The Gas Cycle in the 21 st Century Stephen A. Holditch Schlumberger
Outline The Past The Golden Age of Oil The Golden Age of Gas - Now The Gas Cycle What is it? LNG, GTL, Gas by Wire, UGS Conclusions 2 SPE/Holditch
The Past Progression from - Wood to - Coal to - Oil
Decarbonization 100 Hydrogen H 10 C 1 Methane: H/C = 4 Oil: H/C = 2 Coal: H/C = 1 Methane Economy 0.1 Wood H/C = 0.1 0.01 1800 1850 1900 1950 2000 2050 2100 2150 Year Source: Ausubel, American Scientist, March-April 1996
Decarbonization As we have progressed from wood to coal to oil, the carbon to hydrogen ratio of these fuels has decreased However, more fuel is being consumed, so the amount of carbon released to the atmosphere has been increasing In the future, the switch to natural gas and eventually, to hydrogen will be beneficial to the environment But in the next 20 years, we will burn more oil, gas and coal than ever before 5 SPE/Holditch
6 SPE/Holditch DOE-Energy Information Administration AEO - 98
The Golden Age of Oil
Oil production becoming more important than exploration Annual volume (billion BOE) 40 Oil discoveries Peak, 1962 Oil production Source: US DOE EIA - International Energy Outlook, 1999 30 20 10 1920 1940 1960 1980 2000 2020 2040 Year 8 SPE/Holditch
How Much Oil is Left in Conventional Reservoirs?
Worldwide Oil Production Current oil production rate: 10 SPE/Holditch 27 Billon STB/yr Cumulative production through 1996*: 784 Billion STB Thus, through 2001, production is over 900 Billion STB * From Campbell
World and Opec Oil Reserves 1200 Billion Barrels of Oil 1000 800 600 400 200 Total Reserves OPEC Reserves 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Time in Years 11 SPE/Holditch
World Oil Reserves 700 600 500 400 300 B BBLs 200 100 0 ME NSA AF EE&FSU AP WE 12 SPE/Holditch
How Long Can We Continue Producing Oil from Conventional Reservoirs?
U.S.A. Ultimate 210 Billion Barrels from Campbell 10 Production (MMB/D) 8 6 4 2 14 SPE/Holditch 0 1930 1950 1970 1990 2010 2030 2050 Year
Global Oil Production-Forecasts 50 45 2001 EIA Demand Forecast Billion barrels per year 40 35 30 25 20 15 10 5 Billion barrels 2600 2200 1800 15 SPE/Holditch 0 1950 1970 1990 2010 2030 Source: J. MacKenzie, 1996 Year
Will Energy Demand Keep Growing? Yes, on the basis of everyone s predictions. World population now 6 Billion In 2050, the population will be 9 Billion World population estimates for 2050 range from 7.8 to 13 billion Increased population will require energy Will there be enough oil and gas for the expanding world population? 16 SPE/Holditch
World Population 17 SPE/Holditch 10 9 8 7 6 5 4 3 2 1 0 Billion People 1950 1970 1990 2010 2030 2050 Year
In the next 20 years, oil production from conventional reservoirs may begin to decline, creating a gap between supply and demand
Gap Between Supply-Demand 50 EIA 2001 45 Billion barrels per year 19 SPE/Holditch 40 35 30 25 20 15 10 5 0 1950 1970 1990 2010 2030 Year Gap 2200
What Can Fill The Gap? Gas Reservoirs Around the World 5000 TCF of World Gas Reserves Unconventional Reservoirs Heavy Oil or Tight Gas Renewable Resources Wind or Solar Fuel Cells Nuclear Power Plants 20 SPE/Holditch
What Will Dictate the Way Forward? Environmental Issues Move to H 2 Political Issues Government Actions Capital Costs High for every option Advances in Technology GTL, etc. World Prices for Oil and Gas Existing Conditions Lots of Automobiles Control of Terrorism 21 SPE/Holditch
The Golden Age of Gas in Now
Inevitable shift to gas both exploration and production Annual volume (billion BOE) 40 Source: US DOE EIA - International Energy Outlook, 1999? Gas discoveries 30 20? 10 1920 Gas production 1940 1960 1980 2000 2020 2040 Year 23 SPE/Holditch
World Natural Gas Consumption 180 160 140 120 100 80 60 40 20 0 1970 1980 1990 2000 2010 2020 Tcf 24 SPE/Holditch
World Gas Reserves 2500 Total = 5200 Tcf 2000 1500 1000 TCF 500 0 EE&FSU ME NSA AF AP WE 25 SPE/Holditch
Gas Reserves by Country 1800 1600 1400 1200 1000 800 600 400 200 0 Russia Iran Saudi USA Ven UK USA- NCG TCF 26 SPE/Holditch
Gas Hydrates (1% Recovery)? 7000 6000 5000 4000 3000 2000 1000 0 Russia Saudi Ven USA- NCG TCF 27 SPE/Holditch
The Gas Cycle What is it?
