FEX | Industrie & Energie | 131112 | Conferentie Schaliegas & Olie | Presentatie | Lucia van Geuns
FEX | Industrie & Energie | 131112 | Conferentie Schaliegas & Olie | Presentatie | Gürcan Gülen
Transcript of FEX | Industrie & Energie | 131112 | Conferentie Schaliegas & Olie | Presentatie | Gürcan Gülen
©BEG-CEE-UT, 1
Gürcan Gülen, Ph.D.
Plenty of Gas Resources; How About Deliverability and Demand?
Flevum Shale Gas Conference UtrechtNovember 12, 2013
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Gürcan Gülen, Ph.D.
Outline
• Historical perspective on predicting the future• Resources: TRR, ERR, Reserves
– BEG shale gas resource assessment– Breakeven economics & producer finances
• Difficulty of predicting demand– Power generation– Industrial use– Exports (LNG & pipeline)– Transportation sector
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Global LNG Flows – Expectations Few Years Back
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EXPANDING FLOW TRENDS
2030
Source: NPC 2007, consolidated forecasts
New terminals built in the US since 2000: Sabine Pass (LA), Freeport (TX), Cameron (LA),
Golden Pass (TX)
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Source: U.S. FERC and industry reports as compiled by CEE‐UT.
Today, Much Idle Capacity in NA
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Thanks to Shale Gas Production
Source: EIA Annual Energy Outlook 2013 ©BEG-CEE-UT, 6
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Technically Recoverable Resource Estimates
Source: Based on a widely used chart produced by Gas Technology Institute (GTI).
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Shale Gas Mostly Responsible for Increased Estimates but…
Source: McGlade C, Speirs J, Sorrell S (2013). Unconventional gas – A review of regional and global resource estimates. Energy.
• Shale gas resource estimates cover a wide range• Some are for TRR; others are for ERR• Assumptions & approach not always transparent
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www.beg.utexas.edu/sloan.php
Econometric Analysis:Validate Decline Curve;
Test Geologic and Other parameters;
Describe “typical well”
Well Economics:Attrition rate,
Breakeven prices,Representative well
profiles (by tier)
Production Outlook:
Pace of drilling and ultimate recovery
w.r.t. Prices, Technology,
and Time
Log and seismic data
Production history data
and directional
surveys
Geologic Analysis:Structure, porosity, net pay-zone maps
Decline Analysis:Production rate estimate, EURs
Spacing Study:Well Recovery,Drainage Areas,
Infill drilling locations (by
tier)=> Technically Recoverable Resources
BEG’s Integrated Approach: Barnett, Fayetteville, Haynesville, Marcellus
Funded by Alfred P. Sloan Foundation ©BEG-CEE-UT, 10
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Barnett Shale Resources
Base Case @ $4 HH45 Tcf Cumulative Production
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At What Price Can the Producers Deliver?
Monitoring U.S./Global Oil and Gas: Upstream Attainment, Producer Challenges http://www.beg.utexas.edu/energyecon/thinkcorner/Think%20Corner%20‐%20Producers.pdf
NGL Uplift: how much, when & where?
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Depends on Location
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Breakeven Economics – 10% IRR
BEG analysis.
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Price Expectations
Foss et al, “Sharp Cycles Ahead” Oil & Gas Investor, September 2013©BEG-CEE-UT, 14
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How Much Demand? At What Price?
• Power generation• Industrial demand• Exports (LNG and pipeline)• Transportation (LNG, CNG)
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Different Views of the World
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Consumption of Natural Gas (Index, 2010 = 1)
AEO Real GDP IHS Real GDP AEO IndustrialIHS Industrial AEO Electricity IHS Electricity
Based on data from EIA AEO 2013 & IHS Global Insight
Avg y‐y growth of 2.5%
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Gas Use in Generation Increased
15% 2% 19% 3% 52% 1998
31% 5% 19% 0% 37% 2012
Net generation by fuel, 1998‐2012
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More Risk for Coal & Nuclear
• Pending EPA regulations on SO2/NOX, mercury, water, coal ash, GHG
• State‐level regulations• Up to 80 GW of coal capacity may retire by 2020
– announced about 32 GW (2014‐2020)– 2.6 GW in 2011; 8 GW in 2012; 2 GW in 2013 YTD already retired (mostly older, smaller units)
• 4 recent nuclear retirement announcements; more on the way?
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A Scenario on Gas Use in Power
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U.S. Gas‐Power Linkages: Building Future Views for details: http://www.beg.utexas.edu/energyecon/thinkcorner/Think%20Corner%20Gas‐
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1 Quad 1 tcf ~2.7 bcfd
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Dampers on Gas Use in Power
• Currently, coal is competitive with gas at $4‐4.5/MMBtuof gas price (even at $3.5 in some locations)
• Renewables capacity has been growing– Better capacity factors for wind– Declining cost of PVs (thanks to Chinese subsidies)– Storage projects seem to be moving forward
• Smart grid and demand response• Energy efficiency and conservation (EIA AEO 2013 Reference Case: 0.9% annual demand growth; 0.2% in “best technology available” case)
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Increased Industrial Competitiveness
HH WTI Ratio2005 $8.69 $56.64 6.52012 $2.75 $94.00 34.2
American Chemistry Council, Shale Gas Study (May 2013)
What happens if the WTI‐HH ratio declines?
