Presentation Slides - ncac-usaee
NCAC Annual Energy Policy Conference
The Revolution will be Quantified: Understanding the Tight Oil/Liquids Revolution Prepared for:
NCAC
16th
Annual Energy Policy Conference Prepared By:
Tyler Van Leeuwen [email protected] ADVANCED RESOURCES INTERNATIONAL, INC. Arlington, VA USA April 3, 2012
1
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
The Tight Oil Revolution: Outline for Discussion 1. How Did We Get Here? Building the Foundation for the Revolution
2. Where is Here? The Liquids-Rich Landscape 3. Where are We Going? Our Productive Capacity Forecast for Liquids 4. Conclusions/Observations
2
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
1. How Did We Get Here? Building the Foundation for the Liquids Revolution
3
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
First, there was the Bakken….. Horizontal drilling into the Upper Bakken member had been ongoing since 1987, but was only successful when wells encountered oil bearing natural fracture systems. Low oil prices in the 1990’s effectively killed the play.
4
•
The Bakken “Shale” re-emerged as a viable horizontal oil play in 2000, when Lyco Energy (later purchased by Enerplus) targeted the “Middle Bakken” carbonate member in the (structurallydefined) Elm Coulee oilfield in Montana. By 2005, 300 wells had been drilled into the Elm Coulee field, enabling oil production to reach 40,000 B/D.
•
Next, EOG Resources demonstrated the much greater potential offered by Middle Bakken in North Dakota by using long-lateral massively-fractured Hz wells developed in shale gas plays.
•
Today, over 4,000 wells have been drilled into the ND and MT Bakken and Three Forks formations, with production averaging 375 MB/D in 2011 and exiting the year at 520 MB/D.
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
First, there was the Bakken….. Annual oil production from the Bakken Shale
Lyco Energy drills first horizontal well into the Middle Bakken member of the Elm Coulee field 5
JAF2012_027.PPT
April 3rd, 2012
EOG Drills Nelson Farms 1-24 H Well, demonstrating Elm Coulee-like potential exists in North Dakota
Source: NDIC, MBOGC
NCAC Annual Energy Policy Conference
Building the Foundation for the Liquids Revolution Despite the success in the Bakken, industry was skeptical that oil could be economically produced from other shale formations. As with the “Shale Gas Revolution,” the “Shale Liquids Revolution” required overcoming conventional wisdom: 1. “Oil molecules are too big to pass through the pore matrices of tight shale reservoirs.” 2. “Oil production will only be from natural and induced fractures near the wellbore -- production will be very short lived.” 3. “Retrograde condensation will kill permeability as liquids drop out in the reservoir.”
The Bakken Shale, in which oil is produced from a more permeable carbonate layer sandwiched between shale source rocks, was seen as a “oneoff” “exception to “conventional wisdom.” Enter EOG Resources, again. 6
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
It’s the Pore Throat Distribution! EOG hypothesized that microdarcy shale formations, such as the Barnett and Eagle Ford, contain pore throats of sufficient size to allow for the release of oil molecules.
Source: EOG 7
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
It’s the Pore Throat Distribution! Using scanning electron microscopy, EOG confirmed its hypothesis -- that microdarcy shale formations, contain pore throats of sufficient size to pass oil molecules, and posses significant interconnected pore networks.
Source: EOG 8
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
It’s Not Just Fracture Drainage EOG also determined that production data from vertical wells showed hyperbolic decline in the Eagle Ford and Barnett combo plays, suggesting oil was coming from both fractures and the shale matrix. In an important test of its conjectures, EOG began drilling horizontal wells into a true shale, the oil prone area of the Barnett Shale.
Source: EOG 9
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
Vindication After demonstrating the success of liquids production from the oil rich portion of the Barnett shale, EOG launched it’s Eagle Ford “coup,” leasing 500,000 acres in the condensate-rich north-eastern area of this marine shale play. Up from essentially zero in 2007, oil and condensate production from the Eagle Ford reached an average rate of almost 140,000 B/D last year. The Age of Tight Oil had arrived! Oil production from the Eagle Ford Shale
Source: TXRRC 10
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
2. Where is Here?: The Current Tight Liquids Resource Landscape
11
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
The Liquids-Rich Landscape Encouraged by EOG’s success in producing significant volumes of oil from the Bakken and Eagle Ford shales and impoverished by falling gas prices, industry has identified a robust, evergrowing landscape of oiland liquids-rich shale and tight gas plays.
