America’s New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy Volume 1: National Economic Contributions, Appendix A
which is influenced by price, policy, and infrastructure, determines its competitive position relative to other fuels.
Liquid Production Capacity Liquids refer to crude oil, condensate, and natural gas liquids. IHS CERA also includes nontraditional liquid fuels such as biofuels (ethanol and biodiesel), extra-heavy oil (Canadian oil sands, Venezuelan tar sands), gas-to-liquids (GTL), coal-to-liquids, and oil shale. Liquids are processed to varying degrees into refined products, except for a small volume of crude oil that is directly used for power generation. IHS CERA’s production capacity and production projections for the Dawn of a New Age scenarios are based on CERA’s reference case for liquids, which represents a view on future liquid production capacity assuming business continues as usual. The reference case accounts for some seasonal maintenance and includes:
how existing fields are likely to evolve
timing of the sanctioning and start-up of new projects, including exotic fuels
estimates of new capacity provided by future exploration
depletion assumptions for existing and future production
The reference case does not take into account the impact of dramatic oil price swings, extreme weather, strikes, civil unrest, war, and political changes that affect liquid production capacity and actual production on a regional and a global basis. It provides an aggregate picture of how liquids capacity evolves without major disruption and provides a base line reference case. The Dawn of a New Age scenarios use the reference case as a starting point and then adjustments are made based on assumptions about these aboveground factors that can lead to capacity and production deviating from our reference case. These scenarios are the basis for our market analysis.
Oil Prices The foundation of IHS CERA’s crude oil and refined product price projections is the balance between world oil demand and supply that is built up from our demand and liquid capacity analysis. The price of crude oil is the single most important price in the oil market. The crude oil price projections are based to a large extent on the following factors:
IHS
Relative balance between demand and supply. A finely balanced market generally supports a high price environment compared with one where supply is far in excess of demand. An indicator of how supply levels compare with demand is the level of oil held in inventories. At the global level this is an implied figure since there are no global inventory figures. The production figures used in this analysis are based on our liquid production capacity work, described above. However, our production projections take into account any supply disruptions or production problems that are in line with the parameters of a given scenario. Disruptions or other production problems are not shown in our liquid production capacity outlooks unless the disruption has a material impact on production capacity.
Spare production capacity. Spare crude oil production capacity is the oil market’s shock absorber since it plays a critical role in offsetting unexpected supply losses. The volume of spare crude oil production in future years will be a strong influence on oil
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