The Role of Shale Gas in North American and Global Power Markets

Transcription

1 GCPA Oct, 214 The Role of Shale Gas in North American and Global Power Markets Scott W. Tinker Bureau of Economic Geology The University of Texas at Austin, Austin

2 Framing Conundrum A majority of the educated public do not know how electricity is made nor do they really care. As a result, the public is free to not like everything. We need to take the energy conversation to a different place.

3 Outline Global Demand Shale Gas and Electricity Market Implications

4 Population (millions) Primary energy (quads) Global Population and Energy % Global Population Growth Rate % Year Source: BP Statistical Review of World Energy, Source: US Census Bureau Int l Database, June 211 QAe874

5 Global Population and Energy 12 Rest of World 1 8 Africa 6 4 Asia Source: From the UN, as appeared in The Economist, August 23, 214

6 Population 215 ~1 billion people per color More people live inside the circle than outside

7 Energy Mix (MTOE)

8 Energy Demand (MTOE)

9 Outline Global Demand Shale Gas and Electricity Market Implications

10 Energy Flows Solar.9 Nuclear 8.45 Hydro 2.45 Wind.51 Geothermal.35 Natural gas Electricity generation Net electricity Imports Residential Commercial Energy services Coal Industrial Electricity Transportation (28 US Quads) Source: Lawrence Livermore National Laboratory and U.S. DOE based on Annual Energy Review, 28 (EIA, 29) From National Academies Press, America s Energy Future, 29 QAd8174

11 BcF/Day Global Natural Gas Production 35. OECD Non-OECD Source: BP Statistical Review 212

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 212

13 Production cost (28 $/Mbtu) Produced Conventional Coal Bed Methane Arctic Deep Water Tight Shale Sour 3, 6, 9, 12, 15, 18, 21, 24, 27, 3, Source: IEA World Energy Outlook (29) Global Natural Gas Resources v. Cost Resources (TcF) LNG QAe98

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) Data: BP World Energy 212

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) , Total Natural Gas Conventional Gas Unconventional Gas U.S. Natural Gas Production (TcF) An Anticipated Evolution From a 24 Tinker Talk to the IPAA US Natural Gas 24 forecast 25 TcF 23 TcF 14 TcF Shale gas Coalbed methane 2, 1 15, 1, 5 5, TcF 1 TcF EIA ( ) and NPC ( ) 9 TcF Tight gas Non-associated offshore Alaska Associated with oil Non-associated onshore

17 Near Surface Water Proppant Hydraulic Fracturing Fracking Friction Reducers: always (polyacrylmide) Biocides: often (glutaraldehyde, chlorine) 3, to 1,+ feet Scale Inhibitors: sometimes (phosphonate) Surfactants: sometimes (soaps and cleaners) Shale 3, 1, feet 3 6 million gallons

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

19 Environmental Impact 1 s of Feet of Rock Drawn to Scale

20 Environmental Impact

21 Environmental Issues Regulatory Considerations 1. Mandatory baseline data 2. Cement all gas producing zones 3. Full disclosure of chemicals 4. Minimize fresh water use on the front end 5. Handle flowback and produced water 6. Manage potential induced seismicity 7. Minimize methane emissions and flaring 8. Minimize surface impact after Rao, 212

22 Environmental Issues Regulatory Considerations 1. Mandatory baseline data 2. Cement all gas producing zones 3. Full disclosure of chemicals 4. Minimize fresh water use on the front end 5. Handle flowback and produced water 6. Manage potential induced seismicity 7. Minimize methane emissions and flaring 8. Minimize surface impact after Rao, 212

23 Unconventional Resource Plays Niobrara Fm Cody Heath Fm Mowry HilliardBaxterMancos-Niobrara Bakken Gammon Niobrara- Mowry Niobrara Fm Antrim Antrim Utica- Collingwood Antrim Utica Marcellus Utica 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 Eocene Jurassic T rassic Pennsylvanian Mississippian-Penn Mississippian Devonian Ordovician Cambrian Basins Modified from: EIA and National Geographic QAei2915

24 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 Eocene Jurassic T rassic Pennsylvanian Mississippian-Penn Mississippian Devonian Ordovician Cambrian Basins Modified from: EIA and National Geographic QAei2915

