Shale Gas A Game Changer for U.S. and Global Gas Markets? Flame European Gas Conference March 2, 2010, Amsterdam Richard G. Newell, Administrator Richard Newell, March SAIS, December 2, 2010 14, 2009 1
Overview History of U.S. shale gas production Began with technical success in Barnett Shale Has grown to over 10% of U.S. gas production Role of shale gas in the U.S. gas market Enables growth in U.S. reserves, production, and consumption Reduces projected gas prices and import volumes Shale gas resources outside the U.S. Significant potential in several key gas importing and exporting countries Development will depend on resource characteristics, access, and market competitiveness relative to other gas Potential global effects of increased shale gas production Increased overall production and consumption Reduced gas trade and prices, relative to scenario without shale Richard Newell, March 2, 2010 2
History of U.S. shale gas production Richard Newell, March 2, 2010 3
Since 1997, more than 12,000 gas wells completed in the Barnett shale Richard Newell, March 2, 2010 4
The result has been an accelerating increase in production from the Barnett field gas production billion cubic meters wells drilled thousands Richard Newell, March 2, 2010 Source: EIA 5
Success in the Barnett prompted companies to look at other shale formations in the U.S. U.S. shale gas plays Richard Newell, March 2, 2010 6
At this stage, the Haynesville and the Marcellus formations appear to be the most attractive rigs drilling for gas 180 160 Barnett 140 120 100 80 Haynesville Marcellus 60 40 20 Fayetteville Woodford 0 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Richard Newell, March 2, 2010 Source: Smith International 7
Over the last decade, U.S. shale gas production has increased 8-fold shale gas production billion cubic meters 90 80 70 Antrim Barnett Fayetteville Woodford Haynesville Marcellus 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Richard Newell, March 2, 2010 Source: EIA, Lippman Consulting (2009 estimated) 8
Role of shale gas in the U.S. gas market Richard Newell, March 2, 2010 9
Shale gas has been the primary source of recent growth in U.S. technically recoverable natural gas resources technically recoverable gas resources trillion cubic meters 60 50 Unproved shale gas & coal-bed methane 40 30 20 Unproved conventional (including tight gas and Alaska*) 10 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EIA Annual Energy Outlook Proved reserves (all types & locations) * Alaska resource estimates prior to AEO2009 reflect North Slope resources not included in previously published documentation. Richard Newell, March 2, 2010 Source: U.S. Geological Service, Mineral Management Service, private data, EIA. 10
Shale gas development has also enabled total proved U.S. gas reserves to increase proved gas reserves trillion cubic meters 9.0 7.5 6.0 4.5 3.0 1.5 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Richard Newell, March 2, 2010 Source: EIA 11
In the last five years, accelerating shale gas production has caused total U.S. gas production to trend upward U.S. gas production billion cubic meters per day 1.8 1.7 1.6 3.9% per year 1.5 1.4 1.3 1.2 1.1 1.0 1990 1994 1998 2002 2006 2009 Richard Newell, March 2, 2010 Source: EIA 12
EIA expects shale gas and Alaska production increases to more than offset declines in other supplies U.S. gas production billion cubic meters 750 History Projections 625 500 375 250 Alaska Shale gas Coalbed methane Non-associated onshore 125 Non-associated offshore Associated with oil 0 Net imports 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Richard Newell, March 2, 2010 Source: EIA, Annual Energy Outlook 2010 13
Shale gas availability and a reluctance to add new coal plants underpins increased gas use in the electric power sector U.S. gas consumption billion cubic meters 750 History Projections 625 Electric Power Sector 500 375 Industrial Sector 250 Other* Commercial Sector 125 Residential Sector 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 *- natural gas used for transport, pipelines, and lease and plant fuel Richard Newell, March 2, 2010 Source: EIA, Annual Energy Outlook 2010 14
