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Natural Gas Technology: Investing in a Healthy U.S. Energy Future

Natural Gas Technology: Investing in a Healthy U.S. Energy Future Plenary Panel: Balancing the Technology Role It’s Gonna be Gas: Let’s Make it a Smooth Ride Scott W. Tinker Eugene Kim Bureau of Economic Geology

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Natural Gas Technology: Investing in a Healthy U.S. Energy Future

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  1. Natural Gas Technology: Investing in a Healthy U.S. Energy Future Plenary Panel: Balancing the Technology Role It’s Gonna be Gas: Let’s Make it a Smooth Ride Scott W. Tinker Eugene Kim Bureau of Economic Geology John A. and Katherine G. Jackson School of GeosciencesThe University of Texas at Austin QAd1023

  2. U.S. Energy Consumption Forecast U.S. Energy Consumption Forecast U.S. Energy Consumption Forecast U.S. Energy Consumption U.S. Energy Consumption 100% 1 1 160.00 120 0.9 0.9 Renewable Energy 1973 1973 140.00 Renewable Energy 100 80% 0.8 0.8 Hydroelectric 120.00 Hydroelectric 0.7 0.7 80 Nuclear Energy Nuclear Energy 100.00 Natural Gas, NRH 60% Liquids (Oil) Gases and Renewables Gases and Renewables 0.6 0.6 Natural Gas Natural Gas % of Total Market % of Total Market Quad BTU Quad BTU 80.00 Liquids 60 % of Total Market 0.5 0.5 Liquids Liquids Oil Imported 100 Oil Imported 40% 60.00 Solids 0.4 0.4 Solids Solids Oil Produced 10 40 Oil Produced 90 0.3 0.3 Coal 40.00 20% Coal 20 0.2 0.2 20 Wood and Waste 20.00 80 Wood and Waste 0.1 0.1 30 0 0.00 0% l 1975 l 1910 0 0 70 l 1980 l 1915 l 1985 1845 1870 1895 1920 1945 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 1845 1860 1875 1890 1905 1920 1935 1950 1965 1980 1995 2010 2025 2040 1845 1870 1895 1920 1945 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 l 1990 40 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 l 1920 1845 1860 1875 1890 1905 1920 1935 1950 1965 1980 1995 2010 2025 2040 l 1995 l 1925 60 l 2000 l 1930 50 l 1935 50 l 1940 l 1945 l Supply Instability Price Volatility Governmental Policy Technology 60 l l l l l l 1950 l l 40 l 1955 l l l l l l l 1960 l 70 l l 1965 l l 30 l l 1970 l l l 80 l 20 l l l 90 l l 10 l l l 100 l l l l l l l l l l l l 100 90 80 70 60 50 40 30 20 10 Solids (Wood, Coal) Gases (Natural Gas, Nuclear, Renewables, Hydrogen) U.S. Energy Consumption Forecast Tinker Data: EIA • Natural Gas & NRH Drivers • Efficiency • Economic Stability • Economic Well Being • Environmental Quality • Resource Availability QAd1023 QAd1023

  3. Efficiency Natural Gas is Efficient Relative to Other Electricity Generation Fuels QAd1023

  4. 10.00% $35.00 GDP Growth Crude Oil Domestic Wellhead Price 8.00% $30.00 6.00% $25.00 4.00% $20.00 GDP Growth (% change from previous year) Crude Oil Domestic Wellhead Price ($/bbl) 2.00% $15.00 0.00% $10.00 1973 1976 1979 1982 1988 2000 1970 1985 1991 1994 1997 -2.00% $5.00 -4.00% $0.00 Economic Stability Natural Gas Could Help Stabilize Energy Price Volatility QAd1023

  5. Economic Well-Being $30,000 $25,000 Per capita income United States $20,000 Canada $15,000 France Japan Germany United Kingdom Italy $10,000 $5,000 Note: 15 largest economies shown in red. Saudi Arabia Indonesia Mexico 0 Brazil 0 5 10 15 20 25 30 Russia China India Per-capita oil consumption (bbl/yr) Source: JPT, May 2001 Economic Prosperity Relies on Available, Affordable Energy QAd1023

