The Shale Energy Revolution: New Resources, New Stakeholders, New Responsibilities Bill Whitsitt Executive Vice President, Public Affairs

Transcription

1 The Shale Energy Revolution: New Resources, New Stakeholders, New Responsibilities Bill Whitsitt Executive Vice President, Public Affairs Southern States Energy Board Sept. 25, 2012

2 Devon today Proved reserves: 3.0 billion BOE (42% liquids) Deep Basin Horn River Jackfish Pike Existing operations New areas covered by Sinopec JV Q production: 679 MBOED Canadian Oil Potential (37% liquids) Sales revenue mix: 57% oil 18% NGLs 25% natural gas (Q2 2012) Significant midstream business 2011 operating profit: $542 million Enterprise value: $27.6 billion Powder River Washakie Cana Woodford Granite Wash Permian Basin Rockies Oil Groesbeck Michigan Utica Ohio Mississippian Barnett Shale Tuscaloosa Shale Haynesville/Bossier Carthage Slide 2

3 New technology What has resulted from it? New Resources Stakeholders Responsibilities Slide 3

4 Technology s New resources role Traps vs. shales Fracture stimulation 5,000 15,000 below the surface Hydrocarbon Trap Migrating hydrocarbons Shale organic rich source layer Impermeable sealing layer Porous and permeable reservoir layer Frack page 4

5 North American shale Plays and basins New resources, new stakeholders, new responsibilities Estimated resource base increased 20% just since Bakken Utica Mowry Niobrara Antrim New Albany Devonian (Ohio) Marcellus Monterey Woodford Fayetteville Utica Avalon Barnett Haynesville -Bossier Tuscaloosa Eagle Ford Current and prospective shale plays Basins Sources: EIA, Potential Gas Committee page 5

6 New stakeholders Stakeholders who haven t seen the size or scale of what they will see Other new stakeholders Community leaders Royalty owners Concerned citizens and/or activists page 6

7 New responsibilities Addressing concerns/demystifying our work Hydraulic fracturing Community impacts Water management Air quality Land stewardship Seismic activity page 7

8 Hydraulic fracturing A brief history Hydraulic fracturing is a well-established technology with a strong environmental and safety record Velma Alma, OK March 17, 1949 The technology has been used to complete more than 1 million wells over the past 60 years page slide 8 8

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10 Fracfocus.org Industry s effort to demystify the process Created by regulators and the Interstate Oil and Gas Compact Commission Site went live in April 2011 Industry is responding to this voluntary disclosure effort 207 companies have reported well information Data uploaded for more than 23,000 wells Devon: Nearly 900 wells uploaded page 10

11 GWPC/IOGCC chemical registry FracFocus slide 11

12 Mapped fracture treatments Barnett Shale Kevin Fisher, Data Confirm Safety of Well Fracturing American Oil & Gas Reporter, July 2010 slide 12

13 Groundwater protection Through proper well construction Cement Conductor casing Aquifer Cement Surface casing Drilling fluid Intermediate casing Production casing Production tubing Impervious rock layers 2,000 ft. 4,000 ft. 6,000 ft. 8,000 ft. 10,000 ft. 13,500 ft. page 13

14 Regulation of well construction States role States manage the oversight and enforce federal law and state rules Have the on-the-ground personnel and expertise State-led enforcement allows fit-to-purpose solutions for localized issues Regulated activities: well design well location well spacing well operation water management and disposal air emissions wildlife impacts surface disturbance worker health and safety page 14

15 Water management in Oklahoma A state-industry partnership Cana-Woodford shale play Exceptional quality of flowback and produced water allows for reuse Existing state rules limited water pits to 50,000 barrels Worked with regulators to allow 500,000-barrel pond 1 million barrels (42 million gallons) reused in first three months of operation page 15

16 Water management A few more Devon examples Texas Devon s distillation process approved by regulators in 2005 More than 500 million gallons recycled enough to fracture 100+ Barnett Shale wells Canada SAGD oil production using brackish water exclusively Ohio Purchased treated wastewater from town of Savannah for first hydraulic fracturing job in state Louisiana Paying state 15 cents/1,000 gallons of running surface water page 16

