JAF29167WORLDWIDE GAS SHALES AND UNCONVENTIONAL GAS · Adding coalbed methane and tight gas to our expectations from gas shales, by year 2020 we look for unconventional gas to have

December 7, 2009 JAF29167.DOC

WORLDWIDE GAS SHALES AND UNCONVENTIONAL GAS: A STATUS REPORT

Vello A. Kuuskraa Scott H. Stevens

Advanced Resources International, Inc. Arlington, VA USA

THE “PARADIGM SHIFT”

Driven by a new understanding of the size and availability of gas shales and

unconventional gas, a “paradigm shift” is underway on world natural gas supplies. This

“paradigm shift” began a decade ago in North America with only modest fanfare:

Low cost coalbed methane in the San Juan Basin of Colorado and New

Mexico led the way.

Next was the introduction of highly productive tight gas development from the

Jonah and Pinedale fields in western Wyoming.

Third was the emergence of the Barnett Shale, followed by the other great

gas shale basins/plays of North America, such as the Horn River, Marcellus

and Haynesville.

The final segment of this “paradigm shift” - - the worldwide pursuit of gas shales

and unconventional gas - - has only just begun, with Australia, China and Europe in the

lead. Europe’s gas shale geology is challenging, but its resource endowment and

potential are large.

WHAT IS UNCONVENTIONAL GAS?

Three natural gas sources - - tight gas sands, coalbed methane and gas shales - -

comprise today’s unconventional gas. Methane hydrates, a future candidate, is not yet

ready for “prime time”.


December 7, 2009 2 JAF29167.DOC

A number of features distinguish unconventional gas from better understood

conventional gas.

First, the unconventional gas formations are “continuous”, deposited over

large areas rather than in discrete traps.

Second, the geologic setting of unconventional gas is several orders more

complex and challenging than for conventional gas.

Third, for two of the unconventional gas types - - coalbed methane and gas

shales - - the gas source, trap and reservoir are the same, not three distinct

elements as for conventional gas.

Since gas shales are the most abundant depositional rock and today’s “hot topic”,

it will be addressed first.

WHAT CHANGED THE GAME?

Low rates of gas production from shallow, fractured shale formations in the

Appalachian and Michigan basins of the U.S. have been underway for decades. What

“changed the game” was the recognition that one could “create a permeable reservoir”

and high rates of gas production by using intensively stimulated horizontal wells.

This break-through in knowledge and technology enabled the deep, low

permeability gas shale formations to become highly productive, making the Barnett

Shale “the largest natural gas field in Texas”. Today’s active pursuit of the high visibility

Marcellus, Haynesville and Horn River shales (plus others) could make gas shales the

largest undeveloped natural gas resource in the world.

THE NORTH AMERICAN GAS SHALE AND UNCONVENTIONAL GAS EXPERIENCE

North American gas shales already contribute over 9 Bcfd (250 million cubic

meters per day (Mcmd) and are projected to grow rapidly. In ten years, we expect gas

shales to account for a third of North American natural gas production.



The gas shale resource of North America is huge. We recently completed in-

depth, basin-level assessments of the “Magnificent Seven” gas shale basins of the U.S.

and Canada. The resource endowment (the gas in-place) in these “Magnificent Seven”

gas shales, equals 5,146 Tcf (146 trillion cubic meters (Tcm)), with an estimated 715 Tcf

(20 Tcm) recoverable. The numerous still to be defined and smaller gas plays in the

U.S. and Canada will add to these totals.

ARE GAS SHALES ECONOMICALLY AFFORDABLE?

Given the wealth of geologic and reservoir data now available on North American

gas shales, there is a growing consensus that the resource endowment and the

recoverable resource are, most likely, quite large.

However, there is still uncertainty about its costs and affordability. In our view,

and consistent with the “paradigm shift”, the higher quality gas shale basins and plays

are today the low cost portion of the North American natural gas price/supply curve.

OTHER NORTH AMERICAN UNCONVENTIONAL GAS RESOURCES

While the most visible, gas shales are only one of the unconventional gas

resources under development in North America.

