Natural Gas Technology: Investing in a Healthy U.S. Energy Future

Scott W. Tinker, BEG, 2002

Natural Gas Technology: Investing in a Healthy U.S. Energy Future

Plenary Panel: Balancing the Technology Role

It’s Gonna be Gas:Let’s Make it a Smooth Ride

Scott W. TinkerEugene Kim

Bureau of Economic GeologyJohn A. and Katherine G. Jackson School of Geosciences

The University of Texas at AustinQAd1023


100

90

80

70

60

50

40

30

20

10

100

90

80

70

60

50

40

30

20

10

100 90 80 70 60 50 40 30 20 10

Liquids (Oil)

Solids (Wood, Coal) Gases (Natural Gas, Nuclear, Renewables, Hydrogen)

1910191519201925193019351940194519501955196019651970

Historical U.S. Energy Consumption

0%

20%

40%

60%

80%

100%

1845 1850 1855 1860 1865 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Perc

enta

ge o

f Mar

ket S

hare

Solids

Liquids

Gases + Renewables

Data: EIA

Data: EIA

1973

197519801985199019952000

U.S. Energy Consumption

Supply InstabilityPrice VolatilityGovernmental PolicyTechnology

1973


0

20

40

60

80

100

120

1845

1870

1895

1920

1945

1953

1958

1963

1968

1973

1978

1983

1988

1993

1998

Qu

ad

BT

U

Renewable Energy

Hydroelectric

Nuclear Energy

Natural Gas

Oil Imported

Oil Produced

Coal

Wood and Waste


0%

20%

40%

60%

80%

100%

1845

1870

1895

1920

1945

1953

1958

1963

1968

1973

1978

1983

1988

1993

1998

% o

f T

otal

Mar

ket

Renewable Energy

Hydroelectric

Nuclear Energy

Natural Gas

Oil Imported

Oil Produced

Coal

Wood and Waste

U.S. Energy Consumption Forecast

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1845

1860

1875

1890

1905

1920

1935

1950

1965

1980

1995

2010

2025

2040

% o

f Tot

al M

arke

tGases and Renewables

Liquids

Solids


0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1845

1860

1875

1890

1905

1920

1935

1950

1965

1980

1995

2010

2025

2040

% o

f Tot

al M

arke

tGases and Renewables

Liquids

Solids

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0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Qu

ad B

TU

Natural Gas, NRH

Liquids

Solids

Natural Gas & NRH DriversNatural Gas & NRH Drivers•EfficiencyEfficiency•Economic StabilityEconomic Stability•Economic Well BeingEconomic Well Being•Environmental QualityEnvironmental Quality•Resource AvailabilityResource Availability

Data: EIA

Forecast Tinker


Efficiency

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Natural Gas is Efficient Relative to Other Electricity

Generation Fuels


Economic Stability

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

GD

P G

row

th (

% c

ha

ng

e f

rom

pre

vio

us

ye

ar)

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

Cru

de

Oil

Do

me

sti

c W

ell

he

ad

Pri

ce

($

/bb

l)

8.00%

10.00%GDP Growth

Crude Oil Domestic Wellhead Price

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Natural Gas Could Help Stabilize Energy Price

Volatility


Economic Well-Being

Per capita income

0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

0 5 10 15 20 25 30

Per-capita oil consumption (bbl/yr)

Saudi Arabia

India

China

Indonesia

RussiaBrazil

Mexico

United KingdomFrance

Italy

Japan

Canada

United States

Germany

Note: 15 largest economies shown in red.

Source: JPT, May 2001QAd1023

Economic Prosperity Relies on Available, Affordable Energy


U.S. Carbon Dioxide Emissions from Energy Consumption by End-Use Sector

0

400

800

1,200

1,600

1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999

Non-Electricity Generation in Residential, Commercial and IndustrialTransportationElectricity Generation

Data: EIA, 2002

MM

Metr

ic T

on

s o

f C

oal

Environmental Quality

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Carbon Dioxide Emissions from Electricity Generation

