Shale Gas and the Outlook for U.S. Natural Gas Markets and Global - - PowerPoint PPT Presentation

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Shale Gas and the Outlook for U.S. Natural Gas Markets and Global Gas Resources Organization for Economic Cooperation and Development (OECD) Richard Newell, Administrator June 21, 2011 | Paris, France U.S. Energy Information Administration

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www.eia.gov

U.S. Energy Information Administration

Independent Statistics & Analysis

Shale Gas and the Outlook for U.S. Natural Gas Markets and Global Gas Resources

Organization for Economic Cooperation and Development (OECD) Richard Newell, Administrator June 21, 2011 | Paris, France

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Overview

Richard Newell, Paris June 2011 2

  • History of U.S. shale gas production
  • Outlook for the U.S. natural gas market
  • Implications for electric power
  • World shale gas resources: An initial assessment
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Underground sources of natural gas

Richard Newell, Paris June 2011 3 Source: modified from U.S. Geological Survey Fact Sheet 0113-01

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Diagram of a typical hydraulic fracturing operation

Richard Newell, Paris June 2011 4 Source: ProPublica, http://www.propublica.org/special/hydraulic-fracturing-national

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History of U.S. shale gas production

Richard Newell, Paris June 2011 5

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Since 1997, more than 13,500 gas wells completed in the Barnett shale

Richard Newell, Paris June 2011 6

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Since 1997, more than 13,500 gas wells completed in the Barnett shale

Richard Newell, Paris June 2011 7

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The result has been rapid increases in production from the Barnett field

Richard Newell, Paris June 2011 8

gas production billion cubic meters wells drilled thousands

Source: EIA

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Shale gas plays, Lower 48 States

Richard Newell, Paris June 2011 9 Source: Energy Information Administration based on data from various published studies.

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North American shale plays

Richard Newell, Paris June 2011 10 Source: U.S. Energy Information Administration based on data from various published studies. Canada and Mexico plays from ARI.

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At this stage, the Haynesville and the Marcellus formations appear to be the most attractive

Richard Newell, Paris June 2011 11

rigs drilling for gas

Source: Smith International

Barnett Haynesville Marcellus Fayetteville Woodford Eagle Ford

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Over the last decade, U.S. shale gas production has increased 12-fold and now comprises about 25 percent of total U.S. production

Richard Newell, Paris June 2011 12

annual shale gas production trillion cubic feet

Sources: EIA and Lippman Consulting

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Outlook for U.S. gas market

Richard Newell, Paris June 2011 13

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Recent Annual Energy Outlook natural gas resources

Richard Newell, Paris June 2011 14

U.S. dry natural gas resources trillion cubic feet

Source: EIA, Annual Energy Outlook 2011 and earlier editions

Unproved shale gas Unproved

  • ther gas

(including Alaska and

  • ffshore)

Proved reserves (all types & locations) 827 245 1472 2543

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Shale gas offsets declines in other U.S. supply to meet consumption growth and lower import needs

Richard Newell, Paris June 2011 15

5 10 15 20 25 30 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 U.S. dry gas trillion cubic feet per year

Source: EIA, Annual Energy Outlook 2011

2% Non-associated offshore Projections History Associated with oil Coalbed methane Net imports Non-associated onshore Shale gas 2009 11% 1% 9% 7% 9% 9% 20% 14% 8% 8% 6% 46% Alaska 1% Tight gas 28% 22%

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30% domestic gas production growth outpaces 16% consumption growth, leading to declining imports

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U.S. dry gas trillion cubic feet per year

Source: EIA, Annual Energy Outlook 2011

Projections History 2009 Consumption Domestic supply AEO2011 Reference case AEO2010 Reference case Net imports

11% 1% 6% Richard Newell, Paris June 2011

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Natural gas price projections are significantly lower than past years due to an expanded shale gas resource base

Richard Newell, Paris June 2011 17

natural gas spot price (Henry Hub) 2009 dollars per million Btu

Sources: EIA, Annual Energy Outlook 2011; EIA, Annual Energy Outlook 2010; and EIA, An Updated Annual Energy Outlook 2009 Reference Case

Projections History 2009 Updated AEO2009 AEO2011 AEO2010 $9/MMBtu $7/MMBtu

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Oil to natural gas price ratio remains high over the projection

