Natural Gas Fortune or Folly

Transcription

1 Scott W. Tinker Bureau of Economic Geology AGI Issues Forum November, 2014 Natural Gas Fortune or Folly

2 Outline Energy Demand Natural Gas Supply Issues and Options The Radical Middle

3 Population (millions) Global Population and Energy Primary energy (quads) Global Population Growth Rate 1.8% 1.1% Year Source: BP Statistical Review of World Energy, Source: US Census Bureau Int l Database, June 2011 QAe874

4 Population 2015 ~1 billion people per color More people live inside the circle than outside

5 Population and the Economy 35 China s Share of world GDP at PPP*, % Population, bn * At purchasing-power parity Source: From Monitoring the World Economy, by Angus Maddison, as appeared in The Economist, August 23, 2014 QAe3086

6 GDP Growth (% change on 2000 chained dollars) Oil Domestic Wellhead Price (2013 $) The Economy and Energy U.S. Economy and Oil Price Nixon Ford Carter Reagan Bush Clinton W Bush Obama Year Data: BP Statistical Analysis; US Department of Commerce Arabian Light 1984 Brent dated QAe876

7 Energy Mix Nuke Hydro Renew Coal Nat Gas Oil (MTOE)

8 Energy Demand Hydro Renew Nuke Oil Coal 1389 Nat Gas (MTOE)

9 Global Population and Energy F o r e c a s t Rest of World 8 Africa 6 4 Asia Source: From the UN, as appeared in The Economist, August 23, 2014

10 Outline Energy Demand Natural Gas Supply Issues and Options The Radical Middle

11 BcF/Day Global Natural Gas Production OECD Non-OECD Source: BP Statistical Review 2012

12 BCF/Day Global Natural Gas Production Total North America Total S. & Cent. America Total Europe & Eurasia Total Middle East Total Africa Total Asia Pacific 115 Tcfy Source: BP Statistical Review 2012

13 Production cost (2008 $/Mbtu) Produced Conventional Coal Bed Methane Arctic Deep Water Global Natural Gas Resources v. Cost Tight Shale Sour 0 3,000 6,000 9,000 12,000 15,000 18,000 21,000 24,000 27,000 30,000 Source: IEA World Energy Outlook (2009) Global Consumption 115 Tcfy Resources (TcF) Hydrates Deep Carbon QAe980

14 Marketed Production (Tcf) U.S. Natural Gas Production and Reserves Annual U.S. Production End-of-Year U.S. Proved Reserves Proved Reserves (Tcf) 0 0 Data: BP World Energy 2012

15 U.S. Natural Gas Production (TcF) TcF TcF 9 TcF Shale gas Coalbed methane Tight gas Non-associated offshore Alaska Associated with oil Non-associated onshore

16 Annual Natural Gas Production (Bcf) U.S. Natural Gas ,000 Total Natural Gas Conventional Gas Unconventional Gas Production (TcF) An Anticipated Evolution From a 2004 Tinker Talk to the IPAA US Natural Gas 2004 forecast 25 TcF 23 TcF 14 TcF Shale gas Coalbed methane 20, , TcF 10, TcF 5 5, EIA ( ) and NPC ( ) 9 TcF Tight gas Non-associated offshore Alaska Associated with oil Non-associated onshore

17 Billion cubic feet per day TcF/Year 2013 Dry Shale Gas Production Rest of US Bakken (ND) Eagle Ford (TX) Marcellus (PA and WV) Haynesville (LA and TX) Woodford (OK) Fayetteville (AR) Barnett (TX) Antrim (MI, IM, and OH) Year Source: U.S. Energy Information Administration QAe2255

18 Forecast vs. Actual Model: Rice University, Medlock, 2012 Actual

19 Unconventional Resource Plays Niobrara Fm Cody Bakken Utica Mowry HilliardBaxterMancos-Niobrara Heath Fm Gammon Niobrara- Mowry Niobrara Fm Antrim Antrim Utica- Collingwood Antrim Utica Marcellus Manning Canyon Mancos Kreyenhagen Hermosa Monterey- T emblor Gothic-Hovenweep Lewis Monterey Pierre- Niobrara W oodford New Albany Excello-Mulky Fayetteville Chattanooga Bend A valon-bone Spring W olfberry Cline W olfcamp (Delaware) Barnett- W oodford Barnett W olfcamp (Midland) Chattanooga W oodford-caney Conasauga Floyd-Neal Floyd-Chattanooga Haynesville T uscaloosa Pearsall Eagle Ford Cenozoic Miocene Mesozoic Cretaceous Paleozoic Permian Mississippian-Devonian T ight sands Miocene-Oligocene Jurassic Pennsylvanian Devonian Basins Eocene T rassic Mississippian-Penn Mississippian Ordovician Cambrian Modified from: EIA and National Geographic QAei2915