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Other UnitsGas-Fired Units

Petroleum-Fired UnitsCoal-Fired Units

Data, EIA, 2000

Sh

ort

Ton

s

U.S. Electricity Generation by Fuel Source

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

Mkw

h

Other Renewables

Hydro

Nuclear

Natural Gas

Petroleum

Coal

Data, EIA, 20001950 1960 1970 1980 1990 2000

Natural Gas is Clean(er)


1999 NPC Study (NPC, 1999b)Recoverable Portion of In-Place Gas Resource (Tcf)

Cumulative Production (811)

Reserves (157)Reserve Growth (305)

Undiscovered, Unconventional Reserves (1,004)

Unassessed Unconventional Reserves (400)

Geopressured Brine (Up to 24,000)

Gas Hydrate (Up to 300,000) Not Assessed by NPC

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Resource Availability& Sustainability

Increasing development

costs

Increasinguncertainty

Increasing technology

needs

Decreasing gas concentration

IncreasingPotential Resource

U.S. Production to Date

Natural Gas Resources are Available

Although More Unconventional


EIA (1949-1990) and NPC (1991-2015)

L48 Conventional Onshore

Associated and High-Perm Gas

Shallow Offshore

L48 Unconventional Onshore Tight Gas, Shale Gas, CBMDeepwater+Subsalt Offshore

0

5,000

10,000

15,000

20,000

25,000

30,000

1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013

Year

An

nu

al N

atu

ral G

as P

rod

uct

ion

(B

cf)

$2

$3

$1 Wel

lhea

d P

rice

($/

mcf

)

U.S. Natural GasAn Unconventional Future

Demand

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L48 Unconventional OnshoreL48 Unconventional OnshoreDeepwater+Subsalt Offshore

“Conventional” Unconventionals

Tight (Low Permeability)

Shale

Coalbed Methane

“Unconventional” Unconventionals

Deep (>15,000 ft)

Subsalt

Deep Water

Methane Hydrates


Fracture

Transmitted Light CLMatch point

Tight Gas, Shale Gas, CBM

Fractures

Fracture Strike Laubach et al., 2000, The Leading EdgeLaubach, 1997, AAPG Bulletin

East Texas, Travis Peak Formation QAd1023


0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

1970 1975 1980 1985 1990 1995

Bcf

11 Tcf Incremental Gas

GRI, 1999, GRI’s Gas Resource Database. DOE personal communication.

$2

$3

$1

Wel

lhea

d P

rice

($/

Mcf

)

*Advanced Stimulation Technology*Greater Green River Basin Shale Gas*Piceance Basin

DOE

GRI

Federal Alternative Fuels Production Credit for Unconventional Gas

State of Texas Tight Gas Incentives

Policy & InvestmentTight Gas Resources

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600 km0

400 mi0

N

QAc9715c

Bu rea uo fEc on o mi c

Geo lo g y

MAJOR PRODUCTIVE TIGHT GAS BASINS(Technically Recoverable Resources)

Data: NPC (2000), * Based on estimates of NPC (1993), San Juan Basin tight gas resource included with oil field reserve appreciation and new fields in NPC (2000)

Rocky MountainForeland(13.7 Tcf)

Midcontinent(16.9 Tcf)

Arkla-Tex(29.8 Tcf)

Appalachian(18.3 Tcf)

Permian Basin(19.5 Tcf)

Texas GulfOnshore(9.1 Tcf)

San Juan(5.6 Tcf)*

78 Tcf

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0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

1980 1985 1990 1995

Bcf

2.2 Tcf Incremental Gas


$2

$1

Wel

lhea

d P

rice

($/

Mcf

)

Antrim Shale ResearchAppalachian Basin Shales

DOE(1976-1992)

GRI

Policy & InvestmentShale Gas Resources

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600 km0

400 mi0

N

QAc9712c

Ft. WorthBarnett Shale

(7.2 Tcf)

IllinoisNew Albany

(2.9 Tcf)Cincinnati

Arch(2.2 Tcf)


Data: NPC (2000)


Geo lo g y

Michigan Antrim(16.9 Tcf)

MAJOR PRODUCTIVE DEVONIAN SHALE BASINSTechnically Recoverable Resources

40 Tcf

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0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1980 1985 1990 1995

Bcf

DOE

GRI


$2

$1

Wel

lhea

d P

rice

($/

Mcf

)