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Volatile Markets
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Risks for Industrial Demand
• Need to export petrochemical products– Domestic market seems saturated
• Tremendous petchem capacity additions globally• Ethane‐naphtha cost differential • Frac spread (ethane‐natural gas)• Infrastructure bottlenecks
– Tens of billions of dollars worth of pipeline & processing projects are planned or already under development
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Industrial Gas Demand – A Growth Scenario based on Projects in Progress
CEE analysis ©BEG-CEE-UT, 24
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Increasing Gas Exports• Several terminals received permits to export LNG to non‐FTA countries – Construction started on 2 liquefaction trains of the Sabine Pass terminal in August 2012
– The first exports are not expected until 2016 • EIA AEO: 4.4 bcfd by 2027 (1.6 tcf per year)• Others: 6‐8 bcfd by 2020 and 8‐10 bcfd by 2025 (3.6 tcf)
• Pipe exports to Mexico was 0.6 tcf in 2012– Expected to reach 2.4 tcf by 2040 (EIA AEO) or sooner (much sooner).
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Is there Room for U.S. LNG Exports?
Source: Howard V. Rogers, Senior Research Fellow, The Oxford Institute for Energy Studies, and David Ledesma, South‐Court, LNG 17, Houston, 2013.
Non‐North American LNG Supply
2012 Consumption: 328 bcm
2012 Liquefaction capacity: 388 bcm
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Global LNG Market Risks• Slow economic recovery / growth
– Continental European demand fell 6+ million tons (or ~9 bcm) between 2012 and 2013
• Japan re‐opening nuclear plants• Increased pipeline trade• Russia “flooding” the market; non‐Gazprom exports?
• Global shale gas production (longer term)• Increased & more effective use of renewables; energy efficiency & conservation
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Changing World LNG Trade –Exporters Mix
Indonesia36%
Malaysia15%
Australia11%
Brunei9%
United States (export)
2%
Abu Dhabi8%
Algeria19%
Libya2%
Source: CEE calculations based on petroleum‐economist.com and BP Statistical Review of World Energy
Small group dominated by Asian suppliers (1995)
Much more diversified, emerging Middle East suppliers led by Qatar
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Low Cost High HH High CostEurope
High CostPacific
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RegasificationShippingLiquefactionHenry Hub
Is U.S. LNG Competitive?
$9/MMBtu European floor
CEE analysis
$10/MMBtu NBP
$15‐16/MMBtu Asia spot
$11/MMBtu Japan 2010
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NG Use in Transportation Encouraged by Diesel‐NG Price Differential
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Henry Hub Gulf CoastNatural Gas Spot Price($/DGE)U.S. No 2 Diesel RetailPrices (Dollars per Gallon)
LNG $/DGE Estimate
LNG trucks are ~30% more expensive than diesel trucks with emission systems
CEE analysis
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Infrastructure Challenge
• Only 32 public LNG fueling stations in operation, with about a third of them located in California; 41 private LNG filling stations; and 72 planned stations.
• 587 CNG stations available to the public; 639 private filling stations; and 87 planned stations.
• In comparison, there are 4,000 truck stops that sell diesel fuel.
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Expectations
• The most aggressive scenarios: 1‐3 bcfd of incremental use by 2020 (1 tcf per year).
• EIA: less than 0.3 bcfdby 2020.
• Current use is about 0.1‐0.2 bcfd.
American Clean Skies Foundation (2013)
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Putting All Together
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Transportation EIA ref
LNG exports EIA ref
Pipeline exports EIA ref
Power generation EIA ref
Industrial EIA ref
Other EIA ref
Dry gas prod EIA ref
Imports EIA ref
Total supply EIA ref
Total demand CEE High
Total supply EIA High OGR
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CEE “What If” Scenario
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LNG exports CEE
Pipeline exports CEE
Power generation CEE
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What to Remember
• Shale gas resources are significant but– Costs for many locations are higher than $3‐3.5– Infrastructure bottlenecks and environmental regulations can delay development
– Conventional production has been declining– NGL revenues help
• Demand side puzzles– Export markets are needed, at least for liquids & petrochemical products
– The largest growth potential for gas use remains power generation, which depends on many uncertain factors
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We Welcome Participation & Feedback
Gürcan Gülen, Ph.D.Senior Energy Economist
Center for Energy EconomicsBureau of Economic GeologyJackson School of GeosciencesThe University of Texas at Austin
713‐654‐5404 (o)[email protected]
www.beg.utexas.edu/energyecon