WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE. 

October 22, 2020

MEMORANDUM FOR: Angelina LaRose

Assistant Administrator for Energy Analysis

FROM: John Staub

Director for Petroleum, Natural Gas, and Biofuels Analysis

Subject: Summary of Oil and Gas Supply, Liquid Fuels Markets, and Natural Gas

Markets Working Group Meeting held on September 23, 2020

This memorandum summarizes the presentation given during the Annual Energy Outlook (AEO) 2021 Oil 

and Gas Supply, Liquid Fuels Markets, and Natural Gas Markets Working Group meeting and the 

resulting discussions that took place. The meeting had three parts. The first part covered the Oil and 

Natural Gas Supply Module (OGSM). The second part covered the Liquid Fuels Market Module (LFMM) 

and International Energy Model (IEM). The third part covered the Natural Gas Markets Module 

(NGMM). The presentation slides are available in separate documents on the U.S. Energy Information 

Administration’s (EIA) website. 

All slides, charts, and discussions for AEO2021 were preliminary and therefore, should not be quoted or 

cited. Final AEO2021 materials will be released in early 2021. 

OGSM

In her presentation, Dana Van Wagener covered three main topics: data updates and model 

improvements for AEO2021, assumptions related to COVID-19, and preliminary results for AEO2021. She 

highlighted the following points:

Results (AEO2021)

• U.S. crude oil production and natural gas production are sensitive to resource availability and 

technological improvements.

• U.S. crude oil production and natural gas production continue to be driven by growth in tight oil 

and shale gas supply.

• U.S. crude oil production is generally lower in AEO2021 than in AEO2020 because of lower 

global oil prices.

• The Bakken and Wolfcamp formations lead growth in tight oil production.

• The Marcellus and Utica formations lead production of shale gas.

• U.S. production of natural gas plant liquids is lower in AEO2021 than in AEO2020.

Model and data updates (AEO2021)

• Updated estimated ultimate recovery (EUR) for tight and shale wells
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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• Updated historical production through 2019 and estimate for 2020

• Improved the offshore discovery process component

• Updated offshore announced discoveries for Alaska and Lower 48 states

COVID-19 related assumptions (AEO2021)

• Increased hurdle rate of return

• Reduced drilling responsiveness to price changes in the short term

Discussion

The first question was about how drilling costs will change with the recent drop in drilling activity and 

improved drilling efficiency and technology. We (EIA) explained that decreasing oil prices and decreasing 

activity levels put downward pressure on costs. Another question was related to oil production 

(particularly about the Bakken and Eagle Ford regions and EIA’s expectations for their production levels 

in the long term). We explained that in the OGSM methodology, production is modeled at the play level. 

The Bakken has a lot of technically recoverable reserves, and better quality resources are produced first. 

Over time, drilling moves to less-productive areas, which become economical as the oil price increases. 

The Eagle Ford is a smaller area than the Bakken, so drilling moves to less-productive areas less often 

but still moves. 

Participants also asked about natural gas production. One question was about drilling shifting to gassier 

plays if natural gas prices have a stronger recovery than oil prices. We explained that if natural gas prices 

have a stronger recovery than oil prices, gassier plays will become more economical than oilier plays, all 

based on the economics of projects within each play. Another question was asked about EIA’s view of 

associated gas production. We explained that as with crude oil production, natural gas produced in 

primarily oil formations (associated gas) also declines because of the relatively low prices in the short 

term. We do not project associated gas to return to 2019 levels until 2024, and then we expect it to 

steadily increase at a modest rate through 2050, primarily driven by increased drilling in the Permian 

Basin. We also clarified that natural gas production in the AEO does not include flared gas. 

LFMM and IEM

Estella Shi gave the next presentation. She began by showing the updated crude oil price path for 

AEO2021. She described trends in refining, crude oil and petroleum product trade, and petroleum 

product prices. She focused on updates to biofuels data and representation in LFMM. 

Results (AEO2021)

• Projections for the crude oil price path in AEO2021 will be lower than in AEO2020.

• Crude oil supply to U.S. refineries is lower in AEO2021 than in AEO2020, reflecting lower 

atmospheric distillation capacity.

