7 billion (in 1998
dollars) in 1980, were $46.6 billion in 1998. Although crude oil is expected to
continue as the major component of petroleum imports, refined products represent
a growing share. More imports of refined products will be needed as growth in
demand for refined products exceeds the expansion of domestic refining capacity.
Net refined products make up 28 percent of net imports in 2020 in the reference
case, compared with 12 percent in 1998. The United States Remains One of the Top
Producing Countries The United States was by far the largest crude oil producing
country in the world in 1970, at 9.6 million barrels per day (Figure 4). The
Soviet Union followed with 7.0 million barrels per day followed by four members
of OPEC. By 1999, Saudi Arabia's oil production had increased to 7.8 million
barrels per day, the only one of the top six producers in 1970 that had a higher
production level in 1999. The Soviet Union had broken apart but Russia remained
in second place in global oil production in 1999. The United States had fallen
to third and Iran fourth. China and Norway replaced Venezuela and Libya as the
fifth and sixth largest oil producers. Figure 4. Top Six Crude Oil Producing
Countries, 1970 and 1999 (million barrels per day) Found on hard copy only The
top six countries produced 29.6 million barrels per day of crude oil in 1999,
down 1.7 million barrels per day from the 1970 combined production level.
However, crude oil production has become much more widely dispersed than in
1970. The production total of the top six producers amounted to 68 percent of
the world's crude oil produced in 1970, but in 1999, the top six countries
produced just 45 percent of the world total. Whereas four members of the top six
in 1970 were members of OPEC, just two of the top six were from OPEC in 1999.
U.S. production has fallen, because production elsewhere has been less costly.
The United States has remained a major producer, however, because of a
relatively low tax regime and innovative use of advanced technology. Strategic
Petroleum Reserve The United States began putting crude oil into the Strategic
Petroleum Reserve (SPR) in 1977 (Figure 5). The SPR is considered the first line
of defense against an interruption in oil supplies and, therefore, is also
considered a deterrent to possible oil import cutoffs. Between 1980 and 1985,
inputs into the SPR averaged more than 200,000 barrels per day. By 1990, the
inventory level had reached 586 million barrels. Since then, sales and additions
have resulted in relatively small fluctuations in the total stockpile. The 1999
end-of-year inventory amounted to 567 million barrels. Figure 5. Strategic
Petroleum Reserve Crude Oil Stocks, 1977-1999 (million barrels) Found on hard
copy only Natural Gas Demand for natural gas, with increases principally from
the electric generation sector, is expected to rise to more than 30 trillion
cubic feet (tcf) in 2020. As demand increases, pressure on natural gas supply
will grow. These demand-side pressures will begin to raise questions like: Is
there enough gas to meet demand at affordable prices? and Can we produce the gas
fast enough to keep up with demand? Last year U.S. natural gas consumption was
just over 21 tcf and accounted for 24 percent of domestic energy consumption.
Gas consumption is expected to grow 1.8 percent annually from 1998 to
2020--faster than any other major fuel source, mainly because of the growth in
gas-fired electricity generation. Domestic gas production is expected to
increase a bit more slowly than consumption over the forecast, rising from 19
Tcf in 1998 to 26 Tcf in 2020. Growing production reflects rising wellhead
prices, relatively abundant natural gas resources, and improvements in
technologies, particularly for producing offshore and unconventional gas. Net
imports are expected to rise to make up the difference between domestic
production and consumption, because they are generally expected to be lower
priced than competing domestic sources (Figure 6). Net imports are expected to
climb from 3.0 Tcf in 1998 to 5.0 Tcf in 2020-sornewhat faster than the growth
in overall consumption. Projected imports continue to be dominated by pipeline
imports from Canada over the forecast period. Figure 6. Natural Gas Production,
Consumption, and Net Imports, 1970-2020 (trillion cubic feet) Found on hard copy
only Rising Natural Gas Demand The industrial sector is the largest
gas-consuming sector, with significant amounts of gas used in the bulk chemical,
refining, and metal durables sectors. Industrial gas consumption is expected to
increase by 1.8 Tcf over the forecast--less than 1 percent per
year--particularly in the refining and metal durables sectors, because of
relatively low and stable gas prices. Combined, the residential and commercial
sectors add 1.8 trillion cubic feet from 1998 to 2020. Gas demand in the
residential and commercial sectors is driven by increasing population and
declining consumer prices for delivered gas. The declines in prices paid by the
consumer reflect expected gas distribution efficiencies in an increasingly
competitive market. Projected gas consumption by electric generators, not
including industrial cogenerators, increases more than two and one half times
during the forecast, from 3.7 trillion cubic feet in 1998 to 9.3 trillion cubic
feet in 2020. The significant growth in gas- fired generation is partly driven
by electric industry restructuring, but is mainly spurred by the addition of new
gas turbines and combined-cycle facilities and increased utilization of existing
gas-fired power plants. Lower capital costs, short lead times, and projected
improvements in gas turbine heat rates give gas an advantage over coal for new
generation in most regions of the United States. In 1998 electricity generators
were the third-largest natural gas consuming sector. By 2020, however, the
projected enormous growth in gas-fired generation makes electricity generators
the second largest gas-consuming sector-- rising to within I tcf of the
industrial sector. Over the entire forecast, natural gas consumption is
projected to grow by more than 10 tcf, and more than half of the increase comes
from the electric generation sector. Through 2020, the share of electricity
produced with natural gas rises from 14 percent to 31 percent of the total,
while the coal share declines from 52 percent to 49 percent. Nuclear power
declines as a source of electric power--from 19 percent to 9 percent of
electricity generation as no new nuclear power plants are expected to be brought
on line between 1998 and 2020 and 40 percent of the current stock retires.
