The Shale Energy Revolution - Southern States Energy … · The Shale Energy Revolution: New Resources, ... Fracture stimulation 5,000’ ... DVN page 10

The Shale Energy Revolution: New Resources, New Stakeholders, New Responsibilities Bill Whitsitt Executive Vice President, Public Affairs

Southern States Energy Board Sept. 25, 2012

NYSE: DVN www.devonenergy.com Slide 2

Devon today

Proved reserves: ≈3.0 billion BOE (42% liquids)

Q2 2012 production: ≈679 MBOED (37% liquids)

Sales revenue mix: 57% oil 18% NGLs

25% natural gas (Q2 2012)

Significant midstream business 2011 operating profit: $542 million

Enterprise value: ≈$27.6 billion

Jackfish Pike

Granite Wash Barnett Shale

Permian Basin

Canadian Oil Potential

Cana Woodford Mississippian

Tuscaloosa Shale

Rockies Oil Utica Ohio

Michigan

Horn River

Deep Basin

Powder River

Washakie

Haynesville/Bossier Carthage

Groesbeck

Existing operations

New areas covered by Sinopec JV

New technology What has resulted from it?


“New”

•  Resources

•  Stakeholders

•  Responsibilities

page 4 www.devonenergy.com NYSE: DVN

Technology’s role

Migrating hydrocarbons Shale organic

rich source layer

Frack Porous and permeable reservoir layer

Hydrocarbon Trap

Impermeable sealing layer

Fracture stimulation 5,000’ – 15,000’ below the surface

“New” resources Traps vs. shales


North American shale Plays and basins

Estimated resource base increased 20% just since 2008.

New resources, new stakeholders, new responsibilities

Current and prospective shale plays

Basins

Utica

Eagle Ford

Monterey

Bakken

Mowry

Avalon

Sources: EIA, Potential Gas Committee

Utica

Niobrara

Woodford

Antrim

New Albany

Fayetteville

Marcellus

Tuscaloosa

Haynesville-Bossier

Barnett

Devonian (Ohio)

New stakeholders

NYSE: DVN www.devonenergy.com page 6

•  Stakeholders who haven’t seen the size or scale of what they will see

•  Other new stakeholders –  Community leaders –  Royalty owners –  Concerned citizens and/or activists

New responsibilities Addressing concerns/demystifying our work

NYSE: DVN www.devonenergy.com page 7

•  Hydraulic fracturing

•  Community impacts

•  Water management

•  Air quality

•  Land stewardship

•  Seismic activity


Hydraulic fracturing A brief history

Velma Alma, OK March 17, 1949

•  Hydraulic fracturing is a well-established technology with a strong environmental and safety record

•  The technology has been used to complete more than 1 million wells over the past 60 years

slide 8


Fracfocus.org Industry’s effort to demystify the process

•  Created by regulators and the Interstate Oil and Gas Compact Commission

•  Site went live in April 2011

•  Industry is responding to this voluntary disclosure effort

–  207 companies have reported well information

–  Data uploaded for more than 23,000 wells

–  Devon: Nearly 900 wells uploaded

NYSE: DVN www.devonenergy.com

GWPC/IOGCC chemical registry FracFocus

slide 11


Mapped fracture treatments Barnett Shale

Kevin Fisher, “Data Confirm Safety of Well Fracturing” — American Oil & Gas Reporter, July 2010

slide 12


Groundwater protection Through proper well construction

Cement

Cement

Surface casing

Drilling fluid

Intermediate casing

Conductor casing

Aquifer

2,000 ft.

4,000 ft.

6,000 ft.

8,000 ft.

10,000 ft.

13,500 ft. Im

perv

ious

rock

laye

rs Production casing

Production tubing


Regulation of well construction States’ role

•  States manage the oversight and enforce federal law and state rules –  Have the on-the-ground personnel and expertise

•  State-led enforcement allows fit-to-purpose solutions for localized issues

•  Regulated activities: –  well design –  well location –  well spacing –  well operation –  water management

and disposal

–  air emissions –  wildlife impacts –  surface disturbance –  worker health

and safety


Water management in Oklahoma A state-industry partnership

Cana-Woodford shale play

•  Exceptional quality of flowback and produced water allows for reuse

•  Existing state rules limited water pits to 50,000 barrels

•  Worked with regulators to allow 500,000-barrel pond

•  1 million barrels (42 million gallons) reused in first three months of operation


Water management A few more Devon examples

•  Texas —  Devon’s distillation process approved by regulators in 2005 —  More than 500 million gallons recycled — enough to fracture

100+ Barnett Shale wells

•  Canada —  SAGD oil production using brackish water exclusively

•  Ohio —  Purchased treated wastewater from town of Savannah for

first hydraulic fracturing job in state

•  Louisiana —  Paying state 15 cents/1,000 gallons of running surface water


Freshwater users In the Barnett Shale region

(Source: Texerra; L. Peter Galusky, Jr. Ph.D., P.E., www.texerra.com)

slide 17


Water sustainability principles

•  Devon is committed to the principles of conservation and re-use of water where feasible through the following: –  Educating and working closely with governmental authorities and

members of the public concerning water usage needs and the necessity of water management