Bakken Utica
Niobrara
Marcellus Mississippian Lime
Anadarko Basin Complex Barnett Combo Wolfcamp/ Bone Springs
12
JAF2012_027.PPT
April 3rd, 2012
Eagle Ford
NCAC Annual Energy Policy Conference
The Liquids-Rich Landscape Several important “liquids-rich plays,” such as the Granite Wash, Eagle Ford, and SW Marcellus, are considered “Transitional” and contain significant volumes of NGLs and gas.
Liquid-Rich Unconventional Plays with Significant Development Region
Play Wolfcamp Shale Permian Bone Springs Avalon Shale East Texas Barnett Combo South Texas Eagle Ford Granite Wash Marmaton Mid-Continent Cleveland/Tonkawa Woodford Cana Mississippian Lime Rockies Niobrara Nothern Great Plains Bakken SW Marcellus Appalachia Utica 13
JAF2012_027.PPT
April 3rd, 2012
Type Oil-Dominated Oil-Dominated Oil-Dominated Transitional Transitional Transitional Transitional Transitional Transitional Oil-Dominated Oil-Dominated Oil-Dominated Transitional TBD
NCAC Annual Energy Policy Conference
The “Transitional” Liquids-Rich Eagle Ford Shale Play Wells in the central and northern portions of the play produce significant amounts of condensate and liquids-rich natural gas. Wells along the southern border of the play produce primarily dry gas.
1414
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April 3rd, 2012
NCAC Annual Energy Policy Conference
State of the Liquids Revolution Several important “liquids-rich plays,” such as the Eagle Ford, Wolfcamp Shale and Granite Wash, contain significant volumes of NGLs and gas. Composition of Production (Btus)
Granite Wash Liquids Rich Gas Play – Washita County
15
JAF2012_027.PPT
April 3rd, 2012
Wolfcamp Shale Oil Play – Delaware Basin
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified Several important “liquids-rich plays,” such as the Eagle Ford, Wolfcamp Shale and Granite Wash, contain significant volumes of NGLs and gas. • Yes, but what do I mean by significant? How much resource exists in these plays?? • First, some words on our methodology
16
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified We use the following sophisticated math to calculate recoverable resources: Detailed Geologic Evaluation
17
JAF2012_027.PPT
April 3rd, 2012
Play Area * Risk Factor = Developable Area
NCAC Annual Energy Policy Conference
Eagle Ford Gas Shales: Depth Map
Using depth and other geologic parameters, we divide the Eagle Ford shale into 7 distinct plays
1818
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified We use the following sophisticated math to calculate recoverable resources: Developable Area Well Mapping/ Performance evaluation “Type Well” Construction/ Hyperbolic Curvefitting
19
JAF2012_027.PPT
April 3rd, 2012
* Well Spacing/Well Success Rate = Successful Wells * Well EUR
NCAC Annual Energy Policy Conference
Eagle Ford Shale: Play 2 Well Performance (Oil) We use actual well data to develop a “type curve,” then fit a hyperbolic trend line to the data to develop a 30 year EUR.
Type Well Match Max Rate (B/D):
300
Ai:
4.5
b:
1.05
B/d
300
250
Gas:Condensate Ratio (Mcf/Bbl):
200
Year of Data:
150
Months of Data:
25
Number of Wells:
34
EUR (MBbls)
130
100 50
0 0
2
4
6
8
10 12 14 16 18 20 22 24 26 28 Months on Production
Actual Data
Type Curve
Note: Data in “type curve” are from aggregate 2009-2010 wells. 2020
JAF2012_027.PPT
April 3rd, 2012
24 2009-2011
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified We use the following sophisticated math to calculate recoverable resources: Detailed Geologic Evaluation
Well Mapping/ Performance evaluation “Type Well” Construction/ Hyperbolic Curvefitting 21
JAF2012_027.PPT
April 3rd, 2012
Play Area * Risk Factor = Developable Area
* Well Spacing/Well Success Rate = Successful Wells * Well EUR
=
Recoverable Resources
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified Based on our current analysis, the liquids resource contained in U.S. unconventional plays is:
100+ Billion Barrels 44 Billion Barrels of Oil and….
