WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

June 15, 2021

MEMORANDUM FOR: Angelina LaRose

Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

Director, Office of Long-Term Energy Modeling 

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

Markets Working Group Meeting held on May 25, 2021

This memorandum summarizes the presentation given during the Annual Energy Outlook (AEO) 2022 Oil 

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

discussions that followed. The meeting had three parts that focused on different modules:

1. The Oil and Natural Gas Supply Module (OGSM)

2. The Liquid Fuels Market Module (LFMM) and International Energy Model (IEM)

3. The Natural Gas Markets Module (NGMM)

The presentation slides are available in a separate document on our website. 

All slides, charts, and discussions for AEO2022 were preliminary and, therefore, should not be quoted or 

cited. We will release final AEO2022 materials in early 2022. 

OGSM

Albert Painter presented results from AEO2021, planned data updates and model improvements for 

AEO2022, recent laws and regulations that affect oil and natural gas, and assumptions and questions to 

evaluate for AEO2022. He highlighted the following points:

Results (AEO2021)

• We project U.S. exploration and production from offshore and the Gulf of Mexico to level off 

toward the end of the projection period.

• We project U.S. natural gas and crude oil production to return to pre-pandemic levels by 2023.

• We project dry natural gas production to grow in the Appalachian, Southwest, and Gulf Coast 

regions.

Planned model and data updates (AEO2022)

• Update tight and shale estimated ultimate recovery (EUR) per well

• Update Lower 48 states offshore and Alaska announced discoveries

• Update historical production through 2020 and estimated production for 2021

• Update natural gas plant liquids (NGPL) factors for plays in the Denver-Julesburg Basin

• Calibrate to the Short-Term Energy Outlook (STEO)
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

• Split onshore Lower 48 states production into federal and nonfederal (if time permits)

Recent laws and regulations

• Revised oil and natural gas permitting rules in Colorado

• Took into account the pause on leasing federal lands and waters

Assumptions and questions to evaluate (AEO2022)

• Given current laws and regulations, what other considerations would affect the development of 

U.S. crude oil?

• What developments in NGPL production are not being captured?

• In the AEO2021, increased production in the Appalachian Basin primarily drives the growth in 

dry natural gas production. What are potential impediments to this projected production 

growth?

• What concerns exist about the projected growth in dry natural gas production from oil 

formations, particularly in the Permian Basin (Southwest region)?

Discussion

One attendee asked about dry natural gas growth in the Permian Basin. We explained that the demand 

for liquefied natural gas (LNG) exports primarily contributes to natural gas production growth. The 

greatest growth is in the Permian Basin and Haynesville Basin, which are close to the Gulf Coast LNG 

export facilities.

Another attendee asked if our models incorporate the social costs of greenhouse gases (GHG) in 

government decision-making, such as leasing. We explained that the model assumes current laws and 

regulations and that we consider carbon dioxide and GHG in the macroeconomic and carbon modules of 

the National Energy Modeling System (NEMS). We do not model social costs of GHG on leasing.

LFMM and IEM

Peter Colletti presented key data updates planned for AEO2022, assumptions and questions to evaluate 

for AEO2022, and renewable fuel modeling hurdles for the LFMM. He highlighted the following points: 

Results (AEO2021)

• We project about 30% of domestic light crude oil production to be exported.

• We project heavy crude oil imports to be almost twice the volume of light crude oil exports.

• We project refinery utilization to remain stable over the projection period, as long as product 

exports remain economical to balance changes in petroleum-based product demand.

• We project the High Oil Price case to have higher market penetration of biofuels.

Planned model and data updates (AEO2022)—LFMM

• Update Renewable Fuels Standard (RFS) mandate levels

• Update refinery and biofuels capacities

• Update liquid fuels pipeline capacity

• Update historical and STEO data
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

Planned model and data updates (AEO2022)—IEM

• Update international crude oil supply curves

• Update crude oil price differentials for all crude oil types traded in LFMM

• Update U.S. petroleum products export and import curves

Assumptions and questions to evaluate (AEO2022)

• What percentage of domestic production of light crude oil is expected to be exported? Will it be 

balanced by heavy crude imports?

• Will refinery utilization continue to be high and balanced by product exports?

• What expectations exist between biodiesel and renewable diesel production levels? Both use the 

same feedstock (seed oil, yellow and white grease).

• Under what circumstances would we expect biofuels to have a larger penetration in the liquid 

fuels market?

Discussion

An attendee asked about anticipated electric vehicle (EV) impacts on gasoline demand. We explained 

the Transportation Demand Model (TDM) determines which vehicles, and by extension which fuel 

sources, are more relevant. LFMM provides the liquid fuels to meet TDM demands. We also added that 

the LFMM is not anticipating changes in the market with regard to ethanol blending, so any changes 

would depend on demands from the TDM.