–  Identifying usage needs, determining resource availability and monitoring water use

–  Applying conservation practices and identifying opportunities to improve water use efficiency

–  Employing economically and operationally feasible alternatives to fresh water usage

–  Advocating for appropriate regulations on water use and re-use –  Continuing to employ prudent operating practices to ensure the

protection of surface and groundwater –  Planning for operations to continue if water availability becomes

constrained


Demystifying seismic events Purported connection to E&P activity

•  Experts’ consensus: Low risk managed through good practices

•  “We don't see any connection between fracking and earthquakes of any concern to society.” — Bill Ellsworth, senior U.S. Geological Survey geophysicist, to E&E News, April 23, 2012.

•  Fewer than 30 out of 150,000 U.S. disposal wells have had any alleged connection to seismic activity

•  Generally no damage from those events

•  Devon uses advanced seismic imaging technology and interpretation methods to identify and avoid faults.

•  Industry expanding water recycling/reuse programs to reduce need for disposal wells


Seismic risk in context Seismic array monitoring example

Total array areal coverage is 3 square miles. Source: Spectraseis Array location map

Horizontal Well Paths

Seismic stations that form the seismic array

Frank 11 100 – Station layout

East-West dimension is 12,000 feet (2.3 miles)

Nor

th-S

outh

dim

ensi

on is

7,

000

feet

(1.

3 m

iles)


Seismic risk in context Comparison of frack and trains

0.8

80

0

10

20

30

40

50

60

70

80

90

1

Relative Seismic Amplitudes

Hydraulic Fracture Event Freight Train Vibrations


Land matters Maximizing value while earning trust

Lake Benbrook, Texas

•  Two pads

•  56 wells

•  On-site disposal well reduced truck traffic

•  BLM calls project “spectacular”


API standards for hydraulic fracturing

•  Well construction and integrity guidelines

•  Water management associated with HF

•  Practices for mitigating surface impacts

•  Environmental protection for onshore production

•  Isolating potential flow zones during construction

•  More information: EnergyFromShale.org


API’s public workshops Explaining hydraulic fracturing

Completed

Little Rock, AR

Raleigh, NC

Annapolis, MD

Trenton, NJ

Charleston, WV

Denver, CO

Completed

Columbus, OH

Albany, NY

Bismarck, ND

Lafayette, LA

Lansing, MI

Washington, D.C.

Dates TBD

Baton Rouge, LA

Oklahoma City, OK

Santa Fe, NM

San Antonio, TX


Partners in the effort


In summary

•  New technology has created: –  New resources –  New stakeholders –  New responsibilities

•  One major responsibility is educating the public, especially these new stakeholders, about:

–  Hydraulic fracturing –  Water consumption and management efforts –  Air quality –  Truck traffic –  Land impact –  Seismic activity

Water recycling in North Texas


U.S. shale gas production Major U.S. shale plays

Source: Wood Mackenzie (data through July 2012)

0

4

8

12

16

20

24

BCFD

Barnett Haynesville Fayetteville Marcellus Eagle Ford Utica


Gas price stability As supply grows, price remains low, stable

Lower 48 gas supply has grown by 20 Bcfd since 2000, up 50% •  Driven by shale and infrastructure development post 2005

•  Result: lower, more stable pricing

0

2

4

6

8

10

12

14

16

30

35

40

45

50

55

60

65

70

Hen

ry Hub

FOM In

dex ($/M

MBtu)

U.S. Low

er 48 Gas Sup

ply (BCFD)

U.S. Lower 48 Gas Produc:on (BCFD) Henry Hub FOM Index Price ($/MMBtu)

Cold weather

Hurricanes Katrina & Rita

Strong global economy Price run-up with crude oil

NYSE: DVN www.devonenergy.com slide 30

Major pipeline infrastructure updates 2009 to 2012

Recent Capacity Additions (BCFD)

Rockies Express 1.80

Midcontinent Express 1.80

Gulf Crossing 1.70

SESH 1.00

Fayetteville/Greenville 1.30

Total 7.60

Committed Capacity Additions (BCFD)

ETC Tiger (Haynesville) 2.40

Enterprise (Haynesville) 2.10

Regency (Haynesville) 1.10

Gulf South (Haynesville) .50

Centerpoint (Haynesville) .30

Transco (Marcellus) .75

Texas Eastern (Marcellus) .45

Tennessee (Marcellus) .35

Transco (S.E. & Florida Mkts.) .56

FGT (Florida Markets) .82

Trans Canada Bison (Rockies) .48

El Paso Ruby (Rockies) 1.50

Total 11.31

Thank you.

Documents

The Shale Energy Revolution - Southern States Energy … · The Shale Energy Revolution: New Resources, ... Fracture stimulation 5,000’ ... DVN page 10