The Unconventional Oil and Gas Market Outlook

The Unconventional Oil and Gas Market Outlook The future of oil sands, shale gas, oil shale and coalbed methane Report Price: $2875 Publication Date: July 2010 E N E R G Y

The Unconventional Oil and Gas Market Outlook The future of oil sands, shale gas, oil shale and coalbed methane About us Business Insights' portfolio of energy reports is designed to help you make well informed and timely business decisions. We understand the problems facing today's energy executives when trying to drive your business forward, and appreciate the importance of accurate, up-to-date, incisive product, market and company analysis. We help you to crystallize your business decisions. Business Insights reports are authored by independent experts and contain findings from dedicated primary research. Our authors' leading positions secure them access to interview key executives and to establish which issues will be of greatest strategic significance for the industry. Our energy portfolio of reports can be used across a wide range of business functions to assess market conditions and devise future strategies and cover the oil, gas, electricity and utility sectors and key energy issues including cogeneration, renewable energy sources, green energy and carbon sequestration. Report overview Oil sands, shale gas, oil shale, and coalbed methane (CBM) are the primary unconventional oil and gas resources in the world today. These resources are called unconventional as they are extracted, processed, and refined in a manner that is different from the conventional. Typically, unconventional resources are difficult-to-extract, expensive to refine, and have more impact on the environment. Sustained high oil and gas prices until mid-2008 led to the development of these resources as governments across the world became concerned about dwindling energy supplies amid rising demand. Technological advancements further aided their development. Volatility in commodity prices adds to the uncertainty in unconventionals development. Rise in environmental concerns over extraction and development of unconventional resources may likely slow down the growth of the industry. Pages 93 Figures 25 Tables 18 Use this report to gain an overview of the global unconventional oil and gas market with focus on key regions such as North America, Europe, and Asia- Pacific. This report analyzes the growth of the unconventional oil and gas resources worldwide, discusses the drivers and resistors of the industry, and includes production forecasts for key regions. The report documents statistical data on reserves, production including projections until 2030 for primary markets.

The Unconventional Oil and Gas Market Outlook The future of oil sands, shale gas, oil shale and coalbed methane Key findings In 2009, 1.4m barrels of oil per day were estimated to be produced from Canadian oil sands projects, which grew at a CAGR of 8.9% from 1m barrels of oil per day in 2005. According to the US EIA, the shale gas proven reserves in the US totaled 32,825 bcf by the end of 2008. Industry estimates put US natural gas reserves to last for 100 years at 2008 production rates. Shale gas production in the US grew at a CAGR of 21.2% to reach 1.49 tcf in 2008 from 0.69 tcf in 2004. Its share in total US natural gas production increased from 3.7% in 2004 to 7.3% in 2008. By 2035 shale gas is anticipated to supply 25.8% of the consumption needs of the US. According to Royal Dutch Shell, Europe s unconventional gas reserves may total 1,200 tcf, approximately five times the proven conventional gas reserves. Figure 1.1: Geographic concentration of oil sands deposits, 2010 The world s largest oil sands deposits exist in Canada with as much as 173bn barrels of proven reserves, making the country the second largest holder of oil reserves after Saudi Arabia. Apart from Canada, oil sands deposits exist in 21 countries with largest amounts of deposits in Kazakhstan, Russia, and Africa; with heavy oil deposits in Venezuela. According to the China National Petroleum Assessment (2003 07), China has recoverable CBM reserves of 11 tcm. Use this report to... Achieve a quick and comprehensive understanding of the global unconventional oil and gas industry. Understand the major issues surrounding the development of unconventional resources in important regions of the world. Assess the emerging trends in each of the unconventional resources oil sands, shale gas, oil shale, and CBM. Predict and identify growth potential by resource globally. Quantify reserves and production in key markets such as the US, Canada, Australia, and China.

