The shale revolution. Causes, Causes, opportunities and risks
Philippe Charlez, Total17/11/2016
US oil & gas production and imports
1973 1979 1986 1991 2001 2003
First oilcrisis
Second oilcrisis
Oil countershock
First gulfwar
Twintowers
Secondgulf war
Energy dependency (%)75%
US production
peak oil
1970 2006US
importpeak oil
Oil
Gas
0%
25%
50%
75%
1970 1978 1986 1994 2002
Dependency = import/consumption
BP outlook 2016
Worrying increase of energy dependencyThe answer…shale oil & gas revolution
2006-2008: the start of a revolution
Bakken
Six champions!
BP Energy outlook 2016
Oil + LPG Gas
Mbopd Bcf/d
Total 12.7 74.2
Shale 6.5 42.5
% 51% 57%
0%
10%
20%
30%
30%
40%
50%
60%
70%
2000 2005 2010 2015
Gas dependency
Oil dependency
Marcellus
HaynesvilleBarnett
Eagle-Ford
Permian
champions!
Barnett shales (Dallas)
2000 2005 2010 2015
Sea floorbiomass mud
How oil & gas are formed
2. Biomass sedimentation
Organic
Biodegradation
Biogenic gasBacteria
1. Minerals sedimentation(quartz, lime, clay)
Mineral
Overburden
T°Time
Gas + oil
Biogenic gasKerogen
BacteriaT°<80°C
Thermal alteration
Oil + gas
80°C
to 130°C
Oil w
indow
2 km
3,5 km
Burial
Pressure increases
Temperature increases
Gas
Depth Depth
Land surface
Overburden
Conventional exploits reservoir
Shale exploits source rock but…
Shale oil & gas = natural oil & gas
From source rock to reservoir
Réservoir
Seal
Trap Reservoir
1. Coarse grains
2. High permeability
3. Limited extension (1000 km 2)
Basement
Source rock
3. Limited extension (1000 km )
100 µ
Source rock
1. Very fine grains
2. Very low permeability
3. Very large extensions
1 µ
Hydrocarbon maturation = Temperature + Time
Time condition = very low permeability
Technology made shale O&G viable
Non economic production
Non economic production
Economic production
Economic production
� uneconomic permeability
Shale oil & gas
� economic permeability
Conventional
Non economic production
Recovery of oil and gas from shale formations requires horizontal drilling and
hydraulic fracturing to allow economic production
First in Oklahoma 1947. More than two millions frac in the states.
Hydraulic fracturing is a “mature” upgraded technology
US shale revolution : 3 consequences
40
80
120
5
10
Henry Hub Brent
Source
$/MBTU $/bbl
1. A « double pain » for producers
2. An opportunity for industry
Cement Glass
Steel PetrochemicalsSix years
00
2000 2005 2010 2015
BP outlook 2015 Steel Petrochemicals
2012 2020 2035
Million jobs 1.75 3 4
Source: IHS CERA
Power generation movedfrom coal to gas
3. A positive effect on GHG
400
450
500
550
600
5.4
5.8
6.2
6.6
7.0
2000 2005 2010 2015
Coal (Mt/an)GHG (Gt/an)
GHG (-13%)
Coal (-21%)
Source BP outlook 2015
Shale as the new oil swing
Production
Price
15
20
25
30
35
0
15
30
45
60
75
1965 1968 1971
1. Consumers
40
42
44
46
48
50
0
15
30
45
60
75
2002 2007 2012
3. Market
30
35
40
45
50
55
0
15
30
45
60
75
1973 1983 1993
2. Producers
Weakness of OPEC members, low « breakeven » of Saudi Arabia
0% 25% 50% 75% 100%
Breakeven price
Pétro-monarchies
OtherOPEP Russia
US OtherNon OPEP M
exic
o Bra
sil
Can
ada
(% of world production)
Weakness of OPEC members, low « breakeven » of Saudi Arabia
� Resilience: production resists to strong decline in activities
Shale as the new oil swing
Production (Mbopd)
0
1
2
3
4
5
janv.-12 janv.-13 janv.-14 janv.-15 janv.-16
0
350
700
1 050
1 400
1 750Rig count
Data sourceEIA & Baker Hugues
Production Activities
� Flexibility: light means easily stopped and restarted
� Privacy : subsurface belongs to land owners
VS
janv.-12 janv.-13 janv.-14 janv.-15 janv.-16
US oil dependency (%)
30%
40%
50%
60%
70%
1990 1995 2000 2005 2010 2015
BP energy outlook 2016
-50%
-30%
-10%
10%
30%
50%
70%
1981 1986 1991 1996 2001 2006 2011
China oil dependency(%)
BP energy outlook 2016
Impact on future oil market: displacement to China
+3-18,6+12
US
China+India
Others
2000
1990 1995 2000 2005 2010 2015 1981 1986 1991 1996 2001 2006 2011
+19,3-25,7+4
US
China+India
Others
2030
LNG market
� 1990 : 50 Mtons
� 2000 : 100 Mtons
�2014 : 250 Mtons
� 2030 : 500 Mtons
US LNG
� 20 Mtons in 2020
� 60 Mtons in 2025
� 90 Mtons in 2030
Impact on future gas market: US LNG exports
40
60
80
100
120Production & demand (Bcf/day)
Production
Demande
12 B
cf/jou
r
Russian gas
American LNG
Chineseshale gas?
