American Oil and Gas Reporter - May 2015 - 43

use efficiency and a shift away from
more carbon-intensive fuels should help
keep CO2 emissions below those levels
through 2040, EIA says.

Other Highlights
In the AEO2015 reference case, the
2015 price of Brent crude oil is $56 a
barrel in 2013 dollars. Prices rise steadily
after 2015 in response to demand growth;
however, downward price pressure from
rising U.S. crude oil production keeps
the Brent price below $80 a barrel through
2020. The reference case forecasts U.S.
crude oil production will start to decline
after 2020, but increased output from
non-OECD and OPEC producers helps
keep the Brent price below $100 a barrel
through most of the next decade and
limits price increases through 2040, when
Brent reaches roughly $140 a barrel.
Alternative cases in AEO2015 offer
significant variation. In the low oil price
case, Brent averages $52 a barrel in 2015
and reaches $76 a barrel in 2040. In the
high oil price case, Brent reaches $252 a
barrel in 2040. In the high oil and gas resource case, with significantly more U.S.
production than the reference case, Brent
is under $130 a barrel in 2040, more
than $10 a barrel below its reference
case price.
Total U.S. primary energy consumption
grows from 97.1 quadrillion Btus in 2013
to 105.7 quadrillion Btus in 2040 in the
AEO2015 reference case, with most of
the growth coming from natural gas and
renewable energy use. In the high oil
price case, total primary energy use is
3.9 quadrillion Btus higher in 2040 than
in the reference case, although liquids
consumption is 3.3 quadrillion Btus lower.
Total primary energy consumption is
very sensitive to economic growth assumptions, EIA notes, with projected
levels in 2040 ranging from 98.0
quadrillion Btus in the low economic
growth case to 116.2 quadrillion Btus in
the high economic growth case.
In the AEO2015 reference case, energy
use per dollar of GDP declines at an
annual rate of 2.0 percent from 2013
through 2040, as per capita energy use
declines at an annual rate of 0.4 percent.
Energy intensity declines at a lower rate
in the low economic growth case and at
a slightly higher rate in the high economic
growth case.
In the AEO2015 reference case projection, U.S. energy-related CO2 emissions
are roughly 5.55 billion metric tons in
2040. As renewable fuels and natural gas
account for larger shares of total energy
consumption, CO2 emissions per unit of
GDP decline 2.3 percent a year from
2013 to 2040. Among the alternative

cases, emissions show the greatest sensitivity to economic growth, with 2040
totals varying from 5.98 billion mt in the
high economic growth case to 5.16 billion
mt in the low economic growth case. In
all the AEO2015 cases, emissions remain
below the 2005 level of 5.99 billion mt.
EIA notes that the AEO2015 cases
generally reflect current policies, including
final regulations and tax credits' scheduled
to sunset. Consistent with this approach,
EPA's proposed Clean Power Plan rules
for existing fossil-fired electric generating
units or the effects of relaxing current
limits on crude oil exports are not con-

sidered in AEO2015.
To focus more on rapidly changing
energy markets and the ways in which
they may evolve during the next few years,
EIA says it has revised the schedule and
approach for producing the AEO. Starting
with AEO2015, EIA says it is adopting a
two-year release cycle for the AEO, with
a full edition of the AEO produced in alternating years and a shorter edition in the
other years. AEO2015 is a shorter edition
of the AEO. The projections from the
AEO2015 reference and alternative cases
are available at http://www.eia.gov/forecasts/aeo/.
Ì

Wood Mackenzie: Economics
Remain Robust In Lower-48
HOUSTON-Wood Mackenzie says
its break-even analysis of more than 800
individual assets in the lower-48 reveals
dramatic variations in the viability of
company asset bases and subplays. Although the majority of production is not
at risk in the long term, the firm suggests,
cash flow and funding limitations may
impact activity.
"Experts repeatedly have underestimated unconventionals," assesses Cody
Rice, senior analyst for Wood Mackenzie's
lower-48 upstream research. "While low
prices certainly hurt project economics,
reports of the demise of unconventionals
have been greatly exaggerated."
Wood Mackenzie says it expects oil
and condensate production in the lower48 to grow through 2016, but adds that
the pace of growth will slow considerably
starting in the second half of 2015. Tight
oil production grew 1.2 million barrels a
day in 2014, the firm says, and projects
to grow 673,000 bbl/d in 2015 and 425,000
bbl/d in 2016. "We forecast tight oil production will reach 7.5 MMbbl/d in 2020,
but the growth rate has clearly decelerated," Rice adds.
Some Conclusions
Wood Mackenzie highlights some key
considerations from its analysis. Among
them is a finding that three distinct subplays-the Mid-Continent's Springer, the
Eagle Ford's Karnes Trough and the
Bakken's Nesson Anticline-generate at
least a 10 percent internal rate of return
at a $50 a barrel flat real West Texas Intermediate price. Meanwhile, it says, the
35 remaining top oil-weighted subplays
need an average drilling and completion
cost reduction of 30 percent to be economic at $50 a barrel WTI. Wood Mackenzie suggests such reductions are achiev-

able, considering that some companies
already have announced them. However,
the most prolific subplays, including the
Bakken's Parshall Sanish and the MidContinent's South Central Oklahoma Oil
Province/Woodford, require less than a
5 percent cost reduction.
Wood Mackenzie calculates that, in
the lower-48, North American independents have 20 percent more of their liquids
production break even under $60 a barrel
than majors and national oil companies.
However, flowing production, which is
important for cash flow, accounts for 75
percent of the majors' oil production and
83 percent of their gas production in
2015. In the Bakken, Eagle Ford and
Wolfcamp plays, independents dominate
remaining resources with 12 billion barrels
identified on an entitlement basis.
Wood Mackenzie says it expects the
slump in the lower-48 merger and acquisition market to continue until participants
reach consensus on oil price and appropriate financial metrics. Deal activity has
declined dramatically, with associated
spending in the first quarter of 2015 85
percent lower than the fourth quarter of
2014. The firm adds that it does expect
activity to pick up in the second half of
2015, but suggests that the appetite for
premium assets will make bargain hunting
difficult.
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Coming In June

AOGR spotlights the novel technological and business solutions that
LLOG Exploration and its partners
leveraged to develop the multiplefield Delta House project in the deepwater Gulf of Mexico.
MAY 2015 43

American Oil and Gas Reporter - May 2015

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