ADI Analytics - Innovation in Unconventional Oil & Gas

8/9/2019 ADI Analytics - Innovation in Unconventional Oil & Gas

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Innovation in Unconventional Oil / Gas

Shale Gas Innovation ContestMay 2014

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2www.adi-analytics.com

ADI Analytics is a boutique consulting firm serving energyand chemical companies with passion, rigor, and expertise

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http://www.adi-analytics.com/http://www.adi-analytics.com/


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Fortune 500 and mid-sized companies, start-ups, investors,and governments have hired us to shape decisions globally


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North American shale gas was a small business revolutionand not led by big oil

Experience and Capability in Unconventionals

Acquirers /Late Entrants

FastFollowers

Pioneers


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Technology and innovation have been critical to theincreasingly quicker development of new plays and basins

Months to One Billion Cubic Feet Per Day in Gas Production

125

80

5448 45

40

1612

Jonah Pinedale Barnett Montney Fayetteville Eagle Ford Marcellus HaynesvilleSource: Baker Hughes; ADI Analytics Research


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More significantly, it is addressing the recovery and depletionissues making the shale gas revolution more sustainable

Gas Production Per Horizontal Well(Thousand Cubic Feet Per Day)

0

1,000

2,000

3,000

4,000

0 10 20 30

2007

2008

2009

2010

2011

Time in MonthsSource: Baker Hughes; ADI Analytics Research


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This is coming through smarter e.g., intelligent exploration and harder e.g., higher stage / lateral intensity running

Stages Per Well(Estimates, Number)

45

6 6 6

4

7

8

10

14

2007 2008 2009 2010 2011

Average Lateral Lengths(Estimates, Feet)

2,900 3,000

3,750

4,2004,400

2007 2008 2009 2010 2011Source: Baker Hughes; ADI Analytics Research



2006 2007 2008 2009 2010 2011

Collectively, new technologies, practices, and innovation isbehind the learning curve that we see across the U.S. and

Source: ADI Analytics Research

Pad drillingMulti-lateralsMultiple fracsMore stagesProppant optim.

Average F&D Cost Reductions in U.S. Shale Gas

(Weighted across top 10 operators in 5 basins, U.S. $/MM Btu)



2005 2006 2007 2008 2009 2010 2011

Barnett(F&D cost in U.S. $/MM Btu)

Haynesville / Bossier(F&D cost in U.S. $/MM Btu)

Marcellus(F&D cost in U.S. $/MM Btu)

Fayetteville(F&D cost in U.S. $/MM Btu)

Across all the major basins

Source: ADI Analytics Benchmarking Service, 2013

2005 2006 2007 2008 2009 2010 2011

2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011

-9%-22%

-27%

-15%



Fracture effectiveness continues to be a challenge

Share of Low-Performing Fractures(Fractures contributing 1-5% of production)

Key Issues

Growing realization that production percluster of fractures is not uniform inshale gas reservoirs

Nearly 30% - 50% of fractures contribute

less than 1% to 5% of gas production

30%

43%

50%

Schlumberger Schlumberger Expert

Technology Needs

Better fracture imaging and siting, e.g.,

with cheaper micro-seismic, alternativediagnostic tools such as ultrasound, andbetter data interpretation

Advanced proppants and optimizedproppant delivery mechanisms

Sources: A. Gatti, Schlumberger, December 2010; ADI Analytics Research



Flaring is a significant challenge but addressing it isbecoming very important

Note: Approximate estimates based on averages. Volume of gas not marketed is considered as flared.Sources: North Dakota Industrial Commission

Avg . Gas Flared / Sold by Well(Thousand Cubic Feet Per Day)

0

500

1,000

1,500

2,000

2,500

0 200 400 600 800 1000

34

5259 57

76

26

22

2538

41

60

74

84

95

117

2008 2009 2010 2011 2012

Sold

Flared

Bakken Flaring Rates by Well and (Thousand Cubic Feet Per Day)

Average for 2011using this data set is

54 Mcf/well


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New fuel and vehicular technology adoption is notoriouslyslow and natural gas in transportation will be no different

Years to Achieve 25% Market Share

Gas Oil Diesel-firedocean ships

Diesellocomotives

Source: Vaclav Smil; ACT Research; Argonne National Laboratory; Encana; National Petroleum Council; ADI Analytics Research

Diesel-fired class 8trucks (estimate)

Natural gas-firedrefuse trucks

Years to Achieve 25% of New Sales

Fuel changes have beenquicker but still take at least 10

years for meaningful shares


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ADI Analytics - Innovation in Unconventional Oil & Gas