The Unconventional Oil and Gas Market Outlook The future of oil sands, shale gas, oil shale and coalbed methane Explore issues including... Energy security: Concerns over energy security forced countries such as the US to invent new technologies to tap resources that were previously inaccessible. Technological developments: Technological developments in bitumen upgradation, horizontal drilling and hydraulic fracturing enabled the exploitation of unconventional resources. Continued technological advancements are helping to reduce the carbon footprint and overall environmental impact while increasing the efficiency of exploration and development operations. High cost of extraction and development: Unconventional oil and gas resources need high crude oil and natural gas prices in the international market to be economically viable due to relatively high cost of extraction and development. Volatility in commodity prices adds to the uncertainty in unconventionals development. Global natural gas surplus: An unexpected rise in natural gas production and reserves in the US led to a global supply surplus, which could threaten the development of unconventionals in Asia and Europe. Impact on environment: Development of unconventional resources is increasingly clouded by environmental concerns, which could hamper the growth of the industry. Discover... What are the primary unconventional oil and gas resources in the world today at present? What are the technologies used in exploring and developing unconventional resources such as oil sands and shale gas? What are the key drivers of unconventionals in general and key drivers in specific regions? What is the status of development of unconventionals across continents North America, South America, Europe, Africa and Asia-Pacific? Which unconventional resources are set to grow strongly and where?

The Unconventional Oil and Gas Market Outlook The future of oil sands, shale gas, oil shale and coalbed methane Table of Contents EXECUTIVE SUMMARY Market development North America Europe Asia Pacific Other regions Future outlook CHAPTER 1 MARKET DEVELOPMENT The unconventional oil and gas resources - Oil shale - Coalbed methane Drivers of unconventional oil and gas resources - Energy security - Technological developments - High conventional oil and gas prices Resistors of unconventional oil and gas resources - High cost of extraction and development - Global natural gas supply surplus - Impact on environment CHAPTER 2 NORTH AMERICA Introduction Key unconventional resources - North America oil sands production - North American shale gas production - Coalbed methane - North America coal-bed methane production - Oil shale Drivers - New pipelines to drive demand for oil-sands derived crude - Advances in drilling technologies make shale gas production viable Resistors - Environmental concerns impact on oil sands projects - Environmental regulations could limit growth of shale gas Key players CHAPTER 3 EUROPE Introduction Key unconventional resources Drivers - Prospects for shale gas increased with technological developments Resistors - Unfavorable geology and infrastructure shortages - Competition from conventional gas - Environmental concerns Key players CHAPTER 4 ASIA PACIFIC Introduction Key unconventional resources - Coalbed methane - China - Indonesia - Australia Drivers - Government drive to develop CBM in China and Indonesia - Technology and increasing natural gas demand drive CBM in Australia Resistors - Lack of technical expertise slow development of unconventionals in Asia - LNG flows at competitive prices dampen unconventional gas in Asia Key players CHAPTER 5 OTHER REGIONS Introduction South America / Heavy oil Africa - Coalbed methane The Middle East

