Shale Gas. Short overview of market

Shale Gas – Revolution or evolution of global gas market?

Agenda:

• Importance• History• USA story• Rest of the world• Main players• Eco issues

Why we are talking about shale gas?

Source: IEA

2010 - 77 billions dollars were added to USA GDP by shale gas

2015 – 111,2 billions dollars expected

When it began?

1821 – First US commercial natural gas well in Fredonia, NY, produces natural gas from shale;


After 160 years of development and experiments

1980s – Department of Energy spearheads research in micro seismic and other 3-dimensional mapping techniques that proved critical to shale gas recovery;


After 160 years of development and experiments

1980s – Department of Energy spearheads research in micro seismic and other 3-dimensional mapping techniques that proved critical to shale gas recovery;

2000s – natural gas holds steady in United States with the highest annual increase in production of any energy technology – modern natural gas boom

Development of technology

Source: Visual Capitalist – www.visualcapitalist.com

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How it works?

Shale formation are fine-grained sedimentary rocks with gas trapped in them. Shale has low permeability and gas does not flow through it easily.


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Producers drill down to the level of shale, And then drills then turn horizontal to go along shale


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Water, proppants and chemical additives are injected into the shale at a high pressure to create fracture pathways that increase flow of the well.


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Water, proppants and chemical additives are injected into the shale at a high pressure to create fracture pathways that increase flow of the well.


443 mGas and wastewater flows back to surface. Wastewater it stored in steel tanks until it can be stored log-term by deep injection into oil and gas waste well

The shale gas revolution in USA

Shale development has made US gas reserves the largest in the world

$77 billion in

2010

600,000 jobs

$926 savings per household

$23,16 hourly

wage rate

The shale gas impact to petrochemical market

Source: American Chemistry Council





Expected impact for US economy

More than 1.6 Million Jobs



$231 Billion in Total Value Added



$231 Billion in Total Value Added

$933 Billion in Tax Revenues

Who’s next?

China – preparing for opportunity

Chinese policymakers and state behemoths are laying the groundwork to beginextracting the country’s apparently mighty shale gas resources.

China has set itself an ambitious target of producing 229.5 billion cubic feet of shale gas a year by 2015.

Before 2004 - Study foreign shale gas exploration technology

From 2005 to 2007: Shale gas resource exploitation.

In 2008: Exploitation of the Upper Yangtze region and planning shale gas project.

In 2009: Evaluating shale gas resource potential and defining favorable exploration targets in key areas.

In 2011: Defining areas of probable shale gas reserves in China

June 2011, China conducted the first round of shale gas exploration competitive bidding and invited six state-owned enterprises to participate in bidding.

China activities for shale gas production

Main players in China shale market

Sinopec Group, China's second largest oil and gas producer, has launched its first shale gas project and plans to develop production capacity of 300-500 million cubic meters a year by the end of this yeard

In January 2010, Sinopec and BP cooperated to develop a shale gas block in Guizhou.

Yanchang Petroleum has drilled 12 exploration wells and evaluation wells, strives to produce 20 million cu m/year of gas by 2012, and aims to produce 500 million cu m/year by 2015.

CNPC started shale gas exploration and development in 2006, becoming the first Chinese company to begin work in the sector.CNPC has obtained North Yunnan-Guizhou mineral rights and drilled a shale gas data well in the Sichuan basin in 2009.

In March 2010, CNPC and Schlumberger signed a 2010-12 cooperation agreement on logging services.

In April 2011, CNPC and Total SA agreed to invest $2 billion in Inner Mongolia Province to develop unconventional gas.

India – Shale of the century?

Excitement about a potential Indian shale gas boom is building. As yet, there is not enough evidence to justify the hype.


In January 2011 India’s state-owned Oil and Natural Gas Corporation (ONGC) found the country’s first shale gas at an exploratory site near the city of Durgapur in West Bengal.



Oil and Natural Gas Corporation (ONGC) has called in international expertise to help with exploration by partnering the world’s biggest oil services company, Schlumberger



Oil and Natural Gas Corporation (ONGC) has called in international expertise to help with exploration by partnering the world’s biggest oil services company, Schlumberger

The Indian government is finalizing its shale gas exploration policy and expects to launch its first auction of shale gas blocks by December 2013

Poland – The next Norway?

Shale gas gives Poland a chance to bypass Russia—maybe.


