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North America Energy Creating Shift Worldwide

Natural gas and oil liquids growth that's expanded in North America is expected to expand globally, with U.S. energy imports continuing to decline. The reordering of the fossil fuel mix in North America will prompt a rethinking of domestic energy policy, according to the authors of a study expected later this summer.

New York City-based energy consultants at PIRA Energy Group haven't dotted all the "I'"s or crossed at the "T"'s yet, but President Mark Schwartz said he sees implications for macroeconomic developments and eventual policy shifts in the preliminary results from "The Road to U.S. Energy Independence: The Shale Revolution and Its Implications for North America's Energy Markets."

The natural gas part of the revolution has been ongoing for up to seven years, and Schwartz said PIRA already has chronicled the production and export potential of U.S. gas supplies in earlier reports. The report examines national and regional flows of oil, gas and liquids, and infrastructure constraints, along with what Schwartz called "the implications of all this on flat crude and relative crude pricing."

As an outgrowth of the shale gas and oil booms, liquids are poised to take off, said PIRA's Schwartz, an economist who holds a doctorate from the University of Pennsylvania. He noted that while the liquids market is still "relatively small and global -- not regional -- we see some of the same aspects of the game-changing developments [for shale gas and oil] certainly for North America, and potentially for the world...

"Prospects for the Bakken and Eagle Ford plays have been revised up, and over time, production from shale plays that are currently known and will to be discovered will account for a greater share of growth. The upside potential from new discoveries is probably greater than the downside, if -- and this is a big 'if' -- crude prices remain at or above current levels."

The projected liquids growth seen by PIRA researchers will not come from crude alone. Both oil and gas drilling will contribute "significantly" to U.S. liquids growth, he said.

PIRA's study is expected to underscore a "structural decline" in energy imports with the robust domestic production growth and the essentially flat demand being projected. The import decline has been underway since 2005, he said.

"This represents a dramatic reversal of both history and expectations for the future. We don't see the United States becoming totally independent of imports, but we're certainly on the road to structural decline. It may also bring about a change in energy policy given that energy security and the drive to reduce dependence on imported oil has tended to be a driver of U.S. energy policy discussions the last four years."

Another factor that PIRA addresses in its upcoming report is that as imports overall decline a growing portion of those imports will be coming from Canada, driven by increased oil sands production and shale development. "When we combine the balances in the U.S. and Canada it is plausible that North America will become a net energy exporter to the world some time in the next decade," Schwartz said.

In this environment, PIRA envisions U.S. Gulf of Mexico imports shrinking; oil pipeline takeaway from Cushing, OK, being sufficient, but upstream there may be bottlenecks forming. Natural gas liquids production during the same time should grow "dramatically." As a result, the United States will become a "more extensive" exporter of energy, Schwartz said.

The upcoming study is scheduled for release in September and will concentrate primarily on liquids, along with implications for gas and alternative fuels, a spokesman said. PIRA plans to provide clients with a written report and a two-day forum in Houston on Sept. 10-11.

Separately last week Navigant Consulting's Boulder, CO-based Pike Research unit reported that there could be more than 25 million light-duty natural gas vehicles (NGV) on the road worldwide by the end of 2019 when annual NGV sales are projected to reach 3.2 million. Pike is including as light duty (LD) NGVs both passenger cars and light-duty pickup trucks, along with SUVs, vans and light commercial vehicles. The report was written by senior analyst Dave Hurst and Research Director John Gartner.

Hurst said Pike's overall analysis envisions the global growth of these NGVs despite the continuing lack of a wide variety of NGV models and the lack of fast and cost-effective public and at-home fueling facilities. "Infrastructure remains a key concern in many countries, but it is clear that the low cost of natural gas, combined with geopolitical forces, will expand the market for these vehicles."

Pike's report, "Light Duty NGVs" analyzes global market opportunities for NGVs in both the passenger car and pickup truck space, assessing those light-duty vehicles current market, fuel availability, demand drivers, policy factors, and technology issues tied to NGV growth for the consumer and fleet markets. The report breaks down the global market into five regions -- North America, Latin America, Europe, Asia Pacific, and the Middle East/Africa.

"Many governments have promoted the growth of NGVs, either by offering reduced taxes on the vehicles or by increasing investment in refueling infrastructure," Hurst said. The Asia Pacific region will continue to be the largest regional market globally for NGVs, but NGVs also will grow at a "healthy rate" for North America, with a compound annual growth rate of 10.2% from now through 2019.

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