Status and outlook for shale gas and tight oil development in the U.S. for Energy Symposium, University of Oklahoma, Price College Energy Institute Norman, OK by Adam Sieminski, Administrator U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov
EIA s mission and main functions Independent Statistical and Analytical agency within the U.S. Department of Energy EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment. By law, its data, analyses, and forecasts are independent of approval by any other officer or employee of the U.S. Government [EIA] is the gold standard for energy data around the world, and the accessibility of it is so much greater than other places Dan Yergin, Platts Inside Energy 2
Annual Energy Outlook 213 projections to 24 Growth in energy production outstrips consumption growth Crude oil production rises sharply over the next decade Motor gasoline consumption reflects more stringent fuel economy standards The U.S. becomes a net exporter of natural gas in the early 22s U.S. energy-related carbon dioxide emissions remain below their 25 level through 24 3
U.S. energy use grows slowly over the projection reflecting improving energy efficiency and slow, extended economic recovery U.S. primary energy consumption quadrillion Btu Shares of total U.S. energy 12 History 2 211 Projections 1 8 6 4 24% 6% 8% 23% 26% 8% 8% 1% 2% Natural gas Renewables (excluding liquid biofuels) Nuclear Liquid biofuels Coal 28% 11% 9% 2% 19% 2 39% 36% Oil and other liquids 32% 198 1985 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 4
U.S. Shale Gas 5
These three drivers impact resource estimation metrics differently over time in an iterative process Theory Experiment Practice Thermal maturity Pressure Formation depth Geology Recompletions Drilling costs Technology Price of gas Economics Resources in Place Technically Recoverable Resources (TRR) Economically Recoverable Resources (ERR) P Q Well-level data, incl. estimated ultimate recovery (EUR) 6
EIA s focus is on the timing of production; the modeling focuses on these parameters average initial production (IP) rate per well average decline curve (can vary by region and vintage) IP & decline curve define the Estimated Ultimate Recovery (EUR) per well Other parameters drilling and operating costs number of active rigs how many wells a rig can drill (rig efficiency) well spacing 7
Technically recoverable natural gas resources reflect new information, a combination of assessments and EIA updates U.S. dry gas resources trillion cubic feet 3 25 2 Unproved shale gas Unproved other gas (including Alaska* and offshore) Proved reserves (all types and locations) *Alaska resource estimates prior to AEO29 reflect resources from the North Slope that were not included in previously published documentation. Benchmark to USGS 211 Marcellus Assessment 2,327 543 15 1,479 1 5 2 25 26 27 28 29 21 211 212 213 AEO Edition Source: EIA, Annual Energy Outlook 213 Early Release 34 8
U.S. wet natural gas proved reserves, 198-21 trillion cubic feet 35 3 25 2 U.S. Total 15 1 5 Lower 48 Onshore Federal Offshore Alaska 198 1983 1986 1989 1992 1995 1998 21 24 27 21 Source: U.S. Energy Information Administration 9
EIA fits well production data to hyperbolic decline curves to estimate EUR Classic hyperbolic decline curve (Arps 1945): 24 vertical well EUR=.46 bcf 211 horizontal well EUR=1.76 bcf 1985 vertical well EUR=1.41 bcf Source: HPDI data from horizontal wells in the Newark East field in the Barnett Shale; EIA analysis 1
An average well in shale gas and other continuous resource plays can also have steep decline curves, which require continued drilling to grow production million cubic feet per year 2, Cumulative production = EUR Haynesville 1% Eagle Ford 1,5 Woodford Marcellus 5% Fayetteville 1, % 5 1 15 2 5 1 5 1 15 2 Source: EIA, Annual Energy Outlook 212 11
For example: Oil production by monthly vintage of wells in the Williston Basin Source: DrillingInfo history through August 212, EIA Short-Term Energy Outlook, February 213 forecast 12
Domestic production of shale gas has grown dramatically over the past few years shale gas production (dry) billion cubic feet per day 3 25 2 15 1 5 Rest of US Marcellus Haynesville Eagle Ford Bakken Woodford Fayetteville Barnett Antrim 2 22 24 26 28 21 212 Sources: LCI Energy Insight gross withdrawal estimates as of December 212 and converted to dry production estimates with EIA-calculated average gross-to-dry shrinkage factors by state and/or shale play. 13
