Done by: Andrew Seow

Shale GasIntroduction | Current situation in the US | Shale Boom |

Implications

Done by: Andrew Seow

What is Shale gas and its uses?

Shale Consumption Uses (2012)

Electric power generation – 9.11 TCF

(36%)

Industrial – 7.2 TCF (28%)

Residential – 4.15 TCF (16%)

Commercial – 2.9 TCF (11%)

Lease and plant fuel – 1.39 TCF (5%)

Pipeline and distribution – 0.73

TCF (3%)

Vehicle fuel 0.03 TCF (<1%)

Unconventional natural gas trapped within shale formations

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Where are Shale reserves found?

• 137 shale formations in 41 countries outside the United States

• Account for 32% of the world’s natural gas resources

• US and Canada are the only commercially viable shale producers

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When was Shale first extracted?

• Shale Gas was first extracted in 1825 – at small quantities

• Production became commercially available and produced at large scales in the past decade due to extraction advancements – Horizontal drilling and Hydraulic Fracturing

• Rejuvenating natural gas industry in US

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How is Shale obtained?

Combination of horizontal drilling and hydraulic fracturing technology

Technological advancements in ‘fracking’ techniques allow commercially large scale productions of Shale

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Current Situation of Shale in the US

Capacity• 2,203 TCF recoverable natural gas (92

years)

Production rate (2012)• 29.5 TCF of natural gas • 10.3 TCF of shale • 482,822 producing well

Consumption rate (2012)• 25.5 TCF of natural gas

Prices • 2012 spot price = $2.75/MMBtu• Production price = $0.92/MMBtu• Relative to supply & demand • Relative to industry – (graph on slide 8)• Low prices ($4 per mil Btu) – abundant supply

& efficient production• Prices predicted to increase after 2015 to

$7.48 per mil Btu in 2040

Exports & Imports (2012)• Exports = 1.62 TCF (pipeline and LNG)• Imports = 3.14 TCF (pipeline and LNG) • Increasing domestic supply reducing need

for imports

Done by: Andrew Seow

Done by: Andrew Seow

Done by: Andrew Seow

Company Average Daily Production (bcf)

1. Exxon Mobil (listed) 3.92. Chesapeake Energy (listed) 2.63. Anadarko listex (listed) 2.44. Devon Energy (listed) 25. BP (listed) 1.9 6. Encana 1.87. ConocoPhillips 1.68. Southwestern Energy Co. 1.39. Chevron (listed) 1.310. Williams Energy 1.2

10 Biggest Natural Gas producers in the US

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• Result of natural gas shortage in 1970s (oil embargo)• Horizontal drilling, Hydraulic Fracturing, 3D seismic imagingTech Innovation

• Government funded R&D programs• Provided tax creditFunding (resources)

• Private land & mineral rights ownership (Section 209 of Federal Land Policy & Management Act of 1976)

• Mitchell Energy (1981) - boosted Shale BoomOwnership Regulation

• Existence of pipeline network as transport mechanism Pipeline Infrastructure

• Financial firms providing capital for drilling Capital Market

• Barnett Shales in Texas very profitable• $4/Mcf to earn 10% ROR vs. $7/Mcf for Eagle Ford ShaleGeology

• 3 million gallons per well • Abundant supply of groundwater Water Availability

Factors Leading to Shale Boom

Done by: Andrew Seow

Implication of Shale

Boom

Production • Grows 113% from 2011-

2040• Largest contributor to

natural gas growth (50% of total NG in 2040)

Prices • Price increase due to

higher cost• Affected by oil prices

(transportation consumption & LNG export)

Exports Vs. Imports • Importer Exporter • Exports grow 17.7% from

2020-2040• Converting import

terminals to export facilities of LNG in Texas

• Pipeline exports to Mexico:• 0.5 Tcf 2011 2.4 Tcf

2040• Imports from Canada

decrease drastically• Oil companies lobbying

for crude oil exports1

Job Opportunities • Created 2.1 million jobs,

expected 1.25 million more

• Industries related to Shale production:• Sand suppliers• Chemical industry • Water suppliers• Transportation • Foreign import terminals

Economic Improvements

• Annual economic growth from exports ≈ $75 billion

• $118.2 billion to nation’s GDP

Malaysian Petroleum Industry• 35% of government

revenue 2011• Substantially damage to

Malaysian GDP• 2nd largest exporter of

LNG and could become obsolete when shale is self sustainable

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Summary

Shale exploration is an extremely large industry – expected to grow continuously over the next 3 decades

A result of initiatives from the oil crisis in 1970s

Economic implications:Generating high profitability Change in export & import dynamics globally Job opportunitiesEconomic improvements

Done by: Andrew Seow

SourcesCHESAPEAKE ENERGY CORPORATION . (2012). 2012 Annual Report. Oklahoma: Chesapeake Energy.

Energy Modeling Forum Stanford University. (2013). CHANGING THE GAME?: EMISSIONS AND MARKET IMPLICATIONS OF NEW NATURAL GAS SUPPLIES . Stanford : Stanford University .

International Energy Agency. (2011). Are We Entering A Golden Age of Gas. Paris: IEA Publications.

Wang, Z., & Krupnick, A. (2013). A Retrospective Review of Shale Gas Development in the United States . Washington : Resources for the Future.

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