Coalbed Methane, which had its start in the U.S. San Juan coal basin,

provides over 5 Bcfd (150 Mcmd) in North America.

Tight Gas Sands provides nearly 18 Bcfd (500 Mcmd) in the U.S.

Adding coalbed methane and tight gas to our expectations from gas shales, by

year 2020 we look for unconventional gas to have the capacity to provide 52 Bcfd (1,470

Mcmd) and account for nearly two-thirds of total North American natural gas production.



WORLD GAS SHALES AND UNCONVENTIONAL GAS

All currently published resource estimates for world gas shales start with Rogner’s

1997 “top-down” study of world hydrocarbon resources1:

Gas Shale Resource Endowment: 16,110 Tcf (456 Tcm)

The International Energy Agency “World Energy Outlook (2009)” assumed that

about 40% of Rogner’s resource endowment would become recoverable:

Gas Shale Recoverable Resource: 6,350 Tcf (180 Tcm)

While undoubtedly large, only basin- and play-level (“bottom up”) appraisals of the

diverse gas shale basins of the world will build confidence on the size, quality and

producibility of this natural gas resource.

European Gas Shale Resources. While gas shale exploration is underway in

many of the European basins, three areas stand out - - the Alum Shale of Sweden, the

Silurian Shales of Poland and the Mikulov Shale of Austria. Our preliminary gas shale

resource assessment for these three gas shale basins is 1,000+ Tcf (~30 Tcm), with a

potential recoverable resource of 140 Tcf (4 Tcm).

World Gas Shales Resources. A number of major and leading independent oil

and gas companies are circling the globe looking for high quality gas shales. Based on

the experience to date in North America and Europe, it is likely that Rogner’s resource

endowment estimate for gas shales of 16,110 Tcf (456 Tcm) will prove to be

conservative.

China and India. China and India have numerous gas shale basins that are

only now starting to be evaluated. Recently, Shell and PetroChina

announced plans to jointly evaluate and develop the gas shales in Sichuan

Province.

1 Rogner, H. H., 1997, ”An Assessment of World Hydrocarbon Resources”, Annual Review of Energy and Environment.



Other Countries. Gas shale exploration is underway in many other parts of

the world, including Australia, New Zealand and Southern Africa where Statoil,

Chesapeake and Sasol recently announced joint plans.

World Unconventional Gas Resources. In addition to gas shales, the other two

unconventional gas sources deserve their place on the world resource stage:

Our country-by-country assessment of coalbed methane is 3,540 to 7,630 Tcf

(100 to 216 Tcm), with an estimated 830 Tcf (24 Tcm) recoverable.

Much work remains for defining the tight gas sand resources of the world.

KEY CHALLENGES

Three challenges need to be addressed if natural gas (particularly unconventional

gas) is to become one of the major pathways to a low-carbon economy.

Challenge #1. Building Confidence in Adequate and Robust Natural Gas

Supplies. Considerable skepticism still exists on the abundance of world

unconventional natural gas supplies. Pronouncements that we are “running out of

natural gas supplies”, voiced by M. King Hubbert in the 1970s, can still be heard for

North America.

Detailed basin-level assessments of gas shales and unconventional gas are

essential for building confidence that sufficient supplies of natural gas exist to serve as a

major climate change mitigation option.

Challenge #2. Addressing the Environmental Barriers to Greater Natural

Gas Development. As drilling increases and production grows in areas not used to

hydrocarbon production, a harsher “spotlight” will fall on unconventional natural gas

development. “Green natural gas development” - - capturing methane emissions,

reducing surface impacts, pursuing environmentally acceptable hydraulic fracturing and

re-using produced water - - will help make this activity more environmentally friendly.



Challenge #3. Building demand for natural gas in a carbon constrained

world. The unconventional gas resource base of North America and the world is large.

Our view is that with an aggressive pursuit of unconventional gas, the worldwide natural

gas resource base will prove to be sufficiently large to provide a major, lower CO2

emissions option for power generation and possibly for transportation.