• U.S. crude oil exports are higher in AEO2021 than in AEO2020 in the long term.

• The spread between gasoline and diesel prices is lower in the short term, but it returns to a 

similar spread in AEO2021 as in AEO2020 in the long term.

• Biofuels supply recovers quickly but remains lower in AEO2021 than in AEO2020.
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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• Biodiesel and renewable diesel supply are more in line with historical levels in AEO2021 

compared with AEO2020.

Model and data updates (AEO2021)

• Updated international crude oil and product import and export curves

• Updated crude oil price differentials

• Updated pipeline capacity and transportation costs

• Updated annual data on state and federal fuel taxes

• Updated annual capacity data for refinery and cogeneration

• Reactivated and extended the biodiesel blender tax credits through 2022 (per legislation)

• Added revenue for sale of distillers dried grain 

• Updated annual capacity data for ethanol, biodiesel, and renewable diesel

• Updated data on E15 maximum market penetration rates (slower growth through 2025)

• Improved representation of biodiesel imports

• Added representation of renewable diesel imports

• Updated E85 representation

Discussion

All of the questions were related to biofuels. 

A participant asked about renewable jet fuel, and we confirmed that we consider it a separate stream in 

the model. To be clear, the model produces liquid streams from renewable feedstocks that are available 

to blend into jet fuel, but renewable jet fuel production is not specifically tracked in the model. Another 

participant asked how LFMM will handle renewable fuel mandates (RFS) after 2022 when the 

congressionally mandated volumes will end. We explained that in the model, RFS increases through 

2030 and then it is constant. We also updated this assumption to reflect current congressional 

mandates. We modeled RFS levels through 2030 instead of 2022 because LFMM includes a phase out 

(through 2030) of the small refinery exemptions (SRE), which we included in the RFS adjustment 

because the LFMM was not designed to explicitly model SRE. As a result, we modeled RFS levels as 

increasing through 2030, and then they were kept constant after that. One participant was concerned 

about the distribution cost for corn ethanol not being appropriately represented. We noted that we do 

not plan to update this cost for AEO2021 but may consider researching it for AEO2022. 

A couple of participants were curious about how the E85 consumption volumes would be different in 

AEO2021 compared with AEO2020. We explained that although we are still working on the 

transportation side of NEMS, which can have implications on this result, E85 volumes will be slightly 

higher in AEO2021 but will account for a small fraction compared with other petroleum products. 

Another participant had a question about E85 costs. This participant wanted to know if we considered 

increased costs for E85 (as a result of being taxed at the same rate as gasoline). We confirmed that we 

do. Lastly, a participant asked if renewable diesel capacity data are available on our website, and we said 

that it is not; only biodiesel capacity data are available.
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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NGMM

Katie Dyl presented natural gas prices, consumption, production, and trade preliminary results for 

AEO2021 as well as assumptions made regarding liquefied natural gas (LNG) exports and COVID-19. 

Results (AEO2021)

• U.S. natural gas consumption and production are both lower in the short term. In AEO2021, 

consumption returns to AEO2020 levels, but production remains lower than AEO2020 levels.

• U.S. Henry Hub natural gas spot prices are higher in AEO2021 than in AEO2020 in the short term.

• U.S. natural gas exports to Canada are lower in AEO2021 than in AEO2020.

• Preliminary results suggest that no additional LNG export capacity will be built in the Reference 

case.

Model and data updates (AEO2021)

• Incorporated data from the Natural Gas Annual, released November 2019 (2018 annual data)

• Incorporated data from the Natural Gas Monthly through April 2020 (complete 2019 history)

• Updated pipeline capacity data, natural gas price data, and historical data for Mexico and Canada

• Updated dates of LNG export facility projects

• Will potentially update nameplate versus peak capacity for LNG export facilities and shipping costs 

from both the U.S. Gulf Coast and the East Coast to Asia and Europe

Discussion

Participants asked a few questions about the NGMM. One was about accounting for biogas and 

renewable natural gas. We explained that we account for both under Supply in Supplemental natural 

gas. We elaborated that we use our surveys for data inputs into the model, that the current relevant EIA 

survey (Form EIA-176) does not have a good way to account for renewable natural gas, and that not all 

suppliers are represented. Another question was about how much of the Elba Island LNG facility’s 

capacity is included in AEO2021, and we confirmed that all of this capacity is included and a spreadsheet 

with all LNG facilities is available on the EIA website. Another participant wanted to know if EIA 

considers hydrogen production from natural gas in the context of natural gas demand. We explained 

that we would potentially consider that idea as a future project.

