BP Economists: US Will Be “Energy Self-Sufficient by 2023”
BP recently released its 2017 Energy Outlook, a broad overview of the various dynamics at play in the world of energy and a forecast of what we’re going to see this year. This week, Spencer Dale, BP’s Chief Economist, gave a presentation at the Center for Strategic and International Studies (CSIS) to dive into the outlook before a standing-room-only audience.
According to BP’s research, the United States is poised to become an even bigger producer of oil and natural gas. The British company predicts that the US will become the world’s third-largest exporter of natural gas this year. Most notably, overall growth in energy production led by fossil fuels will make America energy self-sufficient in less than a decade.
BP predicts that by 2035 US shale gas will grow by over 40 billion cubic feet per day, and that natural gas will be the primary fuel for power generation in America by 2020. The same trend will affect countries worldwide:
“Natural gas is expected to grow faster than oil or coal, with consumption increasing by 1.6% per year between 2015 and 2035. Shale production grows at 5.4% per year and accounts for around two-thirds of the increase in gas supplies, driven by the US where shale output more than doubles. Towards the end of the period, China emerges as the second largest shale supplier. While both China and Europe become more dependent on imported gas over the period, an increased diversity of supplies associated with a rapid expansion of liquefied natural gas (LNG) helps to support gas consumption.”
Of the new 40 billion cubic feet of gas being added to our daily supply, 19 will be sold on global LNG markets. This will keep the US on top of the natural gas production leaderboard, producing 25 percent of global supplies and 70 percent of shale gas supplies by 2035.These tremendous supplies to international markets will satiate the increasing demand for gas in Europe, Asia, and Latin America.
“US gas prices are likely to act as an anchor for this globally integrated gas market, because it’s US LNG exporters who are actively arbitraging across different markets around the world” said Dale, implying that the US will assume a swing producer role in LNG trade. Asia is already the region consuming the biggest share of LNG, as countries with high population density and industrial growth are using more and more of the affordable fuel. Asia’s growth, along with increasing European demand, will lead LNG trade to account for half of all globally traded natural gas by 2035. From the Outlook:
“LNG grows seven times faster than pipeline gas trade, such that by 2035 it accounts for around half of all globally traded gas – up from 32% now. The significance of the growing importance of LNG-based trade is that, unlike pipeline gas, LNG cargoes can be redirected to different parts of the world in response to regional fluctuations in demand and supply. As a result, gas markets are likely to become increasingly integrated across the world. US LNG exports are likely to be more diversified, providing the marginal source of gas for markets in Europe, Asia and South and Central America. As such, US gas prices are likely to play a key role in anchoring gas prices in a globally integrated market.”
The US is also expected to grow its oil production by 20 percent, according to BP. Shale oil production will be the main driver of this production increase, expected to grow to 7 million barrels per day by 2035. That will nearly double US shale oil output, currently at about 4 million barrels per day. Overall, strong production growth across oil and gas while demand remains nearly unchanged will allow the US to achieve true energy self-sufficiency by 2023.
But the good news doesn’t end there. BP also projects that energy intensity, the amount of energy required per unit of GDP produced, will decrease to levels not seen since the 1960’s. As a whole, the US economy is becoming healthier because of domestic energy production. Because of this, the US stands to be in a position of relative strength compared to other nations – especially those in Asia – that need more energy to support less-diversified economies.
The US has a bright energy future thanks to expanding domestic production, and the world is going to notice.