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N. America Gas Supply Without N. America Gas Supply Without Any Drilling or DevelopmentAny Drilling or Development
1990 2010
80
60
40
20
100
USA
Canada
Mexico
Bcfd
Demand ?
Natural Gas Reserve AddsFail to Match Production
Natural Gas Reserve AddsFail to Match Production
25
US & Canada by Region(32 Tcf Raw Prod. In 2000)
1990 2000
30
20
15
10
5GOM
Canada
32 TcfTcf
Paths & Pitfalls Paths & Pitfalls Toward a U.S. 34 Tcf MarketToward a U.S. 34 Tcf Market
• EIA 2002 Outlook: 34 Tcf 2020 demand (2% avg. ann. Growth)
• Are DOE supply assumptions realistic? Rockies + 2.67 Tcf Canada + 2.0 Tcf Gulf coast + 1.83 Tcf Deepwater GOM + 1.4 Tcf Appalachian + 1.26 Tcf Mid-continent + 1.25 Tcf
• Alternatives LNG imports + 0.8 Tcf
Western Canada Western Canada
Vintaged Daily Gas ProductionVintaged Daily Gas Production 1990 - 20101990 - 2010
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
MC
FD
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
< 1990
Years
Western Canada has Potentialif the Price is Right …
Western Canada has Potentialif the Price is Right …
30 Bcfd
20 Bcfd
$5.00 Gas Price
$2.00 Gas Price
1990 2010
2010
…and Government Policy Cooperates.
44.6 Tcf Remaining
*Includes Coalbed Gas
Mean 2P Gas Resources BcfMean 2P Gas Resources Bcf Mean 2P Gas Resources BcfMean 2P Gas Resources Bcf
Atlantic40,75113,912
NorthCentral 7,460
Gulf Coast85,247
67,664
MidContinent
95,790 3,050
RockyMountain135,796 51,543Pacific
17,027
Source: PGC: December 2000
U.S. Probable Possible Speculative Total*
223,335 386,551 482,329 1,090,997
AK - N. Slope77,572
© 2001. Petroleum Information/Dwights LLC d/b/a IHS Energy Group.
10,660
?
70%
?
Central Rockies 2001 WellsCentral Rockies 2001 Wells
7,866 wells250 Bcf 2001Jonah
Drunkards Wash
Natural Buttes
Grand Valley
San Juan Basin
Raton
Wattenburg
Echo Springs
Wamsutter
Pavilion
BruffMadden
Rocky Mountain Region Permits YTD August 9 2001 2002 March JulyNew 7,686 6,984 1,470 600Abandoned 2,042
EIA: 43% of Rockies gas - "unavailable for drilling due to environmental regulations, lack of pipeline capacity,
or other barriers to development."
Coal Bed MethaneCoal Bed Methane
1990 2010
1
2
3
4
San Juan, Black Warrior, Powder River, and other US Basins
BCFD
Offshore GOMOffshore GOMVintaged Daily Avg. Gas ProductionVintaged Daily Avg. Gas Production
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Time
MC
F/D
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
<1990
<1960
Alaska Gas PotentialAlaska Gas Potential
• 44.1 Tcf remaining reserves (41.4 on N. Slope)• Almost all used for pressure maintenance • Gas in Cook Inlet exported as LNG to Asia
• Gas pipelines must traverse Canada• 26.6 Tcf competing reserves closer to market
• Gov’t support required for investment
• Bottom line potential – 4 to 6 Bcfd post 2010
LNG Import PotentialLNG Import Potential
2001 2010
9
5
LNG valid in $3.50 - $5.00 Price Range
New
Existing
Convert
Expand
1
3
7
Bcfd
North AmericaNorth America Gas Production Forecast @ $3.00 Gas Production Forecast @ $3.00
0
20
40
60
80
100
120
1990 1995 2000 2005 2010 2015 2020
Years
BC
FD
Alaska Pipeline
LNG Imports
Frontier Dev.
YTF Drilling
Existing
Projected Demand
North AmericaNorth America Gas Production Forecast @ $5.00 Gas Production Forecast @ $5.00
0
20
40
60
80
100
120
1990 1995 2000 2005 2010 2015 2020
Years
BC
FD
AlaskaPipelineLNG Imports
Frontier Dev.
YTF Drilling
Existing
Projected Demand
Natural Gas Going ForwardNatural Gas Going Forward
• Market shifting from demand-driven to supply-driven• Industry will find it difficult to maintain flow
– Canadian energy policy will have big influence– LNG imports increasingly important
• Paradigm shift to imports outside of North America
– Frontier Canada, Deepwater GOM, CBM and other projects share importance – all needed
• Bottom line: Fundamental upward pressure on gas prices
Gas Supply & Policy IssuesGas Supply & Policy Issues
• Gas supply issues more urgent than oil. – Drilling alone won’t meet demand growth
• Smaller reserves, steeper production declines
– Price (volatility) not adequate to pull needed capital
– 5 + years to tap new supplies
• Policy principles same as oil:– Access to prospective lands
– Investment incentives – tax credits, royalty relief
– Efficient regulatory processes – reduce delays & costs
• Long term stability: – Arctic and LNG: price > $4.00 Mcf
Global Oil & Gas SupplyGlobal Oil & Gas SupplyCritical Issue: Capital RequirementsCritical Issue: Capital Requirements
• Oil: To achieve 119 Bbo demand in 2020
Need 42 MMbd new + 48 MMbd replacement
Estimate $1 Trillion for oil E&P investment
• Natural gas: To achieve 162 Tcf demand in 2020
Need 180 Bcfgd new capacity
Estimate $2T overall investment (LNG & pipelines)
2002 AAPG Briefing2002 AAPG Briefing
““Energy and Environment: Energy and Environment: A Partnership that WorksA Partnership that Works”
Energy Supply SettingEnergy Supply Setting
Pete StarkIHS Energy Group
Washington, D.C.23 September, 2002
2002 AAPG Briefing2002 AAPG Briefing
““Energy and Environment: Energy and Environment: A Partnership that WorksA Partnership that Works”
Energy Supply SettingEnergy Supply Setting
Pete StarkIHS Energy Group
Washington, D.C.23 September, 2002