The US Department of Energy’s Energy Information Agency has posted its early release of Annual Energy Outlook 2006.
In recognition of major changes in the energy markets since last year there are several significant differences in what the agency calls its base case. World oil production is expected to grow at a slower rate than previously projected, with total production in 20 years more than 10% lower than projected last year. Essentially all of the difference comes from OPEC. Last year the EIA thought that OPEC members would be supplying 55 million barrels of oil per day by 2025, now, just one year later the projection for the same year is only 44 million barrels.
There are a number of assumptions underlying the projections, but one possibility is that suppliers like high oil prices and will keep their projection in check in order to keep them there. An alternative explanation that results in essentially the same projection is that reserves are smaller than previously assumed and production restrictions are a natural result of increased difficulty in recovery.
Other differences in the annual report include the fact that the base case includes 6,000 MW of capacity (with an assumed capacity factor of about 90%) from new nuclear electric power plants by 2025, in addition to approximately 3,000 MW in new capacity from power uprates in currently operating plants. Last year’s report included the following statement:
“No new nuclear units are expected to become operable between 2003 and 2025.”
A third major difference in the report is a one third reduction in US LNG imports by 2025. Last year’s report projected that the number would be 6.4 Trillion cubic feet, this year’s number is 4.1 Trillion cubic feet. The difference is explained by increasing world natural gas prices caused by the fact that other countries are increasingly converting from coal to cleaner burning natural gas and are increasing their gas to liquid (GTL) fuel production in response to higher oil prices.
What a difference a year makes.