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19-11-2013
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Shale: Can it go Global?
Lucia van Geuns Utrecht , 12 November 2013
The Tale of Two Worlds Source: Exxon, 2012
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100
200
300
400
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1990 2015 2040
Quadrillion BTUs
OECD Energy Demand
North America
Europe OECD
Rest of OECD
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100
200
300
400
500
1990 2015 2040
Quadrillion BTUs
Non OECD Energy Demand
China
India
Middle East
Rest of Non OECD
Latin America
Africa
Russia/Caspian
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Non-OECD economies drive energy consumption growth…
Source: BP energy Outlook 2030, 2012
Foundations of global energy system shifting (EIA WEO 2012)
1. All-time high oil prices acting as brake on global economy
2. Divergence in natural gas prices affecting Europe and Asia
3. Policy makers face critical choices in reconciling energy,
environmental & economic objectives
4. US petroleum renaissance is a remarkable achievement of technology and innovation
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“During the next four years, we will continue to enhance our economic security and our national security through sound energy policy. We will pursue more energy close to home, in our own country and in our own hemisphere, so that we're less dependent on energy from unstable parts of the world. And we will continue to work closely with Congress to produce comprehensive legislation that moves America toward greater energy independence.”
President Bush - On the nomination of Secretary Bodman - Dec., 10, 2004
US Energy Policy Direction 2005
Types of unconventional gas
Source: E-on, 2010
Unconventional gas requires extensive use of horizontal drilling and hydraulic fracturing
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The Barnett Story – Technology Makes the Difference
*IHS Database
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85 90 95 00 05 10
Mil
lio
n C
ub
ic F
eet
Date of First Production
Vertical Wells
Deviated Wells
Horizontal Wells
Source: Schlumberger, 2013
Shale gas production leads growth in production through 2040
U.S. dry natural gas production
trillion cubic feet
Source: EIA, Annual Energy Outlook 2013 Early Release
Associated with oil
Coalbed methane
Tight gas
Shale gas
Alaska
Non-associated onshore
Non-associated offshore
Projections History 2011
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U.S. dry gas consumption
trillion cubic feet
Source: EIA, Annual Energy Outlook 2013 Early Release
Projections History
Industrial*
Electric
power
Commercial
Residential
Transportation**
33%
14%
6%
32%
12%
33%
19%
3%
31%
13%
*Includes combined heat-and-power and lease and plant fuel.
**Includes pipeline fuel.
Gas to liquids 2%
Natural gas consumption is quite dispersed with electric power, industrial, and transportation use driving future demand growth
Domestic natural gas production grows faster than consumption and the U.S. becomes a net exporter of natural gas around 2020
U.S. dry gas
trillion cubic feet
Source: EIA, Annual Energy Outlook 2013 Early Release
Projections History 2011
Consumption
Domestic supply
Net imports
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The success of shale gas in the US
• In 2001, 1% of natural gas production came from shale compared to >20 today
• Prices plummeted with positive effects on manufacturing (steel, petrochemical industry) by reducing costs of operations
• The rapid expension of shale gas production occured because it was largely free of highly restrictive government policies
• Expansion took place almost entirely on private land and was not subject of extensive access restriction and other federal regulations
Percentage change in selected indicators in the United States, 2006-2011
-15% -10% -5% 0% 5% 10% 15% 20% 25%
Renewables
Coal-fired power output
Coal demand
Gas-fired power output
Gas demand
CO2 emissions
Total primary energy demand
GDP (MER)
From 2006-2011, United States CO2 emissions went down by 7% due to coal-to-gas fuel switching, power generation efficiency gains & increased renewables output
Source: IEA. WEO, 2012
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US lower 48 oil and gas shale plays
Source: EIA, 2012
Source: Argus
US oil production and rig counts
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U.S. tight oil production leads a growth in domestic production of 2.6 mb/d between 2008 and 2019
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2
4
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1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
U.S. crude oil production
million barrels per day
Source: EIA, Annual Energy Outlook 2013 Early Release and Short-Term Energy Outlook, April 2013
Projections History 2011
Alaska
Tight oil
Other lower 48 states onshore
Lower 48 states offshore
STEO April 2013 U.S. crude oil projection
Gas flares from Bakken fracking are visible from space
Image: NASA Earth Observatory image/Suomi NPP
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map of basins with assessed shale oil
and gas formations, as of May 2013
Source: United States: EIA and USGS; Other basins: ARI
Shale oil and gas have the potential to dramatically alter world energy markets
Shale oil Shale gas
Rank Country Billion barrels Rank Country Trillion cubic feet
1 Russia 75 1 China 1,115
2 United States 58 2 Argentina 802
3 China 32 3 Algeria 707
4 Argentina 27 4 United States 665
5 Libya 26 5 Canada 573
6 Venezuela 13 6 Mexico 545
7 Mexico 13 7 Australia 437
8 Pakistan 9 8 South Africa 390
9 Canada 9 9 Russia 285
10 Indonesia 8 10 Brazil 245
World total 345 World total 7,299
Source: United States: EIA and USGS; Other basins: ARI.
Note: ARI estimates U.S. shale oil resources at 48 billion barrels and U.S. shale gas resources at 1,161 trillion cubic feet.
Top ten countries with technically recoverable shale resources
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Shale gas and tight oil resources and production Source: BP energy Outlook 2030, 2012
US shale gas and tight oil production success
• Globally 240 Bbbs tight oil; 200 Tcm shale gas (technical recoverable resources)
• In 2012: 2.1 Mb/d (24%) of US oil production from tight oil; 24 Bcf (37%) of natural gas from shale gas
• US will continue to dominate in 2030 because of the importance of ‘above ground’ factors:
– competitive environment
– rig availability
– robust service sector
– land access facilitated by private ownership
– deep financial markets
– favourable fiscal and regulatory terms
A competitive industry spurs continued technological innovation
Source: BP energy Outlook 2030, 2012
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Current European positions on shale gas drilling
Source: The Economist, Febr 2013
Economics of unconventional gas in Europe
The development of shale gas will only be successful in Europe if the environmental and economic boundary conditions can be fulfilled
• Increase drilling efficiency; rig automation technology; zero harmful emissions; lowest possible environmental footprint
• Reduce drilling and fracture cost by 50% • Development of clean fracturing technology • Investment in R&D to establish and build the required technology • Build human resource capacity to support large-scale field development • Develop and build required infrastructure
Source: JRC, 2012
Break-even costs for shale gas production in Europe: $5-12/MBtu
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Thank you