25 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 Eocene Jurassic T rassic Pennsylvanian Mississippian-Penn Mississippian Devonian Ordovician Cambrian Basins Modified from: EIA and National Geographic QAei2915

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

27 Bureau of Economic Geology U.S. Shale Gas 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?

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

29 Relative Frequency Fayetteville Monte Carlo Production Distribution.5 OGIP 8 Tcf Tcf 23 Tcf BEG Shale Reserves and Production Project Cumulative Production (Tcf)

30 Relative Frequency Haynesville Monte Carlo Production Distribution Tcf OGIP 489 Tcf 62 Tcf Cumulative Production (Tcf) BEG Shale Reserves and Production Project

31 Marcellus OGIP 1712 Tcf OGIP free FVille OGIP 8 Barnett OGIP 444 HVille OGIP 489 All Maps Shown with Common Distance Scale BEG Shale Reserves and Production Project

32 Shale Gas Forecast vs. Actual Model: Rice University, Medlock, 212 Actual Production M B H F

33 TCF Henry Hub Price ($212/MMBtu) Base Case ($4) Stacked Production 12 1 Marcellus Haynesville Fayetteville Barnett U.S. Consumption ~ 25 TcF/Year HH $ TcF 17 TcF 45 TcF BEG Shale Reserves and Production Project 4 2

34 TCF Henry Hub Price ($212/MMBtu) EIA Price Case Stacked Production 12 Marcellus Haynesville U.S. Consumption ~ 25 TcF/Year 12 1 Fayetteville Barnett 1 8 HH $ TcF 17 TcF 45 TcF BEG Shale Reserves and Production Project 4 2

35 TCF Henry Hub Price ($212/MMBtu) $6 Case Stacked Production 12 Marcellus Haynesville U.S. Consumption ~ 25 TcF/Year 12 1 Fayetteville Barnett 1 8 HH $ TcF 17 TcF 45 TcF BEG Shale Reserves and Production Project 4 2

36 Forecast vs. Actual Model: Rice University, Medlock, 212 EIA BEG EIA price deck

37 Outline Global Demand Shale Gas Electricity Market Implications

38 Natural Gas Prices

39 Shale Drivers Private Ownership Supply Passionate Confusion Bus Craton! Business Demand Supply

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

41 Tinker, 212 Global Investment in Clean Energy New investment*, $bn Solar Wind Biofuels Other *Excludes corporate and government R&D Source: Bloomberg New Energy Finance, The Economist, April 26, 214 QAe2822

42 The Future Electricity Mix 12 North America Quadrillion BTUs Europe Asia Pacific Electricity Generation by Fuel Renewables 4 4 Nuclear 2 Coal 2 2 Gas Oil ExxonMobil Corporation, 21, The outlook for energy: a view to 23: ExxonMobil report, 53 p.

43 Thousand megawatt hours per day The Future Electricity Mix US Electricity Generation by Fuel, All Sectors 14, 12, 1, % 49.6% 49.% 48.5% 48.2% 44.5% 44.8% 42.2% Forecast 36.7% 36.8% Coal Natural gas Petroleum Nuclear Hydropower Renewables % 18.8% 2.1% 21.6% 21.4% 23.3% 23.9% 24.8% 3.8% 3.1% Year Source: US EIA Short Term Energy Outlook 211.

44 Million metric tons The Future Electricity Mix 18 U.S. First Quarter Total Carbon Dioxide Emissions QAe2823 Source: EIA

45 The Future Electricity Mix 12 North America Quadrillion BTUs Europe Asia Pacific Electricity Generation by Fuel Renewables 4 4 Nuclear 2 Coal 2 2 Gas Oil ExxonMobil Corporation, 21, The outlook for energy: a view to 23: ExxonMobil report, 53 p.

46 ETS carbon price (EUA) (Euro per tonne) Coal consumption OECD Europe (million tonnes) The Future Electricity Mix Thomson Reuters; IEA

47 The Future Electricity Mix 12 North America Quadrillion BTUs Europe Asia Pacific Electricity Generation by Fuel Renewables 4 4 Nuclear 2 Coal 2 2 Gas Oil ExxonMobil Corporation, 21, The outlook for energy: a view to 23: ExxonMobil report, 53 p.

