Unconventional Gas: An Exportable North American...
Transcript of Unconventional Gas: An Exportable North American...
October 7, 2010
Unconventional Gas: An Exportable North American Revolution?
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Unconventional Gas: Unconventional Gas:
An Exportable North American Revolution?An Exportable North American Revolution?Prepared By:
Vello A. Kuuskraa, PresidentADVANCED RESOURCES INTERNATIONAL, INC.
Arlington, VA
Prepared for:
The Changing Fundamentals of Global Gas Markets:Europe as the Battleground?
Sponsored by:
Carnegie Energy & Climate Change ProgramCarnegie Endowment for International Peace
October 12, 2010, Washington, DC
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From From ““Fears of ShortagesFears of Shortages”” to to
““Expectations of PlentyExpectations of Plenty””
Gas shales have changed the outlook for U.S. natural gas from “fears of impending shortages” to “expectations of plenty”.
• Instead of declining, U.S. natural gas production increased, from 53 Bcfd in 2000 to 59 Bcfd this year.
• Gains in unconventional gas of 20 Bcfd more than countered declines in onshore and offshore conventional gas.
• Gas shales provide 12 Bcfd today (20% of domestic natural gas production) account for much of the 20 Bcfd of the growth.
• Today, unconventional gas provides over 60% of U.S. natural gas production.
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Year 2000
13 Bcfd
53 Bcfd
24 Bcfd
16 Bcfd
0
10
20
30
40
50
60
70TOTAL
Conve
ntional
Onsh
ore
Gas
*
Unco
nve
ntional
Gas
Offsh
ore
Gas
Dry
Gas
Pro
duct
ion (Bcf
d)
Year 2010
6 Bcfd
36 Bcfd
17 Bcfd
59 Bcfd
0
10
20
30
40
50
60
70
TOTAL
Conve
ntional
Onsh
ore
Gas
*
Unco
nve
ntional
Gas
Offsh
ore
Gas
Dry
Gas
Pro
duct
ion (Bcf
d)
Unconventional Gas Is Now the Dominant Source of U.S. Unconventional Gas Is Now the Dominant Source of U.S.
Natural Gas ProductionNatural Gas Production
*Includes onshore associated, non-associated and Alaska.
Source: U.S. Energy Information Agency (2010); Advanced Resources Int’l (2010).
JAF2010_043.XLS
The 20 Bcfd growth in unconventional gas production, has more than replaced declines in U.S. conventional onshore and offshore supplies
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0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Dry
Gas
Pro
duct
ion (Bcf
d)
Other Barnett Fayettevi l le Woodford Marcel lus Haynesvi l le
JAF2010_043XLS
Source: Advanced Resources International (2010)
(e)
Annual Gas Shale Production (Bcfd)
How Much Do Gas Shales Contribute Today?How Much Do Gas Shales Contribute Today?
Production of gas shales has grown by ten-fold and is expected to exceed 12 Bcfd, equal to 20% of U.S. natural gas production this year.
2000 2009 (p) 2010 (e)( bcfd) (Bcfd) (bcfd)
Haynesville 0.0 1.0 2.4Marcellus 0.0 0.4 1.0
Woodford 0.0 0.7 0.9
Fayetteville 0.0 1.4 1.9
Barnett 0.2 4.8 5.1Other 0.9 0.9 0.9
Sub-Total 1.1 9.2 12.2
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Projecting the impact and benefits of gas shales and unconventional gas for the U.S. requires that we first address aseries of questions:
• How large is the unconventional gas resource base?
• Is it large enough to enable unconventional gas to become a major climate change solution and support exports via LNG?
• How much of it can be converted to productive capacity at affordable prices?
• How much would progress in technology impact the economically affordable resource base?
• Can the resource be developed in an environmentally sound way?
Addressing the Fundamental QuestionsAddressing the Fundamental Questions
Understanding the impact of gas shales on the European gas markets requires addressing these same topics.
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One of the Many Benefits of Bountiful One of the Many Benefits of Bountiful
Unconventional Gas SuppliesUnconventional Gas Supplies
If abundant and affordable, unconventional gas can provide a major climate change mitigation option for power generation, reducing CO2
emissions by 70%.