1

1 December 7, 2009

Expanded Version - Worldwide Gas Shales and Unconventional Gas: A Status Report

JAF028143.PPT

Worldwide Gas Shales and Worldwide Gas Shales and Unconventional Gas:Unconventional Gas:

A Status ReportA Status ReportPrepared By:

Vello A. Kuuskraa, PresidentScott H. Stevens, Vice PresidentADVANCED RESOURCES INTERNATIONAL, INC.Arlington, VA

December 12, 2009Copenhagen, Denmark

2 December 7, 2009


JAF028143.PPT

Presentation OutlinePresentation Outline

1. Introduction

2. The North American Gas Shale and Unconventional Gas Experience

3. World Gas Shales and Unconventional Gas

4. Key Challenges

2

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The The ““Paradigm ShiftParadigm Shift””

Driven by a new understanding of the size and availability of gas shales and unconventional gas, a “paradigm shift” is underway on world natural gas supplies.

This “paradigm shift” began a decade ago in North America with only modest fanfare. Low cost coalbed methane in the San Juan Basin of Colorado and New Mexico led the way. Next was the introduction of highly productive tight gas development at the Jonah and Pinedale fields in western Wyoming. Third was the emergence of the Barnett and now the other North American gas shales.

The final segment of the “paradigm shift” - - the worldwide pursuit of gas shales and unconventional gas - - has only just started, with Australia, China and Europe in the lead. Europe’s geology is challenging but their gas shales have huge potential.

4 December 7, 2009


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What Is Unconventional Gas?What Is Unconventional Gas?

TIGHT GAS SANDS• Continuous Deposition• Low Permeability

• Both Traditional and “Basin-Center” Settings

COALBED METHANE• Self-Sourcing Reservoir• Gas Adsorbed in Coal

• Requires Depressuring and Usually Dewatering

GAS SHALES• Self-Sourcing Plus Traditional

Porosity Reservoirs• Gas Adsorbed in Organic Matter

• Requires Pervasive Natural or Created Fracture Network

RESOURCEPLAYS

Three natural gas sources comprise today’s unconventional gas. Methane hydrates, a fourth candidate, is not yet ready for “prime time”.

Since gas shales are the world’s most abundant depositional rock and today’s “hot topic”, it will be addressed first.

3

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Gas Shales: WhatGas Shales: What’’s the Big Deal?s the Big Deal?

“Shale Gas Blasts Open World Energy Market”The Sunday TimesNovember 1, 2009

“Shale Gas is the most important energy development since the discovery of oil”

Fred Julander,CEO of Julander Energy

“Mission Critical: Can Shale Gas Save the World?”ASPO, September 21, 2009

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What Changed the Game?What Changed the Game?

Low rates of shale gas production from shallow, fractured shale formations in the Appalachian and Michigan basins of the U.S. have been underway for decades.

What “changed the game” was the recognition that one could “create a permeable reservoir” by using intensively stimulated horizontal wells.

This break-through in knowledge and technology enabled the deep, tight gas shale formations to become highly productive, making the Barnett Shale “the largest natural gas field in Texas”.

Today’s active pursuit of the high visibility Marcellus, Haynesville and Horn River shales (plus others) could make gas shales the largest undeveloped natural gas resource in the world.

4

7 December 7, 2009


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Cased, Cemented, Perforated and Isolated Horizontal Wellbore

A 12 Stage Open Hole Completion System Using Open Hole Packers for Mechanical Diversion

Technologies for Success: Lower Damage, Technologies for Success: Lower Damage, More Intensive Horizontal Well CompletionsMore Intensive Horizontal Well Completions

Early Barnett Shale Well Completion Practices

Latest Gas Shale Well Completion Practices

8 December 7, 2009


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The North American The North American Gas Shale and Gas Shale and

Unconventional Gas ExperienceUnconventional Gas Experience

5

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0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Annual Production (Dry, Bcf/d)

Other Barnett Fayettevi l le Woodford Marcel lus

Haynesvi l le Montney Horn River

How Much Do Gas Shales Contribute Today?How Much Do Gas Shales Contribute Today?

