1. IS THERE A PEAK GAS AHEAD?
IV Congreso Anual Conjunto de Asociaciones del Sector Energético
y XII Congreso Anual de la AMEE Acapulco 2012
IS THERE A PEAK GAS AHEAD?
…and what would be its impact?
Jean-Marie BOURDAIRE
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/ GENERALITIES ON 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 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 GAS IN THE UNITED STATES

9. MAIN SHALE GAS DEPOSITS
US shale resource, as estimated by the DOE-EIA has rapidly grown: 20 Tcf in 2008, 60 Tcf in 2009, 347 Tcf in 2010, and 827 Tcf in 2011

10. THE US SHALE GAS EARLY DAYS
: 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
: Unconventional gas was foreseen to reach a 9 Tcf/y plateau in , 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
Moderate growth of unconventional gas up to a plateau of 9 Tcf/y from 2010 to 2025
Strong and rapid decline of conventional production mimicking the decline of discoveries since the end of the 1970s

12. Year after year, the production forecasts get more pessimistic
AEO FORECASTS:
Year after year, the production forecasts get more pessimistic
The rebound of domestic gas availability in the AEO 2009 and 2010 reflects a “sea change” with the a surge of shale gas production

13. Shale gas contribution overtakes the decline of conventional gas
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 ( )
The contribution of unconventional gas to the US supply is mentioned in all AEO from 2000 to The corresponding values (or interpolations when the data for 2000 or 2005 is not provided) are shown in the next page graphs (AEO bar graph & 2005 display of the US production by J. Laherrere). As the break-down into tight sands, coal beds and gas shales is generally not provided, it is not identified in the bars. Suffice to say their respective contributions over period are nearly constant at 65% for the tight sandstones, 25-20% for coal bed methane, and 10-15% for gas shales. The most remarkable feature of this graph is to show that the expected unconventional gas production profiles were hardly changed for the last four years.

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 PERSPECTIVES FOR THE US SHALE GAS

18. THE VOICE AGAINST SHALE GAS
Contrary to the major limitations that Arthur Berman sees…
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,
…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, 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
Most recent DOE-EIA assessment
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.
Because of the nuclear crisis, Japan will need more LNG (+7 Mt/y?), too little to affect prices
However, what may affect LNG prices is a nuclear moratorium in several countries like Germany
After DB (Global LNG market outlook, 28/09/2010), LNG Australian costs approach 5 $/MBtu)

28. E/ ANNEX: GAS RESOURCES PLAYS

29. CBM RESOURCE PLAYS Recoverable: 600-700 Tcf? 140–1,040 1,680 500 - 700
15-50
100
22-44
100
750
,100
30-280 30 60
5-10
0.5
75 CBG 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 CBM production in 2007: 4.8 Bcf/d (9% of total US dry gas)
Canada – since 2002: 208 Mcf/d in Could exceed 1.4 Bcf/d by 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.
Discovered in the late-1970’s, BP’s San Juan Coal Bed Methane development currently produces 650 mmcfd through 1,200 wells and 200,000 hp of gas compression.
30 Jan 2007: BP today announced that it will invest up to $2.4 billion over the next 13 years to increase its share of ultimate recovery of coalbed methane natural gas from the San Juan Basin of southwestern Colorado by an estimated 1.9 trillion cubic feet. The company anticipates a steady development program that will increase current BP net production of 425 million cubic feet per day by more than 20 percent, and maintain production above present levels for more than a decade. The project includes funding for the drilling of more than 700 new wells for which BP has obtained regulatory infill approval, and associated field facilities. To minimize environmental impact, BP plans to drill nearly all of the new wells from existing well pads, using existing roads and pipelines where possible. “This investment will allow us to continue the responsible development of one of the largest gas fields in the US while enhancing our ability to continue delivering clean-burning natural gas to domestic markets,” said Tony Hayward, Chief Executive, BP Exploration and Production.
Today, coalbed methane gas accounts for about 10 percent of US domestic gas production. BP started development of this important clean energy source when it began testing production methods in the San Juan Basin in It has been a leader in coalbed methane technology development and production ever since.
Powder River coals have high initial water volumes (Powder River water production in 2001 was over half a billion barrels) whereas Alberta coal is often gas-saturated (“dry”).
Alberta in-place resource is estimated at 500 Tcf. Proved reserve is 1 Tcf from 9.32 Tcf established in-place.
6,900 producing wells or wells that have produced.
Mannville water 20,000 – 50,000 ppm salt.
Australian production values exclude coal mine gas.
China in particular has substantial coal mine gas production. 30

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

32. TIGHT SANDS RESOURCE PLAYS
Recoverable: ~1350 Tcf?
560
6,800
0.5
75 Tight 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).
The presence of basin-centred gas implies that the expulsion and migration of gas from deep source rocks is more inefficient than generally perceived and that these aquifers act as closed systems, especially as basin evolution matures and geothermal gradients decline.
BP has estimated up to 30 Tcf recoverable from its Oman acreage.
Algeria: Sonatrach estimates 20 Tcf potential reserves in the Berkine (Ghadames)Basin. BP has identified tight gas potential in In Amenas (Illizi Basin) and In Salah (Timimoun Basin)
Falcon, MOL and ExxonMobil investigating potential in Hungary. Falcon testing at depths of over 5,300m
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.
Wamsutter:
BP Working Interest: 70% average Development Area: 1,700 square miles BP Operated Wells: 1,100 BP has a unique position in this giant and largely undeveloped tight gas field, which started first production in the 1960s.  Wamsutter is the largest contiguous block of BP operated acreage in the U.S. and BP operates about 40% of the acreage.  BP plans to invest over $2.2 billion in Wamsutter over the next 15 years, developing 450 million barrels oil equivalent over the period.  BP net daily production is expected to increase from 125 mmscf/d currently to 250 mmscf/d by the end of the decade.
No reliable global resource estimate available 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.
Deep Bossier wells have come onstream at rates of up to 65 million scf/d. Depths are 17,000 to 21,000 ft with pressures up to 15,000 psi.
Pinedale (48 tcf GIIP) is currently estimated to have UR of 27 tcf (56% RF), assuming 10-acre spacing.
RF estimate for San Juan Mesaverde is 44% (160-acre spacing).
RF estimate for Uinta Mesaverde (EOG) is 37% (10-acre spacing).
RF estimate for Jonah Lance is 30% (40-acre spacing) but EnCana estimates 10-acre is optimum. 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
600 Shale 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. 6600 Tcf of which 20-30% may be recoverable
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