Before the advent of natural gas combined-cycle plants, fossil- fired baseload
capacity additions were limited primarily to pulverized-coal steam units; today,
however, combined-cycle plants cost about half as much and are about 40 percent
more efficient than new coal plants. The lower capital costs and higher
efficiencies of combined-cycle plants offset their higher fuel costs (Figure 7).
Figure 7. Electricity Generation Costs, 2005 and 2020 (1998 mills per
kilowatthour) Found on hard copy only To meet the new demand growth, utilities
can be expected to use existing plants more intensively, import power from
Canada and Mexico, and purchase power from cogenerators and wholesale
generators. Even so, 300 gigawatts of new capacity will be needed from 1998 to
2020 to meet projected demand. Of that new capacity, 90 percent is projected to
be combined-cycle or combustion turbine technology fueled primarily by natural
gas. In other words, more than 900 of the 1,000 new power plants--assuming an
average plant capacity of 300 megawatts--that are expected to be built between
now and 2020 are projected to be gas-fired. New coal plants are not projected to
be cost-competitive until 2010, when rising natural gas prices exceed the price
of coal by $2 per million BTU, leading to the projected construction of new
coal- steam power plants in some regions. Many of the new gas-fired plants built
over the next 20 years will replace nuclear power plants. In AE02000 about 40
percent of the existing nuclear capacity is expected to be taken out of service
by 2020. No new nuclear units are expected to become operable by 2020, because
natural gas and coal-fired plants are projected to be more economical. Growing
Natural Gas Supply Over the forecast period, increased U.S. natural gas
production comes primarily from lower 48 onshore conventional nonassociated
sources. Conventional onshore production accounted for 35 percent of total U.S.
domestic production in 1998 and is expected to increase to 41 percent in 2020.
Offshore production, mainly from wells in the Gulf of Mexico, also rises.
Innovative, cost-saving technology and large finds, particularly in the deep
waters of the Gulf, have encouraged interest in this area. Lower-48 offshore
Gulf Coast natural gas production increased to 5.7 tcf in 1997--the highest yet
recorded -- and dropped off slightly in 1998 to 5.6 tcf. Unconventional gas
production increases at the fastest rate of any other source over the forecast
period, largely because of expanded tight sands gas production in the Rocky
Mountain region. The Rocky Mountain (primarily unconventional sources) and
offshore Gulf of Mexico regions are expected to account for just over half of
the incremental natural gas production between 1998 and 2020, as improvements in
both unconventional and offshore technologies continue. Increased production
from the offshore Gulf Coast and onshore Southwest regions account for almost
one- third of the total increase in the same period. Alaskan gas is not expected
to be transported to the lower 48 States through 2020,because projected natural
gas prices are not high enough to support the required transportation system.
One of the key activities in producing natural gas is drilling. With rising
prices and generally declining drilling costs, drilling in 2020 is expected to
reach 22,600 wells in the reference case and result in 16,900 successful natural
gas well completions. This level of drilling is below the level reached in 1981
of more than 29,000 total wells drilled Oust under 20,000 successful), but
represents approximately a 15-percent increase over current levels. (Figure 8)
Figure 8. Total Natural Gas Wells Drilled, 1970-2020 Found on hard copy only
Technological Development Technology improvements have both reduced effective
exploration and development costs, and increased the recoverability of in- place
resources. Major advances in data acquisition, data processing, and the
technology of displaying and integrating seismic data with other geologic
data-combined with lower cost computer power and experience gained using new
techniques-have exerted downward pressure on costs. Uncertainties about the pace
of technological development are one of the key factors that could affect
natural gas production and prices. Alternative cases were used to assess the
sensitivity of the projections to changes in success rates, exploration and
development costs, and finding rates as a result of technological progress. The
assumed technology improvement rates were increased and decreased by
approximately one-third in the rapid and slow technology cases. Changes in
production in the alternative technology cases reflect the benefits of lower
costs and higher productivity for conventionally recoverable gas, as well as an
array of technological enhancements for unconventional gas recovery. The changes
in supply lead to price changes that affect new investment in gas-fired
technologies, especially in the industrial and electricity generation sectors.