20 Unconventional Resource Plays Bakken Marcellus Fayetteville Permian Basin Barnett Haynesville Eagle Ford Cenozoic Miocene Mesozoic Cretaceous Paleozoic Permian Mississippian-Devonian T ight sands Miocene-Oligocene Jurassic Pennsylvanian Devonian Basins Eocene T rassic Mississippian-Penn Mississippian Ordovician Cambrian Modified from: EIA and National Geographic QAei2915

21 Unconventional Resource Plays Bakken Marcellus Fayetteville Permian Basin Barnett Haynesville Eagle Ford Cenozoic Miocene Mesozoic Cretaceous Paleozoic Permian Mississippian-Devonian T ight sands Miocene-Oligocene Jurassic Pennsylvanian Devonian Basins Eocene T rassic Mississippian-Penn Mississippian Ordovician Cambrian Modified from: EIA and National Geographic QAei2915

22 Middle Devonian Unconventional Resource Plays Bakken Laurentia & Baltica Marcellus Fayetteville Bakken Permian Basin Barnett Haynesville Eagle Ford From Blakey;

23 Bureau of Economic Geology U.S. Shale Gas Integrated Study What is the total resource base in place? What portion is technically recoverable? What potion is economically recoverable? What is the long-term production outlook?

24 BEG Project Workflow Geologic Analysis: Based on: Log and core data Results: structure, porosity, net pay-zone, and OGIP maps Decline Analysis: Based on: Production data and directional surveys Results: Individual well EURs Statistical Data Analysis: Based on: Per well production history and geologic attributes Results: Typical well decline profiles, production drivers Well and Play Recovery Analysis: Based on: OGIP free in each mi 2 and existing wells production declines Results: Normalized well production, exp. productivity (tier) map, individual well recovery factors (by tier), inventory of future wells, Technically Recoverable Resources (TRR) Well Economics: Based on: By tier well production profiles, attrition rate, economic parameters Results: Breakeven prices and IRR by tier Production Outlook: Based on: Production history, well economics and estimated well inventory Results: Pace of drilling by tier by year and expected production scenarios

25 Barnett Shale Phi * H OGIP free BEG Shale Reserves and Production Project

26 Barnett Productivity Tiers Ikonnikova S., et al SPE Res. Eval & Eng

27 Relative Frequency Barnett Monte Carlo Production Distribution Tcf OGIP 444 TcF 56 Tcf Cumulative Production (Tcf) Browning, J. et al SPE Econ & Mgmt

28 Relative Frequency Fayetteville Monte Carlo Production Distribution 0.05 OGIP 80 TcF Tcf 23 Tcf Cumulative Production (Tcf) BEG Shale Reserves and Production Project

29 LNG - Conventional Natural Gas

30 LNG - Conventional Natural Gas Source: Anastasia Shcherbakova. Waterborne Energy, Inc. Units: USD/MMBtu

31 2013 Dry Shale Gas Production Global Forecast Model: Rice University, Medlock, 2012

32 Outline Energy Demand Natural Gas Supply Issues and Options The Radical Middle

33 Near Surface Hydraulic Fracturing Water Fracking Proppant Friction Reducers: always (polyacrylmide) Biocides: often (glutaraldehyde, chlorine) 3,000 to 10,000+ feet Scale Inhibitors: sometimes (phosphonate) Surfactants: sometimes (soaps and cleaners) Shale 3,000 10,000 feet 3 6 million gallons

34 Environmental Impact Not to Scale! After JP Nicot, Bureau of Economic Geology

35 Environmental Impact 1000 s of Feet of Rock Drawn to Scale

36 Environmental Impact

37 Environmental Issues Regulatory Considerations I. Mandatory baseline data II. Cement all gas producing zones III. Minimize fresh water use on the front end IV. Full disclosure of chemicals V. Handle flowback and produced water VI. a. Treat and reuse b. Dispose: characterize for faults Minimize methane emissions and flaring VII. Minimize surface impact after Rao, 2012

