Shale Gas & Oil: Global Implications for our Energy Future Dr Basim Faraj Faraj Consultants Pty Ltd Brisbane, Australia Petroleum Exploration Society of Australia (PESA) (Queensland Branch) Hilton Hotel Brisbane 190 Elizabeth Street, Brisbane Qld 4000 8 th February, 2018
Outline • Global affordable energy is the key to human progress • Shale gas/oil production and consumption • Shale gas/oil systematics • Modern shale technology yielding tremendous results • US Shale and global LNG • Role of Australia’s energy industry • Summary and recommendations
Global drivers for energy demand • By 2040, world population is expected to reach 9.1 billion, up from 7.3 billion in 2017. • Over that same period, global GDP will effectively double to US$150 Trillion! This economic expansion, coupled with growing numbers of people, will help drive up global energy demand by about 25% by the year 2040. • Middle Class will more than double by 2030 to reach almost 5 billion people. India and China will have about 1 Billion of Middle Class each! • The World will need to pursue all economic energy sources to keep up with this considerable demand growth. • Oil and natural gas will likely be nearly 60% of global supplies in 2040, while nuclear energy and renewable (hydro, wind, solar etc) will grow by about 50% and approaching a 25% share of the world’s energy mix. Source : ExxonMobil energy outlook to 2040, 2018
Global energy mix through time ~75% Fossil Fuel! (by 2040) Gas Coal Oil Biomass 2000 2040 1800 1900 ExxonMobil 2011, 2017 “outlook to Energy - A view to 2040”
Great many basins within the markets!
Map of US natural gas pipelines Across the US (lower 48), there are more than 210 pipeline systems that total more than 305,000 miles of interstate and intrastate pipelines. EIA, 2018
Thou shale be light! NASA, 2018
Size does matter! Gas In Place Est. Play (TCF) Barnett 2,100 Eagle Ford 2,100 Haynesville 1,800 Marcellus 4,700 Montney 5,700 Total 16,400 8 Source: Tamboran Estimate modified from Deloitte LLP and Core Lab, 2013 Sources: US EIA 2013, US DOE 2009, Encana 2009, USGS, OilandGasInfrastructure.com
The significance of shale gas/oil production in the US Shale/tight rock contributed ~60% of total gas production of (74bcf/d!). 40% of total oil production (10.59 Million bbl/d) (2017) 60% 2017 40% (million bbl/d 3 bcf (5%) 2005 Source: EIA, 2017: 2016 Intellectual Capital Conference | Oil and natural gas: market outlook and drivers May 25, 2016
World liquid fuels production and consumption balance Crude Production 2017: Opec 39.31, Non-Opec 58.66= 97.97 Million bbl/d Crude Consumption 2017: 98.31 Million bbl/d. Projection to nearly balance at ~100 Million bbl/d in 2018.
The horror graph of the oil producers! 1609 1609 (27.5.2014) (WTI US$ 107/bbl) (-82% within 17 months!) (Price dropped by 60%) 936 (14.10.2011) 4/mcf Oil Rigs Gas Rigs 638 (-60%, 9 months) (WTI US$ 50/bbl) (17.7.2015) 316 (10.10.2016) (WTI US$ 44/bbl) 81 (5.8.2016) 2/mcf 10/1/2018 Source: Baker Hughes data and Oil Price, January, 2018
Darcy’s Law Fick’s Law Tighter than Tight Tight Conventional Extremely Very Tight Low Tight Tight Moderate High 0.0001 0.1 0.01 1.0 10.0 0.001 Permeability (mD) Granite 0 % porosity Limestone Montney General oilfield Good Shale Sidewalk rocks Barnett Cement Modified by B. Faraj after DOE, 2007 12
Shale gas reservoirs micro-texture Marcellus Shale (Eagle Ford pores ~ 5 µm Shale) (2572 m depth) pores < 5 µm (4110 m depth) 25 µm 20 µm Micrographs are from Core Lab shale gas Consortium, 2013
Coffee Making and Shale Gas! Parameter Whole Beans Ground Beans # Coffee 16 gm 16 gm Beans 200 0.02 m 2 800 m 2 Surface Area (50 m 2 /gm) (1 coffee bean/1 cm 2 ) 40,000 Seconds! Caffeine 1 Second or 11 hours! Diffusion Time Concept by Basim Faraj, 2007 (Measurements from Arizona State University)
Leaving too much resource in the ground! (Montney Shale, WCSB) IP:4.5 MMcf/d N Recovery: ~17%! Faraj and Brown, 2009
Advancement in shale gas recovery (Utica Shale) Recovery: 60 %! IP: 43 MMcf/d! 2,000 ft Clawson, 2015
Modern technology yielding tremendous results Examples of modern technology advancement: • longer laterals - proportionately reduced well costs • shorter stages - improved eur/ft • short cluster spacing - improved eur/ft • more water and sand - improved eur/ft • closer well spacing - more eur/section (but lower per well recovery factor) • pinpoint drilling targets - focus on keeping bit in specific part of the reservoir - more eur/ft • stacked laterals in thicker reservoirs - more eur/section
The Permian Basin: The jewel of the crown! The Wolfcamp structure
The Permian Basin is an awakened Giant! Matador 2018
The Permian Basin has 1000’s of ft of hydrocarbon saturated rocks! Matador 2018
Midland Basin, Wolfcamp A oil window (Howard County, Midland Basin) SM Energy, 2018
The Giant Marcellus/ Utica shales
Example of innovation in cost cutting & mitigation of environmental impact: Integrated frac water business! US$ 500,000 savings per well! Antero Resources, 2016
Longer laterals yield better economics Antero, 2018
Longer laterals yield better economics
As a result of the shale gas revolution, the US now has all the gas it needs! Next stop, major LNG export!
