Tony Chovanec at Industrial Procurement Forum 2017
Tony Chovanec, vice president of fundamentals and supply appraisal, Enterprise Products.
According to the International Energy Agency (IEA), demand growth for hydrocarbons, particularly those produced in the U.S., is going to focus primarily on OECD (Organization for Economic Co-operation and Development) Asia.
"Think China, India, Vietnam, Thailand, Korea and Pakistan. That's where our demand growth is going to be, and it's not going to turn around," said Tony Chovanec, vice president of fundamentals and supply appraisal for Enterprise Products. "The European Union's got a sharp downward slope. The Middle East and Latin America have a little upward momentum. East Europe and Eurasia are about flat. In some form or fashion, that's more than the future. That's now."
The U.S. petrochemical community is adding a lot of capacity, enabling U.S. ethane to compete with petrochemicals around the world, Chovanec noted, discussing North American midstream at the Economic Alliance Houston Port Region's 2017 Industrial Procurement Forum held recently in Pasadena, Texas.
"There's a lot of space for U.S. oil and gas exports and for products that count on U.S. oil and gas to compete in the global community," Chovanec continued. "Six to nine months ago, there was this buzz about how all the global LNG markets were going to be glutted for years. Today, you don't read that. You read about companies talking about expanding because people now realize that U.S. natural gas is going to be very competitive."
According to projections, Chovanec said, U.S. production will double between 2010 and 2022.
"Our projections could be low, actually," he said. "The Permian is the Big Kahuna for U.S. oil production. From less than 1 million barrels, I think it will nudge 5 million barrels by 2022."
Huge energy savings
Regarding demand for domestic LPG, Chovanec observed there has been no increase.
"So as we produce more and more of it, it has to be exported," he said.
But U.S. natural gas production, "after it's shrunk, after you take the liquids out of it," Chovanec said, will about double between 2010 and 2022.
"That number in 2022 could be much larger," he said. "The problem is it's hard to find markets for natural gas. Natural gas is not the easiest thing to move around, so it takes a long development cycle for new markets for natural gas."
Chovanec noted that as recently as six years ago, the U.S. had natural gas "sitting on the shelf."
"That's still where we will be for 100 or 150 years to come," Chovanec projected, specifying natural gas production is expected to triple from 2010 to 2022.
That's "really important" to the petrochemical community as well as to the U.S. consumer, according to Chovanec.
"In 2008, before the shale revolution, when we were only really drilling Barnett at that time, and a little bit at Eagle Ford, gas was about $9 per million BTU and it would spike at about $12, $13 or $14," Chovanec said. "The average price for natural gas per million BTU in 2016 was $2.50. The forward market says in 2020, it will be less than $3. So that's a real savings for the U.S. consumer."
Continuing the historical comparison, Chovanec recalled crude in 2008 was $100 a barrel but averaged $43.50 in 2016.
"If you take our consumption of natural gas and oil, the savings through 2016 is $23 trillion," Chovanec calculated. "The QE (quantitative easing) that our children will be paying for, for years to come, is $1.1 trillion. That's the magnitude of the savings from energy. It's huge. And it's huge to every person in the U.S.
"There's a lot of momentum for the U.S. producer. The U.S. producer has shown the world that we can do it at $50 or less."
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