JAF2009059.XLS

(e)

Production from North American gas shales has gown by ten-fold during this decade and is expected to exceed 11 Bcfd (320 Mcmd) this coming year.

U.S. 2000 2009 (e) 2010 (e)(Bcfd) (Bcfd) (Bcfd)

Haynesville - 0.9 1.6Marcellus - 0.2 0.7Woodford - 0.5 0.7Fayetteville - 1.4 1.8Barnett 0.2 4.6 4.8Other 0.9 0.8 0.8

Sub-Total 1.1 8.5 10.4

CanadaMontney - 0.6 0.8Horn River - 0.1 0.2

Sub-Total 0.7 1.0

Total 1.1 9.2 11.4

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How Large is the Gas Shale Resource?How Large is the Gas Shale Resource?

We have completed basin-level assessments of the “Magnificent Seven” North American gas shales which dominate activity.

The resource endowment for these “Magnificent Seven” gas shales of 146 Tcm (5,140 Tcf) already exceeds Rogner’s (1997) estimate for all of North American gas shale of 109 Tcm (3,840 Tcf).

The numerous still to be defined and smaller gas shale plays in the U.S. (e.g., Antrim, Huron, Eagleford) and in Canada (e.g., Liard, Cordova and Utica) will add to these totals.

7240391,380Canada (2 Basins)

134751073,760U.S. (5 Basins)

TcmTcfTcmTcf

RecoverableResource

ResourceEndowmentGas Shale

Basins

6

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Eastern U.S. Gas Shale BasinsEastern U.S. Gas Shale Basins

Source: Advanced Resources International

Five of the “Magnificent Seven” gas shale plays are in the Eastern U.S.

3,760

2,100

790

300

320

250

ResourceEndowment

(Tcf)

342Woodford

1301Haynesville

200-Marcellus

45325Total

503Fayetteville

3919Barnett

UndevelopedRecoverable

Resource(Tcf)*

Produced/Proved

Reserves(Tcf)*

*As of end of 2008.

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Western USAWestern USAGas ShalesGas Shales

Significant gas shale resources exist in Western U.S. basin, in Colorado, Montana, New Mexico, Utah and other states.

• These gas shales, while being explored, have yet to be intensively developed.

• Lower reservoir quality and lower wellhead prices, place these basins at a disadvantage to Eastern gas shales.

• Still, the resource endowment and potential in the Western gas shale basins is huge.

7

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Western CanadaWestern CanadaGas Shale BasinsGas Shale Basins

Source: Advanced Resources International, 2009

Canada’s Horn River and Montney are two of the “Magnificent Seven” gas shale plays.

2401,380Total

110620Montney*

130760Horn River

RecoverableResource

(Tcf)

ResourceEndowment

(Tcf)

Additional resources exist in the other Western and Eastern gas shale basins of Canada.

14 December 7, 2009


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JAF02052.CDR

Are Gas Shales Economically Affordable? Are Gas Shales Economically Affordable?

With a new understanding of supply costs, unconventional gas and particularly the higher quality gas shales make up the low costportion of today’s North American natural gas price/supply curve.

Prior PerceptionPrior Perception New UnderstandingNew Understanding

Gas Resources Gas Resources

Gas

Pric

es

Gas

Pric

es

ConventionalGas

UnconventionalGas (Gas Shale)

UnconventionalGas (Gas Shales)

ConventionalGas

8

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How Big of a Role Could Gas Shales How Big of a Role Could Gas Shales Have Tomorrow?Have Tomorrow?

Starting from a base of over 9 Bcfd (190 Mcmd), 13% of today’s North American natural gas production, gas shales could grow to 26 Bcfd (740 Mcmd), equal to a third of North American natural gas production, by year 2020*:

Other, still to be assessed, North American gas shale plays would add to these totals.

• With aggressive development of the Haynesville and Marcellus plays, U.S. gas shales are projected to reach 20 Bcfd (560 Mcmd) by 2020.

• Led by the mighty Horn River, Canadian gas shales could exceed 6Bcfd (180 Mcmd) by 2020.