38 Texas Water Use 55% 2011 water use for thermoelectricity: 0.41 maf 2010 water withdrawal for other sectors: 14 maf 30% 2% 2% Source: Scanlon et al., 2013

39 Texas Water Use 55% 2011 water use for thermoelectricity: 0.41 maf 2010 water withdrawal for other sectors: 14 maf 30% 8% 3% 2% 2% Source: Nicot and Scanlon, 2012, ES&T Source: Scanlon et al., 2013

40 Unconventional Summary Trade Offs Environmental Risks and Impacts Traffic/noise/light Surface Groundwater Quakes Health Local and atmospheric emissions Energy Security and Economic Benefits Available Affordable Reliable Jobs and Taxes

41 Unconventional Summary Trade Offs Environmental Risks and Impacts Traffic/noise/light Surface Groundwater Quakes Health Local and atmospheric emissions Energy Security and Economic Benefits Available Affordable Reliable Jobs and Taxes These are not mutually exclusive!

42 Options to Natural Gas for Power I. Coal o Available, affordable to generate, reliable o Dirty, expensive to build II. Nuclear o Efficient, no emissions, affordable generation o Expensive to build, waste, safety III. Wind o Simple, affordable, no emissions o Intermittent, land and visual, transmission IV. Solar o Simple, no emissions, local o Expensive, intermittent, land V. Hydro o Efficient, affordable to generate, no emissions o Water, land, drought VI. Geothermal o Affordable where concentrated, no emissions o Geology

43 Global Investment in Clean Energy 80 New investment*, $bn Solar Wind Biofuels Other *Excludes corporate and government R&D Source: Bloomberg New Energy Finance, The Economist, April 26, 2014 QAe2822

44 The Future Electricity Mix 120 North America Quadrillion BTUs Europe Asia Pacific Electricity Generation by Fuel Renewables Nuclear 20 Coal Gas 0 Oil ExxonMobil Corporation, 2010, The outlook for energy: a view to 2030: ExxonMobil report, 53 p.

45 The Future Electricity Mix U.S. Electricity Generation Coal Natural gas Nuclear Hydroelectric Other The Unintended 251 Consequences of 577 Million MWh/Year 2000 Political Will Source: EIA Data

46 Thousand megawatt hours per day The Future Electricity Mix US Electricity Generation by Fuel, All Sectors 14,000 12,000 10, % 49.6% 49.0% 48.5% 48.2% 44.5% 44.8% 42.2% Forecast 36.7% 36.8% Coal Natural gas Petroleum Nuclear Hydropower Renewables % 18.8% 20.1% 21.6% 21.4% 23.3% 23.9% 24.8% 30.8% 30.1% Year Source: US EIA Short Term Energy Outlook 2011.

47 Million metric tons The Future Electricity Mix 1800 U.S. First Quarter Total Carbon Dioxide Emissions QAe2823 Source: EIA

48 The Future Electricity Mix 120 North America Quadrillion BTUs Europe Asia Pacific Electricity Generation by Fuel Renewables Nuclear 20 Coal Gas 0 Oil ExxonMobil Corporation, 2010, The outlook for energy: a view to 2030: ExxonMobil report, 53 p.

49 ETS carbon price (EUA) (Euro per tonne) Coal consumption OECD Europe (million tonnes) The Future Electricity Mix Sources: Thompson Reuters, IEA Thomson Reuters; IEA

50 The Future Electricity Mix 120 North America Quadrillion BTUs Europe Asia Pacific Electricity Generation by Fuel Renewables Nuclear 20 Coal Gas 0 Oil ExxonMobil Corporation, 2010, The outlook for energy: a view to 2030: ExxonMobil report, 53 p.

51 Thousand megawatt hours per day The Future Electricity Mix 14,000 Country/ area China India Russia Japan Canada UK 12,000 10, Germany Europe US 0 US Electricity Generation by Fuel, All Sectors Energy-related carbon-dioxide emissions by geography, and net change since emissions 8715 million metric tons 49.8% 49.6% 49.0% 48.5% 48.2% 44.5% 44.8% 42.2% % 18.8% 20.1% 21.6% 21.4% 23.3% 23.9% 24.8% Forecast Net change in annual emissions from 2005 to 2011, million metric tons % 36.8% 30.8% 30.1% Year Coal Natural gas Petroleum Nuclear Hydropower Renewables 3252 Source: US EIA Short Term Energy Outlook Sources: US DOE, The Wall Street Journal