48 Thousand megawatt hours per day The Future Electricity Mix 14, Country/ area China India Russia Japan Canada UK 12, 1, Germany Europe US 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.% 48.5% 48.2% 44.5% 44.8% 42.2% % 18.8% 2.1% 21.6% 21.4% 23.3% 23.9% 24.8% Forecast Net change in annual emissions from 25 to 211, million metric tons % 36.8% 3.8% 3.1% Year Coal Natural gas Petroleum Nuclear Hydropower Renewables 3252 Source: US EIA Short Term Energy Outlook 211. Sources: US DOE, The Wall Street Journal

49 Thousand megawatt hours per day ETS carbon price (EUA) (Euro per tonne) Coal consumption OECD Europe (million tonnes) Data: average prices from 211 converted at mean exchange rate for that year 14, Country/ area 3 China India 2 Russia Japan 1 Canada UK 12, 1, Germany Europe US 8 India emissions million metric tons The Future Electricity Mix Thomson Reuters; IEA 5 US Electricity Generation by Fuel, All Sectors 8 China Average national electricity prices (in 211 US cents/kwh) Energy-related carbon-dioxide emissions by geography, and net change since % 49.6% 49.% 48.5% 48.2% 44.5% 44.8% 42.2% % 18.8% 2.1% 21.6% 21.4% 23.3% 23.9% 24.8% Mexico 1 Canada 1 S. Africa 11 Russia USA Forecast 36.7% 36.8% 3.8% 3.1% Year 4 Net change in annual emissions from 25 to 211, million metric tons Brazil 18 Nigeria Sources: IEA, EIA, national electricity boards, OANDA, shrinkthatfootprint.com France 2 UK 26 Japan Italy 2 1 Australia 3 Coal Natural gas 35 Petroleum Nuclear Hydropower Renewables Spain Source: US EIA Short Term Energy Outlook 211. Germany Denmark Sources: US DOE, The Wall Street Journal

50 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

51 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

52 The 4 th E Environment Efficiency Energy Economy

53 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

54 The 5E Waltz Environment Education Efficiency Energy Economy

55 The Radical Middle Academia/NGO Government The Radical Middle Industry

56 TPER per capita Energy and the Economy 9, 8, 7, 6, 5, TPER = Total Primary Energy Requirement. Energy needed to facilitate Total Final Consumption (TFC does not include conversion and transmission losses). Australia United States 4, 3, 2, 1, World China Korea Brazil India After: Rice World Gas Trade Model Medlock, 212 5, 1, 15, 2, 25, 3, 35, 4, 45, GDP per capita Japan QAe963

57 TPER per capita Energy and the Economy 9, 8, 7, 6, 5, TPER = Total Primary Energy Requirement. Energy needed to facilitate Total Final Consumption (TFC does not include conversion and transmission losses). Australia United States 4, 3, 2, 1, World ~3 billion people China Korea Brazil India After: Rice World Gas Trade Model Medlock, 212 5, 1, 15, 2, 25, 3, 35, 4, 45, GDP per capita Japan QAe963

58 TPER per capita 9, 8, 7, 6, 5, 4, 3, 2, 1, World Energy and the Economy A Global Challenge TPER = Total Primary Energy Requirement. Energy needed to facilitate Total Final Consumption (TFC does not include conversion and transmission losses). Developing Nations Food Housing Clothing Education Healthcare Electricity Korea Brazil India After: Rice World Gas Trade Model Medlock, 212 GDP per capita Developed Nations Balance of Trade Exports Imports Japan Australia Regulation and Planning Infrastructure Resources Permitting United States Emissions, Climate, Environment Energy Security 5, 1, 15, 2, 25, 3, 35, 4, 45, QAe963

59 Tinker s Top Ten 1. Governments, industry and academe must work together; we all play a role in objective, balanced energy education. 2. The scale of energy demand is difficult to comprehend; energy transitions take many, many decades. 3. Energy security affordable, available, reliable, sustainable drives the energy mix and should be the goal of energy policy. 4. Energy efficiency is underappreciated; individuals matter! 5. Diverse energy portfolios are inevitable and healthy. 6. Renewables are growing but will remain regional supplements until major advances are made in energy storage. 7. Shale will play a global role in the energy future; above ground challenges are as important as below ground. 8. Natural gas and nuclear are the new foundational energies. 9. Oil and coal are abundant at the right price, and difficult to replace as transportation and electricity fuels. 1. Energy, the economy and the environment are linked.