The Future of Oil: Factors that Could
Impact Current Forecasts
Frank Verrastro
Senior Vice President & James R. Schlesinger Chair for
Energy & Geopolitics
Resources for the Future
November 28, 2012
Global Context for Today’s Discussion
-
-
Oil is a Global Commodity and US Remains Part of a Global
Market
Changing Demand Growth Centers
New Emerging Players but Old Institutions
Transformational Potential of Unconventionals, beginning in
North America – Hard to Overstate
Difficult to Isolate Oil, Liquids and Gas Issues
Policies Based on Resource Scarcity and Rising US Demand
Need to Be Revisited
Environmental Issues Still Loom Large
The “Great Dilemma” of How We Go Forward
2
So What Could Alter the Forecasts?
• Resource Over/Under Performance?
• Technology Advancements, including Disruptive
Technologies in Competing Areas
• Commerciality/Economics/Energy Prices & Costs
• Investment Climate for Participants
• Timing/Expense of Infrastructure Buildout
• Public Sentiment – License to Operate (upstream &
downstream)
• Geopolitical and/or Catastrophic Events/Accidents
• Policy & Regulations
• Climate Change & the Transformation to Low Carbon
Energy
3
Oil Supplies Outside MENA Typically More
Expensive and Harder to Produce
4
Source: IEA World Energy Outlook 2009
NPC Study Identified Large Oil Potential
Tight Oil Opportunities Span the Lower 48
Can the Bakken Story be Replicated (Again and Again)?
Surging U.S. Shale Liquid Production (oil and NGL)
000 b/d
2500
Woodford
Niobrara
2000
Marcellus
1500
Lower Monterey
Granite Wash
1000
Eagle Ford
Barnett
500
Bakken
0
Avalon/ Leonard
2005
2010
Source: Energy Security Analysis, Inc. (ESAI) April 3, 2012
2015
2020
PAD Districts and Refinery Locations
Source: EPRINC, Info. From CME Group and Purvin and Gertz Study
Canada
450
+940
Bakken
344
+555
Niobrara
+253
50
Anadarko
Permian
Source: Petroleum Project
Tracker
Not All Projects Shown
Note:
2011 Average to 2016 Average
(MB/d)
Source BENTEK, April 3, 2012
698
+145
+528
Seaway 850
33
350
345
Refinery Expansion
200
+698
Eagle Ford
Refinery Closure
Rail
Barge
Dock Terminal
Climate Change as Threat Multiplier
10
10 Scarcity
Water
Demography
Crop Decline
Hunger
Coastal Risks
Recent Conflicts
Realizing the full promise of shale resources is not a
certainty and US domestic policy is important!
Technical/Economic Challenges
• All shales are not alike; application of drilling/reservoir fracturing
technology & operational experience matters
• Steep decline rates require ongoing investment and drilling; and
repeated fracturing
• Cost escalation and low commodity prices limit prospects
Environmental/Regulatory/Societal Challenges
• Well design and management of surface chemicals/materials are the
best barriers to protecting water aquifers
• Disclosure of components of fracking fluids should/is happening
• Scale of water use, treatment & disposal are challenging
• Community Issues – infrastructure, land use, population density, noise,
haze, road congestion and repair are “real” and need to be addressed
• Regulation and enforcement are essential
POLICY MODEL
Economic Objectives
Reliable and Secure
Affordable/Accessible
Natural
Gas
Supports Economic
Growth &
Employment
Oil
Nuclear
Defensible
Coal
Energy
Efficiency
Environmentally
Benign
Carbon
Capture and
Storage
Environmental
Objectives
Low/no
emissions
Renewable
Energy
Promotes/Supports
Sustainable
Environment
Security &
Foreign
Policy
Objectives