Oil and Gas, 2008

U.S. Market Overview

According to the U.S. Energy Information Administration (EIA), the United States holds about 21 billion barrels of proven oil reserves and 211 trillion cubic feet (tcf) of natural gas. U.S. crude oil production, which declined following the oil price collapse of late 1985/early 1986, leveled off in the mid-1990s and began falling again following the sharp decline in oil prices of late 1997/early 1998. During 2007, the United States produced about 5.1 million barrels of crude oil per day (bpd), a 50-year low. EIA expects that higher oil prices and new technology will increase oil production to a peak of about 6.28 million bpd in 2018. Top producing areas are the Gulf of Mexico, Texas, Alaska's North Slope, California, Louisiana, Oklahoma, and Wyoming.

In 2007, net imports of oil and petroleum products totaled 13.4 million bpd, or 59 percent of total consumption. The top suppliers of imported oil to the United States were Canada, Mexico, Saudi Arabia, Venezuela, and Nigeria. The EIA expects that oil consumption will grow from about 20.6 million bpd in 2007 to 22.8 million bpd in 2030, but that the share of imports will fall to about 54 percent.

There are 145 refineries in the United States, with a capacity of 17.4 million bpd. Most refineries are operating at or near capacity, and it is likely that many refineries will expand in the next few years, but new refinery construction is not expected.

In 2007, the United States produced 24 tcf of natural gas. Domestic gas production has been flat for many years, with only slight increases in production projected. As gas imports from Canada decline, imports of liquefied natural gas (LNG) are projected to increase, spurring many plans for new LNG regasification terminals. EIA expects that net LNG imports will grow from 0.5 tcf in 2006 to 2.8 tcf in 2030. There are currently plans for more than 30 new terminals in North America; however, it is unlikely that more than 8-10 of them will actually be built.

EIA expects that unconventional oil and gas production will increase as conventional supplies dwindle. In 2006, the United States produced 8.5 tcf of gas from unconventional sources, such as coalbed methane, tight sandstone, and gas shales. EIA expects unconventional production of gas to rise to 9.5 tcf by 2030.

It is possible that in the coming years, Congress will decide to open more oil and gas provinces to development, including more fields on Alaska’s North Slope, additional areas in the Gulf of Mexico, more areas off the Atlantic and Pacific coasts, and onshore areas in the lower 48 that hold oil sands resources and oil shale resources.

Investment Potential

Many majors and independents are foreign-owned or affiliated. Two of the largest U.S. oil and gas producers are British-owned BP, and Anglo-Dutch Shell. In 2005, production by companies with foreign direct investment made up almost 14 percent of the oil and about 11 percent of the natural gas produced in the United States. There are no official restrictions on participation by foreign companies in oil and gas production, refining, or distribution. Exports of crude oil are only allowed if found to be consistent with the Department of Commerce's specific export control requirements or falling under very limited exceptions. There are not as many restrictions on the export of natural gas, but companies must apply for a permit from the Department of Energy.