Unconventional Gas: An Exportable North American Revolution?

Transcription

1 Unconventional Gas: An Exportable North American Revolution? Prepared By: Vello A. Kuuskraa, President ADVANCED RESOURCES INTERNATIONAL, INC. Arlington, VA Prepared for: The Changing Fundamentals of Global Gas Markets: Europe as the Battleground? Sponsored by: Carnegie Energy & Climate Change Program Carnegie Endowment for International Peace October 12, 21, Washington, DC 1 From Fears of Shortages to Expectations of Plenty Gas shales have changed the outlook for U.S. natural gas from fears of impending shortages to expectations of plenty. Instead of declining, U.S. natural gas production increased, from 53 Bcfd in 2 to 59 Bcfd this year. Gains in unconventional gas of 2 Bcfd more than countered declines in onshore and offshore conventional gas. Gas shales provide 12 Bcfd today (2% of domestic natural gas production) account for much of the 2 Bcfd of the growth. Today, unconventional gas provides over 6% of U.S. natural gas production. 2

2 Dry Gas Production (Bcfd) Bcfd Bcfd 2 16 Bcfd 13 Bcfd 1 Unconventional Gas Is Now the Dominant Source of U.S. Natural Gas Production The 2 Bcfd growth in unconventional gas production, has more than replaced declines in U.S. conventional onshore and offshore supplies Year 2 Year 21 Dry Gas Production (Bcfd) 7 JAF21_43.XLS 59 Bcfd Bcfd Bcfd 1 6 Bcfd TOTAL Conventional Onshore Gas* Unconventional Gas Offshore Gas TOTAL Conventional Onshore Gas* Unconventional Gas Offshore Gas *Includes onshore associated, non-associated and Alaska. Source: U.S. Energy Information Agency (21); Advanced Resources Int l (21). 3 How Much Do Gas Shales Contribute Today? Production of gas shales has grown by ten-fold and is expected to exceed 12 Bcfd, equal to 2% of U.S. natural gas production this year. Dry Gas Production (Bcfd) Annual Gas Shale Production (Bcfd) 2 29 (p) 21 (e) ( bcfd) (Bcfd) (bcfd) Haynesville Marcellus Woodford..7.9 Fayetteville Barnett Other Sub-Total JAF21_43XLS (e) Source: Advanced Resources International (21) Other Barnett Fayetteville Woodford Marcellus Haynesville 4

3 Addressing the Fundamental Questions Projecting the impact and benefits of gas shales and unconventional gas for the U.S. requires that we first address a series of questions: How large is the unconventional gas resource base? Is it large enough to enable unconventional gas to become a major climate change solution and support exports via LNG? How much of it can be converted to productive capacity at affordable prices? How much would progress in technology impact the economically affordable resource base? Can the resource be developed in an environmentally sound way? Understanding the impact of gas shales on the European gas markets requires addressing these same topics. 5 One of the Many Benefits of Bountiful Unconventional Gas Supplies If abundant and affordable, unconventional gas can provide a major climate change mitigation option for power generation, reducing CO 2 emissions by 7%. CO 2 /SO 2 Emissions by Fuel Type (lbs of CO 2 & SO 2 /BBtu) CO 2 Emissions for Electricity (lbs/kwh) CO 2 25, 2, 15, 1, 5, CO 2 SO 2 CO 2 SO 2 3, 2,5 2, 1,5 1, 5 # of CO 2 /kwh Source: EnCana 29 Coal SO 2 Natural Gas Older, Inefficient Coal Power Plant (@ 3% Efficiency) New, Efficient Natural Gas Power Plant (@ 55% Efficiency) 6

4 How Large is the Gas Shale and Unconventional Gas Resource? Our in-depth assessments of U.S. gas shale, tight gas sand and coalbed methane basins shows nearly 1,4 Tcf of recoverable resources. Sources Recoverable Resource* In addition, the U.S. recoverable conventional gas resource base (including Alaska) is in excess of 1,2 Tcf. Tcf Gas Shales 7 Tight Gas Sands 567 CBM 16 *Includes 39 Tcf of gas shales proved reserves, 96 Tcf of tight gas sands proved reserves and 21 Tcf of coalbed methane proved reserves. 7 Eastern U.S. Gas Shale Basins Mid-21 Production Rate U.S. Gas Shale Basins Antrim Shale.3 Bcfed New Albany Shale Anadarko Woodford.1 Bcfed Marcellus Shale 1. Bcfed Utica Shale Arkoma Woodford.8 Bcfed Fayetteville Shale 1.9 Bcfed Lower Huron Shale.4 Bcfed Barnett Shale 5.1 Bcfed Haynesville Shale 2.4 Bcfed Conasauga Shale Floyd/Chattanooga Shale 8 Source: Advanced Resources International

