Analysis by Poten & Partners
On April 14, the U.S. Energy Information Administration (EIA) released its Annual Energy Outlook 2015 with projections through 2040. The headline conclusion of the report stated that the United States may become a net energy exporter sometime during the forecast horizon.
EIA administrator Adam Sieminski said: With continued growth in oil and natural gas production, growth in the use of renewables, and the application of demand-side efficiencies, the projections show the potential to eliminate net US energy imports in the 2020 to 2030 timeframe. What are the implications for the tanker industry of the various EIA scenarios?
When the EIA talks about eliminating net US energy imports, that means under most scenarios that significant volumes of natural gas are being exported, while liquid fuels, which includes crude oil, petroleum products, natural gas liquids and biofuels, continue to be imported. Only under scenarios which are characterized by a very high recovery from shale gas and tight oil (such as the High Oil and Gas Resource or High Resource case), do we see net exports of liquid fuels. The High Resource case assumes that US crude oil production could grow to 16.6 million barrels per day (mb/d) in 2037 as a result of rapid growth in tight oil production driven by higher ultimate recovery rates, technology improvements, closer well spacing and the development of new tight oil formations. This is more than 50% higher than the peak of 10.6 mb/d which will be reached in 2020 under the EIA Reference case.
Even under the High Resource case, the US will continue to be a net importer of crude oil (Figure 1). A lifting of the US crude oil export ban could completely rearrange crude oil trades worldwide and provide a significant boost for crude tanker ton-mile demand. However, for the moment, the EIA assumes that the ban on domestic crude oil exports will remain in place. Despite this, crude oil exports allowed under current laws and regulations, including exports to Canada and exports of processed condensate, will rise significantly over the forecast period. Under the Reference case, crude oil/condensate exports will reach 600,000 b/d in 2040, and under the High Resource case exports increase to 1.3 mb/d in 2027.
These exports, both crude (to Canada) and processed condensates, can provide a boost to Aframax employment ex-US Gulf.
U.S. net crude oil imports, alternative scenarios (million barrels/day)
(Source: EIA Annual Energy Outlook 2015)
U.S. net petroleum product imports, alternative scenarios (million barrels/day)
(Source: EIA Annual Energy Outlook 2015)
Under all EIA scenarios, the US refiners will enhance their competitive advantage compared to the rest of the world and net exports of refined petroleum products, particularly of motor gasoline and diesel fuel, will increase significantly (Figure 2). Gross petroleum product exports will triple from almost 4.0 mb/d in 2014 to 12.0 mb/d in the High Resource case and even under the more conservative Reference case, exports will increase 60% to 6.4 mb/d. Growing refined product exports will boost employment for both MRs and LRs, as US refiners will be able to sell their products worldwide.
Overall, crude tanker owners looking into the EIAs crystal ball will see some bright spots, but the product tankers appear to be the main beneficiary of the projected developments in the US oil markets.
Source: Poten
