1. SWT, DPA Luncheon, 2006 QAd3931x QAd2349x The Future of Global Energy Trends, Technology and Talent Scott W. Tinker Bureau of Economic Geology Jackson School of Geosciences The University of Texas at Austin DPA AAPG/GSA/SPE Regional Meeting May, 2006

2. SWT, DPA Luncheon, 2006 QAd3931x Outline Trends Technology Talent Tomorrow

3. SWT, DPA Luncheon, 2006 QAd3931x QAc9841c Global Energy Consumption U.S. Data: Annual Energy Review 1999 (EIA, 2000) World Data: International Energy Annual 1999 (EIA, 2000) 100 80 60 40 20 0 Percentage of total market Year 1850190019502000 H/C>4 (Natural Gas, Hydrogen, Nuclear, Emerging) H/C<1 (Wood, Coal) H/C~2 (Oil)

4. SWT, DPA Luncheon, 2006 QAd3931x Global Energy Consumption Energy Information Administration International Energy Annual 2003 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 198019821984198619881990199219941996199820002002 Year % Total Consumption % Coal% Gas% Oil % Hydro% Nuclear% Geothermal, Biomass, Solar & Wind 91%86%

5. SWT, DPA Luncheon, 2006 QAd3931x Global Demand for Fossil Fuels Consumption and Efficiency 1999 Energy Use (ExaJoules) 020406080100120 Africa C & S America Middle East Canada/Mexico Japan & Australasia Eastern Europe/FSU Western Europe Developing Asia U S Oil Gas Coal Nuclear Other Data, 2002, IEO. MJ/$GDP

6. SWT, DPA Luncheon, 2006 QAd3931x Oil Resources Ahlbrandt et al., 2005 Conv. Oil Unconv. Oil Tech-Progress Undiscovered Reserves Consumed Int Panel on Climate Change, 2000

7. SWT, DPA Luncheon, 2006 QAd3931x U.S. Oil Production/Consumption

8. SWT, DPA Luncheon, 2006 QAd3931x Global Oil Production/Consumption

9. SWT, DPA Luncheon, 2006 QAd3931x M ExxonMobil, 2005. http://www.exxonmobil.com/Corporate/Citizenship/Corp_citizenship_energy_outlook.asp Peak Oil The Conventional Liquids “Wedge” 35 MMBD new demand

10. SWT, DPA Luncheon, 2006 QAd3931x -4 Oil Consumption Per Capita Bbl/Person/Year Source of Consumption: BP Statistical Review of World Energy June 2004 Source of Population: Working Alliance on Serial Publications, The Netherlands 0 5 10 15 20 25 19651970197519801985199019952000 JapanS. KoreaChinaIndia China India U.S. Japan S. Korea If China and India each grow to 5 BY/person by 2030, that represents 48 MMBD of new demand

11. SWT, DPA Luncheon, 2006 QAd3931x Insert Picture of North Slope and 35 mbopd Feeds into the Trans Alaska Pipeline System, which peaked in 1988 at 2.1 mbopd and today accounts for < 1 mmbopd (and falling) Photos by Scott Tinker

12. SWT, DPA Luncheon, 2006 QAd3931x Mitigation Option Time to Initiate Impact (+10 Yrs) (Yrs) (MM bpd) –Heavy Oils / Oil Sands38 –Vehicle Efficiency32 –Gas-To-Liquids32 –Coal Liquids45 –Enhanced Oil Recovery53 –Shale Oil102 22 Modified after Hirsch et.al, 2005 Conventional Oil Mitigation

13. SWT, DPA Luncheon, 2006 QAd3931x M ExxonMobil, 2005. http://www.exxonmobil.com/Corporate/Citizenship/Corp_citizenship_energy_outlook.asp Peak Oil The Conventional Liquids “Wedge” Unconventionals Plus EOR

14. SWT, DPA Luncheon, 2006 QAd3931x Natural Gas Resources Ahlbrandt et al., 2005 Tech-Progress Undiscovered Reserves Consumed Int Panel on Climate Change, 2000 Conv. Gas Unconv. Gas Coal (19 TBOE)

15. SWT, DPA Luncheon, 2006 QAd3931x Middle East Eastern Europe/ Former Soviet Union United States Western Europe Africa Asia Pacific Western Hemisphere From Imam and others, Oil and Gas Journal, Aug. 16, 2004. Natural Gas Production 0 10 20 30 40 1940 Production (Tcf) Year 19602000 20402020 1980 2060 Observed Calculated PRODUCTION RATE QAd3967x 0 5,000 10,000 15,000 20,000 25,000 194919611973198519972009 Annual Natural Gas Production (Bcf) Yikes!