LNG has a bright future! (projected liquefaction capacity) 2015: Global LNG Capacity: (294.5 mtpa) 39.9 bcf/d 2025: Global LNG Capacity: (477 mtpa) 64.6 bcf/d. A 38% increase! International gas union, 2017
North American LNG Import/Export Terminals Approved Import Terminals U.S. APPROVED - UNDER CONSTRUCTION - FERC 1. Corpus Christi, TX: 0.4 Bcfd (Cheniere – Corpus Christi LNG) (CP12-507) APPROVED – NOT UNDER CONSTRUCTION - FERC 18 2. Salinas, PR: 0.6 Bcfd (Aguirre Offshore GasPort, LLC) (CP13-193) 16 APPROVED - NOT UNDER CONSTRUCTION - MARAD/Coast Guard 17 3. Gulf of Mexico: 1.0 Bcfd (Main Pass McMoRan Exp.) 4. Gulf of Mexico: 1.4 Bcfd (TORP Technology-Bienville LNG) 15 Export Terminals U.S. 7 APPROVED - UNDER CONSTRUCTION - FERC 5. Hackberry, LA: 2.1 Bcfd (Sempra – Cameron LNG) (CP13-25) 8.95 (bcf/d 6. Freeport, TX: 2.14 Bcfd (Freeport LNG Dev/Freeport LNG Expansion/FLNG Liquefaction) (CP12-509) (CP15-518) 10 11 12 7. Cove Point, MD: 0.82 Bcfd (Dominion – Cove Point LNG) (CP13-113) 14 (66 mtpa) 9 8. Corpus Christi, TX: 2.14 Bcfd (Cheniere – Corpus Christi LNG) (CP12-507) 6 5 3 4 1,8 9. Sabine Pass, LA: 1.40 Bcfd (Sabine Pass Liquefaction) (CP13-552 ) 13 10. Elba Island, GA: 0.35 Bcfd (Southern LNG Company) (CP14-103 ) 6.79 bcf/d APPROVED – NOT UNDER CONSTRUCTION - FERC 11. Lake Charles, LA: 2.2 Bcfd (Southern Union – Lake Charles LNG) (CP14-120) 12. Lake Charles, LA: 1.08 Bcfd (Magnolia LNG) (CP14-347) (50 mtpa) 13. Hackberry, LA: 1.41 Bcfd (Sempra - Cameron LNG) (CP15-560) 14. Sabine Pass, TX: 2.1 Bcfd (ExxonMobil – Golden Pass) (CP14-517) 2 US Jurisdiction Canada FERC APPROVED – NOT UNDER CONSTRUCTION MARAD/USCG As of January 24, 2018 15. Port Hawkesbury, NS: 0.5 Bcfd (Bear Head LNG) 16. Kitimat, BC: 3.23 Bcfd (LNG Canada) 17. Squamish, BC: 0.29 Bcfd (Woodfibre LNG Ltd) 18. Prince Rupert Island, BC: 2.74 Bcfd (Pacific Northwest LNG) Total potential capacity: 15.58 bcf/d! Trains 5 & 6 with Train 5 under construction (115 mtpa!) in the next 10 years or so! FERC, 2018
Cheniere Energy, plant as of September 30, 2017
LNG facilities are well-connected to the low cost shale gas resources Cheniere, 2018
US shale gas LNG going global! Cheniere, 2018
US LNG is very low cost! Cheniere, 2018
Global Shale Basins are ubiquitous But; properties and economics are vastly Different!
Australia unconventional remote basins are a huge challenge and severely disadvantaged
Summary • Clean, affordable energy is key to human progress. Natural gas is key to that progress. • Shale gas science and engineering are progressing rapidly in the US. As a result; the US is poised to be the superpower of energy and in a few years will be self-sufficient! • By 2025 the US will be one of the top 3 LNG exporting countries. US LNG Gas is indexed to Henry Hub as opposed to the volatile oil price index! • Shales are ubiquities globally; but the challenge is to make economic shale gas/oil business out of it!
Recommendations • Best chance of success on unconventional is in areas of established infrastructure. Remote basins are doomed for the foreseeable future. (example Horn River Basin) • Aggressive adaptation of lessons learned from the US are a must for success. Cost is a huge problem. Can be augmented by increased recovery. Better and bigger fracs. • TRV or total rock volume approach is highly recommended.
“The revolutionary concept of hydrocarbon production from shale is without a doubt, the most exciting accomplishment of geosciences & petroleum engineering integration in the last several decades. This revolutionary concept is a bright chapter of innovation from the oil and gas industry that is providing the most needed commodity to the World: Affordable, Clean Energy.” Basim Faraj- Geoscientist, 2009
George Mitchell – the shale revolutionary December 15, 2010 https://youtu.be/infetIpLoq4
May The Shale Be With You!
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