Energy Systems Consulting Perspectives

Energy Systems Consulting Perspectives

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New Study Examines Impact of Halting New Lease Sales in Gulf of Mexico

Posted by OnLocation on May 26, 2022 6:51:13 AM

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OnLocation was asked by the Natural Resources Defense Council (NRDC) to examine the impact of stopping new offshore oil and gas leasing in the Gulf of Mexico (GOM) after January 2021, while continuing all leases prior to January 2021. The analysis assumed that the remainder of onshore production continued to be developed per “current laws and regulations.” Read the report here.

For the analysis, OnLocation created a version of the U.S. Energy Information Administration’s Annual Energy Outlook 2021 (AEO2021) National Energy Modeling System, here referred to as “NRDC-NEMS.” The results of the NRDC-NEMS analysis were compared to the AEO2021 Reference case for the years 2021 to 2035 for the following metrics: 1) Production and prices of crude oil and natural gas, 2) Prices of gasoline and diesel, and 3) Emissions of carbon dioxide (CO2) and methane (CH4).

Key highlights from comparing the results of ‘No New leasing’ in GOM with the AEO2021 Reference case are:

- Domestic U.S. production of natural gas increases in 2024 and 2025 due to shifting from offshore gas to onshore shale gas and tight oil. That shift produces greater volumes of associated-dissolved gas and results in an incremental increase in natural gas production.

- Domestic U.S. production of natural gas starts to decrease in 2026 and is 1.1% lower in 2035 than projected natural gas production in the AEO2021 Reference case.

- Domestic U.S. production of crude oil starts to decrease in 2027 and is 2.3% lower in 2035 than projected oil production in the AEO2021 Reference case.

- Crude oil and natural gas production from GOM are 15% and 38% lower respectively in 2035 than the Reference case.

- Oil and natural gas prices increase slightly by $0.90/barrel and $0.06/million btu by 2035 relative to the Reference case.

- Gasoline and diesel prices increase over time to $3.01/gallon and $3.45/gallon respectively in 2035 in the ‘No new leasing’ scenario, which is 2 cents/gallon higher than those prices in the Reference case in 2035.

- From 2021 through 2035 and relative to the Reference case, the ‘No new leasing’ scenario results in cumulative reductions of 660 million barrels of domestic oil production and 2.3 trillion cubic feet of domestic natural gas production. The resultant changes in oil and gas production, distribution, and consumption in the ‘No new leasing’ scenario produce a lower cumulative amount of 97 MMT CO2* and 470 MT CH4* in the U.S. as compared to the Reference case from 2021 to 2035.

*CO2 and CH4 emissions from oil/gas exploration and production outside U.S. associated with imported oil and gas are not included in this analysis.

For more information about the OnLocation’s integrated energy modeling capabilities, visit our website.

OnLocation, a KeyLogic company, is an independent analysis firm that uses quantitative methods to better inform business decisions and policy development at a wide variety of energy sector organizations, including government agencies, non-profit organizations, and energy-related businesses that represent a broad spectrum of interests. Contact us for a free consultation.

Topics: Energy Policy, Oil and Gas Production, Scenario Analysis

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