16. SWT, DPA Luncheon, 2006 QAd3931x Global Natural Gas Production/Consumption

17. SWT, DPA Luncheon, 2006 QAd3931x U.S. Natural Gas Production/Consumption

18. SWT, DPA Luncheon, 2006 QAd3931x Natural Gas Trade in 2002 Modified from BP Statistical Review of World Energy 2003: June 2003, London, England, BP, in Oilfield Review: Autumn 2003, Schlumberger, p.6.

19. SWT, DPA Luncheon, 2006 QAd3931x USGS World Petroleum Assessment 2000 (Tcf) N. Caspian Basin (156.9) Tcf Amu-Darya Basin (230.4 Tcf) West Siberian Basin (1,271.8 Tcf) Volga-Ural Region (99.2 Tcf) Western Gulf (251.6 Tcf) Gulf Cenozoic OCS (140.3 Tcf) East Venezuela Basin (129.7 Tcf) Qatar Arch (465.6 Tcf) Zagros Fold Belt (399.4 Tcf) Mesopotamian Frdp. Bsn. (298.3 Tcf) Greater Ghawar Uplift (248.6 Tcf) Rub Al Khali Basin (182.3 Tcf) Northwest German Basin (141.7 Tcf) Grand Erg/ Ahnet Basin (114.2 Tcf) North Sea Graben (160.6 Tcf) ~3870 Tcf in Major Basins ~13,000 Tcf Total Resources Current annual global consumption is ~90 Tcf Does not include unconventional gas (shale, coal, tight), brines, gas hydrates, or gasification of coal, heavy oil, tar. Natural Gas Resource Availability

20. SWT, DPA Luncheon, 2006 QAd3931x 1999 NPC Study (NPC, 1999b) Recoverable Portion of In-Place US Gas Resource (Tcf) Reserves (1,004) Reserve Growth (305) Undiscovered, Unconventional Unassessed Unconventional Reserves (400) Geopressured Brine (Up to 24,000) Gas Hydrate (Up to 300,000) Not Assessed by NPC Increasing development costs, technology needs, uncertainty, and decreasing concentration Natural Gas Resource Availability QAd1023 Cumulative Production (811) Reserves (157) Known Reserves

21. SWT, DPA Luncheon, 2006 QAd3931x Conventional Gas Total Natural Gas U.S. Natural Gas Unconventional Gas 0 5,000 10,000 15,000 20,000 25,000 194919551961196719731979198519911997200320092015 Annual Natural Gas Production (Bcf) EIA (1949-1990) and NPC (1991-2015)

22. SWT, DPA Luncheon, 2006 QAd3931x After 8/05 DOE Roundtable White Paper Potential Pathways US In-place Resource US Production Goal 1 Tight Sandstones 1,000s of trillions of cubic feet of gas Expand economically recoverable resource by 350 Tcf by 2015 2 Unconventional Gas: Shale, Coal 1,000s of trillions of cubic feet Approach annual production of >7 TcF by 2015 3 LNG 1,000s of trillions of cubic feet Annual production of > 4 TcF by 2020 4 Deep Gas 1,000s of trillions of cubic feet of gas By 2012 develop systems to enable economic recovery of 100 Tcf by 2020 5 Coal Gasification 1,000s of trillions of cubic feet (~7Tcf/ton) Approach annual production of > 2 TcF equivalent by 2020 6 Methane Hydrates 10,000s of trillions of cubic feet of gas Confirm safe, economical and environmentally sound at pilot scale by 2015 Natural Gas Mitigation Options

23. SWT, DPA Luncheon, 2006 QAd3931x EIA International Energy Annual 2002, International Energy Outlook 2004 Global proved oil and gas reserves Recoverable coal reserves (oil shale and oil sands not included) Global Reserves

24. SWT, DPA Luncheon, 2006 QAd3931x US Coal Resources Anderson, John, and others, 2003, Oilfield Review, v. 15, no. 3, p. 10.

25. SWT, DPA Luncheon, 2006 QAd3931x U.S. Coal Consumption

26. SWT, DPA Luncheon, 2006 QAd3931x Outline Trends Technology Talent Tomorrow

27. SWT, DPA Luncheon, 2006 QAd3931x Unocal Conoco Texaco Shell Phillips ARCO Marathon Amoco Mobil Chevron ExxonMobil ARCO Marathon Amoco Mobil Chevron Conoco Texaco Phillips Unocal Technology

28. SWT, DPA Luncheon, 2006 QAd3931x * US E&P firms and the US R&D investments of international E&P firms; source Department of Energy, EIA, CERA analysis. ** Traditional Oil Field Service companies (Baker Hughes, Halliburton, Schlumberger, Smith, Weatherford); source, company annual reports, CERA analysis. Source: Cambridge Energy Research Associates, 2005 Technology R&D Investments in the Upstream Sector ($ 2004) 0 200 400 600 800 1,000 1,200 1,400 197719821987199219972002 R&D Investment ($, millions) E&P Firms* Service Companies** Basic/BreakthroughApplied/Incremental