Older, Inefficient
Coal Power Plant
(@ 30% Efficiency)
# of CO
2/k
wh
1.09
0.33
CO2/SO2 Emissions
by Fuel Type (lbs of CO2 & SO2/BBtu)CO2 Emissions for
Electricity (lbs/kwh)
250,000
200,000
150,000
100,000
50,000
0Coal Natural Gas
CO2
CO2
CO2
Source: EnCana 2009
SO2
SO2
SO2
3,000
2,500
1,500
1,000
500
0
2,000
1.0
0.8
0.6
0.4
0.2
0
1.2
New, Efficient
Natural Gas Power Plant
(@ 55% Efficiency)
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How Large is the Gas Shale and How Large is the Gas Shale and
Unconventional Gas Resource?Unconventional Gas Resource?
Our in-depth assessments of U.S. gas shale, tight gas sand and coalbed methane basins shows nearly 1,400 Tcf of recoverable resources.
In addition, the U.S. recoverable conventional gas resource base(including Alaska) is in excess of 1,200 Tcf.
SourcesRecoverable Resource*
Tcf
Gas Shales 700
Tight Gas Sands 567
CBM 106
*Includes 39 Tcf of gas shales proved reserves, 96 Tcf of tight gas sands proved reserves and 21 Tcf of coalbed methane proved reserves.
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U.S. Gas Shale BasinsU.S. Gas Shale Basins
Source: Advanced Resources International
Utica ShaleAnadarko – Woodford
0.1 Bcfed
Arkoma – Woodford
0.8 Bcfed
Haynesville Shale
2.4 Bcfed
Barnett Shale5.1 Bcfed
Floyd/Chattanooga Shale
Conasauga Shale
Lower Huron Shale
0.4 Bcfed
New Albany Shale
Antrim Shale
0.3 Bcfed
Fayetteville Shale
1.9 Bcfed
Marcellus Shale
1.0 Bcfed
Eastern U.S. Gas Shale Basins
Mid-2010 Production Rate
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Will Gas Shale and Unconventional Gas Remain Will Gas Shale and Unconventional Gas Remain
Economically Affordable?Economically Affordable?
Unconventional gas (particularly the higher quality gas shales) is today the low cost portion of the natural gas price/supply curve.
Prior PerceptionPrior Perception New UnderstandingNew Understanding
Gas Resources Gas Resources
Gas P
rices
Gas P
rices
ConventionalGas
UnconventionalGas (Gas Shale)
UnconventionalGas (Gas Shales)
ConventionalGas
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Role of Policies, R&D and TechnologyRole of Policies, R&D and Technology
(A Model for Europe and Other Gas Shale Regions)(A Model for Europe and Other Gas Shale Regions)
Gas shales and unconventional gas are a R&D and policy success story:
• The DOE/NETL helped build the essential resource and science knowledge base.
• The Gas Research Institute and industry launched the early technology demos.
• Section 29 tax credits (now expired) helped attract capital and build economies of scale.
However, we are still in the early, emerging stages of having anoptimum set of technologies.
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What Changed the Game?What Changed the Game?
Horizontal Well with Multi-Stage Fracturing
Source: EnCana
Natural gas production from shallow, fractured shale formations in the Appalachian and Michigan basins of the U.S. has been underway for decades.
What “changed the game” was the recognition that one could “create a permeable reservoir”and high rates of gas production by using intensively stimulated horizontal wells.
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Can These New Natural Gas Resources Be Can These New Natural Gas Resources Be
Developed In An Environmentally Sound Way?Developed In An Environmentally Sound Way?
• Reducing Surface Impacts
• Capturing Methane Emissions
• Assuring Environmentally Safe Wells and Hydraulic Fractures
As drilling increases and production grows, a harsher spotlight will fall on natural gas. “Green natural gas development” will help put a more environmentally friendly face on this activity.
