SHALE GAS IN EUROPE Where do we stand? Where do we go?

JAH 2014

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•Gas to become the second-largest energy

source by 2030

•Fossil energies to represent 76% of energy

supply in 2030

Source : Total estimates

COAL

LNG

Pipeline (from outside Europe)

Pipeline (from Europe)

Shale gas (from Europe)

• When used to produce electricity, all sources of natural gas have lower GHG emissions than coal

Source: e.g. AEA report for the European Commission DG CLIMA (2012)

Shale Gas will be part of the Energy transition to more renewable Climate impact will depend on the usage made of shale gas

ENERGY MIX & ENERGETIC TRANSITION : room for Shale Gas Gas growth 2010-2030: +2.0%

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US: Shale gas boom since 2005: who can deny the revolution

Break-even @15% source ARI

0,0

50,0

100,0

150,0

200,0

250,0

300,0

350,0

400,0

450,0Gm3/an

Production de Shale Gas aux US

Eagle Ford

Woodford

Fayeteville

Marcellus

Haynesville

Barnett

Shale gas production US

France : consumption = 50 Gm3/an (1,8 tpc/an)

Marcellus basin production close to Qatar production in only 4 years…

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US: A revolution with multiple impacts

0

1000

2000

3000

4000

5000

6000

7000

2000 2002 2004 2006 2008 2010

oil

gas

coal

JAPAN

EUROPE

US

Source World Data bank

Low price> impact on energy price >impact on industry competitiveness

Source EIA

Reduction of 4% of the CO2 emissions (Gas replacing coal) >> GHG

Importations d’huile aux US

0 2000 4000 6000 8000

10000 12000 14000 16000

janv

.-200

0 ja

nv.-2

001

janv

.-200

2 ja

nv.-2

003

janv

.-200

4 ja

nv.-2

005

janv

.-200

6 ja

nv.-2

007

janv

.-200

8 ja

nv.-2

009

janv

.-201

0 ja

nv.-2

011

janv

.-201

2 ja

nv.-2

013

Kb/d

Reduction of imports Creation of more than 600000 direct employement (+1M indirect)

Source: EIA

Source: WM

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Europe needs gas…and affordable gas

Decreasing domestic production

Shift away from nuclear power

Objectives of GHG emissions limitation favoring gas over coal

Political will to limit dependency on imports

Industry competitiveness

Source: CEDIGAZ (2009)

05 10(e) 15(e) 20(e)

Mdpc/j

(demand 2010-20(e) : +1,8% per year)

écart

Conventional gas

Imports

Known LNG contracts

Demand

60

30

Europe

Source : TOTAL

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Europe shale gas potential : dream or reality?

Studies suggest huge resources but yet to be proven

Less than 100 wells drilled in Europe with Shale gas objective

Results are not significant so far

136

26

26

17

10 32

145

23

XX Ressources technically recoverable (TCF) Source EIA2013

Shale Gas resources in Europe are yet to be proven

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8

UK Zoom – Slide 3

Poland – Zoom Slide 2

France

Danemark

Lithuania

Romania

Kaliningrad

Switerzland

Spain

Shale oil Wells: 2 shale oil, no info Blocks awarded to LL Investicijos, former Chevron blocks

Shale Gas-Tight Gas Wells: 1 tight gas, no gas Blocks awarded to Shell (East) and Chevron (West)

Gas Shale Blocks awarded to Chevron 1 well, no info strong Protest

Shale Gas Moratorium on fracking until 2021 Blocks awarded to BNK, Exxon mobil

Shale Gas Blocks awarded to Tamboran 1 well planned: Q4 2014 Rathlin Energy

Shale Gas Blocks awarded to PEOS –SEAG, Celtique energie Ban fracking in Bern region

Shale Gas Moratorium on E&P in Flandres (Netherland and Belgium)

Shale Gas Ban fracking in Cantabria and Catalogna regions Blocks awarded to SHESA, Frontera, Cuadrilla

Bulgaria

Netherland Germany

Ukraine

Ireland

74/16 Wells drilled / tested 2009-2014

3/0

8/2

1/0

52/13 9/1

1/0

Protest from Activists

European Shale Gas activity : update 2014

Presentation title - Place and Country - Date Month Day Year 9

2012 – Concession map

Baltic basin 30 wells drilled / 10 tested Activity concentrated in the northern part of the Baltic Basin Lebien-2H (Hz) stabilized flow rate 250-500 mscf/d Lublewo LEP-1ST1H, multi stage fracc, oil prod: 350bbl/d to be confirmed, low gas

Lublin basin 6 wells drilled / 1 tested: disapointing results Chevron still present

Poldasie basin 16 wells drilled / 2 tested No information on test

Poland Shale Gas activity : update 2014

Presentation title - Place and Country - Date Month Day Year 10

Bowland basin – Cuadrilla 3 wells drilled / 1 tested Preese Hall 1: tested vertical well – 4 frac - Initial pick flowrate > 1 mm scfd (4 stages) - env 150 mscfd/stage 2 wells planned: Roseacre Wood Q4-2014, Preston New Road