52 Thousand megawatt hours per day ETS carbon price (EUA) (Euro per tonne) Coal consumption OECD Europe (million tonnes) Average national electricity prices (in 2011 US cents/kwh) Data: average Energy-related prices from 2011 carbon-dioxide converted at emissions by mean exchange rate for that year 14,000 Country/ area 30 China India 20 Russia Japan 10 Canada UK 12,000 10, Germany 0 Europe US 8 India 0 US Electricity Generation by Fuel, All Sectors emissions million metric tons China The Future Electricity Mix geography, and net change since 2005 Forecast 400 Net change in annual emissions from 2005 to 2011, million metric tons % 49.6% 49.0% 48.5% 48.2% 44.5% 44.8% 42.2% % 18.8% 20.1% 21.6% 21.4% 23.3% 23.9% 24.8% % 36.8% 30.8% 30.1% Mexico 10 Canada 10 S. Africa 11 Russia 12 USA 17 Brazil Year Coal Natural gas 35 Petroleum Nuclear Hydropower Renewables Source: US EIA Short Term Energy Outlook Thomson Reuters; IEA Sources: US DOE, The Wall Street Journal Sources: IEA, EIA, national electricity boards, OANDA, shrinkthatfootprint.com 18 Nigeria France 20 UK 26 Japan Italy Australia 30 Spain Germany Denmark

53 Outline Energy Demand Natural Gas Supply Issues and Options The Radical Middle

54 Energy Security Affordable Available Reliable Sustainable Cost Price Volatility: stable or fluctuating Infrastructure: Cost to build the plant Access: substantial resources Intermittent: source consistent or variable Safe: natural/human causes Clean: air and atmospheric emissions Dense: land footprint Dry: fresh water use/risk

55 Energy Security Affordable Available Reliable Sustainable Cost Economy Price Volatility: stable or fluctuating Infrastructure: Cost to build the plant The Three Es Access: substantial resources Intermittent: source consistent or variable Safe: natural/human causes Environment Clean: air and atmospheric emissions Dense: land footprint Dry: fresh water use/risk

56 The 4 th E Environment Efficiency Energy Economy

57 Efficiency Benefits Save energy Lower emissions Less water Less infrastructure Less land Save $ Challenges Incentivize producers to produce less Expensive to install Requires a cultural change

58 The 5E Waltz Environment Education Efficiency Energy Economy

59 TPER per capita Energy and the Economy 9,000 8,000 7,000 6,000 5,000 TPER = Total Primary Energy Requirement. Energy needed to facilitate Total Final Consumption (TFC does not include conversion and transmission losses). Australia United States 4,000 3,000 2,000 1, World China Korea Brazil India After: Rice World Gas Trade Model Medlock, ,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 GDP per capita Japan QAe963

60 TPER per capita Energy and the Economy 9,000 8,000 7,000 6,000 5,000 TPER = Total Primary Energy Requirement. Energy needed to facilitate Total Final Consumption (TFC does not include conversion and transmission losses). Australia United States 4,000 3,000 2,000 1, World ~3 billion people China Korea Brazil India After: Rice World Gas Trade Model Medlock, ,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 GDP per capita Japan QAe963

61 TPER per capita 9,000 Energy and the Economy A Global Challenge 8,000 United States Balance of Trade 7,000 Exports 6,000 Imports Australia Regulation and Planning 5,000 Infrastructure Developing Nations Resources 4,000 Food Korea Permitting 3,000 Housing Emissions, Climate, Environment Japan Clothing 2,000 World Energy Security Education 1,000 Healthcare Electricity Brazil India 0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 GDP per capita Developed Nations QAe963

62 The Radical Middle Academia/NGO Government The Radical Middle Industry Scott W. Tinker, EARTH, 2013

63 The Eight 1. Energy security affordable, available, reliable, sustainable should guide energy strategy. Dear Keystone decision makers 2. Governments, industry and academe must compromise for objective, balanced energy strategy. 3. Energy efficiency requires a cultural change. 4. A diverse energy mix is healthy. 5. Renewables will remain regional supplements until advances are made in energy storage. 6. Shale will play a global role in the energy future; above ground issues are as challenging as below ground. 7. Natural gas resources are abundant and along with nuclear is a 21 st century foundational energy. 8. Energy, the economy and the environment are linked.