Attendees

Registered Guests (WebEx/phone)

Emil Attanasi U.S. Geological Survey

Jose Benitez U.S. Department of Energy

Ray Boswell National Energy Technology Laboratory

James Brooks RBAC Inc.

Phillip Brown Congressional Research Service

Dallas Burkholder U.S. Environmental Protection Agency

Chris Carr n.a. 

Ernest Carter U.S. Department of Agriculture
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE. 

Luciane Cunha National Energy Technology Laboratory

Trisha Curtis n.a. 

Anthony Dixon California Energy Commission

Kevin Easley U.S. DOE Fossil Energy Program

Melchert Elena U.S. Department of Energy

Nicholas Farrar IPA Global

Cory Forgrave U.S. Dept of Interior, Office of Natural Resources Revenue (ONRR)

Evan Frye U.S. Department of Energy

Kathy Gramp Congressional Budget Office

Scott Greenip U.S. Dept of State, Bureau of Energy Resources

Walter Guidroz U.S. Geological Survey

Robert Gulliksen California Energy Commission

Donald Hanson Argonne National Lab

David Hughes Global Sustainability Research, Inc.

Blu Hulsey Continental Resources, Inc.

Svetlana Ikonnikova TUM School of Management

Gabby Intihar U.S. Department of Energy

Joanne Ivancic Advanced Biofuels USA

Bryan Just American Petroleum Institute

Jordan Kislear U.S. Department of Energy

Brian Lavoie U.S. Department of Energy

Yupo Lin Argonne National Laboratory

Michael Lynch Energy Policy Research Foundation, Inc. (EPRINC)

John Meyer Leidos Inc.

Marianne Mintz Argonne National Lab

Ryan Monson n.a.

David Morgan National Energy Technology Laboratory

Brett Murray Advanced Resources International, Inc.

Dale Nesbitt Stanford University and ArrowHead

Chris Nichols National Energy Technology Laboratory

Ramses Omar Cabrales Federal Energy Regulatory Commission

John Powell U.S. Department of Energy

Tony Radich U.S. Department of Agriculture

Tim Reinhardt U.S. Department of Energy

Michael Schaal OnLocation, Inc.

Charles Sheppard EOG Resources, Inc.

Zota Stevens U.S. Department of Energy

Tony Straquadine The INGAA Foundation Inc.

Morgan Summers National Energy Technology Laboratory

Wyatt Thompson University of Missouri

Paul Touradji Touradji Capital Management

Barbara Treat Infrastucture World

Peri Ulrey Natural Gas Supply Association

Boddu Venkatesh ICF International, Inc.
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE. 

Shree Vikas Conoco Phillips

Ken Walsh Leidos, Inc.

Jarrett Whistance University of Missouri

Frances Wood OnLocation, Inc.

Lester Wyborny U.S. Environmental Protection Agency

Yan Zhou Argonne National Laboratory

EIA participants (WebEx/phone)

Erin Boedecker

Hannah Breul

Michael Cole

Meg Coleman

Troy Cook

Jim Diefenderfer

Kathryn Dyl (presenter)

Mindi Farber-DeAnda

Adrian Geagla

Peter Gross

Sean Hill

Ari Kahan

Angelina LaRose

Kirby Lawrence

Mary Lewis

Perry Lindstrom

John Maples

Barbara Mariner-Volpe

Elizabeth May

Jim O'Sullivan

Albert Painter

Corrina Ricker

Elizabeth Sendich

Estella Shi (presenter)

Nicholas Skarzynski

John Staub

Manussawee Sukunta

Dana Van Wagener (presenter)

Warren Wilczewski

Stephen York

Victoria Zaretskaya