Richard Newell, Paris June 2011 18

ratio of oil price to natural gas price

Source: EIA, Annual Energy Outlook 2011

History Projections 2009

Oil and natural gas prices 2009 dollars per Btu

History Projections 2009

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U.S. oil rig count overtakes natural gas rig count

Richard Newell, Paris June 2011 19

share of weekly rig count

  • il-to-gas price ratio

million Btu per barrel

Sources: EIA, Baker Hughes

Gas-directed rigs Oil-directed rigs Crude oil-to-natural gas price ratio

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Shale gas resource potential and related costs remain highly uncertain

Richard Newell, Paris June 2011 20

Four alternate cases

High Estimated Ultimate Recovery (EUR) case assumes an EUR per shale gas well set 50% higher than in the Reference

  • case. Results in lower per Mcf costs.

High Recovery case assumes 50% more natural gas can be recovered from the shale formation than in the Reference case. Per Mcf costs are unchanged. Low Recovery case is like High Recovery but less. Low EUR case is like High EUR but lower.

2035 Results

Projection Ref High EUR High Recov. Low EUR Low Recov. Shale gas

  • prod. (tcf)

12.3 17.1 15.1 5.5 8.2 Total gas

  • prod. (tcf)

26.3 30.1 28.5 22.4 24.6 Henry Hub price (09$/Mcf) 7.07 5.35 6.03 9.26 8.17 High recovery Reference High EUR

shale gas production trillion cubic feet

Low EUR Low Recovery

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Implications for electric power

Richard Newell, Paris June 2011 21

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Natural gas, wind and other renewables account for the vast majority of capacity additions from 2009 to 2035

Richard Newell, Paris June 2011 22 Source: EIA, Annual Energy Outlook 2011

Coal 313 (30%) Natural gas 351 (34%) Hydropower* 99 (10%) Nuclear 101 (10%) Other renewables 15 (1%) Other fossil 118 (11%)

* Includes pumped storage

Coal 14 (6%) Natural gas 135 (60%) Hydropower* 3 (1%) Nuclear 6 (3%) Other renewables 28 (12%) Other fossil 1 (0.4%) 2009 capacity Capacity additions 2009 to 2035 1,033 gigawatts 223 gigawatts Wind 25 (11%) Wind 32 (3%) End-use coal 4 (0.3%) End-use coal 12 (5%)

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Electricity generation capacity additions by fuel type, 2010-2035

Richard Newell, Paris June 2011 23

electric power capacity additions gigawatts

Source: EIA, Annual Energy Outlook 2011

Natural gas Renewables Coal Nuclear

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Natural gas electricity generation outlook varies with economic growth and regulatory policies

Richard Newell, Paris June 2011 24

electricity generation billion kilowatthours

Source: EIA, Annual Energy Outlook 2011

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World shale gas resources: an initial assessment

Richard Newell, Paris June 2011 25

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Initial assessment of shale gas resources in 48 major shale basins in 32 countries indicates a large potential

Richard Newell, Paris June 2011 26 Source: U.S. Energy Information Administration

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32 countries covered in the report

Richard Newell, Paris June 2011 27

  • North America

– Canada, Mexico

  • South America

– Colombia, Venezuela, Argentina, Bolivia, Brazil, Chile, Uruguay, Paraguay

  • Australia
  • Europe

– Denmark, France, Germany, Netherlands, Norway, Sweden, United Kingdom, Lithuania, Poland, Ukraine

  • Africa

– Algeria, Tunisia, Libya, Morocco, Mauritania, Western Sahara, South Africa

  • Asia

– China, Pakistan, India

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Approach and methodology

Richard Newell, Paris June 2011 28

  • 1. Conducted preliminary geologic and reservoir

characterization of shale basins and formation(s)

  • 2. Established the areal extent, thickness and key

reservoir properties of the major shale gas formations

  • 3. Defined the prospective area of each shale gas

formation

  • 4. Estimated the risked shale gas in-place
  • 5. Calculated the technically recoverable shale gas

resource

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Findings

Richard Newell, Paris June 2011 29

  • The initial shale gas technically recoverable resource (TRR)

estimates for the 32 countries outside the U.S. is 5,760 Tcf

– More than six times EIA’s 862 Tcf TRR estimate for U.S. shale gas

  • Together with U.S. shale gas, world shale gas TRR of 6,622

Tcf raises total estimated world TRR by over 40% to 22,600 Tcf

  • These are moderately conservative ‘risked’ estimates

– Not probabilistic estimates – The methodology employed recognizes the sparseness and uncertainty of the data and includes conservative discounting of the potential resource

