IIHHSS
PPllaannnniinngg ffoorr SSuucccceessss iinn SShhaallee
GGaass
Shale Gas Asia
24th February 2011
CONFIDENTIAL © 2010, All rights reserved, Cambridge Energy Research Associates, Inc., 55 Cambridge Parkway, Cambridge, Massachusetts 02142
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© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
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1
17th August TATA Petrodyne "Unconventional Gas"
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
AA ssuucccceessssffuull sshhaallee ggaass bbuussiinneessss iinn IInnddiiaa::
UUnnddeerrssttaanndd sshhaallee ggaass ffuunnddaammeennttaallss,, aasssseessss
tthhee rreessoouurrccee aanndd bbuuiilldd aa ddyynnaammiicc ssttrraatteeggyy..
2
Screening and Mapping Indian
Basins
Shale Gas Strategy
Phase 1 Phase 2 Phase 3
Fundamentals of Unconventional Plays and Keys to Success
•� Lessons from North America
•� Shale Gas fundamentals – below ground and above ground issues
•� Characteristics of a successful shale gas development
•� Geological mapping of prospective areas
•� Resourceassessment(geochemistry, pay thickness, TO etc)
•� Operational and productionframework scenarios for shale gas
•� Dynamic roadmap to develop asset
Activities
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
AAggeennddaa
•� Fundamentals of Unconventional Plays and Keys to Success
—� Lessons from North America
—� Keys to Success
•� A Geological Framework
•� Closing Remarks
3
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Source: IHS Cambridge Energy Research Associates.
4
NNoorrtthh AAmmeerriiccaa iiss iinn tthhee mmiiddsstt ooff oonnee ooff tthhee
llaarrggeesstt eenneerrggyy ssuuppppllyy ttrraannssiittiioonnss iinn mmooddeerrnn
ttiimmeess
•� Unconventional gas grew from 16 to 28 bcf/d by end of 2009 in 3 years. Driven by the “Shale Gale”
•� Emerging shale plays will drive the unconventional gas growth over the next 10 years.
Could this be repeated
elsewhere?
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
WWhhyy wwaass tthhee UUSS ffiirrsstt iinn UUnnccoonnvveennttiioonnaall
RReessoouurrccee DDeevveellooppmmeenntt??
5
Bcf/d
2005200019951990
US Shale
Australia
Canada
US Tight Sands
US CBM
Bcf/d
200520001997
•� Robust, open access pipeline system
•� Deep, liquid market
•� Mineral rights held by the surface owner
•� Many independent producers
•� No dominant players
•� Absence of long-term contracts
Daily Production from Unconventional Resources
Daily Production from Unconventional Resources
Source: IHS Consulting
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
TToo wwhhaatt eeffffeecctt hhaass pprriiccee oorr rreegguullaattiioonn hheellppeedd oorr
hhuurrtt tthhee ddeevveellooppmmeenntt ooff uunnccoonnvveennttiioonnaall ggaass??
6
Source: EIA, IHS Consulting
!"#$%&’()*+,*-%
.)&(*%(*&/&’0,%
1234%5%6.*’%$((*,,%6)-*)%
!+78)+/%"+,%9 *//:*+-%
;*(<’7)</%$(7%
TTiigghhtt GGaass CCBBMM
SShhaalleeGGaallee
18//%8’=8’-/&’0%
>??@%
As Federal incentives expired in 1992, State incentives are still in place.
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
IInnccrreeaassee iinn IInniittiiaall PPrroodduuccttiioonn rraatteess iiss dduuee ttoo
tteecchhnnoollooggiiccaall cchhaannggee aanndd ddrriivveess sshhaallee ggaass
eexxppaannssiioonn
7
Source: IHS Cambridge Energy Research Associates.
7
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Breakeven Henry Hub Price for Natural Gas Resources in Analyzed Plays
HenryHub*
Henry Hub gas price $4.70 on 03/02/2011
TThhee ddrraassttiicc rreedduuccttiioonn iinn uunnccoonnvveennttiioonnaall ggaass
ccoossttss tthhaatt hhaavvee rreeddeeffiinneedd tthhee ““bbaassee ssuuppppllyy””
aass uunnccoonnvveennttiioonnaall ggaass
Unconventional gas has largely replaced
conventional gas as the “base supply” because
of the ongoing reductions in cost
Offshore GOM is becoming
marginal
Source: IHS Cambridge Energy Research Associates.