The Gas Cycle Includes Everything From Exploration Reservoir evaluation Reservoir description Reservoir development Production operations Reservoir engineering Gas processing facilities Gas transportation LNG processing GTL processing Burner tip use Gas-by-wire use Gas powered vehicles Gas as feedstock 29 SPE/Holditch
Natural Gas Utilization Options Domestic Gas LNG Methanol / MTBE Power Generation GAS Dimethyl Ether Ammonia Urea CNG Fischer-Tropsch Products 30 SPE/Holditch
Gross Production 23.8 Tcf Injected 3.3 Tcf Imports Canada - 3.4 Algeria - 0.076 Mexico - 0.055 Trinidad - 0.051 Qatar - 0.02 Australia - 0.012 UAE - 0.003 31 SPE/Holditch Malaysia - 0.003 Vented 0.2 Tcf 3.62 Tcf Non-hydrogen Gas 0.6 Tcf Exports Gas Plants 0.164 Tcf 18.7 Tcf Dry Gas Production Loss/Use 0.9 Tcf 22.15 Tcf Canada - 3.4 Mexico - 0.055 Japan - 0.064 Storage In 2.7 Tcf 22.36 Tcf Out 2.9 Tcf Residential 4.72 Commercial 3.07 Industrial 7.95 Electricity 3.78 Fuel 1.87 Transportation 0.02 Discrepancy.946
Natural Gas Logistics Natural gas is more difficult to transport than oil Most gas use is in the USA and Europe where systems of pipelines are used to transport natural gas In remote parts of the world, gas must be transported As LNG, which requires high Capex, or GTL which is an emerging technology, or Gas-by-wire, which is electric power generation, or New, expensive pipelines will have to be constructed 32 SPE/Holditch
LNG Trade
LNG Properties Stored as a liquid at minus 260 o F under pressure Occupies 1/600 (0.00167) the volume of natural gas at standard temperature and pressure Mostly methane with very few heavy components LNG is Odorless - Colorless Non-corrosive - Non-toxic 34 SPE/Holditch
LNG Facts Australia has 100 Tcf looking for a market Shell is looking at a floating LNG plant in Timor Sea Others looking at LNG for Alaska s 35 Tcf New Sources from Nigeria and Venezuela Large expansion will require more tankers 35 SPE/Holditch
36 SPE/Holditch
LNG Trade Movements Malaysia 122 million boe Indonesia 218 million boe Middle East 54 million boe Brunei 50 million boe NW Shelf 60 million boe 37 SPE/Holditch
LNG Movement in 1999 Major Importer Volume (Tcf) Major Exporter Volume (Tcf) Japan 2.440 Indonesia 1.273 South Korea 0.617 Algeria 0.907 France 0.361 Malaysia 0.724 Spain 0.252 Australia 0.355 USA 0.161 Brunei 0.296 Belgium 0.142 Qatar 0.286 Others (3) 0.307 Others (5) 0.439 Total 4.280 Total 4.280 38 SPE/Holditch
LNG Capacity in the U.S. Location Owner Capacity Rate Operation BCF MMcf/day Everett MA Cabot 3.5 435 1971-1985; 1987 - present Lake Charles CMS 6.3 700 1982-1983; 1989-present Cove Point Williams 5.0 1000 1978-1980; 1985- present Elba Island El Paso 4.2 675 1978-1980 Puerto Rico Enron 3.5 186 2000 present 39 SPE/Holditch
GTL Technology
What is GTL? Gas to Liquids is the conversion of natural gas to high value liquid fuels,such as Methanol Dimethyl Ether (DME) Middle distillates Specialty chemicals and waxes Fischer-Tropsch Chemistry began in 1920 s and was used in WWII by Germans 41 SPE/Holditch
