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IS THERE A PEAK GAS AHEAD?

IS THERE A PEAK GAS AHEAD?. Jean-Marie BOURDAIRE jmbourdaire@sfr.fr. IV Congreso Anual Conjunto de Asociaciones del Sector Energético y XII Congreso Anual de la AMEE Acapulco 2012. …and what would be its impact?. ACAPULCO. May 25, 2012. OUTLINE. A/ World generalities on reserves

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IS THERE A PEAK GAS AHEAD?

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  1. IS THERE A PEAK GAS AHEAD? Jean-Marie BOURDAIRE jmbourdaire@sfr.fr IV Congreso Anual Conjunto de Asociaciones del Sector Energético y XII Congreso Anual de la AMEE Acapulco 2012 …and what would be its impact? ACAPULCO May 25, 2012

  2. OUTLINE A/ World generalities on reserves B/ The rise of shale gas in the US C/ US shale gas: future perspectives D/ And what about elsewhere? E/ Annex: Gas resources plays

  3. A/ GENERALITIESON RESERVES AND PEAK

  4. THE 2005 NATURAL GAS VISION World production peaks at 130 Tcf/y in 2030

  5. WORLD GAS RESERVES (TCM) Total reserves: 187 Tcm or 6.6 Pcf

  6. NATGAS RESERVES: ~200 TCM

  7. THE 2012 LAHERRERE’S VISION Ultimate reserves: 13 Pcf = 10.4 Pcf conventional + 2.6 Pcf unconventional World production peaks at nearly 150 Tcf/y If unconventional gas is > 2.6 Pcf, the peak is not changed but the decline is slower

  8. B/ THE RISE OF SHALE GASIN THE UNITED STATES

  9. MAIN SHALE GAS DEPOSITS

  10. THE US SHALE GAS EARLY DAYS 1970-2000: Unconventional gas (on average 70% tight gas, 20% CBM and 10% gas shale up to 2008) has grown slowly from less than 1 Tcf/y in 1970 to ~5 Tcf/y in 2000 2000-2008: Unconventional gas was foreseen to reach a 9 Tcf/y plateau in 2010-25, but the fall of conventional gas was such that much increased LNG imports were to be needed 2008: Oil, natgas prices, and the US rig count, collapse. To maintain their production, operators deploy new technologies, which are at the origin of the shale boom Because of their belief that LNG imports were set to grow, many operators have developed LNG terminals now idle

  11. THE PRE-2008 VISION Tight gas, shale gas, and CBM US unconventional gas was forecast to plateau at 9 Tcf/y

  12. AEO FORECASTS: 2000-2008 Year after year, the production forecasts get more pessimistic

  13. 2008: THE TURNING POINT Shale gas contribution overtakes the decline of conventional gas

  14. AEO SHOW A BREAK IN 2008… Shale gas production jumps above the former 9 Tcf/y forecast 2009 & 2010 are in discontinuity with the 9 Tcf/y plateau foreseen before (2000-08)

  15. 2008: THE RIG COLLAPSE… The rig count closely follows the price trend

  16. …BUT PRODUCTION GROWS Impressive growth up to 2012

  17. C/ FUTURE PERSPECTIVESFOR THE US SHALE GAS

  18. THE VOICE AGAINST SHALE GAS High costs, poor economics and destruction of capital, Infrastructure limitations (pipelines and NGL-stripping plants), Physical fundamentals (small core areas, fast decline rates), Average break-even prices higher than current prices, Contrary to the major limitations that Arthur Berman sees… …One may be optimistic about the future of shale gas • Shale gas development is not like a Ponzi scheme… • …and US gas majors are not behaving like Madoff. • Some operators may fool some analysts for a while but… • …the entire industry cannot be wrong for ever

  19. TRUE SHALE GAS REALITIES Shale gas is the last unconventional gas in development, and still is at the beginning of its learning curve. The pace of technological improvement will continue Expected ultimate reserves critically depend on the type of decline (exponential or hyperbolic) High costs plays: Liquids (oil or NGL) are essential for the economics Core areas with good IP are small (a few %), but overall reserves may be very large Good operators will manage environmental concerns Infrastructure (NGL plants and pipelines) is critical

  20. US PRODUCTION GROWTH Shale gas dominates the natural gas growth

  21. WHAT CHESAPEAKE SAYS

  22. WHAT THE US DOE-EIA SAYS: US dry natural gas production forecast in the AEO-2012: Growing from 5 Tcf in 2010 to 14 Tcf in 2035!

  23. D/ AND WHAT ABOUT ELSEWHERE IN THE WORLD?

  24. UNCONVENTIONAL TRANSPORT OF METHANE IN CHINA (1997)

  25. CANADA SHALE RESOURCES With resources of 1100 Tcf, 200-300 Tcf may be recoverable A total of 1100 TCF of which ~50% in the Horn River Basin

  26. AND WHAT ABOUT THE WORLD? First feedbacks are good for Argentina, possibly good for China (?), uncertain for Europe and Ukraine 6600 Tcf or 6.6 Pcf of which 2-3 recoverable?