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
IInn NNAA,, wwhhiillee tthheerree’’ss lloottss ooff sshhaallee,, nnoott aallll
aarreeaass hhaavvee bbeeeenn ssuucccceessssffuull
9
NewAlbany
Utica shale
Source: IHS Consulting
Out of the 25 shale plays in North America only 7 are being developed in a significant manner
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
IInn ddeevveellooppeedd ppllaayyss,, sswweeeett ssppoottss aarree vveerryy
llooccaalliisseedd aanndd nneeeedd ttoo bbee ddeeffiinneedd
10
Source: IHS Consulting
Frontierarea
Sweetspots
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
PPrrooppeerrllyy uunnddeerrssttaannddiinngg aa ppllaayy aanndd rreedduucciinngg
rriisskk rreeqquuiirreess aa cceerrttaaiinn aammoouunntt ooff ddrriilllliinngg
11
Fayetteville2005
SEECO didn’t get to the sweetspot until 2006 after piloting 4
other drill clusters
2005 SEECO pilots
30km
26 wells drilled over ~50km2
Caney
Fayetteville example of Sweet spot Hunting Example of a Failed Play
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
12
UUnnccoonnvveennttiioonnaall ppllaayyss aarree ““ssttaattiissttiiccaall ppllaayyss””
Source: IHS CERA
•� “Sweetspots” have not been “predicted” (yet) by conventional tools (seismic/ regional studies); rather, multiple pilot and development drilling has revealed the better areas.
•� At Final Investment Decision the level of uncertainty will be similar to the level of uncertainty seen post-seismic or exploration (before appraisal) for a deep water play.
•� Management needs to learn how to handle this type of uncertainty
Conventional Play Unconventional Play
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
13
KKeeyy bbuussiinneessss ddrriivveerrss ffoorr ssuucccceessss iinn
uunnccoonnvveennttiioonnaall ggaass ppllaayyss
•� Commercially successful unconventional plays are “fast-paced”
•� Unconventional plays are “statistical plays”
•� Unconventional plays are “manufacturing plays” and are “scalable”
•� Unconventional plays are “infrastructure plays”
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
AAggeennddaa
•� Fundamentals of Unconventional Plays and Keys to Success
—� Lessons from North America
—� Keys to Success
•� A Geological Framework
•� Closing Remarks
14
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
15
IHS_CERA_Unconventional Gas Plan
GGeeoollooggiiccaall FFrraammeewwoorrkk -- RReessoouurrccee PPllaayy SSppaattiiaall
MMaappppiinngg
IHS well databse
•� Formation Tops
•�Test Data •� Gas Shows
•� Gas kicks
Ordovician – Silurian Shale Gas Play, Baltic Depression, Poland
IHS Reservoir, Field, Basin and
Stratigraphy databasesGeochemistry
Maturity
TOC
QC
Analyse
Interpret
Analogue
Extrapolate
Define
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
GGeeoollooggiiccaall FFrraammeewwoorrkk
GGaass--iinn--ppllaaccee RReessoouurrcceess EEssttiimmaatteess
Accessible area
Prospective Area Pay Thickness
Total GIP
Net GIP
DepthPressure
Temperature
Phase II Production Capacity
Gas Content
Source: IHS CERA.
Risk Parameters
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
17
IHS_CERA_Unconventional Gas Plan
GGeeoollooggiiccaall FFrraammeewwoorrkk EExxaammppllee
WWeesstt EEuurrooppeeaann SShhaallee GGaass PPllaayyss
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
•� Shale gas: gross 5,500 Tcf
•� Baltic has 55 percent of shale gas, France 25 percent
•� Not all areas have similar risk profiles or potential.
GGeeoollooggiiccaall FFrraammeewwoorrkk EExxaammppllee
WWeesstt EEuurrooppeeaann SShhaallee GGaass PPllaayyss
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Source: IHS CERA.