Shale gas leads growth in total gas production through 24 U.S. dry natural gas production trillion cubic feet 35 History 211 Projections 3 25 2 Shale gas 15 1 5 Non-associated offshore Tight gas Coalbed methane Associated with oil Alaska Non-associated onshore 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 14
Natural gas consumption is quite dispersed with electric power, industrial, and transportation use driving future demand growth U.S. dry gas consumption trillion cubic feet 35 3 History Projections *Includes combined heat-and-power and lease and plant fuel. **Includes pipeline fuel. 25 32% Electric power 2 15 1 5 31% 33% 33% 3% 2% 6% 13% 12% 19% 14% 25 211 22 225 23 235 24 Industrial* Gas to liquids Transportation** Commercial Residential Source: EIA, Annual Energy Outlook 213 Early Release 15
Growth of natural gas in transportation led by heavy duty trucks (LNG) and gas to liquids (diesel) marine and rail to come? U.S. natural gas consumption quadrillion Btu 3. History 211 Projections 2.5 2. Gas to liquids 28% 1.5 Freight 38% 1% trucks 1. 1% Buses 3%.5 Light-duty vehicles 1% 3% 95% Pipeline fuel 31%. 1995 2 25 21 215 22 225 23 235 24 Note: Gas to liquids includes heat, power, and losses. Source: EIA, Annual Energy Outlook 213 Early Release 16
Total natural gas exports nearly quadruple by 24 in the AEO213 Reference case U.S. natural gas exports trillion cubic feet 6 5 4 Exports to Mexico 3 2 1 Exports to Canada Lower 48 LNG exports Alaska LNG exports 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 17
Domestic natural gas production grows faster than consumption and the U.S. becomes a net exporter of natural gas around 22 U.S. dry gas trillion cubic feet 35 3 History 211 Projections 25 Consumption 2 15 Domestic supply 1 5 Net imports -5 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 18
U.S. Tight Oil 19
Multiple factors have contributed to U.S. crude oil resource estimate increases over the years, with tight oil contributing recently U.S. crude oil and lease condensate resources in non-prohibited areas billion barrels 25 2 15 Unproved Alaska (1) Unproved L48 Offshore (2) Unproved Tight Oil (3) Unproved Tight Oil (reclassified from onshore) Unproved Other L48 Onshore Proved Reserves 222.6 23.8 48.6 41.6 1 16.5 5 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Year of Annual Energy Outlook 67. 25.2 (1) The USGS reduced NPR-A resource estimates, which is responsible for the lower AEO213 Alaska resources. (2) Prior to AEO29, resources in Pacific, Atlantic, and Eastern GOM OCS were under moratoria and not included. (3) Includes shale oil. Prior to AEO211, tight oil is included in unproved other lower-48 onshore category. Source: EIA, Annual Energy Outlook 213 Early Release 2
U.S. crude oil plus condensate proved reserves, 198-21 billion barrels 35 3 25 U.S. Total 2 15 Lower 48 Onshore 1 5 Alaska Federal Offshore 198 1983 1986 1989 1992 1995 1998 21 24 27 21 Source: U.S. Energy Information Administration 21
Domestic production of tight oil has grown dramatically over the past few years 2. 1.8 1.6 1.4 1.2 1..8.6.4.2 tight oil production for select plays million barrels per day Eagle Ford Bakken Granite Wash Bonespring Monterey Woodford Niobrara-Codell Spraberry Austin Chalk. 2 22 24 26 28 21 212 Source: Drilling Info (formerly HPDI), Texas RRC, North Dakota department of mineral resources, and EIA, through August 212 22
U.S. tight oil production leads a growth in domestic production of 2.6 million barrels per day between 28 and 219 U.S. crude oil production million barrels per day 8 History 211 Projections STEO Feb. 213 U.S. crude oil projection 6 Tight oil 4 Other lower 48 onshore 2 Lower 48 offshore Alaska 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release and Short-Term Energy Outlook, February 213 23
U.S. petroleum product exports exceeded imports in 211 for first time in over six decades annual U.S. net exports of total petroleum products, 1949 211 million barrels per day 4 3 2 1 exports net product exporter -1-2 -3 net exports imports -4 1949 1955 1961 1967 1973 1979 1985 1991 1997 23 29 Source: EIA, Petroleum Supply Monthly 24