Rapid technology improvements yield benefits in the form of both lower prices
and increased production to meet higher consumption requirements. Production
from unconventional gas resources (tight sands, shales, and coalbeds) is
particularly responsive to changes in the assumed levels of technological
progress. Whereas the reference case projects total U.S. natural gas production
in 2020 at 26.4 trillion cubic feet, the rapid technology case projects 28.1
trillion cubic feet of production in 2020, with the increase coming primarily
from offshore and unconventional sources. Offshore gas production in the Gulf of
Mexico is expected to grow from 5.5 trillion cubic feet in 1998 to a peak of 6.7
trillion cubic feet in 2015 in the reference case. In the rapid technology case,
however, offshore Gulf of Mexico production peaks at 7.7 trillion cubic feet in
2017, and projected cumulative offshore production between 1998 and 2020 is
148.3 trillion cubic feet, compared with 137.1 trillion cubic feet in the
reference case. The rapid technology assumption has a similar but less dramatic,
effect on unconventional gas recovery (UGR). Cumulative UGR production between
1998 and 2020 is projected to be 132.9 trillion cubic feet in the rapid
technology case, compared with 129.5 trillion cubic feet in the reference case.
Changes in production in the alternative technology cases reflect the benefits
of lower costs and higher finding rates for conventionally recoverable gas, as
well as an array of technological enhancements for unconventional gas recovery.
Slowly Rising Natural Gas Wellhead Prices Wellhead prices for natural gas in the
lower 48 States increase on average by 1.7 percent a year in the reference case
to $2.81 per thousand cubic feet in 1998 dollars (Figure 9). The increase
reflects rising demand for natural gas and the impact of the progression of
discoveries from larger and more profitable fields to smaller, less economical
ones. The natural gas price projections are highly sensitive to changes in the
assumptions about technological progress. Over the projection period, lower 48
wellhead prices increase at an average annual rate of 3.0 percent in the slow
technology case, rising fairly steadily to $3.74 (1998 dollars) per thousand
cubic feet in 2020. In the rapid technology case, average natural gas wellhead
prices remain below 1997 level of $2.39 through 2020. Figure 9. Lower 48 Natural
Gas Wellhead Prices in Three Cases,1 970-2020 (1998 dollars per thousand cubic
feet) Found on hard copy only Natural Gas Imports Net natural gas imports are
expected to grow slightly in the forecast from 14 percent of total gas
consumption in 1998 to I 6 percent in 2020. Most of the increase is attributable
to imports from Canada, primarily from western Canada, although some new gas is
also expected from Sable Island in the offshore Atlantic. Gas trade with Mexico
is expected to consist primarily of exports. Conversion of power plants from
heavy fuel oil to natural gas, in compliance with Mexico's environmental
regulations, is expected to gain momentum and it is uncertain whether indigenous
production can be increased enough to satisfy rising demand. LNG provides
another source of gas imports, and gross LNG imports are expected to grow at a
rate of 7.2 percent a year, reaching a level of 390 bcf by 2020. Summary In
summary, over the next 20 years petroleum consumption in the United States is
expected to be driven primarily by the demand for "light products" in the
transportation sector. Petroleum consumption is expected to rise to over 25
million barrels per day in 2020, and domestic petroleum supply including
refinery gain and natural gas plant liquids--is projected to decline slightly to
just over 9 million barrels per day in 2020. Net imports are projected to
increase to 16 million barrels per day in 2020. Continued dependence on
petroleum imports is projected, reaching 64 percent in 2020. Although imports
are projected to grow, the United States is one of the largest oil producing
countries in the world, and domestic production is expected to remain a
significant source of petroleum supply. Over the next 20 years the U.S. natural
gas market is expected to be largely driven by the demand for electricity. From
now through 2020 gas consumption by electricity generators is expected to
increase more than two and one half times. Total gas consumption is expected to
rise to more than 31 tcf in 2020, and U.S. production is expected to increase to
26 tcf. Net imports, primarily from Canada, are projected to increase to 5 tcf
by 2020. In spite of this increase, technically-recoverable natural gas
resources are believed to be adequate to sustain growing production volumes for
many years without dramatic price increases.
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