29. SWT, DPA Luncheon, 2006 QAd3931x Technology The trend towards unconventional oil and natural gas production will drive The Rock Revival Rheology and rock mechanics Fracture modeling and simulation Diagenetic and rock quality modeling Petroleum system modeling

30. SWT, DPA Luncheon, 2006 QAd3931x Technology Logging Through Casing Seismic Imaging: 4C and 9C Surface/Subsurface Area: 1/2500 Subsurface Combustion Seafloor Operations Real Time Sensors: Nanotech

31. SWT, DPA Luncheon, 2006 QAd3931x Outline Trends Technology Talent Tomorrow

32. SWT, DPA Luncheon, 2006 QAd3931x Talent AAPG Website US Undergraduate Geosciences AGI, 2003 1.1 mil 1.7 mil 0.7 mil Employees Large O&G Co $10 $80 Oil Price: 2003 Dollars BP Website US Upstream R&D 2004 Dollars CERA

33. SWT, DPA Luncheon, 2006 QAd3931x Learning from the Past Supply PushDemand PullRock R&DInformation TechUS: MajorsUS: IndependentsMedian Age ~ 30Median Age ~ 50S&E StrongS&E Weakening

34. SWT, DPA Luncheon, 2006 QAd3931x Determine the real demand for talent Act for the long term in terms of talent investment (and try to ignore the Wall Street reaction!) Invest in universities in good and bad times. Universities are the seed crop. Do not expect quarterly bottom line impact Require performance measures Develop university partnerships outside of the standard faculty/student models Industry Response

35. SWT, DPA Luncheon, 2006 QAd3931x Do not overreact to industry talent demands (learn from the 1970s) Create tougher (not easier) enrollment and retention standards; focus on quality not quantity. One talented person is worth 10 warm bodies. Break out of the discipline silos: well- designed, integrated research programs. Establish global university partnerships that are long term, research based, and two- way. University Response

36. SWT, DPA Luncheon, 2006 QAd3931x Invest in longer-term, higher-risk research. Support programs that drive commercialization. Adapt US policies to fit a global industry. Energy independence is a sound bite. Structure for global interdependence. Work to bring respect and allure back to science and engineering. Government Response

37. SWT, DPA Luncheon, 2006 QAd3931x Get professional help to develop a coordinated, accurate, and interesting global message about energy. The story is international, and includes universities, government and industry. Find a credible storyteller, because there is a great story to tell! Professional Society Response

38. SWT, DPA Luncheon, 2006 QAd3931x Outline Trends Technology Talent Tomorrow

39. SWT, DPA Luncheon, 2006 QAd3931x 0 20 40 60 80 100 65% 16% 12% 7% Source: PFC Energy research, based on BP’s 2005 Statistical Review of World Energy From Ball (2006) World’s Proved Oil and Natural-Gas Reserves? Controlled by governments; not open to Western companies Russian reserves, held by Russian companies Open to any oil company Controlled by governments; limited access for Western companies QAd4882x

40. SWT, DPA Luncheon, 2006 QAd3931x 0 0.05 0.1 0.15 0.2 0.25 0.3 Aramco (Saudi) NIOC (Iran)INOC (Iraq) KPC (Kuwait) PDV (Venezuela) Adnoc (UAE) Libya NOC NNPC (Nigeria) Pemex (Mexico) Lukoil (Russia) Gazprom (Russia) ExxonMobil Yukos (Russia) PetroChina Qatar Sonatrach (Algeria) BP Petrobras (Brazil) Chevron Total Global Oil Reserves (2004 %) % IOCs

41. SWT, DPA Luncheon, 2006 QAd3931x Follow the Molecules IOCs will focus on unconventional resources Liquids: shale oil, heavy oil, tar sands, coal liquefaction, and beyond Gases: coalbed methane, shale gas, tight gas, hydrates, coal gasification, and beyond Technology and Talent needed!

42. SWT, DPA Luncheon, 2006 QAd3931x Tomorrow Global energy demand, combined with limited conventional energy choices and political instability in key regions, will keep the price of fossil fuels moderate to high, and volatile Liquid fuels production will flatten over the next 30 years and incremental growth will come from unconventional forms Natural gas reserve adds will be largely unconventional, LNG lanes will open, coal gasification will accelerate. Natural gas prices will detach from oil and compete with coal in electricity markets

43. SWT, DPA Luncheon, 2006 QAd3931x Tomorrow Rocks will make a revival Great advances in subsurface measurement and drilling will continue Fossil fuel emissions limits, based on global warming concerns, will be put into place (p.s. let them hear from you!) Universities, industry, governments and professional societies must coordinate a energy message

44. SWT, DPA Luncheon, 2006 QAd3931x This is the greatest industry in the world, and the most vital for the coming century. Do well and have a blast! Thank You!