United States Oil and Gas Report Q3 2012

Published : June 2012
No. of Pages : 128

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BMI View: Unconventional shale gas and tight oil production continue to make waves in the US market,
drastically altering domestic energy supply, demand and price dynamics. This trend is set to continue, though
we expect the lion’s share of production growth to be focused on liquids over the next five years given that low
natural gas prices are rendering a swathe of more marginal plays uneconomic. While the gradual upturn in
the business cycle is set to lift both natural gas and liquids demand, we expect most growth to focus on gas as
utilities take advantage of low prices to boost gas-fired generation. Oil demand is set to continue falling as
high prices and growing energy efficiency hit consumption.
The main trends and developments we highlight in the US oil and gas sector are:
􀂃 According to our forecasts, the boom in US unconventional liquids production is set to combine with
higher output from the Gulf of Mexico (GoM) to push total liquids supply (crude oil, NGLs, other
liquids and refinery gains) to 10.95mn b/d in 2012. By 2016, we anticipate that total liquids output will
have hit 11.99mn b/d.
􀂃 Oil demand growth is set to remain negative despite the slow recovery in the macro-economy (BMI’s
latest forecasts point to average real GDP growth of 2.0% in 2012, rising to 2.4% in 2013). We
estimate a fall in consumption of 0.6% and 0.1% in 2012 and 2013, respectively. Demand growth will
remain below trend over the course of the forecast period (to 2021) as the US energy market reduces
its energy intensity. We expect total oil demand of 18.73mn b/d in 2012 and 18.91mn b/d in 2016.
􀂃 The shale gas revolution in the US saw total output soar 6.3% in 2011 to approximately 651bn cubic
metres (bcm). However, this unconventional boon has created a supply glut, forcing prices down to 10-
year lows. Gas producers have therefore started shutting in non-associated wells and are endeavouring
to channel capital expenditure (capex) towards liquids-rich plays where possible. We therefore
estimate a sharp fall in gas production growth in 2012. Our forecast is somewhat below consensus,
with total gas output anticipated to rise just 4.0% to 677.34bcm. With prices set to remain well below
their five-year average over the medium term, we do not anticipate dramatic growth in gas output. In
2016 we anticipate total production of 692.36bcm.
􀂃 Sluggish economic growth is set to limit gas demand growth in all but the power sector, where low gas
prices are pushing utilities to switch away from coal generation. We expect a rise in gas-fired
generation of nearly 11% between 2012 and 2016. Given this outlook, we anticipate a rise in gas
consumption from 723.48bcm in 2012, to 739.85bcm by 2016.
􀂃 Changing dynamics in the US gas market have drastically reduced the US’ import burden. We expect
the total oil and gas net import bill to hit US$342.05bn in 2012, falling to just US$273.56bn by 2016
and US$261.66bn in 2021.
􀂃 The most dramatic shift is taking place in the natural gas market where surging production is reducing
the import burden dramatically. We expect net imports of 46.13bcm in 2012, falling to just 16.46bcm
by 2021. Perhaps in light of this collapse, the US Federal Energy Regulatory Commission (FERC)
granted a landmark export permit to Chenier Energy for its Sabine Pass facility on April 17 2012. The
plant is set to begin operations by 2016/2017 with exports totalling 16mn tonnes per annum, or
approximately 12bcm. This has now been factored into our forecasts and we expect net LNG imports
to fall from 6.68bcm in 2012, to just 3.38bcm in 2015. From 2016, the US should become a netexporter
of LNG with the approval of further export facilities a major upside risk to our forecasts.
􀂃 There has been a great deal of activity in the US midstream segment as operators react to changing
North American supply dynamics. We expect further midstream consolidation to occur particularly in
crude oil and natural gas liquids (NGL) processing, transportation and storage.
􀂃 In the downstream segment, US refiners on the east coast have been suffering due to high oil prices
and low demand. The Marcus Hook facility remains shut, reducing total refinery capacity by
178,000b/d. Sale negotiations relating to the 335,000b/d Philadelphia refinery are ongoing. We
therefore anticipate total refinery capacity will fall to 17.60mn b/d in 2012, before recovering to
17.79mn b/d by 2016.
At the time of writing, we assume an OPEC basket oil price for 2012 of US$111.47/bbl, falling to
US$107.00/bbl in 2013. Global GDP growth in 2012 is forecast at 2.6%, down from an estimated 3.1% in
2011, reflecting slowing growth in China and uncertainty with regard to the eurozone debt crisis.