U.S. dependence on imported liquids depends on both supply and demand U.S. liquid fuel supply million barrels per day 25 History 25 211 Projections 2 Consumption 15 Net imports 6% 45% 37% 1 Domestic supply 5 197 1975 198 1985 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 25
Light-duty vehicle liquids consumption is lower primarily due to more stringent CAFE standards light-duty vehicle liquids consumption million barrels per day 1 AEO212 8 AEO213 6 4 2 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 26
Reference case oil price initially drops and then rises steadily, but there is uncertainty about the future trajectory Annual average spot price of Brent crude oil 211 dollars per barrel 25 History 211 Projections High Oil Price 2 15 Reference 1 Low Oil Price 5 198 1985 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 27
Global liquids supply increases 26 percent with regional market shares relatively stable Global liquids supply million barrels per day 12 History 211 Projections 1 8 OPEC 44% 4% 6 4 34% Other non-oecd 31% 2 26% OECD 25% 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 28
Global tight oil production comparisons IEO213 DRAFT BP Energy Outlook 23 12 million barrels per day 1 8 6 Australia Russia Mexico United States China Argentina Canada 4 2 2 21 22 23 Source: Preliminary International Energy Outlook 213, BP Energy Outlook 23 29
Uncertainties that could slow global growth of shale gas and tight oil Resource quantities and distribution Surface vs. mineral rights Risk appetite of industry participants Infrastructure and technology Environmental constraints 3
Changing electricity generation mix in AEO212 reference case and carbon fee allowance side cases U.S. electricity net generation trillion kilowatthours 5 212 Reference Case $15 Carbon Fee $25 Carbon Fee 21 5 5 4 24% Natural gas 28% 4 Natural gas 34% 4 Natural gas 34% 3 2 1% 2% Renewables 15% Nuclear 18% 3 2 Renewables 22% 3 2 Renewables 23% Nuclear 27% 1 45% Coal 38% 1 1 Nuclear 38% Coal 16% Coal 199 25 22 235 199 25 22 235 199 25 22 235 4% Source: EIA, Annual Energy Outlook 212 31
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Coal and Electricity 33
Growth in electricity use slows, but still increases by 28% from 212 to 24 U.S. electricity use percent growth (3-year rolling average) 14 12 1 8 6 4 2 History 211 Period Annual Growth 195s 9.8 196s 7.3 197s 4.7 198s 2.9 199s 2.4 2-211.9 212-24.9 Projections 195 196 197 198 199 2 21 22 23 24 Source: EIA, Annual Energy Outlook 213 Early Release 34
Over time the electricity mix shifts toward natural gas and renewables, but coal remains the largest fuel source U.S. electricity net generation trillion kilowatthours 6 1993 History 211 Projections 5 4 3 2 13% 11% 19% 25% 13% 19% Natural gas Renewables Nuclear 3% 16% 17% 1 53% 42% 35% Coal Oil and other liquids 4% 1% 1% 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 35
Coal regains some competitive advantage relative to natural gas over time on a national average basis ratio of natural gas price to steam coal price 211 8 Energy prices to the electric power sector 211 dollars per Btu 1 History 211 Projections 6 8 6 4 2 Natural gas Coal 4 199 2 21 22 23 24 2 Competitive parity History Projections 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 36
Non-hydro renewable generation more than doubles between 211 and 24 non-hydropower renewable generation billion kilowatthours per year 6 5 History 211 Projections Advanced biofuels cogeneration (not visible) 4 3 Wind 2 Power sector Biomass 1 Industrial CHP Solar Geothermal Waste 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 37
Energy and CO 2 per dollar of GDP continue to decline; percapita energy use also declines energy and emission intensity index, 25=1 History 2. 25 211 Projections 1.5 1..5 Energy use per capita Energy use per 25 dollar of GDP Carbon dioxide emissions per 25 dollar of GDP. 198 1985 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 38
In the AEO213 Reference case, energy-related CO 2 emissions never get back to their 25 level carbon dioxide emissions billion metric tons History 25 211 7 Projections 6 AEO213 5 4 3 2 25 22 24 (billion metric tons) 6. 5.45 5.69 1 - - -9.% -5.1% (percent change from 25) 199 1995 2 25 21 215 22 225 23 235 24 Source: EIA, Annual Energy Outlook 213 Early Release 39
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