www.eia.gov U.S. Energy Information Administration Independent Statistics & Analysis
EIA Projections of Oil Production Rates
in a New Price Environment
For
API San Joaquin Chapter
March 17, 2015 | Bakersfield, CA
By
Troy Cook
EIA mission: independent statistics and analysis
• EIA was created by the U.S. Congress in 1977
• EIA collects, analyzes, and disseminates independent and
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interaction with the economy and the environment
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by law, its data, analyses, and forecasts are independent of
approval by any other officer or employee of the U.S.
Government
• EIA does not propose or advocate any policy positions
API - San Joaquin Basin Chapter Bakersfield California
March 17, 2015 2
EIA produces data series, analyses, and energy projections
• Weekly, monthly, and annual data
– Displays U.S. and regional production, stocks, blender inputs, imports, and exports
• Real-time analyses
– Digests important developments in Today in Energy, This Week in Petroleum, Issues & Trends, Country Analysis Briefs, Drilling Productivity Report
• Short-Term Energy Outlook (STEO)
– Forecasts U.S. supplies, demands, imports, stocks, and prices of energy with a horizon of 12 to 24 months
• Annual Energy Outlook (AEO)
– Presents 25- to 30-year projection and analysis of U.S. energy supply, demand, and prices
• International Energy Outlook (IEO)
– Assesses international energy production and consumption
API - San Joaquin Basin Chapter Bakersfield California
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API - San Joaquin Basin Chapter Bakersfield California
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International Price
Brent crude oil prices were relatively stable through the first half of
2014; increased oil supply and lower global economic growth
expectations lowered prices from July 2014 to January 2015
API - San Joaquin Basin Chapter Bakersfield California
March 17, 2015
dollars per barrel
Source: EIA, Bloomberg
5
40
50
60
70
80
90
100
110
120
Jan-2014 Apr-2014 Jul-2014 Oct-2014 Jan-2015
Brent front month futures price
Potential disruption in
Russian oil/gas
exports
Potential disruption in
Iraq oil production
Lowered global economic growth
expectations for 2014 and 2015
Increased U.S. production and
uncertainty over OPEC future
production quotas
November OPEC meeting
resulted in no production quota
changes
Lowered risk of oil
supply outages in
Iraq
Stable demand and
supply outlooks
Higher, sustained
Libyan oil production
API - San Joaquin Basin Chapter
Bakersfield California
March 17, 2015 6
0
25
50
75
100
125
150
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct
Historical Spot Price
STEO Forecast
NYMEX Futures Price
Current 95% NYMEX futures price confidence interval
2013 2014 2015 2016
WTI price
dollars per barrel
Source: EIA, Short-Term Energy Outlook, March 2015
API - San Joaquin Basin Chapter Bakersfield California
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Oil prices rise from mid-2015 through mid-2016 in EIA’s forecast
– however, the market-implied confidence band is very wide
2015 2016
WTI $52 $70
Brent $60 $75
API - San Joaquin Basin Chapter Bakersfield California
March 17, 2015 8
International Supply
Inventory builds contribute to crude oil prices that are lower in
2015 than 2014; however, EIA expects prices to rise in 2016 as
inventories level off
API - San Joaquin Basin Chapter Bakersfield California
March 17, 2015 9
World liquid fuels production and consumption balance
million barrels per day
Source: EIA, Short-Term Energy Outlook, March 2015
annual change
million barrels per day
-3
-2
-1
0
1
2
3
4
5
6
78
80
82
84
86
88
90
92
94
96
2010-Q1 2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1
Implied stock change and balance (right axis)
World production (left axis)
World consumption (left axis)
Various events could lead to changes in global supply or demand
that could push future crude oil prices higher or lower than the
STEO forecast
API - San Joaquin Basin Chapter Bakersfield California
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Increase Prices
Decrease Prices
Event
ISIL disrupts Iraqi exports
Iranian sanctions are tightened
Social unrest in oil-dependent countries leads to supply disruptions
OPEC cuts output more than projected
World economic growth is lower than projected (e.g., China)
OPEC keeps production at 2015 levels in 2016
Reduction in unplanned production outages
Iranian sanctions are lifted
API - San Joaquin Basin Chapter Bakersfield California
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Domestic Supply
World crude oil and liquid fuels production growth
million barrels per day
Source: EIA, Short-Term Energy Outlook, March 2015
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North American oil production growth slows with lower oil
prices but remains the main driver of global production growth
-0.5
0.0
0.5
1.0
1.5
2.0
2014 2015 2016
OPEC countries North America Russia and Caspian Sea
Latin America North Sea Other Non-OPEC
Forecast
API - San Joaquin Basin Chapter Bakersfield California
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Shale gas and tight oil plays
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
1
2
3
4
5
6
7
8
9
2000 2002 2004 2006 2008 2010 2012 2014
Rest of U.S. Oil Production
Eagle Ford (TX)
Bakken (MT & ND)
Spraberry (TX & NM Permian)
Bonespring (TX & NM Permian)
Wolfcamp (TX & NM Permian)
Delaware (TX & NM Permian)
Yeso-Glorieta (TX & NM Permian)
Niobrara-Codell (CO, WY)
Haynesville
Utica (OH, PA & WV)
Marcellus
Woodford (OK)
Granite Wash (OK & TX)
Austin Chalk (LA & TX)
Monterey (CA)
Tight oil % of total
Tight oil production
million barrels of oil per day
Tight oil production as a
percent of total oil production
Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through December 2014 and
represent EIA’s official tight oil estimates, but are not survey data. State abbreviations indicate primary state(s).