EEaacchh ppllaayy hhoowweevveerr iiss rriisskkeedd iinn tthhee ffiirrsstt
iinnssttaannccee ffrroomm aa ggeeoollooggiiccaall ppeerrssppeeccttiivvee
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
1st Order Risks
2nd Order Risks
3rd Order Risks
“Plateau Probable Production”
“Ramp-up”
“Decline”
“Time to First Production”
“Plateau Probable Production”
“Time to First Production”
“Ramp-up”“Decline”
Play Development Risks: �� Play Specific Risks
�� Cost of Gas Supply �� Production Potential
�� Above Ground Risk Resource Risk:
�� Geological Characteristics
�� Access Constraints �� Reservoir Recovery
�� Geological Potential �� NAG Analogues
Pace of Development: �� NAG Analogues
Milking the Barrel: �� Global Learning Set
Source: IHS CERA.
OOppeerraattiioonnaall aanndd PPrroodduuccttiioonn FFrraammeewwoorrkk
PPllaayy LLeevveell RRiisskkss
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Gross GIP
Apply Cutoffs:
•� Maturity
•� Thickness
•� TOC
Net GIP
Screen for Access
•� Natura 2000
Net Recoverable
Recovery Factors
Probable Net Recoverable
Plateau Probable Production
Apply North American
Analogues
“Plateau ProbableProduction”
Source: IHS CERA.
AAsssseessssiinngg RReessoouurrccee RRiisskk aanndd TTrraannssffoorrmmiinngg IItt
iinnttoo ““PPllaatteeaauu PPrroobbaabbllee PPrroodduuccttiioonn””
Apply risk factors to range
of geological potential
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Key Risks
Describe the key development risks
at the play level
Key Outcomes
•� Identify the range of outcomes
DevelopmentThemes
Create development themes
“Time to First Production”
“Time to First Production”
Source: IHS CERA.
AAsssseessssiinngg PPllaayy DDeevveellooppmmeenntt RRiisskk aanndd
TTrraannssffoorrmmiinngg TThheemm iinnttoo ““TTiimmee ttoo FFiirrsstt
PPrroodduuccttiioonn””“Cost of Gas Supply” $/
Mcf
Production Potential
Above Ground Risk
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
125 wells
5 years
16 wells
1 year
200 wells
3 years
50 wells
1 year
~3,500 wells
10 years
100+ wells
10 years
50 wells
8 years
4 wells
N/A
TThhee ttiimmee aanndd ccoosstt pprriioorr ttoo mmaannuuffaaccttuurriinngg hhaass
ddeeccrreeaasseedd ssiiggnniiffiiccaannttllyy iinn NNoorrtthh AAmmeerriiccaa
23
PilotingExtendedPiloting
Trial Manufacturing
Manufacturing
BarnettDevon
FayettevilleSEECO
Pilot
ExtendedPilot
Trial manufacture / Infrastructure spend
Full scale manufacturing
Unconventional DecisionPoint
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
AAggeennddaa
•� Fundamentals of Unconventional Plays and Keys to Success
—� Lessons from North America
—� Keys to Success
•� A Geological Framework
•� Closing Remarks
24
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
WWoorrllddwwiiddee SShhaalleess:: ~~66,,000000 ttccff rreeccoovveerraabbllee 25
© 2010, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
SSuucccceessss iinn SShhaallee GGaass:: UUnnddeerrssttaanndd sshhaallee ggaass
ffuunnddaammeennttaallss,, aasssseessss tthhee rreessoouurrccee aanndd bbuuiilldd
aa ddyynnaammiicc ssttrraatteeggyy..
26
Screening and Mapping Indian
Basins
Shale Gas Strategy
Phase 1 Phase 2 Phase 3
Fundamentals of Unconventional Plays and Keys to Success
•� Commonunderstandingamongst managers and team of a shale gas business
•� What it takes to win operationally and organisationally
•� Overview of the prospective areas in each basis
•� Geologicalfundamentals
•� Production profile ranges
•� Cost of supply •� Risk profile of
alternativedevelopment plans and real options as uncertainty gets resolved
Understanding Gained
For more information about this proposal or IHS CERA in general, please contact
David Finlayson+44 7527392872
55 Cambridge Parkway Cambridge, Massachusetts 02142, USA
IHSCERA.com
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