4.5 Tcf Incremental Gas

Federal Alternative Fuels Production Credit for Unconventional Gas

Policy & InvestmentCoalbed Methane

Resources

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600 km0

400 mi0

N

QAc9714c


Geo lo g y

Powder River(24.0 Tcf)

Hanna-Carbon (4.4 Tcf)Uinta & Piceance(5.5 Tcf)

San Juan(10.2 Tcf)

Northern Appalachianand PA Anthracite

(10.6 Tcf)

Black Warrior(4.4 Tcf)

Raton-Mesa (3.7 Tcf)

Alaska(Bering River, North Slope,

Chignik and Herendeen Bay)(57.0 Tcf)

SW Coal Region(5.8 Tcf)

Data: PGC (2001)

MAJOR PRODUCTIVE COALBED METHANE BASINS(Total Most Likely Resources)

81 Tcf

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Cocuite

Mirador

Veracruz

Jalapa

Córdoba

Cardel

Golfo de M

éxico

P.Oro

Angostura

Cópite

Gloria

Lagarto

M.Pionche

M.R.A.

Mecayucan

Miralejos

NopaltepecNovillero

R.PachecoSan Pablo

T. Higueras

Veinte

Tlacotalpan

Estanzuela

Coapa

277 Km²

240 Km²

280 Km²

180Km²

CAMPO DE GASO ACEITE

SÍSMICA 3D

Playuela

Deep GasSeismic Attribute Analysis

Source: A. Guzman, 2001, HGSPEMEX E&P Planning

QAd1023


600 km0

400 mi0

N

QAc9713cData: PGC (2001)


Geo lo g y

MontanaFolded Belt

(5.2 Tcf)

Wind River(5.0 Tcf)

Greater Green River(8.4 Tcf)

San Joaquin(9.0 Tcf) Anadarko, Palo Duro

(17.7 Tcf)Permian(12.9 Tcf)


LA, MS, AL Salt(15.8 Tcf)

Louisiana Gulf Coast(14.5 Tcf)

TexasGulf Coast(14.3 Tcf)

MAJOR PRODUCTIVE DEEP (>15,000 FT) GAS BASINS(Total Most Likely Resources)

62 Tcf

QAd1023


Deep Water GasSalt Tectonics

Field Studies

Seismic Studies

Numerical Models

Physical Models

Martin Jackson, AGL, BEGQAd1023


600 km0

400 mi0

N

QAc9716c


Geo lo g y

MAJOR PRODUCTIVE DEEP-WATER GAS BASINS(Total Most Likely Resources)

Data: PGC (2001)

Pacific Slope(8.9 Tcf)

Louisiana Slope(12.4 Tcf)

Texas Slope(4.3 Tcf)

Eastern Gulf Slope(7.6 Tcf)Gulf of Mexico OCS

(47.7 Tcf)

71 Tcf

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L48 Unconventional OnshoreDeepwater+Subsalt Offshore

Policy & InvestmentCreating Unconventional Resources

EIA (1949-1990) and NPC (1991-2015)

0

5,000

10,000

15,000

20,000

25,000

30,000

1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013

Year

An

nu

al N

atu

ral G

as P

rod

uct

ion

(B

cf)

170 Tcf

Unc. Gas Major Basins

(Technically Recoverable)

Tight Gas 78 Tcf

Shale Gas 40 Tcf

CBM 81 Tcf

Deep Gas 62 Tcf

Deep Water 71 Tcf

332 TcfQAd1023

U.S. Fossil Energy R&D Funding

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1992 1993 1994 1995 1996 1997 1998 1999

Million

s $

Private

Federal

Data: Science and Engineering Indicators 2000, NSF.


Summary

Efficiency, economy, environment and resource availability all point towards a natural gas future.Natural gas will come increasingly from “unconventional sources”, and history shows that a balance between production incentives and technology investment will result in the creation of new unconventional natural gas resources.

QAd1023

The Federal/Private research and technology investment ratio needs to be increased if the U.S. transition to natural gas is to be smooth.


Thank you!

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Documents

Natural Gas Technology: Investing in a Healthy U.S. Energy Future