*Assumes sufficient demand and natural gas prices of U.S.$7/MMbtu (Henry Hub, spot).

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North American Gas Shale Production*North American Gas Shale Production*

*Assuming sufficient demand and a natural gas price ($US, Henry Hub) of $7/MMBtu.

0

5

10

15

20

25

30

2008 2010 2012 2014 2016 2018 2020

Shale Gas Production (Bcfd)

U.S. CanadaJAF2009066.XLS

Source: Advanced Resources International (2009)

9

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Other North American Unconventional Other North American Unconventional Gas ResourcesGas Resources

While the most visible, gas shales are only one of the unconventional gas resources under development in North America.

• Coalbed Methane, which had its start in the U.S. San Juan coal basin, provides over 5 Bcfd (150 Mcmd) in North America.

• Tight Gas Sands provides nearly 18 Bcfd (500 Mcmd) in the U.S.

Adding coalbed methane and tight gas to our expectations from gas shales, we look for unconventional gas to provide 52 Bcfd(1,470 Mcmd) by 2020 and account for nearly two-thirds of total North American natural gas production.

18 December 7, 2009


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0

10

20

30

40

50

60

2008 2010 2012 2014 2016 2018 2020Unconven

tional Gas Production (Bcfd)

Projected North American Gas Shale Projected North American Gas Shale and Unconventional Gas Production*and Unconventional Gas Production*

*Assuming sufficient demand and a natural gas price ($US, Henry Hub) of $7/MMBtu.

JAF2009067.XLS

Source: Advanced Resources International (2009)

U.S. Gas Shale

Canadian Gas Shale

U.S. Tight Gas

North American CBM

10

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World Gas Shales and Unconventional Gas

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How Big Are World Gas Shale Resources?How Big Are World Gas Shale Resources?

The current estimates for world gas shales start with Rogner’s1997 study (1):

The International Energy Agency “World Energy Outlook (2009)” assumed that about 40% of Rogner’s resource endowment would become recoverable:

• Gas Shale Resource Endowment: 16,110 Tcf (456 Tcm)

While undoubtedly large, only basin- and play-level (“bottom up”) appraisals of the diverse gas shale basins of the world will build confidence on the size, quality and producibility of this natural gas resource.

• Gas Shale Recoverable Resource: 6,350 Tcf (180 Tcm)

(1) Rogner, H. H., 1997, ”An Assessment of World Hydrocarbon Resources”, Annual Review of Energy and Environment.

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• The Late Cambrian/Early Ordovician organic-rich Alum shale, while generally about 40 m thick, reaches 200 m of thickness in western Sweden and has high TOC, from 2 to 20%.

• Shell is drilling shallow coreholes at Skane, a relatively mature area of shale deposition.

• Our preliminary estimate of the unriskedresource endowment for the leased acreage is 60 Tcf (1.7 Tcm), with a recoverable resource of about 10 Tcf(0.3Tcm).

Source : J. Dyni, USGS, 2005

European Gas Shales:Sweden - Alum Shale

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• Lane Energy, EurEnergy, BNK, ExxonMobil and ConocoPhillips have leased and are exploring for gas shales in Poland.

• Gas shales in the large Baltic Basin of northern Poland appear to be prospective.

• More speculative are the prospects for gas shales in the Podlasie Depression and the Lublin Basin, although thermal maturity appears to be favorable.

• Our preliminary estimate of the unrisked resource endowment, within currently leased areas, is 710 Tcf (20 Tcm) with a risked recoverable resource of 100 Tcf (3 Tcm).

Source : Modified from Poland Ministry of Environment, 2008

European Gas Shales:European Gas Shales:Poland Poland -- Silurian ShalesSilurian Shales

12

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European Gas Shales:European Gas Shales:Vienna Basin Vienna Basin –– MikulovMikulov ShaleShale

• With benefit of earlier 1970s/80s, test wells, OMV is returning to explore the deep Jurassic Mikulov Shale in the Vienna Basin:

– The University of Vienna has a study, funded by OMV, to characterize these shales.

