How Do We Judge Fracking? Gary Sernovitz Northwest Gas Association June 7, 2017 6/19/17 1
What kind of question is that? 6/19/17 2
Well, in Oregon… 6/19/17 3
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How Do We Judge Fracking? Industrial Local Financial Global National 6/19/17 7
The Industrial Perspective 6/19/17 8
The Oil Business: 1858-1998 6/19/17 9
The Shale Revolution: 1998 6/19/17 10
What took you so long? Shale reservoirs are ~1 Billion Times worse than conventional reservoirs in terms of permeability and porosity But that’s the secret to why they hold so many hydrocabrons. 6/19/17 11
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What Was Old What Was New Fracking since ~1946 1. High oil and gas prices 2. Trial and error 3. One stubborn rich guy… Directional drilling since 1930s… 6/19/17 13
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The Local Perspective 6/19/17 17
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From our assessment, we ? conclude there are above and below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources…. We did not find evidence that these mechanisms have led to EPA Report widespread, systemic impacts June 2015 on drinking water resources in the United States . 6/19/17 20
There are nuisances and accidents near homes 6/19/17 21
Is oil and gas unique? 6/19/17 22
Ho Horizontal U. U.S. Pl Play We Wells Restaurant Re Lo Locations Eagleford Shale 17,541 Subway 27,205 Barnett Shale 15,608 McDonald's 14,350 Bakken Shale 13,238 Starbucks 12,107 Marcellus Shale 9,458 Dunkin' Donuts 8,082 Fayetteville Shale 5,891 Pizza Hut 7,863 Wolfcamp Midland 4,909 Burger King 7,142 Mississippian 4,856 Taco Bell 5,921 Anadarko Pennsylvanian 4,182 Wendy's 5,780 Wattenberg 4,006 Domino's 5,067 Haynesville Shale 3,926 Dairy Queen 4,512 Bone Spring 3,356 KFC 4,370 Austin Chalk 2,673 Wolfcamp Delaware 2,334 Utica Shale 1,694 Woodford - Arkoma 1,687 Anadarko Wash Plays 1,606 Niobrara Fracture Play 1,525 Cotton Valley 1,171 Woodbine 974 Scoop 480 Anadarko Morrow 313 Tot Total 101,428 101, 428 Total Tot 102, 102,399 399 Source: cumulative horizontal shale wells by basin as of July 2016; IHS Source: QSR 50 as of 2016 6/19/17 23
The Financial Perspective 6/19/17 24
12,000 U.S. Oil Production (MB/D) 9,000 6,000 WTI Oil Price ($/B) 3,000 1995 2000 2005 2010 2015 Source: Energy Information Administration 6/19/17 25
My careful estimates in early 2015 400,000 new jobs $600 billion in increased U.S. oil and gas revenue to date $2 trillion in increased wealth 2 million landowning families , splitting $50 billion in “bonuses” and earning additional $30 billion per year 6/19/17 26
And today? 6/19/17 27
Issue one: life, liberty, and the pursuit of… But ASPEN HOME 6/19/17 28
Issue two: the Internet of oil? 6/19/17 29
The Global Perspective 6/19/17 30
We don’t agree on much, but peak oil. 6/19/17 31
But Something Happened On the Way to the Apocalypse Annual Global Oil Demand Growth WTI Oil Price ($/B) Source: Energy Information Administration Source: International Energy Agency 6/19/17 32
Oil consumption won’t be driven by oil scarcity…. 2040 2040 450 Current 2040 2040 New PPM 2040 450 Policies: Current Policies: 2040 New Scenario: PPM Current Total Policies: Total Policies: Total Scenario: Current Share Change Share Change Share Change Share Coal 28.8 29% 43% 29% 12% 25% -36% 16% Oil 30.9 31% 27% 27% 12% 26% -21% 22% Gas 21.3 21% 59% 23% 46% 24% 15% 22% Nuclear 4.7 5% 60% 5% 86% 7% 152% 11% Hydro 2.4 2% 56% 3% 63% 3% 80% 4% Bioenergy 10.1 10% 33% 9% 36% 10% 69% 15% Other Renewable 1.2 1% 330% 4% 482% 5% 813% 10% Total 99.4 45% 32% 12% Source: International Energy Agency 6/19/17 33
% of U.S. Electricity Total Carbon Emissions Generation Reduction, 2007—2014 (Million Metric Tons per Year) Coal-Fired: Down by a Third U.S .S.A .A (590.8 .8) Spain (118.1) Italy (109.6) United Kingdom (66.4) Canada (57.3) Australia (35.9) France (31.6) Gas-Fired: Ukraine (25.6) Romania (25.4) Almost Tripled Germany (24.8) Source: Energy Information Administration Source: Global Carbon Atlas 6/19/17 34
How much does methane matter? 6/19/17 35
No simple answer to climate change impact… 6/19/17 36
The National Perspective 6/19/17 37
There is shale oil and gas in a lot of places… 6/19/17 38
It has transformed only the United States. Why? 6/19/17 39
How important is this? U.S. Net Imports of Oil and Petroleum Products (MB/D) Source: Energy Information Administration 6/19/17 40
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How Do We Judge Fracking? Industrial Financial Global National Local 6/19/17 42
An optimistic national moment… 6/19/17 43
Feel free to email me at gs@lrpartners.com. 6/19/17 44
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