SAMPLE. US Shale. Insight Report

Transcription

1 US Shale Insight Report

2 Contents Page Outlook and Executive Summary 8-15 Shale Operations and Technology Shale Economics and International LNG Markets Major Shale Plays Appendix: Operators Activity Overview References 66 Tables Table 1: US LNG Export Terminals Applications as of Q Table 2: Known US Shale Plays Table 3: County Drilling Activity in the Eagle Ford April Table 4: Eagle Ford County Activity Overview October Table 5: Active Companies in the Eagle Ford Table 6: Active Rigs in the Eagle Ford by Operator 60 Figures Figure 1: Major US Shale Gas Plays 40-41

3 Graphs Page Graph 1: Active Rigs in the US by Type Graph 2: Number of Active Rigs in the US by Type 2012 and Graph 3: Active Drilling Rigs in the US by Hydrocarbon Type 26 Graph 4: Average US Wellhead Gas Price 27 Graph 5: US Gas Production and Consumption Graph 6: International Gas Prices Graph 7: Consumer Prices for Natural Gas in the US Graph 8: US LNG Export Destinations Graph 9: Total US LNG Exports Graph 10: US LNG Export Destinations Graph 11: US LNG Exports to Japan Graph 12: Average Price of US LNG and Pipeline Natural Gas Exports Graph 13: US Shale Gas Production Graph 14: Historical Shale Gas Production in the 8 largest Shale Gas Plays 42 Graph 15: Shale Gas Production Major Play comparison Graph 16: Tight Oil Production in the US 2005 and Graph 17: Natural Gas Output from the Antrim 44 Graph 18: Natural Gas Output in the Bakken Graph 19: Barrels of Oil Output per well in the Bakken Graph 20: Bakken Oil Production 45 Graph 21: Producing Wells in the Bakken Graph 22: Natural Gas Production in the Barnett Graph 23: Permitting in the Barnett Graph 24: Top Ten Producers in the Barnett Shale Graph 25: Natural Gas Production in the Fayetteville Graph 26: Natural Gas Production in the Haynesville Graph 27: Natural Gas Production from the Marcellus Shale Graph 28: Natural Gas Production in the Fayetteville Graph 29: Drilling Permits in Texas Graph 30: Average Rotary Rig Count in Texas 53 Graph 31: Oil Production in Texas Graph 32: Natural Gas Production in Texas Graph 33: Natural Gas Production in Texas Graph 34: Oil Wells Completed in Texas

4 EIC CONSULT Key US Shale Plays Bakken Total US Dry Shale Gas Production Tcf Pacific Ocean Antrim (MI, IN, and OH), Shale Play Gas Produciton Profiles (BCF) Marcellus (PA and Haynesville (LA and WV), 10 TX), 29 Bakken (ND), 5 Woodford (OK), 79 <0 (Bakken) Fayetteville (AR), 84 Rest of US, 510 Barnett (TX), 911 Barnett Woodford Eagle Figure 1: Major US Shale Gas Plays