BMI Industry View 7
SWOT Analysis 9
US Oil and Gas SWOT ... 9
Global Energy Market Outlook . 10
Table: Oil Production Forecasts, 2010-2016 (‘000 b/d) .. 10
Table: Oil Consumption Forecast, 2010-2016 (‘000 b/d) 16
Regional Energy Market Outlook . 17
US Energy Market Overview . 22
Table: US – Upstream Projects ... 22
Industry Forecast Scenario .. 27
Table: US Oil & Gas – Historical Data And Forecasts, 2009-2016 27
Table: US Oil & Gas – Long-Term Forecasts, 2014-2021 ... 28
Oil and Gas Reserves 29
Oil Supply And Demand 31
Gas Supply And Demand .. 32
LNG .. 34
Refining and Oil Products Trade .. 37
Revenues/Import Costs .. 37
Key Risks To BMI’s Forecast Scenario . 37
Oil And Gas Infrastructure 38
Oil Refineries 38
Service Stations . 40
Oil Storage Facilities 40
Oil Terminals/Ports .. 40
Oil Pipelines . 41
LNG Terminals . 44
Table: LNG Terminals In the US . 47
Gas Storage Facilities ... 48
Gas Pipelines 48
Regional and Country Risk/Reward Ratings .. 51
Table: Developed States Oil & Gas Risk/Reward Ratings, Scores out of 100 .. 51
Table: Developed States Upstream Risk/Reward Ratings 55
Table: Developed States Downstream Risk*/Reward Ratings .. 55
US Upstream Rating – Overview . 56
US Upstream Rating – Rewards... 56
US Upstream Rating – Risks 56
US Downstream Rating – Overview . 56
Competitive Landscape 57
Executive Summary ... 57
Table: Key Players – US Oil And Gas Sector .. 59
Overview/State Role .. 59
Licensing and Regulation .. 59
Government Policy .. 65
Licensing Rounds . 69
International Energy Relations 71
Table: Key Upstream Players .. 72
Table: Key Downstream Players .. 72
Company Monitor .. 73
ExxonMobil ... 73
Chevron 76
BP America ... 79
ConocoPhillips.. 83
Anadarko Petroleum . 86
Royal Dutch Shell . 89
Marathon Oil – Summary 92
Marathon Petroleum– Summary .. 92
Total – Summary .. 93
Hess – Summary... 95
Statoil – Summary 95
Kinder Morgan – Summary .. 96
Chesapeake Energy – Summary ... 97
Apache – Summary .. 98
Enbridge – Summary 99
Devon Energy – Summary .. 100
Maersk Oil – Summary .. 101
Valero Energy – Summary . 101
BHP Billiton – Summary 102
Tesoro – Summary . 103
El Paso – Summary 104
Gazprom – Summary.. 105
Talisman Energy – Summary . 106
Western Refining – Summary . 106
Denbury Resources – Summary . 107
Range Resources – Summary . 107
McMoRan Exploration – Summary 107
Lewis Energy – Summary ... 109
Petrohawk – Summary ... 109
Repsol YPF – Summary.. 109
HollyFrontier – Summary .. 110
Reliance Industries/Atlas Energy – Summary 110
Others – Summary . 111
Service Companies .. 113
Table: US Service Sector M&A Deals 113
North America – Regional Appendix . 116
Table: Oil Consumption Historical Data & Forecasts, 2009-2016 (’000b/d) 116
Table: Oil Consumption Long-Term Forecasts, 2014-2021 (’000b/d) ... 116
Table: Oil Production Historical Data & Forecasts, 2009-2016 (’000b/d)) .. 116
Table: Oil Production Long-Term Forecasts, 2014-2021 (’000b/d) .. 117
Table: Refining Capacity Historical Data & Forecasts, 2009-2016 (’000b/d)) . 117
Table: Refining Capacity Long-Term Forecasts, 2014-2021 (’000b/d) . 117
Table: Gas Consumption Historical Data & Forecasts, 2009-2016 (bcm) 117
Table: Gas Consumption Long-Term Forecasts, 2014-2021 (bcm) ... 118
Table: Gas Production Historical Data & Forecasts, 2009-2016 (bcm) ... 118
Table: Gas Production Long-Term Forecasts, 2014-2021 (bcm) ... 118
Table: LNG Imports/Exports Historical Data & Forecasts, 2009-2016 (bcm) .. 118
Table: LNG Imports/Exports Long-Term Forecasts, 2014-2021 (bcm) . 119
Methodology And Risks To Forecasts .. 120
Glossary Of Terms ... 121
Oil And Gas Risk/Reward Ratings Methodology .. 122
Ratings Overview 122
Table: BMI’s Oil & Gas Business Environment Ratings – Structure . 123
Indicators 123
Table: BMI’s Oil & Gas Upstream Ratings – Methodology... 123
Table: BMI’s Oil & Gas Business Environment Downstream Ratings – Methodology .. 124
BMI Methodology . 126
How We Generate Our Industry Forecasts . 126
Energy Industry ... 126
Cross checks ... 127
Sources 127Table: Oil Production Forecasts, 2010-2016 (‘000 b/d) . 10

