WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

October 28, 2022

MEMORANDUM FOR: Angelina LaRose

Assistant Administrator for Office of Energy Analysis

FROM: Jim Diefenderfer

Director, Office of Long-Term Energy Modeling

Subject: Summary of Oil and Gas Supply, Liquid Fuels Market, International 

Energy, and Natural Gas Market Modules Working Group Meeting held 

on September 29, 2022

This memorandum summarizes the presentation given during the Annual Energy Outlook (AEO) 2023 Oil 

and Gas Supply, Liquid Fuels Market, International Energy, and Natural Gas Market Modules Working 

Group meeting and the resulting discussions that took place. The meeting had three parts that focused 

on each of the different modules. 

The presentation slides are available in a separate document on our website. All slides, charts, and 

discussions for AEO2023 were preliminary and, therefore, should not be quoted or cited. We will release 

final AEO2023 materials in early 2023.

Oil and Gas Supply Module

Will Sommer presented on this module. He discussed how updates for AEO2023, including routine data 

updates, changes to drilling responsiveness, and representation of the Inflation Reduction Act (IRA) will 

affect oil and natural gas supply projections. He highlighted several points:

Model and data updates

• Updated assumptions for tight and shale estimated ultimate recovery (EUR) of crude oil and 

natural gas per well

• Updated the Lower 48 states offshore and Alaska announced discoveries

• Updated historical production through 2021

• Updated drilling responsiveness

Preliminary results

We project:

• West Texas Intermediate (WTI) crude oil prices will be higher than in AEO2022.

• U.S. crude oil production will be slightly higher than AEO2022 projections with higher oil prices.

• U.S. crude oil production will grow, primarily as a result of tight oil from the Permian Basin.

• U.S. dry natural gas production will be less than in AEO2022 after 2025.
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

 DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE.

• Marcellus, Hayesville, Utica, and tight oil plays will be the primary drivers of growth in shale gas 

production.

• Natural gas plant liquids (NGPL) production will be lower than in AEO2022 after 2025.

Discussion

An attendee asked about including oil and natural gas provisions from the IRA in the natural gas market. 

We explained the increased royalty rate of 16.67% is included in the model, but leasing costs are not 

included because they are considered sunk costs.

Liquid Fuels Market Module and International Energy Module

Peter Colletti and Adrian Geagla presented on this module. Peter covered key data updates for AEO2023

about domestic petroleum consumption, gross product exports, diesel price spreads, and biofuels 

supply, in particular, renewable diesel. Adrian covered Brent crude oil prices, crude oil supply and 

exports, and refinery supply and utilization. They highlighted several points:

Model and data updates

• Updated international crude oil and petroleum product curves

• Updated crude oil price differentials by crude oil type

• Updated pipeline capacity and transportation costs

• Updated state and federal fuel taxes

• Updated historical and Short-Term Energy Outlook (STEO) liquid fuels data

• Updated refinery, biofuels, and cogeneration capacities

• Substituted unfinished oils imports from Russia with imports from other countries

• Updated annual and biannual biofuels capacities and E15 penetration rates

• Updated Renewable Fuel Standard (RFS) mandate levels

• Added a representation of Sustainable Aviation Fuel (SAF)

• Added Oregon’s Clean Fuels Program (CFP) based on the existing representation of California’s

Low Carbon Fuel Standard (LCFS)

Preliminary results

We project:

• Brent crude oil prices will be higher over the projection period compared with AEO2022.

• The Brent-WTI price spread will rise in the near term and remain similar to AEO2022 throughout 

the rest of the projection period.

• Crude oil exports will decline slightly in the near term and remain under 25% of total crude oil 

production through the rest of the projection period.

• The total crude oil supply will be slightly lower than in AEO2022, but refinery utilization will

remain strong over the projection period.

• Consumption of domestic petroleum products will be slightly lower than in AEO2022 through

the projection period.

• Gross product exports will be higher than in AEO2022 to compensate for lower domestic 

demand, and gross product imports will remain unchanged.

• Price spreads between gasoline and diesel will be narrower in the near term before settling at a 

slightly higher spread compared with AEO2022.
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

• Biofuels supply will be slightly lower than in AEO2022.

• Renewable diesel supply will be higher than biodiesel supply throughout the projection period.

