Shale Gas Development

Presentation to:APEC Unconventional Natural Gas Workshop

Sally KornfeldTeam Leader –

International Oil and Gas ActivitiesOffice of Fossil Energy

November 14, 2012

National Petroleum Council Reports: Dramatic Change in Gas Supply

“North American and U.S. natural gas production is likely to lag projected demand growth over the study time frame, requiring significant growth in LNG imports….Forecasts range from 2.5 percent of U.S. supply to 16 to 18 percent by 2030.”- National Petroleum Council, 2007

“As a result of drilling technology advances and the emergence of the recent ‘game changing’ shale gas plays, the gap between U.S. demand and productionIs closing rapidly and likely to reduce greatly the future need for LNG imports.”- National Petroleum Council, 2011

Shale gas offsets declines in other U.S. production sources

U.S. dry gas production

trillion cubic feet per year

Source: EIA, Annual Energy Outlook 2012 Early Release

2%

Non-associated offshore

ProjectionsHistory

Associated with oil

Coalbed methane

Non-associated onshore

Shale gas

2010

10% 7%

9%7%

21%

23%

9%

9%

7%

49%

Alaska 1%

Tight gas26% 21%

Energy Security: U.S. Becomes Self-sufficient in Natural Gas

4

19901992

19941996

19982000

20022004

20062008

20102012

20142016

20182020

20222024

20262028

20302032

2034

-100

0

100

200

300

400

500

600

700

800

U.S. dry gasbillion cubic meters per year

• Source: EIA, Annual Energy Outlook 2012 Early Release

ProjectionsHistory 2010

Consumption

Domestic supply

Net imports

North American Shale Plays

Conventional vs. Unconventional Resource Play

Source: U.S. Geological Survey

Or “continuous” …

Deregulation, Tax Incentives and Government R&D Facilitated Unconventional Gas

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Bill

ion

cu

bic

fe

et

pe

r y

ea

r

DOE CBM R&D 1978-1982

DOE Shale Gas R&D 1978-1992

Section 29 Credit 1980-2002

Natural Gas Policy Act, 1978 Natural Gas Wellhead Decontrol Act, 1989

Shale Gas

Coalbed Methane

Tight SandsSingle-stage HF

Tight SandsMulti-stage HF

Shale – horiz well +Multi-stage HF

Multi-stage hydraulic fracture stimulation (HF) unlocks gas in unconventional reservoirs

1850’s to present 1950’s to 1990’s 1990’s to present 2000 to present

Conventional Reservoir

Hydraulic Fracture Stimulation- The Key to Today’s Natural Gas Revolution

Hydraulic Fracturing

Well Bore Integrity Key to Environmental Protection

Multiple layers of Protection• Conductor casing is set

and cemented• Surface Casing is

cemented below deepest aquifer

• Surface casing is cemented to surface

• Production casing inside surface casing to formation

• Production casing cemented back to surface

• Steel production tubing • Internal plastic coating on

tubing to prevent corrosion

Composition of Hydraulic Fracturing Fluid

Source: ARI, 2009 after Arthur, J. D., et al, 2008

Shale Gas Far Below Useable Groundwater

COMPARISON OF TARGET SHALE DEPTH AND BASE OF TREATABLE GROUNDWATER

Source: 2009 Shale Gas Primer

Water Management is Critical for Shale Gas Development

Phases of water management for shale gas development

● Withdrawal

● Transport

● Storage

● Use (drilling and fracturing)

● Treatment and reuse/recycle

● Treatment and disposal Logistics, costs, water

volume/scale of operation, and timing

DOE is sponsoring a number of studies on water management for shale gas production 13

Courtesy of All Consulting, Inc.

Secretary of Energy Advisory Board Recommendations

Manage short-term and cumulative impacts on communities, land use, wildlife, and ecologies

Protect water resources

Disclosure of fracturing fluid composition

Identify research and development needs

Create a public, national portal improving public information.

Organize for sharing best practices

Improve communication among state and federal regulators

Reduce use of diesel fuel in fracturing

www.shalegas.energy.gov

EPA: Study the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources

•Best available science

•Independent sources of information

•Transparent, peer-reviewed process

•Consultation with others

Next Steps:

•Publish an interim report of results in 2012

•Provide additional results in a 2014 report

EPA Shale Gas Study

Available Resources:

In 2009, DOE and the Ground Water Protection

Council (GWPC) published “Modern Shale Gas Development in the United States: A Primer,” an in-depth analysis of Shale Gas development , including water management and disposal issues related to shale gas stimulation and production.

In 2009, DOE helped fund GWPC publishing a comprehensive review of regulations designed to protect water resources nationwide. This report, “State Oil and Natural Gas Regulations Designed to Protect Water Resources,” includes a detailed look at current state oil and gas regulations intended to protect water resources, including regulations related to hydraulic fracturing and waste handling.

Available at www.fossil.energy.gov/programs/oilgas/index.html, www.netl.doe.gov/technologies/oil-gas, and www.gwpc.org.

Successful Regulatory Strategy

A successful regulatory strategy…

Mitigates adverse impacts

Scientifically quantifies risks

Ensures public safety

Protects environment

GOAL: Clear rules and regulations to encourage investment while protecting public safety and environment.

COMMUNITYand NGOs

TheENVIRONMENT

TheENVIRONMENT

GOVERNMENTINDUSTRY

IEA Projects Rise in World Unconventional Gas Production

18IEA, “Golden Rules for a Golden Age of Gas,” 2012

Below Ground:

Favorable Geology

Technology – Including U.S. Government R&D

Infrastructure – pipelines and domestic industry

Above Ground:

Stabile & Transparent Regulatory/Taxes/Fiscal Terms

Developed Gas Markets

Ease in Leasing

Factors in U.S. Shale Gas Success

Factors in Global Shale Gas Development

Additional Factors to those in U.S.:

Access to: • Resources, • Gas Treatment, • Pipelines, and • Markets

Ability/Willingness to Import Expertise:

• Investment Climate: Huge Capital Required

• Equipment• People (Visa support)

Great Potential, BUT:In infancy – shale geology not yet provenYou never know if it is economic until drilled!!

Shale Gas Wells Drilled 2008-2011(PFC Energy)

Questions?