Energy Production and Imports 

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Net imports of energy are expected to continue to meet a major share of total U.S. energy demand (Figure 5). In the AEO2008 reference case, the net import share of total U.S. energy consumption in 2030 is 29 percent, slightly less than the 30-percent share in 2006. Rising fuel prices over the projection period are expected to spur increases in domestic energy production (Figure 6) and to moderate the growth in demand, tempering the projected growth in imports. 

The projection for U.S. crude oil production in the AEO2008 reference case is higher than in the AEO2007 reference case, primarily due to more production from the expansion of enhanced oil recovery (EOR) operations and, to a lesser extent, higher crude oil prices. U.S. crude oil production in the AEO2008 reference case increases from 5.1 million barrels per day in 2006 to a peak of 6.4 million barrels per day in 2019, with production increases from the deep waters of the Gulf of Mexico and from onshore EOR projects. Domestic production subsequently declines to 5.6 million barrels per day in 2030, as increased production from new smaller discoveries are inadequate to offset the declines in large fields in Alaska and the Gulf of Mexico. 

Total domestic liquids supply, including crude oil, natural gas plant liquids, refinery processing gains, and other refinery inputs (e.g., ethanol), generally increases throughout the AEO2008 reference case, as growth in CTL production offsets the decline in crude oil production after 2019. Total domestic liquids supply grows from 8.2 million barrels per day in 2006 to 10.2 million barrels per day in 2030. 

In the AEO2008 reference case, the net import share of total liquids supplied, including crude oil and refined products, drops from 60 percent in 2006 to 55 percent in 2010, stays relatively stable through 2020, and then increases to 59 percent in 2030. Net crude oil imports in 2030 are 1.3 million barrels per day lower, and net product imports are 0.3 million barrels per day lower, in the AEO2008 reference case than in the AEO2007 reference case. The primary reason for the difference between the AEO2008 and AEO2007 projections for net imports of liquid fuels is the lower level of total liquids consumption in 2030 in the AEO2008 reference case. 

Total domestic natural gas production, including supplemental natural gas supplies, increases from 18.6 trillion cubic feet in 2006 to 20.2 trillion cubic feet in 2021 before declining to 19.9 trillion cubic feet in 2030 in the AEO2008 reference case. The projections are lower than in the AEO2007 reference case, primarily because of the higher costs associated with exploration and development and, particularly in the last decade of the projection, lower demand for natural gas. 

In the AEO2008 reference case, lower 48 offshore natural gas production shows a pattern similar to that in the AEO2007 reference case, growing from 3.0 trillion cubic feet in 2006 to a peak of 4.5 trillion cubic feet in 2019 as new resources come online in the Gulf of Mexico. After 2019, lower 48 offshore production declines to 3.5 trillion cubic feet in 2030. After a small near-term increase, onshore conventional production of natural gas in the AEO2008 reference case declines steadily, as it did in AEO2007. 

Onshore production of unconventional natural gas in AEO2008 is expected to be a major contributor to growth in U.S. supply, increasing from 8.5 trillion cubic feet in 2006 to 9.5 trillion cubic feet in 2030. As in AEO2007, most of the increase in unconventional production is projected to come from gas shale, which more than doubles over the projection, from 1.0 trillion cubic feet in 2006 to 2.3 trillion cubic feet in 2030. 

The Alaska natural gas pipeline is expected to be completed in 2020 (2 years later than in the AEO2007 reference case) because of delays in the resolution of issues between Alaska’s State government and industry participants. After the pipeline goes into operation, Alaska’s total natural gas production in the AEO2008 reference case increases to 2.0 trillion cubic feet in 2021 (from 0.4 trillion cubic feet in 2006) and then to 2.4 trillion cubic feet in 2030 as the result of a subsequent expansion. The pipeline connecting the MacKenzie Delta in Canada to the United States is not constructed in the AEO2008 reference case, unlike in AEO2007, because cost estimates recently filed by the industry substantially exceed the estimates included in AEO2007, and as a result the project is not economical with the AEO2008 reference case prices. 

Net pipeline imports of natural gas from Canada and Mexico, predominantly from Canada, fall from 2.9 trillion cubic feet in 2006 to 0.5 trillion cubic feet in 2030 in the AEO2008 reference case (compared with 0.9 trillion cubic feet in AEO2007).  The difference between the AEO2008 and AEO2007 projections for 2030 is largely a result of increased exports to Mexico. The higher level of exports to Mexico is the result of a lower assumed growth rate for Mexico’s natural gas production in the AEO2008 reference case than in AEO2007. Net imports from Canada also decline, reflecting resource depletion in Alberta and Canada’s growing domestic demand, which are offset in part by increases in unconventional natural gas production from coal seams and tight formations. 

Total net imports of liquified natural gas (LNG) to the United States in the AEO2008 reference case increase from 0.5 trillion cubic feet in 2006 to 2.9 trillion cubic feet in 2030, as compared with 4.5 trillion cubic feet in 2030 in AEO2007. The lower projection is attributable to two factors: higher costs throughout the LNG industry, especially in the area of liquefaction, and decreased U.S. natural gas consumption due to higher natural gas prices, slower economic growth, and expected greater competition for supplies within the global LNG market. 

U.S. LNG regasification capacity increases from 1.5 trillion cubic feet in 2006 to 5.2 trillion cubic feet in 2009 in the AEO2008 reference case with the addition of five new regasification facilities that are currently under construction (four along the Gulf Coast and one off the coast of New England). Given global LNG supply constraints, overall capacity utilization at the U.S. LNG import facilities is expected to remain under 35 percent through 2013, after which it is expected to increase to 57 percent in 2017 and remain in the range of 55 to 58 percent through 2030. 

The future direction of the global LNG market is one of the key uncertainties in the AEO2008 reference case. With many new international players entering LNG markets, competition for the available supply is strong, and the supplies available to the U.S. market may vary considerably from year to year. The AEO2008 reference case has been updated to reflect current market dynamics, which could change considerably as worldwide LNG markets evolve. 

As domestic coal demand grows in the AEO2008 reference case, U.S. coal production increases at an average rate of 1.1 percent per year, from 23.8 quadrillion Btu (1,163 million short tons) in 2006 to 31.2 quadrillion Btu (1,595 million short tons) in 2030—7 percent less than in the AEO2007 reference case. Production from mines west of the Mississippi River provides the largest share of the incremental coal production. On a Btu basis, 60 percent of domestic coal production originates from States west of the Mississippi River in 2030, up from an estimated 49 percent in 2006. 

Typically, trends in U.S. coal production are linked to its use for electricity generation, which currently accounts for 91 percent of total coal consumption. Coal consumption in the electric power sector in the AEO2008 reference case, at 28.5 quadrillion Btu in 2030, is less than in the AEO2007 reference case (31.1 quadrillion Btu in 2030). Slower growth in overall electricity demand, combined with more generation from nuclear and renewable energy, underlies the reduced outlook for electricity sector coal consumption. Another fast-growing market for coal is CTL. Coal use in CTL plants grows from 0.7 quadrillion Btu (42 million short tons) in 2020 to 2.4 quadrillion Btu (157 million short tons) in 2030. Coal use for CTL production becomes the second largest use of coal (after electric power generation) in 2025 in the AEO2008 reference case.