– A hydraulically fraccedhorizontal is being considered for the exploration well.

• Our preliminary estimate for the unrisked resource endowment is 240 Tcf (7 Tcm) with a risked recoverable resource of 30 Tcf (1 Tcm).

Source : F. Hanot, First Break, 1992Source : Modified from W. Hamilton, Wien, 2000

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Major Gas Shale Basins of AustraliaMajor Gas Shale Basins of Australia

Australia has a number of prospective gas shale basins, including the Amadeus, Cooper and Georgina, among others.

Source: Advanced Resources International, 2009.

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New Zealand: New Zealand: Gas Shale ProspectsGas Shale Prospects

Map Source: Trans-Orient Petroleum 2008.

Two significant organically rich shale deposits exist in the 40,000 km2 East Coast Basin on the North Island of New Zealand.

The deeper Whangai Shale has reservoir properties that appear to be comparable with the Barnett Shale.

Energy Corp of America’s Kauhauroa#1 discovery well was reported to have flowed at 12 million cfd.

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World Gas Shales: OverviewWorld Gas Shales: Overview

• China and India. Both China and India have numerous gas shale basins that are only now starting to be evaluated. Just recently, Shell and PetroChina announced plans to jointly evaluate and develop the gas shales in Sichuan Province.

• Other Countries. Gas shale exploration is underway in many other parts of the world, including Australia, New Zealand and Southern Africa where Statoil, Chesapeake and Sasol recently announced joint plans.

A number of the major and leading independent oil and gas companies are circling the globe looking for high quality gas shales. Based on the experience to date in North America and Europe, it is likely that Rogner’s resource endowment estimate for gas shales of 16,110 Tcf (456 Tcm) will prove to be conservative.

14

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How Large Are the Other World Resources How Large Are the Other World Resources of Unconventional Gas?of Unconventional Gas?

Coalbed methane (CBM), which once enjoyed the spotlight and enthusiasm as the gas shales of today, is one of the “other”unconventional gas resources.

• Our company, along with many others, toured the world looking for the next “San Juan Basin Fairway” and its world class CBM resource.

• Our country-by-country assessment of CBM is 3,540 to 7,630 Tcf (100 to 216 Tcm), with an estimated 830 Tcf (24 Tcm) recoverable.

Tight gas sands, which today is still the largest source of North American unconventional gas, is only now starting to be developed, with prospective basins in South America, the Middle East and China.

• Rogner’s resource endowment estimate for tight gas is 7,400 Tcf (210 Tcm).

• The IEA’s estimate of recoverable tight gas resource (starting with Rogner’s in-place values) is 390 Tcf (110 Tcm).

Much work remains for defining the tight gas sand resources of the world.

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World World CoalbedCoalbed Methane Resources (Methane Resources (TcfTcf))

8303,540-7,630TOTAL (Tcf)

25170Ukraine

120500-1,000Australia/New Zealand

1050+South American/Mexico

20200Western Europe

(24)(100-216)TOTAL (Tcm)

520-50Poland

1040-60Kazakhstan2070-90India1050-110Turkey

3090-220Southern Africa (incl. Carbonaceous Shales)

50340-450Indonesia90360-460Canada

140500-1,500United States100700-1,270China200450-2,000+Russia

CBM RecoverableResource (Tcf)

CBM ResourceIn-Place (Tcf)Country

15

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HungaryHungary’’s s MakoMakoTrough May Hold One Trough May Hold One of the Worldof the World’’s Highest s Highest Concentrations of Gas Concentrations of Gas

InIn--PlacePlace

Location, Pipeline and Markets

Exploration Wells: Mako Trough

Source: Falcon Oil & Gas Ltd., 2008

The Mako Trough tight gas sand/gas shale play reaches resource concentrations estimated at 700 Bcf/mi2.

The operator, Falcon Oil and Gas, estimates 40 Tcf (~1 Tcm) of contingent recoverable resource.

However, the latest exploration well, while testing notable volumes of gas, encountered strong flows of water.