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““GreenGreen”” Unconventional Gas DevelopmentUnconventional Gas Development
Source: Canadian Association of Petroleum Producers, 2010
Reducing Land Use Impacts with Multi-Well Pads and Horizontal Wells
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Reducing Methane EmissionsReducing Methane Emissions
Source: U.S. Environmental Protection Agency (www.epa.gov.gasstar/accomplish.htm)
• Since 1990, Natural Gas Star partners have eliminated over 500 Bcf of methane emissions from the oil and gas production sector.
• Williams reports 24 Bcf of methane emissions captured with costs of $17 million and revenues of $159 million.
Cumulative Methane Emission Reductions by EPA Natural Gas STAR Partners (2000-2008)
0
100
200
300
400
500
600
700
800
900
2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Cu
mu
lati
ve E
mis
sio
n R
ed
ucti
on
s (
Bcf)
Other
Production Sector
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Protecting the Environment Protecting the Environment (Properly Designing the Well and Monitoring the Frac)(Properly Designing the Well and Monitoring the Frac)
• The well is designed with steel casing and cement to protect groundwater aquifers.
• The shale interval is 5,000 to 10,000 feet below the water table, protected by unfractured strata.
• Real-time micro-seismic monitoring reveals that the fractures remain in the shales, deep underground.
• Disclosure and less environmentally impactful chemicals are increasingly being used.
SHALE FRAC
Source: Shell
AQUIFER
5,000+ FEET IMPERMEABLE
ROCK
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Feet
Source: EOG
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European Gas Shales:European Gas Shales:
ResourcesResources
Our preliminary gas shale resource assessment is 1,000+ Tcf (~30 Tcm), with a potential recoverable resource of 140 Tcf (4 Tcm).
These resources are located in three deposits - - the Alum Shale of Sweden, the Silurian Shales of Poland and the Mikulov Shale of Austria.
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European Gas Shale Geology Is Complex European Gas Shale Geology Is Complex
• Europe is structurally more complex than North America.
• Steeper dips, larger and more closely spaced faults.
• Faults may be water conduits which would inhibit gas production.
• More structural analysis needed. Every well becomes a PhD thesis.
Source: Hamilton et al, 2000
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Highest Potential Gas Shales May Be In Poland Highest Potential Gas Shales May Be In Poland
• Poland appears to be favorable for gas shales.
– Geology is simpler, with fewer faults; numerous prospective areas.
– Lane/COP’s first well mid-May 2010 near Zwartowo. Second well near Gdansk. BNK/RAG/ Sorgenia first well mid-2010.
– Resources is characterized as “Silica-rich, mature, high in TOC.”
BALTIC BASIN
POMERANIA
WIELKOPOLSKA
LUBLIN BASIN
CARPATHIAN FOREDEEP
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Constraints Facing European Gas Shale Constraints Facing European Gas Shale
Development Development
While the gas shale resources of Europe, and particularly Poland, are impressive, many barriers and constraints need to beovercome for converting these resources to reserves:
• Establishing the size and quality of the economically recoverable shale resource.
• Resolving the environmental consequences of hydraulic fracturingplus water use and disposal.
• Expanding the infrastructure to efficiently drill, develop, transport and store gas.
• Overcoming significantly higher capital and operating costs, currently at least two times those in North America.
• Initiating simpler certification approvals and a transparent regulatory process.
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Concluding RemarksConcluding Remarks
• Promote progress on climate change by substituting
natural gas for coal in old, inefficient power plants.
• Increase energy security by replacing imported petroleum for transportation with CNG and low emission power for electric cars.
• Improve the economy from lower energy costs, more domestic jobs and an improved trade balance.
Our work to date shows that the U.S. and potentially Europe have large resources of gas shales and other unconventional gas. The challenge for Europe is to convert these resources into economically competitive reserves.
With “green development practices”, these resources can be developed in an environmentally sound way.
Bountiful supplies from gas shales and unconventional sources can provide many benefits:
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Advanced
Resources International
www.adv-res.com
Office Locations
Washington, DC4501 Fairfax Drive, Suite 910
Arlington, VA 22203Phone: (703) 528-8420
Fax: (703) 528-0439
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11490 Westheimer, Suite 520Houston, TX 77042
Phone: (281) 558-6569
Fax: (281) 558-9202