40
2005 2015 2025 2035
American LNG : a threath forRussian gas markets ?
Threath for russian gas market (Europe)?
Paris
Moscow
Warsaw
Kiev
Minsk
Berlin
Yamal
R² = 0,96
0 20 40 60 80
Wholesale gas price Europe (€/MWh)
0 20 40 60 80Oil price (€/MWh)
Russian gas<<
American GNL
0
2
4
6
8
10du GNL ($/MBTU)
CAPEX
OPEX
Prix du gaz
Coût du GNL américain ($/MBTU)
CAPEX
OPEX
Prix du gaz
Pétrole Gaz Europe
$/bbl $/MBTU
110 11.2
50 5.6
30 3.8
Price Russian gas(5,6$/MBtu)
Threath for russian gas market (Asia)?
Tuymen
Prokokovo
Blagove-
CHAYANDA
URENGOY
OmskSAKHALINE
YAMAL
Vers les marchés
européens
Gazoduc existant
Projet f
Liaison des deux réseaux
Projet Altaï
Novossibirsk
0%
25%
50%
75%
100%
2000 2005 2010 2015
Europe CEI Asie
% d
es e
xp
ort
ati
on
s d
e g
az r
usse
Cost russian gas (9$/Mbtu)Coût du GNL ($/MBTU)
0
2
4
6
8
10
Asie
CAPEX
OPEX
Prix du gaz
Pétrole
$/bbl
110
50
30
Gaz Asie
$/MBTU
15.3
7.5
4.9
Vladivsotok (GNL)
Blagove-shensk
Khaba-rovsk
KOVYTKA
Omsk
Entrée ouest
Entrée est
2000 2005 2010 2015
% d
es e
xp
ort
ati
on
s d
e g
az r
usse
Russian gas=
American GNL
The case of Europe: shale not a game changer
2035 -20 -10 -28
Gas price
reduction (%)
Electricity price
reduction (%)
Energy import
dependency (%)
2035 0,7 50 900
Additional
growth (%/yr)
Increase in taxes
(Geuros/yr)
Employment
(thousands jobs)
BP energy outlook 2015 & IEA
Tcf Gboe
Poland 148 25
France 137 23
Romania 51 9
Denmark 32 5
Shale gasCountry
Unit 2014 2035
Gas consomption Bcf 41
Gas production Bcf 14
Gas dependency % 67% 95%
Russian gasDenmark 32 5
UK 26 4
Netherlands 26 4
Others 50 9
Total 470 80
<5 $/MBtu
>12 $/MBtu
- Geology
- Social blockage
- Uneconomic
(>12$/MBtu)
Russian gas<<<
European SG
Short Resume
Philippe A. Charlez is Mining Engineer from Ecole Polytechnique de Mons (Belgium) and PHD from Institut de
Physique du Globe de Paris. He works for 35 years with Total E&P. He was during 15 years Rock Mechanics Expert. He
then occupies several operational positions in Scotland, Angola and more recently Kazakhstan. Expert in
Unconventional Resources, he is currently Senior Technical Advisor. Charlez is the author of more than 50 scientific
papers. He has published in 2014 & 2015 with Ed. Technip “Our Energy Future is not Set In Stone” and “The Shale Oil
& Gas debate”. A new book on energy transition is planned to be published September 2016.
www.philippecharlez.com
www.editionstechnip.com
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