Keystone XL -- Nebraska -- Hope Springs Eternal -- August 23, 2019

From twitter moments ago:

Later: see the "Seward jog" here.

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Another Bogus Story: The US Drowns The World In Oil

Nope, Virginia, the world is not going to be drowning in oil in 2029.

This might be as good a time as ever to re-look at that "US to drown the world in oil" story that went viral a few days ago.

Something didn't ring true about that article when I first read it, but I couldn't put my finger on it.

Remember, this was at an anti-oil, green energy site. Why would they post such a story? It's obvious they were posting the story to scare folks about how much oil (i.e., CO2 emissions] the US was going to produce over the next ten years, a "call to arms," as such, to keep this from happening. If I recall correctly the data for that article came from Rystad Energy.

This is what caught my attention. There were some interesting data points not mentioned in the article.

For example:

• total global supply
• total global demand

This is what also caught my attention.

Not one Mideast country is contributing any significant amount of new oil or natural gas to the global supply by 2029 (and perhaps earlier). By 2029, Saudi Arabia will be a net importer of oil.  By 2029, Russia will not be adding any more new oil and gas more than Ohio. One has to assume that if Russia's production is growing only  as much as Ohio, Russia's growth in exports will be similarly constrained; they will need it for themselves Mexico, Venezuela, Norway are not on the list.

Think about that. Assuming global growth pretty much matches global demand, if it were not for the US, the global shortfall would be huge.

That's the real take home message in the graphics at that post.

By 2029 the world is not going to be drowning in oil. The US won't be drowning the world in oil. In fact, the US will be the major source for new oil and gas in 2029, but supply will not exceed demand by much; there won't be anyone drowning in oil.

The flip side of all that hand-wringing by Global Witness is opportunity. For the US.

From a white paper published in 2018, looking out to 2035, McKinsey provided this reference case:

• We expect growth in oil supply to come from (1) OPEC, (2) US shale oil and (3) selected offshore basins e.g. Brazil that are breaking-even below USD75/bb; ample resource base and cost discipline keeps long term average prices at USD65-75/ bbl 
• The outlook is combined with a peak in demand growth in the early 2030s - driven by slower chemicals growth and peak transport demand as fuel economy, electrification, & reduced car ownership decreases oil consumption 
• By 2035, under our base case E&P companies need to add >40 MMb/d of new crude production from mainly offshore and shale unsanctioned projects to meet demand, and ~4- 5% of these new additions will come from YTF resources.

["YTF" = "yet to find."]

But think about that.

Today, Russia, Saudi Arabia, and the United States produce about 40 million bopd. An amount equal to that will need "to be found" (and the infrastructure to support it) to meet global demand by 2035.

McKinsey does provide an alternative scenario in which there is an accelerated transition away from fossil fuels. If that were to occur, McKinsey concludes:

• A radical disruption scenario in road transport and chemicals sectors brings peak oil demand before 2025, and a ~30 MMb/d decline by 2035 compared to the Reference Case
• Liquids demand disruptions reduce the need for unsanctioned projects by ~50%, driving project cancellations and delays mostly in offshore regions and oil sands
• The reduced supply stack leads the average global crude slate to become more sour 
• Lower oil demand could subsequently drive OFSE and refinery utilization down, with European refineries feeling the strongest impact; there could be further opportunities in decarbonization

The tea leaves do not suggest to me we will see that "accelerated transition" but even so, let's say we do, read the McKinsey summary very, very closely. If I'm reading that correctly, even in the Accelerated Transition case, global demand for liquids will increase by 10 million bpd by 2035.