An attendee asked if the LFMM splits E10 and E15 endogenously. We explained the E10 requirement for 

any blend can be displaced if it is economical. We further added that it is not forced but E15 allowance is 

exogenously limited. Someone also asked if ethanol and renewable diesel compete for D6 renewable 

identification numbers (RINs) in our model, but we do not model RIN accounting. An attendee who is a 

biofuel modeler shared that his team is investigating renewable diesel and biodiesel competition for 

feedstocks. They found that higher soybean oil prices will favor renewable diesel over biodiesel, but how 

long this trend persists is a key uncertainty.

An attendee asked if we analyze the competitiveness of U.S. refinery operations relative to other global 

refineries. We explained the International Energy Outlook (IEO) provides a comparison of domestic 

refining to other world regions. Although some refineries are closing or converting service to renewables 

production, we can only represent this shift in our model’s existing and planned capacity input data. The 

model is not set up to make these decisions endogenously.

An attendee asked about modeling sustainable aviation fuel. We stated that although it is not explicitly 

represented in the model at this time, sustainable aviation fuel is on the list for future updates.

NGMM

Stephen York presented planned updates for AEO2022, natural gas pipeline infrastructure, liquefied 

natural gas (LNG) exports and facilities, and assumptions and questions to evaluate for AEO2022. He 

highlighted the following points:

Results (AEO2021)

• We project the average annual Henry Hub price to remain below $4 in the Reference case.

• We project LNG demand will be sensitive to domestic and world oil prices.
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

• We project natural gas pipeline flows will increase as a result of pipeline expansion in the midAtlantic region to demand areas such as the eastern Midwest.

• We project U.S. natural gas exports will level off as a result of eastern Canada’s shift away from 

natural gas.

Planned model and data updates (AEO2022)

• Incorporate data from the Natural Gas Annual, released November 2020 (2019 annual data)

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

• Update in-service dates of LNG export facility projects

• Update world oil price assumptions

• Update economic recovery and related consumption changes

• Update STEO calibration

Assumptions and questions to evaluate (AEO2022)

• Which consumption sectors are most likely to see growth or declines over the next 30 years?

• What changes to interstate natural gas flows and pipeline infrastructure can we expect?

• Which LNG facilities that have yet to reach a final investment decision (FID) are most likely to 

come online, fueling LNG export growth?

• How much can U.S. natural gas pipeline exports grow?

Discussion

One attendee asked if natural gas assumptions will take into account climate goals established by the 

Biden administration and how these goals might affect natural gas demand. We replied that leasing 

orders, policies, and regulations are handled within OGSM. We explained that laws and regulations that 

are approved and in effect are reflected in the AEO. The administration’s goals are not integrated into 

the model. We explained that we need more details on how these goals will be implemented before 

considering model updates.

Attendees

Registered guests (WebEx/phone) 

Amy Andruszak

Emil Attanasi

Interstate Natural Gas Association of America

U.S. Geological Survey

Joe Benneche

Kevin Birn IHS Markit

Ray Boswell National Energy Technology Laboratory

Marshall Carolus INTEKI 

Luciane Cunha National Energy Technology Laboratory

Kenneth Ditzel FTI Consulting 

Anthony Dixon California Energy Commission

Katharine Ehly Natural Gas Supply Association

Steven Gabriel University of Maryland

Kathy Gramp Congressional Budget Office
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

Walter Guidroz U.S. Geological Survey

Robert Hershey Consultant

David Hughes

Bryan Just American Petroleum Institute

Jordan Kislear

Stephanie Kruse

U.S. Department of Energy

Oregon State Government

Brian Lavoie U.S. Department of Energy

Michael Lynch Energy Seer

James Nowlin U.S. Army Corps of Engineers

John Powell U.S. Department of Energy

Darryl Rogers IHS Markit

Isabella Ruble U.S. Department of Energy

Janani Shankaran Congressional Budget Office

Yvonne Sisler Z Federal

Robert Sudar U.S. Office of Natural Resources

Jarrett Whistance University of Missouri 

EIA participants (WebEx/phone)

Greg Adams

Daniel Agee

Erin Boedecker

Peter Colletti (presenter)

Troy Cook

Jim Diefenderfer

Kathryn Dyl

Joshua Eiermann

Mindi Farber-DeAnda

Adrian Geagla

Peter Gross

Sean Hill

Ari Kahan

Mala Kline

Angelina LaRose

Mary Lewis

Perry Lindstrom

Laura Martin

Elizabeth May

Kyle Morley

Kevin Nakolan

Albert Painter (presenter)

April Patel

James Preciado

Corrina Ricker

Andri Rizhakov

Mark Schipper

Estella Shi

Nicholas Skarzynski

William Sommer

John Staub

Manussawee Sukunta

Dana Van Wagener

Neil Wagner

Warren Wilczewski

Stephen York (presenter)