Weald basin Cuadrilla, 1 well drilled / 0 test Balcombe 1, conv. & unconv. Obj. no info

Cheshire basin – Igas / Dart 2 wells drilled / 0 tested Irlam 1 & Ince Marshes 1

Other basins (Cleveland / Humber) 3 wells drilled / 0 tested Conventional objectives with explo in Unconventional play

13th round (2008) mainly focused on conventional & CBM. 1 company applied for Shale gas (Cuadrilla) 14th round (2014) Focused on shale gas

Gainsborough basin Igas, 1 well planned in 2015

UK Shale Gas activity : update 2014

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Is there an “european” development business case ? 1/2

Some Boom Some Boom Some Boom

2035 0,3 0,7 20 50 400 900

2050 0,6 1 40 70 650 1200

Macroeconomic indicators

Additional growth (%/yr)

Increase in taxes (Geuros/yr)

Employment (thousands jobs)

EUR 3,3 Bcf over 30 yrs

Barnett typical well decline

23000 wells for some shale gas

52000 wells for shale gas boom

Gas ($/MBTU)

Well cost (M$)

4 57 1010 1513 20

Breakeven gas price

Some Boom Some Boom Some Boom

2035 -10 -20 -5 -10 -22 -28

2050 -17 -22 -10 -13 -25 -30

Impact on energy markets

Gas price reduction (%)

Electricity price reduction (%)

Energy import dependency (%)

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Prod

uctio

n 10 years 20 years 30 years

Exploration Appraisal

FID : Project sanction

First gas Plateau decline

Is there an “european” development business case ? 2/2

The notion of « planning » will be critical >>FLEXIBILITY will be the key Conventional development scheme cannot apply as many parameters can influence the planning of the development : •Limited number of rigs working in the same basin (5 rigs?)

•Drilling will be influenced by a lot of parameters (gas price, land access, presence of sweet spots…)

•Environmental conditions, access to water will also influence and probably create local bottlenecks

Shale Gas development business case will definitevely differ from conventional development >>need to adapt

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In Danemark as elsewhere, making acceptance the top priority: it’s our responsibility

Water Local communities Aquifer zones

Protection of aquifer zones during drilling, fracking and production Safety and reliability of wells and installations Reduction in the quantity and impact of additives Use of seismic data to localize and control the intervals to be fracked

Reduction in water use Reduction in water use during fracking operations Research into solutions aimed at avoiding the use of public-domain and fresh water Optimized water reuse after appropriate treatment

Reduction in the impact of industrial activities Reduction in the number of industrial drilling sites in favor of horizontal production wells in each cluster Cluster installation near existing infrastructure Fluids transported by pipeline Site rehabilitation

Impact of operations Consultation and exhanges with local communities Taking appropriate account of the questions relative to local biodiversity, the countryside, heritage, dwellings and traffic relative to the planning of installations Oversight and respect for commitments

Legitimate questions that require appropriate reponses and measures.

Landscape

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1- Measure, disclose & engage

2- Watch where you drill

3- Isolate well and prevent leaks

4- Treat water responsibly

5- Eliminate venting, minimize flaring & other emissions

6- Be ready to think big

7- Ensure a consistently high level of environmental performance

http://www.ngsfacts.org

http://www.ogp.org

What can the industry do ?

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What is the EU position ?

The EU Commission sees the interest for shale gas

o Could represent a significant part of European gas production by 2035

o Could help the EU limit the increase in gas imports

The EU Commission has released three external studies in 2012

o Unconventional Gas: Potential Energy Markets in the EU

o Climate impact of potential shale gas production in the EU

o Potential risks for the environment and human health arising from

hydrocarbons operations involving hydraulic fracturing in Europe

The European Parliament has voted several resolutions

o Call for involvement of civil society and for full transparency of the

industry - 2012

o Rejection of a moratorium proposed by the Green party - 2012

o Recommendation to include unconventional HC projects at HF stage

into EIA Directive - 2013

Vendsyssel-1 (assembly) Exploration well

Airborne gravimetry

16 16

Denmark : Total’s showcase of Shale Gas operations in Europe

Bio-methane

Public meetings

Air monitoring

Water monitoring

H2S Radioactive

… Noise

monitoring

Flora & fauna monitoring

seismometer

Seismicity monitoring

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Conclusions

Still huge uncertainties on the resources

and on the development business case

Environmental and societal challenges exist, especially in Europe

which are well-identified which can (technically) be addressed in a safe way And addressed through adequate regulations and

industry practices

Shale gas will only be developed if Public & community are convinced that the risks are limited and that the benefits are there

If present and done properly , there is room for shale gas in the European energy mix

If developed, it will be with a different model compared to the U.S.

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