Discussion

One attendee asked about cost and availability of feedstock in SAF representation. We explained that 

although we have no explicit assumptions about costs of feedstock, the SAF demand for feedstock 

competes with demand for renewable diesel and biodiesel production. Other attendees asked about 

SAF representation in the AEO2023 published data tables. We stated that SAF will be accounted for in 

the AEO tables for the first time but will not be separated like the renewable diesel and biodiesel

projections. An attendee asked about SAF credits in 2023 and 2024 as set forth in the IRA. We stated 

that a flat credit for SAF production will be included, but scaling credits based on carbon intensity are

not included in AEO2023.

An attendee asked about the drop off in supply of renewable diesel and biodiesel in 2024. We explained 

biofuels credits apply through 2024, and then a lack of economic incentive comes into play starting in 

2025.

Natural Gas Market Module

Stephen York presented updates for AEO2023 that were related to natural gas production and 

consumption, spot prices, pipeline trade with Canada and Mexico, and liquefied natural gas (LNG) 

exports and facilities. He highlighted several points:

Model and data updates 

• Incorporated data from the Natural Gas Annual, released September 2021 (2020 annual data)

• Incorporated data from the Natural Gas Monthly through April 2022 (complete 2021 history)

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

Canada

• Updated in-service dates of LNG export facility projects and the first year of allowed 

endogenous LNG builds

• Notable non-model updates include the world oil price assumptions, impacts from the Inflation 

Reduction Act (IRA) in the upstream and electric sectors, and changes to STEO

• Restructured the representation of projected natural gas flows within Texas into three distinct 

demand nodes based on Texas Railroad Commission Districts

Preliminary results 

We project:

• U.S. natural gas consumption and production will be lower in the long-term projections 

compared with AEO2022 due to the IRA provisions.

• Henry Hub natural gas spot prices will fall from 2022 highs before settling around $4.00 per 

million British thermal units (MMBtu) by 2050.

• Large declines in natural gas consumption in the electric power sector relative to AEO2022 due 

to impacts from the IRA.
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

• Imports from Canada will increase, but we expect overall imports to remain mostly unchanged 

compared with AEO2022.

• Pipeline exports to Mexico will be lower than in AEO2022, with projected growth in exports to 

Mexico will peak near 2035.

• Some LNG facilities will be completed earlier than assumed in AEO2022. In addition, we are 

exploring some updates to the number of trains that can come online in a given year.

• LNG exports will be higher in AEO2023 as LNG export economics will be more favorable 

compared with AEO2022.

Discussion

An attendee asked about model consideration of pipeline exports to Mexico for LNG export projects. We 

explained that this LNG export project is not being represented, and we do not currently allow for the 

construction of LNG export facilities in Mexcio at this time. 

Attendees

Registered guests (Webex and phone)

Jenna Bloxom Advanced Biofuels USA

Ray Boswell U.S. Department of Energy

Phillip Brown Library of Congress, Congressional Research Service

Claire Dodinval ICF

Andrew Foss U.S. Department of Energy

Kathy Gramp Congressional Budget Office

Tim Grant U.S. Department of Energy

Joyce Kim U.S. Environmental Protection Agency

Eric Kreig ICF

Brian Lavoie U.S. Department of Energy

Beth Lau Canadian Association of Petroleum Producers

Tony Radich U.S. Department of Agriculture

Michael Schaal OnLocation Inc.

Kristen Strellec Bureau of Ocean Energy Management

Wyatt Thompson University of Missouri, Food & Agriculture Policy Research Institute

Ken Walsh Leidos Inc.

Jarrett Whistance University of Missouri, Food & Agriculture Policy Research Institute

Frances Wood OnLocation Inc.

EIA participants (Webex and phone)

Erin Boedecker

Hannah Breul

Michael Cole

Peter Colletti (presenter)

Matt Corne

Jim Diefenderfer

Michael Dwyer

Kathryn Dyl

Mindi Farber-DeAnda

Adrian Geagla (presenter) 

Ari Kahan

John Maples

James Preciado

Mark Schipper

Elizabeth Sendich

Estella Shi (presenter)

Sauleh Siddiqui

Nicholas Skarzynski

Andrew Smiddy

Manussawee Sukunta

Will Sommer (presenter)

Stephanie Tsao

Mary Webber

Stephen York (presenter)