Global Energy Assessment: Shale Gas and Oil

Transcription

1 Global Energy Assessment: Shale Gas and Oil KEEI September, 2014 Yonghun Jung

2 Shale Gas: a new source of energy

3 Shale gas deposits around the world vs natural gas consumption (tcf) U.S Canada France Poland China 1, Mexico Algeria Libya Brazil Argentina South Africa Australia Source: US DOE, MIT

4 Shale gas deposits Map of basins with assessed shale oil and shale gas formations, as of May 2013 Legend Assessed basins with resource estimate Assessed basins without resource estimate Source: United States basins from U.S. Energy Information Administration and United States Geological Survey; other basins from ARI based on data from various published studies. Source: U.S. Energy Information Administration

5 Top 10 countries with technically recoverable shale oil/gas resources Rank Country Shale oil (billion barrels) 1. Russia U.S (48) 3. China Argentina Libya Australia Venezuela Mexico Pakistan Canada 9 World Total 345 (335) 1 EIA. Rank Country Shale gas (trillion cubic feet) 1. China 1, Argentina Algeria U.S (1,161) 5. Canada Mexico Australia South Africa Russia Brazil 245 World Total 7,299 (7,795) 1 EIA. Note: estimates used for ranking order. ARI estimates in parentheses Source: U.S. Energy Information Administration

6 Shale gas development in the United States From December 2010 to December 2011, US production increased 5.5 bcfd equivalent to bcm/d 17%of total 2011 global LNG demand Low prices of natural gas still persist, but projected to go up As of May 1st, natural gas price was about 4.3/mmbtu 16~17/mmbtu in NE Asia, 9~10/mmbtu in Europe A big shifts from Gas Rigs to Liquid Rigs: more oil! Gas Rig counts dropped from 804 as of January 1, 2010 to 451 as of July 27, 2012 Liquid Rig counts from 375 as of January 1, 2010 to 1409 as of July 27, 2012 Cost reductions and high recoverable resource estimates benefit the US export potential for natural gas and oil.

7 U.S. Shale Plays Also Attract Foreign Investors International joint venture investment in U.S. shale plays( ) billion dollars Source: U.S. Energy Information Administration

8 Dramatic Rise of U.S. Shale Gas Production Estimated annual U.S. dry shale natural gas production, Trillion cubic feet per year Source: U.S. Energy Information Administration

9 Why only in the US? A perfect storm? Good geology with abundant water resources Technology availability Well-developed infrastructure: roads, gas treatment, gas transportation Well-developed and functionally sound oil and natural gas Predictable and transparent regulatory, fiscal, and legal systems. High gas and oil prices Less likely that other countries would emulate the US case.

10 Impact of shale gas development in the US on NE Asia Downward pressure on LNG contract prices in NE Asia (as well as on coal) But in the long run, the impact could become insignificant Deepening discontent over currently rigid LNG contracts: hub-based pricing, no destination clause A critical review of energy policies regarding energy mix in view of shale gas: what to do with coal? Regional diversification? Petrochemical industries at the crossroads Backbone industry in NE Asia

11 World LNG Estimated June 2013 Landed Prices Federal Energy Regulatory Commission / Market Oversight / Natural Gas Overview: World LNG Prices UK 9.49 Spain Belgium 9.77 Lake Charles 3.56 Korea Cove Point 3.90 India China Japan Altamira Rio de Janeiro Bahia Blanca Source: Waterbome Energy, Inc Data in SUS/MMBtu

12 KOGAS has signed an SPA with Cheniere

13 A Schematic View of Petrochemical Processing Gas Field NG Methane C3 LPG C4 LPG Gasoline Electricity generation Heating Ethylene glycol Fiber, Clothe Polyethylene Plastic Gas/Fluid Methanol Oil Field NGL NGL Separation Process C2 (Ethane) Ethane cracker Ethylene (C2) Naphtha Naphtha cracker Propylene (C3) Butadiene (C4) Oil Refinery LPG, Gasoline, Jet Fuel, Kerosene, Diesel, Fuel Oil, etc. Condensate B. T. X (Aromatic) BTX

14 Recent trends in petrochemical industry New added capacity in the Middle East and China Ethylene production surpass demand by 23million ton in 2011 with the total production 150 million ton The market share of China and the Middle East combined rose from 11.1% in 2000, 16% in 2005 and to 28% in 2010 Shale-gas-based Ethylene production capacity is anticipated to increase rapidly for the next decade in the US From 22 million ton in 2010 to 32 million ton 2020 Ethylene Production cost 500 ~600 /ton in the US, while 1000~1100 /ton in Korea However Naphtha based ethylene production is projected to decline sharply. All in all in 2020 ethylene production in the US will be 5 ~ 8 million ton higher than in 2010.

15 Petrochemical cost curve by country/region, 2010 High Cash Costs (/Pound) Western Europe China Japan Other Northeast Asia Canada Low Middle East Low United States Cumulative Supply Quantity (Billion Pounds) High Source: American Chemistry Council (2011)

16 Expansion of the US petrochemical Industry Dow chemical: a series of petrochemical projects in the Gulf coast Eagle Ford shale 2.3 million ton + PE Shell Signed a land option agreement in Pennsylvania. Would use ethane from Marcellus 1.2 million ton Chevron Phillips Chemical 1.5 million ton plus 1 million ton PE Formosa Plastics Westlake Chemicals: Many more including BASF, NOVAchem, SASOL

17 Shale gas deposits in China Junggar Basin Songliao Basin Turpan-Hami(Tuha) Basin Tarim Basin Ordos Basin Beijing Bohai Basin North China Basin Shanghai Sichuan Basin Legend Prospective Basin Other Basin Gas Pipeline

18 Shale gas in China Hugh reserve 25.1 tcm of exploitable shale gas (approximately 17.5 billion ton) 13th Five-Year plan ( ) 6.5 bcm production by 2015 (4.5 million ton) - a subsidy of 0.4 yuan (6.3 cents) will be offered for every cubic meter of shale gas developed by enterprises during the period. But deeper wells and inaccessible areas Drilling cost in China ranges between 6.5 ~ 13 million US per a single well while that of US, between about 3~4 million US on average So far only 63 wells have been completed (20,000 wells by 2020) Subsidy of Water issue Except in Sichuan, water is a big issue Natural gas pipeline belongs to prohibited area on the investment catalogue

19 Pre-requisites for large-scale shale development Resource availability Favorable geology Infrastructure availability Access to pipeline Gas treatment facilities Market Regulatory certainty Investment conditions Transparent and non-discriminatory regulation Enforceable legal institutions Availability of technologies: foreign or domestic Labor and capital equipments

20 Big questions for the future How much oil and gas will be produced in the US, China and Eastern Siberia? At what cost? Large-scale additional natural gas demand in the US: Transport, Power generation Will there be significant inter-fuel substitution from coal to natural gas? Will there be lifting of the BIS ban on oil export in the US? How much investment will be made on petrochemical industries in the US?

21 Conclusion Downward pressure on LNG, impacting the current contractual practices: fluid and liquid LNG market expected! - Increasing spot trade with time and Downward pressure on oil prices or at least helping stabilize the global oil price Regional specialization of ethane-based chemical industries in North America and Naphta-based, BTX-concentrated industries in Northeast Asia