EIA predicts energy independence by 2026, but it's not all bad news for Canada
In their latest Annual Energy Outlook 2017, the US Energy Information Agency (EIA) now estimates the US will be energy independent by 2026, shifting the country from a net energy importer to a net exporter. Total US energy production is expected to increase more than 20% from 2016 to 2040, but consumption is expected to rise only 5% during that period. The last time the US was a net energy exporter was 1953.
A big part of that forecast is expanding natural gas production, which continues to grow in the US. Gas exports will increase sharply in 2020 thanks to several LNG export facilities expected to come online over the next few years. US imports of natural gas from Western Canada is expected to continue to decline, while US exports to Eastern Canada will increase due to proximity to the Marcellus shale basin.
Natural gas consumption will continue to rise in the US, mainly due to higher demand from the petrochemical industry and declining use of coal-fired power. Higher demand and increased LNG exports will likely be bullish for Henry Hub prices (priced out of Louisiana) and may in turn lift gas prices out in Western Canada.
Most Canadian oil and gas producers are already betting on higher natural gas prices next year, which is headwind for the big oil sands players that have little or no gas production (such as Suncor and Cenovus). If the EIA forecast is correct, that trend is likely to continue.
US oil production is expected to peak at 11 million bbl/day as extraction from tight oil formations moves into less productive areas and productivity gradually decreases. However, the EIA concedes production from unconventional plays can be difficult to predict since extraction technology continues to evolve.
Much of the EIA's forecast is predicated on the price of oil, which they expect will top US$100 a barrel by 2040 (in 2016 dollars).
The news isn't all bad for Canada's oil producers, however. US refineries are designed for heavy oil, which provide better yields and margins than light oil. Since the growth in US production is all light oil, demand for Canadian heavy oil is expected to remain strong. Imports of Canadian oil into the US reached record highs late last year, despite falling import volumes into the US overall.