5 Shale Operations and Technology fracturing fluids are injected into the well at high pressure to force oil and gas from the formations into the well and to the surface. The fluids contain proppant chemicals which hold open spaces in the rock pores to allow hydrocarbons to flow from the formations. The right chemicals and proppant fluids can make substantial savings to the industry. In some cases cost savings range between 14% to 40% as the fluids are easier to dispose of, more effective or cheaper to produce. The fracturing fluids are mostly sand and water and there is generally only around a 1% chemical content. Chemicals are also used to reduce friction in the well bore and improve well integrity. Other chemical services include treating contaminated water, recycling it for re-use in other wells and transport and disposal. Some chemicals can clean pipelines and generally represent less environmental risk, some pose no threat to humans even on contact. Some operators are pioneering multi-stage perforation techniques where wells are perforated and fractured multiple times, three or four and above in some cases, to enable maximum production output and lower decline rates. Micro seismic monitoring is employed to observe the stress state of a reservoir during hydraulic fracturing and provide real time data to exploration and production models. There are a large and growing number of fracturing mixtures. The size of proppant particles is a key determinant of the success of fracturing operations and research and development into the most effective proppants has become a focus for operators, service providers and dedicated fracturing companies alike. A mix of fracturing sand is commonly used, particularly in the Eagle Ford, though there are many types of fracturing sand and chemical mixtures in use across the play depending on geology. The content of many mixtures remains at the experimental stage and there is no commonly accepted best practice for fracturing fluids. The chemical mixtures are extremely valuable, closely guarded secrets in the industry and there remain opportunities for novel solutions. Nanotech applications are in operation at an experimental stage and bring new possibilities for future applications in fracturing operations. After the fracturing process has been completed the fracturing fluids are brought to the surface for disposal. While they await treatment and removal they are stored in a frac pool nearby. This practice has raised environmental concerns in some areas due to the risk of the chemicals affecting local wildlife as contaminated water left on the surface can enter the water table through evaporation and the water cycle. Some operators and fracturing contractors have pioneered closed loop recycling of fracturing fluids on site, which brings substantial cost savings and economic advantages. Novel solutions are available to mitigate the risk of water contamination and chemical problems related to hydraulic fracturing activity. Greater safety issues are focused around the cement casing of wells, especially around areas close to the water table as this is where the risk of contamination is greatest. Hydraulic fracturing also requires large amounts of water and sourcing. This is a challenge in some areas. Many of the issues raised by environmental groups are identical to issues faced in conventional operations. However the consequences of a flawed well casing when hydraulic fracturing is involved, has the potential to cause other negative outcomes as the chemicals in fracturing fluids would leak into the surrounding area. This concern has driven movements towards greater regulation of the shale sector. Supply Chain The shale oil and gas supply chain is complex and varied, it is also undergoing rapid change in some areas. In addition to the elements associated with conventional oil and gas projects, shale developments require fracturing, sand, water and greater waste disposal services. Demand for conventional drilling and completion services is also on a larger scale due to the higher number of wells shale projects involve. Post production services including enhanced recovery operations are also expanding and have high future growth expectations as a large number of wells experience production declines. Overall the shale supply chain has become disparate as demand has spiraled and there is no uniform model in place across the US. Several large integrated service companies offer services covering the entirety of operations from drilling to completion. Baker Hughes, Halliburton and Schlumberger offer these services amongst others. However not all work is completed by integrated service companies as even with their substantial resources they lack the capacity to meet demand. This trend is only increasing as demand has continued to grow, leading to costly delays. The large supply chain and service shortfall, particularly in relation to completion services, has led to significant project delays and increased costs to operators in the shale sector. The size of proppant particles is a key determinant of success in fracturing operations and R&D into the most effective proppants has become a focus for operators, service providers and dedicated fracturing companies The shale supply chain has become disparate as demand has spiraled and there is no uniform model in place across the US EIC CONSULT US Shale

6 KURDISTAN Shale Economics and Global Gas Markets Number of Rigs 1,800 1,600 1,400 1,200 1, Graph 3: Active Drilling Rigs in the US by Hydrocarbon Type Source: Baker Hughes (2013) For the average shale well in the US 40% of the unit cost is allocated for drilling, 10% for services and 50% on completion 0 supply chain. This has adversely affected many operators, but greatly encouraged the growth of service providers and strengthened the position of the integrated service companies. Despite the advantages there remain risks associated with shale developments in the US. Economic risks include commodity prices and rising service costs. There are additional environmental risks including water contamination concerns which have led to moratoriums on shale projects in places across the US. Regulatory hazards are an increasing risk to the development of the sector, but currently vary greatly on a state by state basis. The prospect of national regulation from the federal government has emerged as a long term risk to shale developments in the future. The difficulty of implementing national regulation will delay any new legislation. Investigations into shale operations by the Environmental Protection Agency and other federal bodies are ongoing and the outcome is uncertain, however were new regulations imposed compliance costs would rise for operators. Depletion rates and output decline profiles are also steeper for shale wells than conventional wells, bringing additional costs associated with enhanced recovery operations over time. The key factors which determine production profiles and the success of wells are spacing, stages, perforation techniques, pad drilling utilization and operator s knowledge of the geology of the area. Long term decline rates remain unknown for many shale plays as the sector is young with production in many areas only having been online for 3 to 5 years. Shale developments also require more wells to realise comparable output as pressure is lost faster. Ultimately over the productive lifetime of a shale play thousands of wells will be required, far more than are associated with conventional oil and gas projects. Well Costs Oil Gas In the US a conventional onshore oil and gas well costs around $1 million to $2 million per well. An unconventional shale well, taken alone, costs in the region of $5 million to $9 million depending on a range of factors. In the Eagle Ford unit costs are $6 million to $7 million per well. Of this 40% is drilling costs, 10% services and 50% completion costs. Shale oil and gas wells have higher single well costs due to costs associated with the fracturing process, lateral drilling and typically higher completion costs related to chemical and water disposal. However, in the US shale wells are completed on an industrial scale, which dramatically reduces unit costs using new technology. Pad drilling allows for multiple wells to be completed in close proximity to one another using a single drilling rig. Chemical disposal and completion work can be conducted on multiple wells simultaneously, further reducing completion time and costs. While it may be more expensive to complete a single unconventional well, it is far cheaper to complete 8 to 10 unconventional wells 6 US Shale 2013 EIC CONSULT