Shale gas production will play an even larger role if new climate change policies cause a rise in U.S. gas demand electricity generated using gas billion kilowatt hours 1,800 ACESA no international/limited 1,500 1,200 900 600 300 ACESA high cost Reference ACESA basic 0 2005 2010 2015 2020 2025 2030 Major emissions reductions in electricity generation require EXISTING coal capacity to be retired in favor of NEW generation capacity Conventional coal generation declines and renewables grow in all climate policy cases Level of natural gas generation is sensitive to the availability and costs of nuclear power, coal with CCS, biomass, and offsets Richard Newell, March 2, 2010 15 Source: Energy Market and Economic Impacts of H.R. 2454 (August 2009)
Oil prices are likely to remain well above U.S. gas prices as the availability of shale gas restrains gas price growth ratio of oil prices to natural gas prices on a thermal equivalent basis 5 History Projections 4 3 2 1 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Richard Newell, March 2, 2010 Source: Annual Energy Outlook 2010 16
Global shale gas resources Worldwide shale potential A 2007 study ranked 688 shale formations in 142 petroleum basins. Richard Newell, March 2, 2010 Source: Schlumberger 17
Shale gas resources could also play a significant role in other markets Technically recoverable shale gas resources in the U.S. estimated at 12 trillion cubic meters (tcm), or 20% of total remaining recoverable gas resources Shale resource estimates are much less certain for other regions (less commercial shale gas activity) Current estimates of remaining recoverable gas shale resources Canada: 2 tcm, 15% of resources OECD Europe: 3 tcm, 11% of resources China: 15 tcm, 56% of resources Also substantial shale gas in Russia and the Middle East but given the magnitude of other gas resources, shale gas is less likely to be a game changer in these regions Richard Newell, March 2, 2010 18
By 2030, we expect shale gas to represent 7% of total global gas production global gas production trillion cubic meters 5 4 Shale gas Other natural gas 3 2 1 0 2006 2010 2015 2020 2025 2030 Richard Newell, March 2, 2010 Source: EIA 19
EIA expects increased shale gas production to have the largest market effects in North America and China gas production in 2030 billion cubic meters 1,000 800 Shale gas Other natural gas 600 400 200 0 US China Canada OECD Australia/ Latin Other Middle Europe New America Europe/ East Zealand Eurasia Russia Richard Newell, March 2, 2010 Source: EIA 20
Potential global effects of increased shale gas production Richard Newell, March 2, 2010 21
Over the past 5 years, EIA has significantly lowered its projection of LNG imports into the U.S. U.S. net LNG imports billion cubic meters 200 History Projections AEO2005 150 100 50 AEO2010 0 2000 2005 2010 2015 2020 2025 2030 2035 Richard Newell, March 2, 2010 Source: EIA, Annual Energy Outlooks 22
Significantly reduced expectations for future U.S. LNG imports relative to conventional wisdom a few years ago LNG trade expectations as of 2005-2006: National Petroleum Council s Hard Truth s study 2000 2030 138 billion cubic meters per year Richard Newell, March 2, 2010 Source: National Petroleum Council, 2007 23
Shale gas production significantly affects projected U.S. gas imports, and could have similar effects in other gas importing countries total U.S. natural gas imports billion cubic meters 150 History Projections 120 No new U.S. shale scenario 90 Reference scenario 60 30 High U.S. shale scenario 0 2000 2005 2010 2015 2020 2025 2030 Richard Newell, March 2, 2010 Source: preliminary EIA projections 24
For more information U.S. Energy Information Administration home page www.eia.gov Short-Term Energy Outlook Annual Energy Outlook www.eia.gov/emeu/steo/pub/contents.html www.eia.gov/oiaf/aeo/index.html International Energy Outlook Monthly Energy Review www.eia.gov/oiaf/ieo/index.html www.eia.gov/emeu/mer/contents.html National Energy Information Center (202) 586-8800 Live expert from 9:00 AM 5:00 p.m. EST Monday Friday (excluding Federal holidays) email: InfoCtr@eia.doe.gov Richard Newell, March 2, 2010 25