GTL Chemistry Gas Purification Syngas Production Fischer Tropsch Product Upgrade CH 4 CO n(ch 2 ) + Methane O 2 + + + H 2 O H 2 nh 2 O Liquid Fuels 42 SPE/Holditch
Methanol Methonal Fuel Cells DME Gasoline Natural Gas Syngas Production Ammonia/Urea Fischer Tropsch Process Diesel Naphtha LPG Wax/Lubes 43 SPE/Holditch
Commercial GTL Plants Operator Location Bbls/day Products Sasol 1955 South Africa 124,000 Light olefins and gasoline Mossgas 1991 South Africa 22,500 Gasoline and diesel Shell 1993 Malaysia 12,500 Waxes, chemicals and diesel 44 SPE/Holditch
Proposed GTL Plants Operator Location Bbls/day Products Rentech USA 1200 Waxes and fuels Syntroleum Australia 10,000 High margin products Sasol Qatar 34,000 Liquid fuels ExxonMobil Qatar 100,000 Liquid fuels SasolChevron Nigeria 33,000 Liquid fuels BP Alaska 100,000 Liquid fuels Sicor Ethiopia 20,000 Liquid fuels PDVSA 45 SPE/Holditch Venezuela 15,000 Liquid fuels
Feasibility Studies for GTL Operator Location Bbls/day Products Shell Indonesia 75,000 Liquid fuels Shell Australia 75,000 Liquid fuels Shell Malasia 75,000 Liquid fuels Shell Egypt 75,000 Liquid fuels Shell Iran 75,000 Liquid fuels Shell Argentina 75,000 Liquid fuels Shell Trinidad 75,000 Liquid fuels SasolChevron Australia (2) 30-100,000 Liquid fuels 46 SPE/Holditch
Economies of Scale Plant Size Small Capacity (BPD) < 10,000 Capex (US$/BPD) 40,000 Medium 10,000 35,000 40,000 22,000 Large > 35000 19,000 22,000 47 SPE/Holditch
Approximate GTL Plant Costs Oxygen Plant and Gas Purification 35% Synthesis Gas Generation 25% Fischer-Tropsch Processes 30% Product Upgrades 10% 48 SPE/Holditch
Gas by Wire
World Electricity Consumption Billion Kilowatthours 25000 20000 15000 10000 Develp FSU/EE Indus 5000 0 1990 1999 2005 2010 2015 2020 50 SPE/Holditch
World Electricity Generation Quadrillion BTU 250 200 150 100 50 Renew Nuclear Coal Gas Oil 0 1995 1999 2005 2010 2015 2020 51 SPE/Holditch
USA Electricity Consumption Billion Kilowatthours 5000 4000 3000 2000 1000 Indus Comm Resid 0 1999 2005 2010 2015 2020 52 SPE/Holditch
USA Natural Gas Consumption Tcf 40 35 30 25 20 15 10 5 0 Major Increase is in Electricity Generation 1999 2005 2010 2015 2020 Fuel Elec Indus Comm Resid 53 SPE/Holditch
USA Natural Gas Demand Demand to increase 10 Tcf per year by 2015 Virtually all the increase will be in electricity generation Sources of new gas LNG Alaska/Canada pipeline New Drilling Need $ 3 + /Mcf for any of these options 54 SPE/Holditch
Sources of New Gas Imported Liquified Natural Gas (LNG) Current 5 terminals can supply 1 Tcf/yr 10 more terminals are being planned Will take time and more tankers Alaska/Canada Pipeline May cost $18-20 billion May take 6-7 years Will deliver 1-2 Tcf/yr 55 SPE/Holditch
New Drilling Offshore recovery is 5-10 bcf per well but costs are very high Onshore recovery is 1-2 bcf per well with lower costs than offshore For 1 Tcf/yr of new gas onshore, it will require, Hundreds of new rigs Thousands of new wells Thousands of people (40 people for each new rig) Lost of new $$$ 56 SPE/Holditch