Oil and gas investment is flooding into the region in amounts not seen since the fall of the Berlin Wall. Anglo-Dutch giant Royal Dutch Shell, France's Total and ConocoPhillips of the U.S. have acquired exploration rights in Poland



Poland has granted 112 shale exploration licensees to international firms such as Chevron, ConocoPhillips and Marathon Oil.

Exxon Mobil decided to quit Poland market.



Poland has granted 112 shale exploration licensees to international firms such as Chevron, ConocoPhillips and Marathon Oil.

Exxon Mobil decided to quit Poland market.

The country’s government is preparing draft legislation for development of shale gas resources, expecting to start natural gas production in late 2014

Argetina – untapped potential

Unconventional hydrocarbons meet familiar problems in Argentina as in USA


In May 2011 Argentina announced that it would become the site of the first large-scale development of oil from an unconventional reservoir outside of the US and Canada.



Repsol, a Spanish oil major, announced that its Argentinian subsidiary, Yacimientos Petrolíferos Fiscales (YPF), will drill 17 new wells and fracture 14 existing ones this year in the Vaca Muerta



Repsol, a Spanish oil major, announced that its Argentinian subsidiary, Yacimientos Petrolíferos Fiscales (YPF), will drill 17 new wells and fracture 14 existing ones this year in the Vaca Muerta

Companies worldwide are showing interest in Argentina shale gas projects, and investment in shale gas production is expected to reach US $1 billion in 2012. Joint ventures are currently the preferred model for financing development activities.

South Africa – Game changer?

Shell and other shale gas contenders meet stiff resistance in South Africa, which has the continent’s most promising reserves of the gas.


In August 2011 the South African government decided to extend a six-month moratorium on licensing for shale gas exploration for another half-year period—a disappointment for those circling what are thought to be the world’s fifth-largest shale gas resources.



South Africa’s shale gas could be a “game changer”. The country depends on imports (of oil and some gas) and does not generate enough electricity to satisfy demand.



South Africa’s shale gas could be a “game changer”. The country depends on imports (of oil and some gas) and does not generate enough electricity to satisfy demand.

2012 Sep. 7 South Africa has lifted a moratorium on shale gas exploration in the Karoo region

Shale gas provides opportunity for countries

• Decrease gas prices;• Collect more taxes;• Become more independent from import;• Attract investments;• Create new jobs and new industry;

BUT…




Communities actively protesting against fraking because of danger to environment

Bulgaria - after a nationwide protest in January 2012, the government decided to ban the hydraulic fracturing technology.

Denmark - a critical view is reflected in national media, and national campaigns against shale gas have started.

France - Hydraulic fracturing was banned in France in 2011 after public pressure.

UK - Though not officially suspended, the process was unofficially suspended for nearly a year in the UK from June 2011 over safety concerns, but an expert report in April 2012 said that it’s safe

US - This method of drilling has become controversial because of the complaints, from some residents of the areas, about pollution, and health effects, and a sense that their lives and their community have been ruined by the system.

Main players in shale gas industry

World’s largest producer of shale gas

Revolution or evolution…?

EUROPE“Europe, with higher population density, higher environmental hurdles and increased levels of government coordination, will likely see a ‘shale evolution’. Europe will require more environmentally friendly materials and more advanced horizontal drilling technology.

The net effects are:• A flatter geology-specific shale gas

learning curve. • Slower aggregate growth in

proved reserves and production. • A more R&D focused approach

with longer play timelines. “

Delloite.

“China’s lower population density in regions with shale gas potential, less restrictive environmental concerns, centralized government planning and willingness to invest enables replication of the US manufacturing-style shale development. The likely result will be a ‘shale revolution’ as China progresses rapidly along the shale gas learning curve.”

Delloite.

CHINA

SOUTH AMERICA‘’Shale reserves in Brazil are estimated to be one of the biggest in the region, but there has been little interest or investment in exploring this resource. Argentina is the only South American country that seems set to embark on full-scale shale gas production, primarily in the Neuquén Basin.

Development of shale gas in Argentina will be valuable to the country and occur at reasonable prices. Further, given the Argentine government's willingness to support these projects, we expect that shale gas field development will continue to be allowed.”

KPMG

Many ways Australia is in a similar emerging position to where the North American shale industry was several years ago. As the resource in Australia becomes better defined and clear routes to market identified, then the transaction values could increase significantly.

Norton Rose

Questions?

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Shale Gas. Short overview of market