BMI View: The US will continue to lead gains in non-OPEC crude oil production over the next decade . High growth rates seen in recent years will moderate through our 10-year forecast period , reflecting abrupt depletion rates in shale oil fields, a glut in the domestic market for light sweet crude , and lower oil prices dampening some production . Consumption for fuels will be largely stagnant throughout the course of the next decade as energy efficiency gains take root. I n the gas market, we forecast a ramp - up in production when demand gears up from 201 6 onwards as new LNG export facilities and pet ro chem ical plants come online.
|e/f = BMI estimate/forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||11,265.5||12,887.0||13,591.0||13,991.0||14,227.7||14,441.3||14,630.6|
|Refined products production, 000b/d||19,106.0||19,284.5||19,591.7||19,822.7||19,957.2||20,060.4||20,122.7|
|Refined products consumption & ethanol, 000b/d||19,815.9||19,930.3||20,304.9||20,514.6||20,687.3||20,750.7||20,806.0|
|Dry natural gas production, bcm||688.9||728.1||749.9||779.9||815.0||855.8||890.0|
|Dry natural gas consumption, bcm||740.8||759.3||774.4||793.8||813.6||834.0||850.7|
Falling oil prices, especially on the WTI contract, have pressured developments on the fringes of the US oil industry. Our research suggests the majority of shale oil growth remains profitable above USD60/bbl, with more developed 'sweet spot' acreage profitable at rates as low as USD40/bbl. With prices now trading below USD50/bbl, marginal areas within some of the plays will be negatively impacted beginning in the latter half of 2015.
Exploration and appraisals in the Gulf of Mexico (GoM) are constantly providing new resources and reserves. A number of new developments are expected to come online this year, adding over 200,000b/d in crude production capacity. We caution, however, that the low price environment could dampen future upstream developments.
Consumption patterns in the US have gone through a structural shift over the past four years towards much greater fuel economy and efficiency. We expect that demand for motor gasoline, comprising the majority of consumed fuel in the US, will decline over the course of the next decade. That said, we anticipate that fuel consumption will increase through 2017 as consumers react to lower gasoline prices as well as gains in distillate fuel oil (diesel) and liquefied petroleum gas (LPG) consumption.
The uptick in distillate and LPG production - a function of robust crude production and a ban on crude exports - will accelerate the US' recent shift from net fuels importer to net exporter. While the US will continue to import crude oil, albeit in reducing volumes, we believe the US will become an increasingly important supplier of refined petroleum products to Latin America, Europe and Asia.
We forecast growth in natural gas production to continue in 2015 and to become more pronounced from 2016 onwards as LNG terminals, petrochemicals plants and new gas-fired power plants come online. This will support Henry Hub prices and stimulate production growth over the next 10 years.
There has been a great deal of activity in the US midstream segment as operators react to changing North American supply dynamics. At this point, we believe that the bottleneck has returned to the midstream sector as crude shipments continue to be sent to storage facilities to await a higher sale price. Specifically, US crude storage capacity utilisation is at 61% as of March 31, with Cushing capacity reaching 81%.
The crude wall presents one of the most pertinent medium-term risks to the US upstream story as it can devastate prices and production. We expect that there will be enough new capacity added in condensate splitters in the Gulf each year that will allow light sweet crude to be processed and exported through existing loopholes to the crude export ban, reducing the likelihood of reaching the crude wall.
The combination of high debt loads and low oil prices will increase financial pressures on US oil companies, threatening a more aggressive slowdown in spending and isolated company defaults. Out of the USD274bn of global exploration and production and international oil company debt maturing in the period H215 to H217, the US holds among the largest shares at USD39bn. Much of this debt is held by smaller independents and these markets are among those most exposed to company defaults and more aggressive slowdowns in spending. Globally, US shale producers have announced the largest percentage reductions in capex in 2015 to-date.