Global upstream spending is dominated by North America, and particularly the United States. That was a message delivered by Phjani Gadde, a senior upstream business analyst for Wood Mackenzie, in his presentation at the NAPE Business Conference audience this week.
Development spending in the energy industry is expected to be $620 to 630 billion this year, with one-quarter of that amount coming from the United States, Gadde said.
“A big part of that is tight oil. This came about by independents driving technology change, and ever-improving efficiencies,” he noted.
Tight oil accounts for $72-plus billion in development spending, Gadde said. That figure puts it “well ahead of shale gas or anything else,” Gadde said. The Eagle Ford was a big part of the reason for the development figure, accounting for $27 billion. Bakken and the Permian also accounted for a large percentage of total development spending, he said.
In terms of production, Gadde said, tight oil is expected to reach about 5.8 million barrels a day by 2020, with Eagle Ford accounting for 2 million barrels of oil per day (bopd), while the Bakken will contribute about 1.7 million bopd. The Permian plays are likely to account for 1.1 billion bopd, and there could be more upside potential in the Permian Basin.
The natural gas picture is dominated by the Northeast part of the country, which will account for one-third of total U.S. supply by 2020, Gadde said. The Marcellus Shale is expected to contribute about 21 billion cubic feet (Bcf) in 2020, compared with about 12.8 Bcf today.
Demand in the U.S. natural gas market is expected to grow substantially over the next three to five years, Gadde said. By 2020, U.S. liquid natural gas (LNG) exports are forecast to reach 7 Bcf. However, the natural gas picture is expected to be bearing over the next 3-to-5 years due to the strong production growth in the Marcellus Shale.
Natural gas prices by 2023 should be in the $5 range, Gadde said, helped by a carbon tax. However, for most of the next ten years, prices are likely to remain in the $3 and $4 range.
Oil market forecasts reflect a balance between strong growth in tight oil in North America, and geopolitical issues that are “knocking some supply off.” The downside comes from sooner-than-expected resolutions to global issues in Iran and Algeria, while the current chaos in Iraq is providing some upside potential. The longer-term forecast was made, Gadde said, by “taking a moderate view.”