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"The Road to U.S. Energy Independence: The Shale Revolution and Its Implications for North America's Energy Markets" addresses the complex implications for North American pricing parity, crude and product flows, refining behavior and energy policy that will arise from increasing oil and gas production and falling imports. It features a two-day Client Forum (which took place on September 10-11, 2012, in Houston and has been recorded), along with a written report and online database.
Like all PIRA multi-client studies, companies that are clients to PIRA's retainer services receive a discount.
Released in September 2012, "The Road to U.S. Energy Independence" — through an interactive forum, written report, and online database — features:
The "Road to U.S. Energy Independence" answers the following questions:
As the U.S. begins to reduce its crude imports, what crude qualities and sources will be displaced? The reductions cannot be only from light sweet grades as the growth in domestic production of such grades will ultimately exceed current import volumes.
What will these changes mean for relative crude pricing? What will set Gulf Coast light sweet crude prices if the U.S. ceases to be a significant importer of that grade? If light-heavy differentials narrow, how will refiners respond, including those refineries designed to run on medium/heavy sour imports? What are the implications for heavy crude pricing and import volumes? Will the impact be large enough to weaken global flat crude prices?
How will the U.S. dispose of ever growing volumes of natural gas and NGL production? What is the potential for growing domestic use? What are the limits to exports?
Within North America, will the infrastructure required to move crude oil from North to South (and possibly East and West) keep pace with production growth or will we be facing an extended period of inland price disconnects?
How will energy policy evolve in a world where supply security may not be the principal policy driver in the future? Will free market principles allow unlimited oil product and natural gas exports? Or will America-first policies seek to add additional restrictions on exports in order to force down U.S. prices? Will Canada be forced to respond by expanding efforts to increase its oil and gas exports to Asia and other alternative markets?
Will enthusiasm for ethanol dissipate in this new world? Tough automobile fuel efficiency standards? Natural gas use in transportation?
What will happen to production costs as drilling activity continues to accelerate? Will costs increase as economic rents mount as was the case in the development of the Canadian oil sands projects? Or will further improvements in technology and drilling productivity continue to drive costs down as has been the case for shale gas to date?
Will the U.S. undergo a new energy-intensive manufacturing boom led by relatively (on a global scale) cheap gas, gas liquids and electricity prices?
The answers to these questions are neither simple nor straightforward since they involve the interaction between regional liquids supply and demand trends and balances, refining economics, pipeline and other infrastructure assessments, and a potentially wide range of policy uncertainties. PIRA's ongoing detailed analysis of oil and gas supply/demand and balances, along with our refinery databases and flow models, make us uniquely qualified to carry out these assessments.
Companies purchasing the study will be entitled to have three users to each of the following deliverables (licensing options are available to add extra users):
Given the importance of the topic and the uncertainties across the upstream and downstream, oil and gas, domestic and international markets, etc., we believe that the topic of U.S. energy independence warrants extensive discussion and the ability for clients to probe the assumptions and methodology used in an open forum. Over the course of two days, attendees have the opportunity to see a presentation of the key results, discuss those findings and their implications, and question the study’s authors.
The report outlines the findings of the study and explains the bases underlying those results, while providing a discussion of the key uncertainties that impact the major findings. The report includes an executive summary and the full set of charts, with descriptions, that are displayed during the two-day forum.
After 40 years of largely unsuccessful policy attempts to reduce U.S. energy import dependence, imports are now in structural decline. The lack of demand growth has certainly played a role and the combination of past and future energy policies will soon usher in a period of declining demand. However, the reversal in net imports is primarily due to an abrupt shift in supply trends resulting from a combination of continued progress in drilling technology, the creativity of upstream entrepreneurs in utilizing that technology on a well known resource base, and a price level that has made pursuit of these higher-cost opportunities economically attractive.
The trend has been extremely powerful in the case of natural gas, as the U.S. market rapidly turned from a future of large LNG imports to one where it has the potential to be the next major LNG exporter. The revolution has now moved on to liquids — both crude and NGLs — and while the U.S. is likely to remain an importer for some time, the volumes will be in decline from this point forward and the composition (both source and quality) will be rapidly changing. In fact, much of the conventional wisdom regarding pricing parity, crude and product flows, refining behavior and even energy policy may no longer be true in this new U.S. energy world.
These trends will not be news to those paying attention to press reports. However, many of the specific implications for the industry are complex and have not yet been fully analyzed — until now. With the multi-client study, "The Road to U.S. Energy Independence: The Shale Revolution and Its Implications for North America's Energy Markets," PIRA is undertaking such an assessment. The study’s findings will be provided to clients during a two-day forum, as well as through a written report and online database, where each key sector will be addressed in detail.
The study addresses wide ranging issues such as pricing parity relationships between U.S. crudes and international crudes; the response of U.S. refiners to changing incentives to run light sweet vs. heavier crudes; the outlook for U.S. oil products, NGL and natural gas exports; and even the macroeconomic and policy implications of a world of ever-declining imports.
"The Road to U.S. Energy Independence: The Shale Revolution and Its Implications for North America's Energy Markets" can be purchased by both PIRA retainer clients as well as non-clients. Existing PIRA retainer clients receive a reduced price.
The standard fee allows for three users to the study; extra report copies and database/Forum passwords can also be purchased.