Global supply and market impacts of US unconventional oil production growth
Andrew Slaughter,
Vice-President, Energy Insight, IHS
Presentation to EIA 2013 Energy Conference
June 18th 2013
Washington, DC
CONFIDENTIAL
© 2013, All rights reserved, IHS CERA., 55 Cambridge Parkway, Cambridge, Massachusetts 02142
No portion of this presentation may be reproduced, reused or otherwise distributed in any form without prior written consent.
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Today’s Themes
•US unconventional oil – where, how, how much?
•US position in global oil supply growth
•Market implications
•Can tight oil go global?
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Tight Oil plays in North America
- diverse and distributed
• IHS estimates that tight oil adds over 40 billion barrels to North American recoverable supply
2
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Step 1: Higher prices enabled investment in technology
• Gas prices began to rise in early 2000s -- gas supply bubble worked off and
concerns grew over future gas supply
• Tight gas sand work in the Rockies develops slick water fracturing
• Horizontal drilling rolled out in earnest and combined with hydraulic fracturing in
the Barnett Shale
Step 2: Technology transformed uneconomical and inaccessible
resources into viable large-scale unconventional plays • Shale gas boom unleashed in multiple basins
• New supply led to fall in gas prices
• Oil prices remained strong and supported migration of horizontal drilling and multi-
stage fracturing technology to tight oil plays, beginning with the North Dakota
Bakken
• Multiple tight oil plays now developing
Price and technology drove success in US
unconventional oil and gas plays
3
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• Regulatory frameworks in the main allow horizontal drilling and
fracturing to safely proceed
• Mineral ownership in the U.S. resides with private individuals, not
just government, allowing for access to resources on private lands • Mineral owners are stakeholders in success
• Acreage leaseholdings are distributed among many operators
• Intense competition for leases and acreage price escalation
causes companies to develop plays very quickly to protect land
investments
• Infrastructure, human resources, rigs, services and fit-for-purpose
equipment are all readily available
The US oil and gas business environment has
enabled a rapid pace of development to scale
4
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How big and how competitive is the US
tight oil resource?
Source: IHS CERA.
5
Tight oil resources
are larger than US
proved oil reserves—
and much can be
produced at a
wellhead price of up
to $60
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Unconventional natural gas and crude oil
has revitalised US hydrocarbon production T
ho
us
an
d b
/d o
il e
qu
iva
len
t
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Tight Oil is driving US crude oil production
towards 8 mbd
Source: IHS CERA
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2005 2010 2015 2020 2025
Thousand
Barrels
Per Day
U.S. Crude Oil Production Outlook
Other Lower 48
Gulf of Mexico
Alaska
Tight Oil
US crude oil production outlook
7
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United States is the largest source of new
liquids supply since 2008
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Un
ite
d S
tate
s
Sa
ud
i A
rab
ia
Ru
ss
ia
Ira
q
Ca
na
da
Qa
tar
Un
ite
d A
rab
Em
ira
tes
Nig
eri
a
Ch
ina
Co
lom
bia
Million barrels
per day
Total liquids growth 2008–12
Source: IEA, IHS CERA, national government data.
Note: Liquids includes ethanol and biodiesel for the United States and Canada, and ethanol for China and Columbia.
8
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North America will sustain its position as a
leading contributor to liquids growth
(500)
-
500
1,000
1,500
2,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year-On-Year World Crude Oil Supply Growth
ROW Iraq North America Brazil
Thousands
of barrels
per day
9
Sources: IHS CERA, with some historical data from International Energy Agency and US EIA.
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Growing supply contributes to higher
OPEC spare capacity
10
-
1,000
2,000
3,000
4,000
5,000
6,000
2010 2012 2014 2016 2018 2020
OPEC Spare Crude Oil Production Capacity
Thousands
of barrels
per day
10
Sources: IHS CERA
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Strong North American supply will reshape
trade patterns
11
Latin America
Africa
Middle East
North Sea / CIS / Other
-
2,000
4,000
6,000
8,000
10,000
2000 2005 2010 2015 2020 2025 2030
North America Offshore Crude Imports
11
Sources: IHS CERA, with some historical data from US EIA.
Thousands
of barrels
per day
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Can lessons learned migrate to new regions of
unconventional oil development?
Source: IHS CERA.
20412-2
12
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Many plays outside North America could be
sources of significant development
South
America
14 play areas
Africa
15 play
areas
Europe
27 play
areas
CIS
13 play areas
South Asia
20 play areas
North Asia
26 play areas
Australasia
17 play areas
Middle East
16 play
areas
Source: IHS CERA.
13
148 play areas
~ 500 billion barrels potentially technically recoverable
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Unconventional oil and gas E&P: Above
ground factors more challenging outside
North America
Source: IHS CERA.
20313-1
14
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In conclusion
• North America has led the world in unconventional gas and oil
development • Uniquely favourable business environment factors helped accelerate
development scale and timing
• The rest of the world has high scope for both unconventional gas and oil
• Above ground factors will limit the speed of development in most places relative
to North America but long-term prospects are positive
• Expansion of supply options opens up new options for markets
and trade • Shifting patterns of crude oil trade as US import needs decline
• Spill over effects into refined products trade
• Consolidates non-OPEC role in future investment and supply growth
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