Mako Trough

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• CBM: 1,270 Tcf GIP. Over 3,000 drilled wells; horizontal CBM wells show promise in the Qinshui Basin.

• Tight Gas: Producing >400 MMcfd from the Ordos Basin.

• Recently, Shell and PetroChina signed an agreement to appraise the gas shale basins of Sichuan.

ChinaChina’’s CBM, Tight Gas s CBM, Tight Gas and Gas Shale and Gas Shale

Resources Are Large Resources Are Large and Challengingand Challenging

Source: Advanced Resources International

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Indonesian CBM Is Expected To Counter Production Indonesian CBM Is Expected To Counter Production Decline of Decline of KuteiKutei Basin LNG SuppliesBasin LNG Supplies

• Estimated 450 Tcf GIP of CBM, mainly in Sumatra and Kalimantan.

• Low-rank coals but deeper, thicker, higher rank than in the Powder River Basin.

• Initial CBM blocks just recently awarded to BP, ENI, Arrow and others.

2,000

2,500

1,500

1,000

500

0

Fm

1

Depth(Feet)

Fm

2F

m 3

Mud Gas Units Unknown0 100 200 300 400

JAF

0152

5.C

DR

Source: Stevens et al., Oil & Gas Journal, October 22, 2001

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Key ChallengesKey Challenges

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Challenge #1. Building Confidence in Challenge #1. Building Confidence in Adequate and Robust Natural Gas SuppliesAdequate and Robust Natural Gas Supplies

Considerable skepticism still exists on the abundance of world natural gas supplies.

Pronouncements that we are “running out of natural gas supplies”, first voiced by M. King Hubbert in the 1970s, can still be heard for North America.

Detailed basin-level assessments of gas shales and unconventional gas are required for building confidence that increased use of natural gas can be a major climate change mitigation option.

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Challenge #2. Addressing the Challenge #2. Addressing the Environmental Barriers to Greater Natural Environmental Barriers to Greater Natural

Gas DevelopmentGas Development

As drilling increases and production grows in areas not used to hydrocarbon development, a harsher “spotlight” will fall on unconventional natural gas development.

“Green natural gas development” will help make this development more environmentally friendly.

• Capturing Methane Emissions

• Further Reducing Surface Impacts

• Pursuing Environmentally Acceptable Hydraulic Fracturing

• Increasing Re-use of Produced Water

18

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Challenge #3. Building Demand for Natural Challenge #3. Building Demand for Natural Gas in a Carbon Constrained WorldGas in a Carbon Constrained World

Natural gas is a relatively “clean fuel” with lower emissions of CO2 and SO2 than coal or oil. With aggressive pursuit, unconventional gas could provide a major climate change mitigation option for power generation and possibly for transportation.

1.0

0.8

0.6

0.4

0.2

0Coal Natural Gas

# of

CO

2/kw

h

0.99(32% E)*

0.75(43% E)*

0.34(54% E)*

Source: EnCana 2009

CO2/SO2 Emissions by Fuel Type (lbs/BBtu)

CO2 Emissions for Electricity (lbs/kwh)

*E - - efficiency of the power plant

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The Gas Shale TransformationThe Gas Shale Transformation

• Article 1 – Magnificent Seven Shales(September 28, 2009).

• Article 2 – Technology; Lessons Learned (October 5, 2009).

• Article 3 – Emerging Shales; Environment (October 19, 2009).

For more information, please see the recent three-part series on gas shales written by the staff of Advanced Resources International and published in the Oil and Gas Journal.

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AdvancedResources

Internationalwww.adv-res.com

Office LocationsWashington, DC4501 Fairfax Drive, Suite 910Arlington, VA 22203Phone: (703) 528-8420Fax: (703) 528-0439

Houston, Texas11490 Westheimer, Suite 520Houston, TX 77042Phone: (281) 558-6569Fax: (281) 558-9202

Documents

JAF29167WORLDWIDE GAS SHALES AND UNCONVENTIONAL GAS · Adding coalbed methane and tight gas to our expectations from gas shales, by year 2020 we look for unconventional gas to have