API - San Joaquin Basin Chapter Bakersfield California
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Estimated U.S. tight oil production was 4.6 MMbbl/d in January
2015 about 49% of total U.S. oil production (9.1 MMbbl/d)
Growing tight oil and offshore crude oil production drive U.S.
output close to historical high
U.S. crude oil production
million barrels per day
Source: EIA, Annual Energy Outlook 2014 Early Release
0
2
4
6
8
10
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Tight oil
Alaska
Other lower 48 onshore
Lower 48 offshore
Projections History 2012
API - San Joaquin Basin Chapter Bakersfield California
March 17, 2015
U.S. maximum production level of
9.6 million barrels per day in 1970
15
U.S. crude oil and liquid fuels production
million barrels per day
Source: EIA, Short-Term Energy Outlook, March 2015
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U.S. crude oil production is expected to increase 700,000 bbl/d in
2015 and 140,000 in 2016; if prices do not recover to the mid-
$70s by mid-2016 as forecast by EIA, production would be lower
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2013 2014 2015 2016
6
7
8
9
10
11
12
13
14
15
Crude oil (right axis) Natural gas plant liquids (right axis)Fuel ethanol (right axis) Biodiesel (right axis)Total production (left axis) Production forecast (left axis)
annual change
million barrels per day
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
Alaska
Federal Gulf of Mexico
Lower 48
Total U.S. Production
U.S. crude oil production growth by area
cumulative growth compared with 4Q14
Source: EIA, Short-Term Energy Outlook, March 2015
API - San Joaquin Basin Chapter Bakersfield California
March 17, 2015 17
Lower-48 production in 4Q2015 and 1Q2016 is only slightly
above its 4Q2014 level; offshore production continues to grow
US oil production
million barrels per day rig count L48 production vintages
Source: EIA, Short-Term Energy Outlook, January 2015
API - San Joaquin Basin Chapter Bakersfield California
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Rigs drilling for oil will decrease, but a backlog of oil wells
awaiting completion will add to oil production
0
500
1,000
1,500
2,000
2,500
0
1
2
3
4
5
6
7
8
9
10 2016Q4
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
2014Q2
2014Q1
Pre-2014
federal GOM
Alaska
Rig Count (RHS)
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March 17, 2015 19
California Supply
References
• US Oil Production
• Oil Inventory
• Crude Stock Projections
• California Field Production - Crude Oil
API - San Joaquin Basin Chapter Bakersfield California
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Monterey oil production includes comingled conventional oil
API - San Joaquin Basin Chapter Bakersfield California
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0
10
20
30
40
50
60
70
80
2000 2002 2004 2006 2008 2010 2012 2014
tight oil production
thousand barrels of oil per day
Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through April 2014 and
represent EIA’s official tight oil estimates, but are not survey data.
Crude oil production
million barrels per day
Source: EIA website, West Coast Region, and AEO 2013 and 2014 Projections from Reference Case
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West Coast Region and Monterey Shale oil production is not
growing
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2000 2005 2010 2015 2020 2025 2030 2035 2040
West Coast History
West Coast Projection
Monterey History
Monterey AEO 2014 Projection
Monterey AEO 2013 Projection
So where does California potential reside?
• Mature Monterey source rock is relatively small in size, but
certainly has been wildly prolific in migration into reservoir rock
(including immature Monterey)
• Well level results in mature source rock to date have not been
promising, but this doesn’t discount changes in price or
technology unlocking some amount of oil resource
• California has already proven to be wildly prolific in reserve
growth in existing conventional fields
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API - San Joaquin Basin Chapter Bakersfield California
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Source: Tennyson, M.E.,Growth History of Oil Reserves in Major California Oil Fields During the Twentieth Century,
Chapter H of U.S. Geological Survey Bulletin 2172-H, Geologic, Engineering and Assessment Studies in Reserve
Growth, Figure 3A
Field growth magnitudes, Midway-Sunset
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Source: USGS Factsheet 2012-3050 Mean=6.478 Billion Barrels
For more information
26
U.S. Energy Information Administration home page | www.eia.gov
Short-Term Energy Outlook | www.eia.gov/steo
Annual Energy Outlook | www.eia.gov/aeo
International Energy Outlook | www.eia.gov/ieo
Monthly Energy Review | www.eia.gov/mer
State Energy Portal | www.eia.gov/state
Today in Energy | www.eia.gov/todayinenergy
Drilling Productivity Report | http://www.eia.gov/petroleum/drilling
API - San Joaquin Basin Chapter Bakersfield California
March 17, 2015