5 Will Gas Shale and Unconventional Gas Remain Economically Affordable? Unconventional gas (particularly the higher quality gas shales) is today the low cost portion of the natural gas price/supply curve. Prior Perception New Understanding Gas Prices Unconventional Gas (Gas Shale) Conventional Gas Gas Prices Conventional Gas Unconventional Gas (Gas Shales) JAF252.CDR Gas Resources Gas Resources 9 Role of Policies, R&D and Technology (A Model for Europe and Other Gas Shale Regions) Gas shales and unconventional gas are a R&D and policy success story: The DOE/NETL helped build the essential resource and science knowledge base. The Gas Research Institute and industry launched the early technology demos. Section 29 tax credits (now expired) helped attract capital and build economies of scale. However, we are still in the early, emerging stages of having an optimum set of technologies. 1

6 What Changed the Game? Horizontal Well with Multi-Stage Fracturing Natural gas production from shallow, fractured shale formations in the Appalachian and Michigan basins of the U.S. has been underway for decades. What changed the game was the recognition that one could create a permeable reservoir and high rates of gas production by using intensively stimulated horizontal wells. Source: EnCana 11 Can These New Natural Gas Resources Be Developed In An Environmentally Sound Way? As drilling increases and production grows, a harsher spotlight will fall on natural gas. Green natural gas development will help put a more environmentally friendly face on this activity. Reducing Surface Impacts Capturing Methane Emissions Assuring Environmentally Safe Wells and Hydraulic Fractures 12

7 Green Unconventional Gas Development Reducing Land Use Impacts with Multi-Well Pads and Horizontal Wells Source: Canadian Association of Petroleum Producers, Reducing Methane Emissions Cumulative Emission Reductions (Bcf) Cumulative Methane Emission Reductions by EPA Natural Gas STAR Partners (2-28) Other Production Sector Year Since 199, Natural Gas Star partners have eliminated over 5 Bcf of methane emissions from the oil and gas production sector. Williams reports 24 Bcf of methane emissions captured with costs of $17 million and revenues of $159 million. Source: U.S. Environmental Protection Agency ( 14

8 Protecting the Environment (Properly Designing the Well and Monitoring the Frac) Feet 1, 2, 3, AQUIFER The well is designed with steel casing and cement to protect groundwater aquifers. The shale interval is 5, to 1, feet below the water table, protected by unfractured strata. Real-time micro-seismic monitoring reveals that the fractures remain in the shales, deep underground. Disclosure and less environmentally impactful chemicals are increasingly being used. 4, 5, 6, 5,+ FEET IMPERMEABLE ROCK 7, 8, SHALE FRAC 15 Source: Shell Source: EOG European Gas Shales: Resources Our preliminary gas shale resource assessment is 1,+ Tcf (~3 Tcm), with a potential recoverable resource of 14 Tcf (4 Tcm). These resources are located in three deposits - - the Alum Shale of Sweden, the Silurian Shales of Poland and the Mikulov Shale of Austria. 16

9 European Gas Shale Geology Is Complex Europe is structurally more complex than North America. Steeper dips, larger and more closely spaced faults. Faults may be water conduits which would inhibit gas production. More structural analysis needed. Every well becomes a PhD thesis. Source: Hamilton et al, 2 17 Highest Potential Gas Shales May Be In Poland Poland appears to be favorable for gas shales. Geology is simpler, with fewer faults; numerous prospective areas. Lane/COP s first well mid-may 21 near Zwartowo. Second well near Gdansk. BNK/RAG/ Sorgenia first well mid-21. Resources is characterized as Silica-rich, mature, high in TOC. POMERANIA WIELKOPOLSKA BALTIC BASIN LUBLIN BASIN CARPATHIAN FOREDEEP 18

10 Constraints Facing European Gas Shale Development While the gas shale resources of Europe, and particularly Poland, are impressive, many barriers and constraints need to be overcome for converting these resources to reserves: Establishing the size and quality of the economically recoverable shale resource. Resolving the environmental consequences of hydraulic fracturing plus water use and disposal. Expanding the infrastructure to efficiently drill, develop, transport and store gas. Overcoming significantly higher capital and operating costs, currently at least two times those in North America. Initiating simpler certification approvals and a transparent regulatory process. 19 Concluding Remarks Our work to date shows that the U.S. and potentially Europe have large resources of gas shales and other unconventional gas. The challenge for Europe is to convert these resources into economically competitive reserves. With green development practices, these resources can be developed in an environmentally sound way. Bountiful supplies from gas shales and unconventional sources can provide many benefits: Promote progress on climate change by substituting natural gas for coal in old, inefficient power plants. Increase energy security by replacing imported petroleum for transportation with CNG and low emission power for electric cars. Improve the economy from lower energy costs, more domestic jobs and an improved trade balance. 2

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