The Unconventional Oil and Gas Market Outlook The future of oil sands, shale gas, oil shale and coalbed methane Table of Contents - Oil Shale Drivers - Declining production from conventional energy resources - High dependence on energy imports Resistors - Political instability and regulations - Environmental concerns surround oil sands development in Congo Key players CHAPTER 6 FUTURE OUTLOOK Introduction Key unconventional resources - Oil shale - Coalbed methane Glossary Index LIST OF FIGURES Geographic concentration of oil sands deposits, 2010 Geographic concentration of shale gas deposits, 2010 Geographic concentration of oil shale deposits, 2010 Geographic concentration of Coalbed methane deposits, 2010 Canada oil sands regions Crude oil production from Canadian oil sands ( 000 bbl/d), 2005 09 US shale gas basins US Shale gas production (tcf), 2004 08 US coalbed methane fields US CBM production (tcf), 2004 08 US oil shale basins North America proposed crude oil and natural gas pipeline expansions, 2008 Canada s GHG emissions (kilo tons of CO 2 equivalent), 2003 07 Proposed natural gas pipelines to Europe Location of Australia s CBM reserves and gas infrastructure, 2010 Venezuela crude oil production and exports ( 000 bbl/d), 1990 2008 Argentina natural gas production and consumption (bcf/d), 2004 08 Crude oil production from Canadian oil sands forecast ( 000 bbl/d), 2009 25 Crude oil production from China oil sands forecast ( 000 bbl/d), 2015 30 US Shale gas production forecast (tcf), 2009 35 US Shale gas production forecast (tcf), 2009 35 Crude oil production from US oil shales forecast ( 000 bbl/d), 2010 30 Crude oil production from China oil shales forecast ( 000 bbl/d), 2010 30 US CBM production forecast (tcf), 2010 30 China CBM production forecast (bcm), 2010 30 LIST OF TABLES Crude oil production from Canadian oil sands ( 000 bbl/d), 2005 09 US shale gas production (tcf), 2004 08 US CBM production (tcf), 2004 08 US market demand for western Canadian crude oil, actual and estimated ( 000 bbl/d), (2008 15) Canada s GHG emissions (kilo tons of CO 2 equivalent), 2003 07 Major companies with Shale gas exploration acreage in Europe, 2010 Select US shale gas stake acquisitions Major CBM-to-LNG projects in Australia, 2010 Venezuela crude oil production, consumption, and exports ( 000 bbl/d), 1990 2008 Argentina natural gas production and consumption (bcf/d), 2004 08 Crude oil production from Canadian oil sands forecast ( 000 bbl/d), 2009 25 Crude oil production from China oil sands forecast ( 000 bbl/d), 2015 30 US shale gas production forecast (tcf), 2009 35 US natural gas supply by source forecast (tcf), 2009 35 Crude oil production from US oil shales forecast ( 000 bbl/d), 2010 30 Crude oil production from China oil shales forecast ( 000 bbl/d), 2010 30 US CBM production forecast (tcf), 2010 30 China CBM production forecast (bcm), 2010 30

under high pressure into a shale formation to generate cracks in the formation. The advent of horizontal drilling and hydraulic fracturing technologies led to increased development of shale gas in the US. Shale gas deposits are anticipated to be found widely across the world, but at present are largely unexplored. Apart from proved reserves in the US and Canada, some of the well-known shale gas deposits are found in southwestern Argentina, parts of Western Europe, and southeastern China as shown in Figure 1.2. Figure 1.2: Geographic concentration of shale gas deposits, 2010 Source: Lambert Energy Advisory; FT.com!"#$%&##'(%#$)*+#',+- The US pioneered the technology to produce natural gas from shale rock. The successful exploitation of shale gas resource in the US led to increased interest in the resource in Canada, Europe, Africa, and Asia. In fact, shale gas is termed as a gamechanger by industry players as it is expected to widely influence the global natural gas industry dynamics. However, at present shale gas development is at an early stage development in most regions of the world except in the US. The US produced as much as 1.49 tcf of shale gas in 2008 representing 7.3% of its total production. Advancements in drilling technology are expected to drive down cost of development 22

