Dr. Charles Ebinger of Brookings Institution presented at the Rumi Forum Luncheon Speaker Series on February 18, 2014.
Six years ago it was predicted that by 2018 the US would be importing at least 40% of their natural gas. With some current estimates suggesting that reserves could last up to 100 years, it is clear natural gas is now ubiquitous within the United States. The domestic effect is that prices are being driven down by excess supply and the international effect is that gas scheduled for export to the US now needs to find a market.
Due to previous fears over gas scarcity, the US invested heavily into 11 Liquified Natural Gas (LNG) import facilities costing the taxpayer billions and causing huge environmental controversy. The import facilities are currently being converted into export plants as the production of shale gas does not seem to be falling short in the near future. For example, the Bakken oil field in North Dakota production is at a rate of nearly 1m barrels a day and increasing. Production is currently conducted at a depth of 10,000 feet. It is predicted that rich supplies exist at 12,000-15,000 feet, although further technological advancement will be needed in order to reach these reserves. Figures from the Energy Information Administration shows domestic production increasing by 56% between 2012 – 2040 as technology advances.
On the production side of shale gas, controversy continues over fracking. Pollution due to hazardous waste material produced, and potential risk to public health are two of the concerns. However, as major energy players enter the shale gas markets, fracking is seen as an increasingly safe form of extraction as any leakage would be fatal to entire industry’s reputation.
Oil production has been in consistent decline since the 1970s in the US, but due to the production of shale oil this trend has been overturned. Shale oil is increasing oil production to nearly 2.5m barrels a day and offering a $450 billion saving to the US government due to reductions in oil imports.
Demand for this energy is increasing due to advancement in the uses of shale oil and emerging economies. Plans to replace diesel in large trucks with shale oil, LNG railroad locomotives in North America and Canada and the switching of marine and coastal transport to gas are predicted in the future. Asia, India and Pakistan have unlimited demand for reserves but without viable payment methods their needs will go unserved by the energy community. It is predicted in the future that 90% of fossil fuel demands will stem from Asia. Russia has the potential to become an energy giant upon the establishment of a stable political economy enabling the construction of a viable pipeline satisfying this growing energy demand. Both Turkey and Iran need to restructure their national energy price indices by phasing out subsidies, dampening demand and increasing export supplies. Following this, the projected volume of nuclear plants could be reduced presenting huge savings and the opportunity to export gas to the EU.
OPEC could be in big trouble due to conflicts within the middle east having 3 million barrels of oil a day shut in due to conflict. However, if Iran gets access to advanced western technology and Iraq is stabilized, the energy industry could be increase efficiency significantly.Tapping into this supply could see US oil prices hitting $70 a barrel before $150.
Future prices within the energy industry look promising for the consumer; with a flat European market, a competitive coal market from asia and 10 world class coal projects currently going to enter market, by 2020 coal will remain cheap and very competitive with LNG.
He recommendations for the United States include a lift on the ban of crude oil exports, brought in as a measure to tackle scarcity; he argues the ban on exports is outdated. Brookings predicts future LNG projects within the US may not be fulfilled due to increased competition and falling return on investment. 2020 will see the emergence of huge gas market projects within Australia, New Guinea and possibly Indonesia; this combined with decreasing returns and the possibilities of Russia becoming an energy giant means that even projects with approval may not be financed.
Dr. Charles K. Ebinger is the Director of the Energy Security Initiative at the Brookings Institution. Previously, he was a Senior Advisor at the International Resources Group, where he advised over 50 governments on various aspects of their energy policies. Dr.Ebinger has special expertise in South Asia, the Middle East, and Africa and has also worked in the East, Southeast, and Central Asia, Eastern Europe, and Latin America. He is the author of Energy and Security in South Asia: Cooperation or Conflict? (Brookings Institution Press, September 2011) and co-editor of Business and Nonproliferation: Industry’s Role in Safeguarding a Nuclear Renaissance, (Brookings Institution Press, October 2011). He has been an adjunct professor of electricity economics at Johns Hopkins Nitze School of Advanced International Studies and at Georgetown University’s Walsh School of Foreign Service, and is one of the Nuclear Energy Institute’s “Nuclear Energy Experts.” He sits on the Board of Directors of the North American arm of the Energy and Resources Institute (TERI-NA) and the Jackson Hole Center for Global Affairs. He is a member of the editorial board of the Howard Baker U.S.-Japan Energy Forum. He received his B.A. from Williams College and his Masters and Ph.D. degrees from the Fletcher School of International Law and Diplomacy at Tufts University..
Tim Boersma, a fellow in the Energy Security Initiative in the Foreign Policy program, will moderate the talk. His research focuses on energy policy coordination, energy security, gas infrastructure and regulation, resource scarcity, resource nexus issues, Arctic resources and unconventional natural gas extraction. Before becoming a full time academic, Boersma spent five years in the private sector, working as a corporate counsel to the electricity production sector in the Netherlands.