Table: Oil Consumption Forecast, 2010-2016 (‘000 b/d) . 16

Table: US – Upstream Projects . 22

Table: US Oil & Gas – Historical Data And Forecasts, 2009-2016 . 27

Table: US Oil & Gas – Long-Term Forecasts, 2014-2021 . 28

Table: LNG Terminals In the US . 47

Table: Developed States Oil & Gas Risk/Reward Ratings, Scores out of 100 . 51

Table: Developed States Upstream Risk/Reward Ratings . 55

Table: Developed States Downstream Risk*/Reward Ratings . 55

Table: Key Players – US Oil And Gas Sector . 59

Table: Key Upstream Players . 72

Table: Key Downstream Players . 72

Table: US Service Sector M&A Deals. 113

Table: Oil Consumption Historical Data & Forecasts, 2009-2016 (''000b/d) . 116

Table: Oil Consumption Long-Term Forecasts, 2014-2021 (''000b/d) . 116

Table: Oil Production Historical Data & Forecasts, 2009-2016 (''000b/d)) . 116

Table: Oil Production Long-Term Forecasts, 2014-2021 (''000b/d) . 117

Table: Refining Capacity Historical Data & Forecasts, 2009-2016 (''000b/d)) . 117

Table: Refining Capacity Long-Term Forecasts, 2014-2021 (''000b/d) . 117

Table: Gas Consumption Historical Data & Forecasts, 2009-2016 (bcm) . 117

Table: Gas Consumption Long-Term Forecasts, 2014-2021 (bcm) . 118

Table: Gas Production Historical Data & Forecasts, 2009-2016 (bcm) . 118

Table: Gas Production Long-Term Forecasts, 2014-2021 (bcm) . 118

Table: LNG Imports/Exports Historical Data & Forecasts, 2009-2016 (bcm) . 118

Table: LNG Imports/Exports Long-Term Forecasts, 2014-2021 (bcm) . 119

Table: BMI''s Oil & Gas Business Environment Ratings – Structure . 123

Table: BMI''s Oil & Gas Upstream Ratings – Methodology. 123

Table: BMI''s Oil & Gas Business Environment Downstream Ratings – Methodology . 124

United States Oil and Gas Report Q3 2012

Published By: Business Monitor International

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