17 Freshwater users In the Barnett Shale region (Source: Texerra; L. Peter Galusky, Jr. Ph.D., P.E., slide 17

18 Water sustainability principles Devon is committed to the principles of conservation and re-use of water where feasible through the following: Educating and working closely with governmental authorities and members of the public concerning water usage needs and the necessity of water management Identifying usage needs, determining resource availability and monitoring water use Applying conservation practices and identifying opportunities to improve water use efficiency Employing economically and operationally feasible alternatives to fresh water usage Advocating for appropriate regulations on water use and re-use Continuing to employ prudent operating practices to ensure the protection of surface and groundwater Planning for operations to continue if water availability becomes constrained page 18

19 Demystifying seismic events Purported connection to E&P activity Experts consensus: Low risk managed through good practices We don't see any connection between fracking and earthquakes of any concern to society. Bill Ellsworth, senior U.S. Geological Survey geophysicist, to E&E News, April 23, Fewer than 30 out of 150,000 U.S. disposal wells have had any alleged connection to seismic activity Generally no damage from those events Devon uses advanced seismic imaging technology and interpretation methods to identify and avoid faults. Industry expanding water recycling/reuse programs to reduce need for disposal wells page 19

20 Seismic risk in context Seismic array monitoring example Frank Station layout Seismic stations that form the seismic array Horizontal Well Paths North-South dimension is 7,000 feet (1.3 miles) Total array areal coverage is 3 square miles. Source: Spectraseis Array location map East-West dimension is 12,000 feet (2.3 miles) page 20

21 Seismic risk in context Comparison of frack and trains Relative Seismic Amplitudes Hydraulic Fracture Event Freight Train Vibrations page 21

22 Land matters Maximizing value while earning trust Lake Benbrook, Texas Two pads 56 wells On-site disposal well reduced truck traffic BLM calls project spectacular page 22

23 API standards for hydraulic fracturing Well construction and integrity guidelines Water management associated with HF Practices for mitigating surface impacts Environmental protection for onshore production Isolating potential flow zones during construction More information: EnergyFromShale.org page 23

24 API s public workshops Explaining hydraulic fracturing Completed Little Rock, AR Raleigh, NC Annapolis, MD Trenton, NJ Charleston, WV Denver, CO Completed Columbus, OH Albany, NY Bismarck, ND Lafayette, LA Lansing, MI Washington, D.C. Dates TBD Baton Rouge, LA Oklahoma City, OK Santa Fe, NM San Antonio, TX page 24

25 Partners in the effort page 25

26 In summary New technology has created: New resources New stakeholders New responsibilities One major responsibility is educating the public, especially these new stakeholders, about: Hydraulic fracturing Water consumption and management efforts Air quality Truck traffic Land impact Seismic activity page 26

27 Water recycling in North Texas

28 U.S. shale gas production Major U.S. shale plays BCFD Barnett Haynesville Fayetteville Marcellus Eagle Ford Utica Source: Wood Mackenzie (data through July 2012) Slide 28

29 Gas price stability As supply grows, price remains low, stable Lower 48 gas supply has grown by 20 Bcfd since 2000, up 50% Driven by shale and infrastructure development post 2005 Result: lower, more stable pricing U.S. Lower 48 Gas Produc:on (BCFD) Henry Hub FOM Index Price ($/MMBtu) U.S. Lower 48 Gas Supply (BCFD) Cold weather Hurricanes Katrina & Rita Strong global economy Price run-up with crude oil Henry Hub FOM Index ($/MMBtu) 30 0 page 29

30 Major pipeline infrastructure updates 2009 to 2012 Recent Capacity Additions (BCFD) Rockies Express 1.80 Midcontinent Express 1.80 Gulf Crossing 1.70 SESH 1.00 Fayetteville/Greenville 1.30 Total 7.60 Committed Capacity Additions (BCFD) ETC Tiger (Haynesville) 2.40 Enterprise (Haynesville) 2.10 Regency (Haynesville) 1.10 Gulf South (Haynesville).50 Centerpoint (Haynesville).30 Transco (Marcellus).75 Texas Eastern (Marcellus).45 Tennessee (Marcellus).35 Transco (S.E. & Florida Mkts.).56 FGT (Florida Markets).82 Trans Canada Bison (Rockies).48 El Paso Ruby (Rockies) 1.50 Total slide 30

31 Thank you.