  6. Other Units Gas-Fired Units Petroleum-Fired Units Coal-Fired Units U.S. Electricity Generation by Fuel Source 3,500,000,000 U.S. Carbon Dioxide Emissions from Energy Consumption by End-Use Sector 3,000,000,000 Other Renewables Non-Electricity Generation in Residential, Commercial and Industrial 2,500,000,000 1,600 Hydro Transportation 2,000,000,000 Nuclear Electricity Generation Mkwh Natural Gas 1,500,000,000 Petroleum 1,000,000,000 Coal 1,200 500,000,000 0 1950 1960 1990 2000 1970 1980 Data, EIA, 2000 800 MM Metric Tons of Coal Carbon Dioxide Emissions from Electricity Generation 3,000,000,000 400 2,500,000,000 2,000,000,000 Short Tons 1,500,000,000 0 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 1,000,000,000 500,000,000 Data: EIA, 2002 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Data, EIA, 2000 Environmental Quality Natural Gas is Clean(er) QAd1023

  7. 1999 NPC Study (NPC, 1999b) Recoverable Portion of In-Place Gas Resource (Tcf) U.S. Production to Date Cumulative Production (811) Reserves (157) Reserve Growth (305) Undiscovered, Unconventional Reserves (1,004) Unassessed Unconventional Reserves (400) Geopressured Brine (Up to 24,000) Gas Hydrate (Up to 300,000) Not Assessed by NPC QAd1023 Resource Availability & Sustainability Increasing development costs Increasing technology needs Increasing Potential Resource Decreasing gas concentration Increasing uncertainty Natural Gas Resources are Available Although More Unconventional

  8. 30,000 Demand Deepwater+Subsalt Offshore Deepwater+Subsalt Offshore L48 Unconventional Onshore L48 Unconventional Onshore L48 Unconventional Onshore 25,000 Shallow Offshore $3 L48 Conventional Onshore 20,000 Wellhead Price ($/mcf) $2 Annual Natural Gas Production (Bcf) 15,000 10,000 $1 5,000 0 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 Year U.S. Natural Gas An Unconventional Future “Conventional” Unconventionals Tight (Low Permeability) Shale Coalbed Methane Tight Gas, Shale Gas, CBM “Unconventional” Unconventionals Deep (>15,000 ft) Subsalt Deep Water Methane Hydrates Associated and High-Perm Gas EIA (1949-1990) and NPC (1991-2015) QAd1023

  9. Fracture Transmitted Light CL Match point Tight Gas, Shale Gas, CBMFractures Fracture Strike Laubach et al., 2000, The Leading Edge Laubach, 1997, AAPG Bulletin East Texas, Travis Peak Formation QAd1023

  10. *Advanced Stimulation Technology *Greater Green River Basin Shale Gas *Piceance Basin $3 State of Texas Tight Gas Incentives GRI Federal Alternative Fuels Production Credit for Unconventional Gas $2 Wellhead Price ($/Mcf) DOE $1 Policy & Investment Tight Gas Resources 4,000.0 3,500.0 3,000.0 2,500.0 2,000.0 Bcf 1,500.0 11 Tcf Incremental Gas 1,000.0 500.0 0.0 1970 1975 1980 1985 1990 1995 GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. QAd1023

  11. Rocky Mountain Foreland (13.7 Tcf) Midcontinent (16.9 Tcf) Appalachian (18.3 Tcf) N Permian Basin (19.5 Tcf) Arkla-Tex (29.8 Tcf) 0 4 0 0 m i Texas Gulf Onshore (9.1 Tcf) 0 6 0 0 k m B u r e a u o f E c o n o m i c Q A c 9 7 1 5 c G e o l o g y MAJOR PRODUCTIVE TIGHT GAS BASINS (Technically Recoverable Resources) San Juan (5.6 Tcf)* 78 Tcf Data: NPC (2000), * Based on estimates of NPC (1993), San Juan Basin tight gas resource included with oil field reserve appreciation and new fields in NPC (2000) QAd1023

  12. GRI $2 Wellhead Price ($/Mcf) $1 Policy & Investment Shale Gas Resources Antrim Shale Research Appalachian Basin Shales 350.0 300.0 250.0 200.0 Bcf 150.0 2.2 Tcf Incremental Gas 100.0 DOE (1976-1992) 50.0 0.0 1980 1985 1990 1995 GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. QAd1023

  13. M i c h i g a n A n t r i m ( 1 6 . 9 T c f ) A p p a l a c h i a n I l l i n o i s ( 2 3 . 4 T c f ) N e w A l b a n y ( 2 . 9 T c f ) Cincinnati N A r c h ( 2 . 2 T c f ) F t . W o r t h B a r n e t t S h a l e ( 7 . 2 T c f ) 0 4 0 0 m i 0 6 0 0 k m B u r e a u o f D a t a : N P C ( 2 0 0 0 ) E c o n o m i c Q A c 9 7 1 2 c G e o l o g y MAJOR PRODUCTIVE DEVONIAN SHALE BASINS Technically Recoverable Resources 40 Tcf QAd1023