U.S. Dry Gas Production (Tcf) 18.8 18.6 18.8 18.9 18.7 18.7 17.1 17.3 17.8 17.7 17.9 18.1 16.6 16.1 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 57 SPE/Holditch Source: DOE/EIA
U.S. Production History* 60 Drilling Year: 1998 60 1997 50 1996 1995 50 40 1994 1993 40 BCFD 30 1992 1991 1990 30 20 Pre-1990 Base 20 10 10 0 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 14% 15% 15% 17% 18% 19% 20% 23% Production Decline Rate of Base 58 SPE/Holditch 0 * Representing 93% of US Production
Total Natural Gas Resources U.S. (TCF) Total Natural Gas Resources 1281 Proved Reserves 164 Total U.S. Unproved 1117 Alaska 33 Associated-Dissolved 129 Unconventional 278 62 53 393 Inferred 10 Offshore 42 52 Reserves 244 Onshore 165 26 192 Tight Gas CBM Shale Undiscovered Offshore 118 34 152 319 Onshore 85 83 167 59 SPE/Holditch Deep
More gas storage will be needed
The Gas Cycle from E&P to Distribution Incremental consumer cost ($) 61 SPE/Holditch Source: IEA, GRI
European UGS Outlook 15 17 19 22 27 1.4 2.1 2.9 3.3 4.1 0.7 0.8 0.5 0.7 Consumption [TCF] UGS Capacity [TCF] add. UGS Capacity [TCF] 1995 2000 2005 2010 2015 62 SPE/Holditch Source: International Energy Agency
UGS projects in Europe: 2000-2010 97 existing UGS 44 new projects 40 expansions Total UGS Work Gas in Europe: Today = 57 Bcm 2015 = 126 Bcm 63 SPE/Holditch Source: UN
Optimization of the Gas Cycle Incremental consumer cost ($) Software Data Management Networking Metering 64 SPE/Holditch Automation
Summary and Conclusions
World Energy Generation Quadrillion BTU 700 600 500 400 300 200 100 0 1990 1999 2005 2010 2015 2020 Other Nuclear Coal Gas Oil 66 SPE/Holditch
Summary of World Increases Item 2000 2020 % Increase Population (billion) 6.1 7.6 25 Energy (Quadrillion BTU) 385 607 58 Oil Production (billion bbls) 27 43 60 Gas Production (Tcf) 86 162 88 Electricity (Quadrillion BTU) 150 225 50 67 SPE/Holditch
Conclusions The world population (25%) and energy needs (60%) will grow substantially in the next 20 years Production from conventional oil reservoirs will peak and begin to decline in the next 20 years There will be a gap between demand for oil and production from conventional oil reservoirs during the next 20 years Other resources (gas) will have to be developed to meet the world energy demands by 2020 68 SPE/Holditch
Conclusions The world currently has the oil and gas resources required to meet demand in the next 20 years Liquids from conventional natural gas, plus unconventional oil and gas can fill the gap once conventional oil production begins to decline Opportunity exists for the next 1-2 generations of young professionals to have a successful career in the global E&P Oil and Gas Industry 69 SPE/Holditch
Conclusions To meet the growing world energy needs Liquified Natural Gas (LNG), Gas to Liquids Technology (GTL), New Gas Pipelines, and Gas by Wire (electric generation) New Underground Gas Storage will be required to transport the world s natural gas energy from the field to the end user Significant capital investment and new technology are required to bring more gas to market 70 SPE/Holditch