The $250 Billion Technology Dividend Petroleum Equipment Suppliers Association April 5, 2013 Presented by: Tom Bates
Disclaimer These are the organizations that have not approved this message! Lime Rock Partners Hercules Offshore, Inc. Tetra Technologies, Inc. Southwest Oilfield Products, Inc. Independence Contract Drilling, Inc. Iracore International, Inc. Reelwell AS Texas Christian University
Deepwater makes a splash Technology headlines Source: O&GJ and BHI.
New tricks for old dogs Horizontal drilling and hydraulic fracturing changed shale economics
Shale plays are economic everywhere Source rock becomes the reservoir gas then oil
Fast moving rigs Not all technology makes headlines Source: Independence Contract Drilling
Natgas mix can cut fuel cost by 50% Dual fuel capability Source: Independence Contract Drilling
Big fracs get big results Source: FTSI
Impact on North American market History U.S. dry gas production, TCF per year 2010 Projections 23% Shale gas 49% 2% 26% 9% 9% 10% 21% Tight gas Non-associated offshore Coalbed methane Associated with oil Non-associated onshore Alaska 1% 22% 7% 6% 6% 9% Source: EIA, Annual Energy Outlook 2012
Natgas prices collapse Shale production overwhelms demand
Source: Tudor Pickering Holt U.S. Energy Mix
Gas displaces coal And drives the cost of electric power down Source: Tudor Pickering Holt
Gas redefines electric power markets Natgas Drives Power Prices Lower 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 Wholesale US Power Prices, $/MWHr (Blue) Natgas, $/MMCF X 10 (Red) 2007 2008 2009 2010 2011 2012 Source: EIA
The $250B Technology Dividend Power prices down by $40/MWHr since 2008 Electric Power market is 4 billion MWHr annually Users in the supply chain benefit more than $160B 65% of Natgas not used for electricity generation 2012 price $5.50 cheaper than 2008 Delivers a direct benefit of $90B
Natural Gas Resource Good News NATGAS Resource Triples!!! Source: NPC
Shales deliver long term More Good News Shales meet NAM demand at modest cost!!! Source: NPC
GHG Emissions Even More Good News NATGAS reduces GHG emissions by 50%!!! Source: NPC
Conventional Wisdom Hubbert s Peak happened in 1970 Ken Deffeyes, leading expert on Hubbert s Peak, says that U.S. peaked in conventional crude production in 1970. IEA said that global crude oil production peaked in 2006 and will never reach that level again.
Conventional Wisdom Discoveries lag consumption since 1984
Conventional Wisdom We need to find 50 MMBD by 2035
Competing for Oil Asia dominates new vehicle market Source: IEA
Doubts Remain OPEC Spare Capacity???
US Oil Production Rebounds Unconventional Wisdom
Unconventional Wisdom Price is NOT affected by Shale Production
Unconventional Wisdom $320 But our import bill has come down $400 Billion Source: Oil and Gas Journal
Asia to consume 64% of coal for power Let s sell them some of ours!!
Hydraulically Fractured Gas Field Myth vs. Reality
THE VALUE CASE FOR COFFEE Grande Caramel Macciato $4.60 for 16 oz. or $36.80/gallon!!
MORE THOUGHTS Oil is scarce, even at $100/bbl Gas is a screaming long term buy at $4 Gas is still 75% cheaper than oil Demand in the US will increase US vehicles must convert for economic and security reasons Gas fired electric power is cheap and clean LNG will become globally fungible Wind, solar or ethanol won t pass the economic smell test any time soon 1.7 million jobs created since 2008
CONCLUSIONS Drilling and completion technologies have created a huge dividend for the US economy in regional gas and power markets Citi estimate adds $375 $625 billion to GDP in 2020 The Golden Age of gas has begun in the US because it is cheap and clean and we have an enormous resource base Oil remains scarce limited global impact so far from shales With increased domestic supplies, energy security is likely and energy independence is possible (on a net BTU basis) if we export coal and LNG