!"#$#%&'#(&)(*+,&+-"+%$&+./(&$/(.+0(1.#('"#&*',"#( 2$13(,&#%(&)("4%'.,%$&+(.+0(0"-"/&56"+%( Unconventional oil and gas resources need high crude oil and natural gas prices in the international market to be economically viable, due to relatively high cost of extraction and development. Volatility in commodity prices adds to the uncertainty in unconventionals development. While technological advances and government could assist the development of unconventionals, they are still largely dependent on prices in the international market for project viability. 7/&8./(+.%*'./(1.#(#*55/9(#*'5/*#(( An unexpected rise in natural gas production and reserves in the US led to a global supply surplus, which could threaten the development of unconventionals in Asia and Europe. Many of the LNG liquefaction plants that are being commissioned during 2010 15 in the Middle East and Africa are being built with the intension to supply to supply the growing US market. However, as the US reached self-sustainability in gas production, its imports reduced resulting in diversion of LNG cargoes to Europe and Asia. In addition, European and Asian countries are increasingly trying to exploit their own unconventional resources, exerting further downward pressure on natural gas prices. LNG overcapacity and eagerness of resource-rich countries to supply efficiently to demand centers by building new pipelines will likely hamper the growth of unconventionals. For example, shale gas development in Europe could be challenged by cheap LNG inflows from Africa and the Middle East in addition to Russia s eagerness to supply piped-gas at competitive prices through trouble-free transit routes. :65.,%(&+("+-$'&+6"+%( Development of unconventional resources is increasingly clouded by environmental concerns, which could hamper the growth of the industry. While oil sands in Canada continue to face strong opposition from environmental groups, the so far successful shale gas development in the US is attracting accusations that it results in contamination of ground water. The US Environmental Protection Agency (EPA) started investigations on the environmental impact of shale gas development, which 27

Excess LNG in the global market could head to the US at low prices and may compete with US domestically produced natural gas. Table 6.14: US natural gas supply by source forecast (tcf), 2009 35 Source (tcf) 2009 2010 2015 2020 2025 2030 2035 Net imports 2.76 2.82 2.38 2.57 2.17 1.84 1.46 Associated with oil 1.91 2.01 2.23 2.35 2.15 2.07 2.04 Non-associated offshore 2.12 2.01 2.12 2.55 2.56 2.96 3.33 Non-associated onshore 11.66 10.81 8.92 8.41 8.00 8.13 8.11 Coalbed methane 2.19 2.07 1.89 1.88 1.77 1.85 1.93 Shale gas 2.36 2.75 3.85 4.51 4.94 5.50 6.00 Alaska 0.36 0.35 0.29 0.27 1.88 1.88 1.87 Total production 20.60 20.01 19.29 19.98 21.31 22.38 23.27 Source: Annual Energy Outlook, 2010; EIA!"#$%&##'(%#$)*+#',+- Figure 6.21: US Shale gas production forecast (tcf), 2009 35 Natural gas supply (tcf) 30 25 20 15 10 5 Net imports Non-associated offshore Coalbed methane Alaska Associated with oil Non-associated onshore Shale gas 0 2009 2010 2015 2020 2025 2030 2035 Source: Annual Energy Outlook, 2010; EIA!"#$%&##'(%#$)*+#',+- ;$/(#3./"( According to the US EIA s Annual Energy Outlook 2010, commercial crude oil production from the country s oil shale deposits will likely start in 2023. Production 85

<&./8"0(6"%3.+"( The US EIA, in its Annual Energy Outlook 2010, estimates the production from CBM deposits in the country to remain stable or decrease at a CAGR of -0.6% to 1.85 tcf in 2030 from 2.07 tcf in 2010, as shown in Table 6.17. CBM production is expected to remain flat as reserves in the US are confined largely to the Rocky Mountain region. Table 6.17: US CBM production forecast (tcf), 2010 30 2010 2015 2020 2025 2030 CAGR 2010 30 (%) Production (tcf) 2.07 1.89 1.88 1.77 1.85 Growth (%) -8.7-0.5-5.9 4.5-0.6 Source: US EIA s Annual Energy Outlook, 2010!"#$%&##'(%#$)*+#',+- Figure 6.24: US CBM production forecast (tcf), 2010 30 2.1 2.0 Production Growth 6 4 2 Production (tcf) 1.9 1.8 1.7 0-2 -4-6 -8 Growth (%) 1.6 2010 2015 2020 2025 2030-10 Source: US EIA s Annual Energy Outlook, 2010!"#$%&##'(%#$)*+#',+- According to the China National Petroleum Assessment (2003 07), China s CBM production will reach nearly 30 bcm by 2030 from an anticipated production of 5 bcm 88

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