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Findings (continued)

Richard Newell, Paris June 2011 30

  • Countries dependent on imports but have significant shale

gas resource estimates relative to their production or consumption

– France, Poland, Turkey, Ukraine, South Africa, Morocco, Chile

  • Countries that already produce a substantial amount of

natural gas and are currently estimated to have a large amount of shale gas

– U.S., Canada, Mexico, China, Australia, Libya, Algeria, Argentina, Brazil

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Technically recoverable shale gas resource estimates (trillion cubic feet)

Richard Newell, Paris June 2011 31 Source: EIA ARI World Shale Gas Resources

Continent Technically Recoverable (Tcf) North America (non U.S.) Canada, Mexico 1,069 U.S. 862 Total North America 1931 Africa Morocco, Algeria, Tunisia, Libya, Mauritania, Western Sahara, South Africa 1,042 Asia China, India, Pakistan 1,404 Australia 396 Europe France, Germany, Netherlands, Sweden, Norway, Denmark, U.K., Poland, Lithuania, Kaliningrad, Ukraine, Turkey 624 South America Colombia, Venezuela, Argentina, Bolivia, Brazil, Chile, Uruguay, Paraguay 1,225 Total 6,622 Total without U.S. 5,760

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Continent Country Technically Recoverable (Tcm) North America (non U.S.) Canada and Mexico 30.3 U.S. 24.4 Total North America Canada, Mexico, U.S. 54.7 South America Colombia, Venezuela, Argentina, Bolivia, Brazil, Chile, Uruguay, Paraguay 34.7 Europe France, Germany, Netherlands, Sweden, Norway, Denmark, U.K., Poland, Lithuania, Kaliningrad, Ukraine, Turkey 17.7 Africa Morocco, Algeria, Tunisia, Libya, Mauritania, Western Sahara, South Africa 29.5 Asia China, India, Pakistan 39.8 Australia 11.2 Total 187.4 Total excluding U.S. 163.2

Technically recoverable shale gas resource estimates (trillion cubic meters)

Richard Newell, Paris June 2011 32 Source: EIA ARI World Shale Gas Resources

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Western Europe’s shale gas resources and basins

Richard Newell, Paris June 2011 33 Source: EIA ARI World Shale Gas Resources

Onshore shale gas basins of Western Europe

  • Western Europe’s shale

gas resources (assessed by our study) exist in the Ordovician Alum shale of Scandinavia, the Permian/Carboniferous shale of the Paris basin, and a host of Jurassic- age shale basins.

  • Our shale gas

assessment for Western Europe indicates a major resource: – 372 Tcf (10.54 Tcm)

  • f technically

recoverable resource.

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Distribution of Western Europe’s shale gas resources

Richard Newell, Paris June 2011 34 Source: EIA ARI World Shale Gas Resources

  • France holds large

technically recoverable shale gas resources (180 Tcf or 5.10 Tcm) in the Paris and South-East basins.

  • Norway’s (83 Tcf or 2.35

Tcm) and Sweden’s (41 Tcf or 1.16 Tcm) shale gas resources are within the Alum shale of the Baltic basin.

  • Smaller but still significant

shale gas resources exists in Denmark (23 Tcf

  • r 0.65 Tcm), Netherlands

(17 Tcf or 0.48 Tcm) and Germany (8 Tcf or 0.23 Tcm).

France Germany Netherlands Sweden Norway Denmark U.K.

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Poland’s shale gas resources and basins

Richard Newell, Paris June 2011 35 Source: EIA ARI World Shale Gas Resources

Onshore Shale Gas Basins of Poland

  • Poland appears to hold

some of the geologically most favorable shale gas resources in Europe, primarily in three basins: – Baltic – Lublin – Podlasie

  • Our shale gas assessment

for Poland indicates a large resource base: – 187 Tcf (5.30 Tcm) of technically recoverable resource.

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For more information

Richard Newell, Paris June 2011 36

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