  14. GRI DOE Federal Alternative Fuels Production Credit for Unconventional Gas Policy & Investment Coalbed Methane Resources 1,200.0 1,000.0 800.0 $2 600.0 Bcf Wellhead Price ($/Mcf) 400.0 4.5 Tcf Incremental Gas 200.0 $1 0.0 1980 1985 1990 1995 GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. QAd1023

  15. Powder River (24.0 Tcf) Uinta & Piceance (5.5 Tcf) Hanna-Carbon (4.4 Tcf) Northern Appalachian and PA Anthracite (10.6 Tcf) Raton-Mesa (3.7 Tcf) SW Coal Region (5.8 Tcf) San Juan (10.2 Tcf) Black Warrior (4.4 Tcf) N 0 4 0 0 m i 0 6 0 0 k m B u r e a u o f Alaska (Bering River, North Slope, Chignik and Herendeen Bay) (57.0 Tcf) D a t a : P G C ( 2 0 0 1 ) E c o n o m i c Q A c 9 7 1 4 c G e o l o g y MAJOR PRODUCTIVE COALBED METHANE BASINS (Total Most Likely Resources) 81 Tcf QAd1023

  16. Jalapa Cardel Golfo de México Veracruz Lagarto Miralejos P.Oro T. Higueras 180Km² Cópite M.R.A. Córdoba 277 Km² Playuela M.Pionche Mecayucan 240 Km² Cocuite Angostura Tlacotalpan Estanzuela SÍSMICA 3D R.Pacheco Mirador Coapa San Pablo Gloria 280 Km² Veinte CAMPO DE GAS O ACEITE Nopaltepec Novillero Deep Gas Seismic Attribute Analysis Source: A. Guzman, 2001, HGS PEMEX E&P Planning QAd1023

  17. Montana Folded Belt (5.2 Tcf) Wind River (5.0 Tcf) Greater Green River (8.4 Tcf) Appalachian (5.0 Tcf) San Joaquin (9.0 Tcf) Anadarko, Palo Duro (17.7 Tcf) N Permian (12.9 Tcf) LA, MS, AL Salt (15.8 Tcf) Louisiana Gulf Coast (14.5 Tcf) 0 4 0 0 m i Texas Gulf Coast (14.3 Tcf) 0 6 0 0 k m B u r e a u o f D a t a : P G C ( 2 0 0 1 ) E c o n o m i c Q A c 9 7 1 3 c G e o l o g y MAJOR PRODUCTIVE DEEP (>15,000 FT) GAS BASINS (Total Most Likely Resources) 62 Tcf QAd1023

  18. Physical Models Deep Water Gas Salt Tectonics Seismic Studies Field Studies Numerical Models Martin Jackson, AGL, BEG QAd1023

  19. Pacific Slope (8.9 Tcf) N Louisiana Slope (12.4 Tcf) Texas Slope (4.3 Tcf) 0 4 0 0 m i 0 6 0 0 k m Eastern Gulf Slope (7.6 Tcf) Gulf of Mexico OCS (47.7 Tcf) B u r e a u o f D a t a : P G C ( 2 0 0 1 ) E c o n o m i c Q A c 9 7 1 6 c G e o l o g y MAJOR PRODUCTIVE DEEP-WATER GAS BASINS (Total Most Likely Resources) 71 Tcf QAd1023

  20. U.S. Fossil Energy R&D Funding $1,600 Private 30,000 $1,400 Federal Deepwater+Subsalt Offshore $1,200 L48 Unconventional Onshore 25,000 $1,000 Millions $ $800 170 Tcf 20,000 $600 $400 Annual Natural Gas Production (Bcf) 15,000 $200 $0 1992 1993 1994 1995 1996 1997 1998 1999 10,000 Data: Science and Engineering Indicators 2000, NSF. 5,000 0 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 Year Policy & Investment Creating Unconventional Resources Unc. Gas Major Basins (Technically Recoverable) Tight Gas 78 Tcf Shale Gas 40 Tcf CBM 81 Tcf Deep Gas 62 Tcf Deep Water 71 Tcf 332 Tcf EIA (1949-1990) and NPC (1991-2015) QAd1023

  21. Summary Efficiency, economy, environment and resource availability all point towards a natural gas future. Natural gas will come increasingly from “unconventional sources”, and history shows that a balance between production incentives and technology investment will result in the creation of new unconventional natural gas resources. The Federal/Private research and technology investment ratio needs to be increased if the U.S. transition to natural gas is to be smooth. QAd1023

  22. Thank you! QAd1023

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