  27. CONCLUSION: WHAT FUTURE? In North America: Exports of a few % of production as LNG will sustain a balanced price level (5-6 $/kcf) which, in turn, will allow production to grow evenly. In Europe: Unconventional gas prospects are remote: not only spot LNG imports push prices down but the EU E&P legislation needs to be deeply redrafted In Asia-Pacific: Neither China unconventional (still far away), nor Australian CBM-to-LNG (a few Bcf/d) will be game changers and decouple LNG from oil soon.

  28. E/ ANNEX:GAS RESOURCES PLAYS

  29. CBM RESOURCE PLAYS Recoverable: 600-700 Tcf? 140–1,040 1,680 500 - 700 15-50 390-425 22-44 100 100 750 800 - 1,100 30-280 30 335-450 60 220 - 350 5-10 0.5 75CBG resource in-place (Tcf) Other countries with significant exploration activity 29

  30. CBM RESOURCE PLAYS Production Summary • USA - production commenced in San Juan Basin in 1953. CBM production in 2007: 4.8 Bcf/d (9% of total US dry gas) • Canada – since 2002: 208 Mcf/d in 2007. Could exceed 1.4 Bcf/d by 2015. Average new well on stream at 100 Mcf/d. • Australia – since 1996; 215 Mcf/d in 2006; Queensland produced 272 Mcf/d in 2007; planning up to 6 LNG schemes near port of Gladstone. • Minor production or approaching commercial production: UK; China; India; Kazakhstan; Russia (Kuznetsk Basin). • 13 coal-producing countries have CBM projects. 30

  31. CBM (BCF/D) Pierre Mauriaud, ASPO 9 Bruxelles

  32. TIGHT SANDS RESOURCE PLAYS Recoverable: ~1350 Tcf? 560 6,800 0.5 75Tight sand gas resource in-place (Tcf) Other countries / areas with known tight sand exploration activity 32

  33. TIGHT SANDS RESOURCE PLAYS Basin-Centered Gas • Gas dissolved in abnormally-pressured low-permeability aquifers in the central (generally deeper) part of basins - • over-pressured in subsiding basins • under-pressured in uplifted and eroded basins. Also known as “deep gas” and “tight sand gas” but these are not necessarily restricted to continuous accumulations (and BCG is not always deep). Examples: San Juan Basin & Greater Green River basins (USA); Western Canada Sedimentary Basin (southern deep basin); Northwest Europe Permian Basin; Pannonian Basin; Algerian basins; Oman Basin; Ordos Basin, China. 33

  34. TIGHT SANDS RESOURCE PLAYS Resources of tight Sand Gas / Basin-Centered Gas • Enormous in-place resources in USA (all tight sands) • 3,000-5,000 Tcf in the Greater Green River Basin; • 900 Tcf in the Wind River Basin, Wyoming; • Total in-place resource ~ 7,000 Tcf. • USA Ultimate Tight Sand Resource Estimate • 380 Tcf: 140 produced, 60 proved, 180 unproved/undiscovered, 200 Tcf produced and proved considered as “conventional” • USA unproved/undiscovered BCG resource estimates from other sources range up to 340 Tcf. No reliable global resource estimateavailable 34

  35. TIGHT SANDS RESOURCE PLAYS Production of tight Sand Gas / basin-centered gas • USA production from all tight sands • Total US production estimated at >6 Tcf (16.5 Bcf/d) in 2007 • 5-6% recovery factor - but much higher from “sweet spots”: • - Pinedale: 56% (10-acre spacing); • - San Juan Mesaverde: 44% (160-acre spacing); • - Uinta Mesaverde (EOG): 37% (10-acre spacing); • - Jonah Lance: 30% (40-acre spacing). • Canada • Canadian production from tight sands and carbonates: • - Alberta: ~3 Bcf/d; • - British Columbia: ~1 Bcf/d. 35

  36. TIGHT GAS (BCF/D) Pierre Mauriaud, ASPO 9 Bruxelles

  37. SHALE GAS RESOURCE PLAYS Recoverable: > 700 Tcf? AB / BC ~ 1,000 1,900 600Shale gas resource in-place (Tcf) Other countries / areas with known shale gas exploration activity / potential 37

  38. SHALE GAS RESOURCE PLAYS • USA Ultimate Fractured Shale Resource Estimate • ~415 Tcf: 9 produced, 21 proved, 385 unproved/undiscovered (ICF International). 30 Tcf produced + proved is considered “conventional”. • Unproved / undiscovered shale gas recoverable resource estimates from other sources range from 32 Tcf to 125 Tcf but predate recent improvements in recovery and assessment of recent plays such as Haynesville and Marcellus. • Global Resource Estimates • No reliable estimate available but considerable potential exists. • Canada (BC; AB; QC; NB; NS) will be next significant player. Estimated 860 Tcf IP in Western Canada (130 Tcf recoverable). 38

  39. SHALE GAS (BCF/D) Source: World gas profiles (2011) Pierre Mauriaud, ASPO 9 Bruxelles

  40. ALL GAS RESOURCE PLAYS 6600 Tcf of which 20-30% may be recoverable

  41. UNCONVENTIONAL GAS RECOVERABLE BY REGIONS

  42. RANGE OF UNCONVENTIONAL REGIONAL RECOVERABLE GAS

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