OUTLOOK 2003: United States
US Production

US oil and gas production flat

 The best we can say now is that 2001 – 2002 oil production was about flat – possibly slightly up; the 2002 numbers will be revised in mid-year. This is good news, since US crude and condensate production has fallen for the previous nine consecutive years, but only minimally during the last three years.

    Alaskan oil production stopped its relentless fall, and has leveled off at roughly a million barrels a day. Even after revision, it may show an increase for 2002. The reasons are further efforts at enhanced recovery such as at Milne Point. Also helping was production at Aurora and Borealis, two of five Prudhoe Bay satellite fields, plus about 65,000 bopd from Northstar – which includes the first federal offshore Alaskan production. Northstar came onstream near year-end 2001.

 In coming years, ANWR could help fill the Trans Alaska Pipeline, assuming that the Senate has the political will to open ANWR to E&P. Republicans can unilaterally do this if they want, simply by extracting it from the Energy Bill and calling it a budgetary item. However, before that happens, Alaskan production will likely resume its previous 2 – 5% decline within the next two years.

    Lower 48 states production was also about flat, but will probably decline by 100 – 200 Mbopd during the next two years. In the federal Gulf waters, production from just five fields – Dianna-Hoover, Mars, Mad Dog, Nakika and Ursa – should increase to 9% of Lower 48 production within two years. 

    Demand for oil appears to have soared 2 – 6% in the last two months of 2002, relative to the same period in 2001. This was more than a million-barrel-a-day increase. Cold weather was much of the reason. However, for 2002 as a whole, oil demand was nearly flat compared to 2001, such was the weakness during the first 10 months. Going forward, oil demand is forecast to increase 3% per year. In contrast, US crude production is expected to fall by about 3% this year to 5.62 MMbopd. 

 Natural gas. Last year’s dry gas production appears to be slightly up over 2001, at 22.4 Tcf, according to the Energy Information Administration (EIA). Perhaps because of high gas prices, demand for gas declined 1.7% last year compared to 2001. Assuming recovery in the industrial sector, 2003 should see demand rise as much as 4.7% over last year, with only a modest increase in production this year, the rest coming from imports. It should be noted that, in the last four years, projection of higher gas usage has not materialized. Earlier predictions of a 30-Tcf US-demand economy within 10 – 15 years seem wildly optimistic at this point.

 As 2002 closed, the federal EIA reported an increasingly large imbalance between estimated gas demand and supply for 2002. The obvious problem is either significant underestimate of demand, overestimate of production, or some combination of the two. EIA analysts felt that it was likely overestimate of production.

 Coalbed methane is expected to contribute about 8% to gas production in 2002.