57 Billion Barrels of NGLs The liquids rich plays alone contain 316 Tcf of dry gas, almost all of which is economic to produce at today’s prices, thanks to liquids.
22
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
Liquids-Rich Plays on the Horizon Numerous new and emerging liquids-rich shale gas plays will add to domestic gas and liquids productive capacity also show potential
23
•
Gulf Coast Tuscaloosa Marine Shale (EnCana: 2 Hz w/30 day IP of 690 B/D; 10 wells in 2012).
•
Louisiana/Mississippi Lower Smackover Brown Dense Shale (Southwestern Energy: 6 wells w/first well marginally productive; others: 8 wells).
•
Michigan Basin Collingwood Shale, A-1 Carbonate and Utica/Pt. Pleasant Shale (EnCana: 2 Hz w/7 day IP of 3.1 and 6.5 MMcfd; 90 Bbls of NGL per MMcf; Devon: 1 well w/mixed results, 15 wells in 2012 w/Sinopec JV)).
•
Montana Heath Shale (Endeavor: 4 well pilot; Others: 20 tests wells).
•
California “Monterey Shale” (15 billion barrels recoverable (EIA, 2011); Oxy: 140 shale wells in 1st half 2012).
•
Alaska shales (2 billion barrels recoverable (USGS, 2012); Great Bear: 4 test wells this winter).
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
3. Where Are We Going?: Liquids-Rich Productive Capacity Forecast
24
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
Methodology for Estimating Domestic Natural Gas Productive Capacity Our unconventional gas production projections are based on our internal resource data base and supply model (MUGS). Our current forecast uses the AEO 2012 Reference Case (Early Release) for the natural gas and oil price track. The Advanced Resources’ Unconventional Gas Supply And Technology Model (MUGS)
Resource Base and Productivity Module Activity, Production and Reserves Module
Technology Impacts and Timing Module
INTEGRATED ASSESSMENTS OF SUPPLY AND PRODUCTION
Costs and Economic Module*
Drilling and Capital Allocation Module
Production, Reserve Additions and Reserves Accounting Module
*MUGS contains a series of cost-price factors that relate costs to changes in natural gas prices. 25
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
EIA AEO 2012: Reference Case Natural Gas and Oil Prices Natural Gas Prices (Henry Hub, $2010/MMBtu)
26
JAF2012_027.PPT
April 3rd, 2012
Oil Prices (Average Wellhead, $2010/Barrel)
NCAC Annual Energy Policy Conference
Tight Oil Productive Capacity Based on our current resource and economic evaluations, liquids rich plays could provide 4MM Bbls/day of crude oil supply by 2030. •
Last year’s tight oil and associated condensate production of 656,000 barrels per day was primarily from the Bakken and Eagle Ford shales.
•
While the Bakken remains the largest tight oil source through 2030, peaking at 1.45 MM BBls/day in 2020, Permian Basin oil plays exhibit the fastest growth – increasing from 56MB/d in 2011 to over 800 MB/d in 2030.
Bakken/Three Forks Eagle Ford Anadarko Permian Others Total JAF2012_021.XLS
27
JAF2012_027.PPT
April 3rd, 2012
2011 375 125 67 56 33 656
Tight Oil Production (MB/D) 2012 2015 2020 650 1,040 1,450 180 420 520 130 230 420 80 260 480 60 380 600 1,100 2,330 3,470
2030 1,250 580 560 820 860 4,070
NCAC Annual Energy Policy Conference
NGL Productive Capacity We anticipate a “tidal wave” of natural gas liquids productive capacity from liquids-rich shales and tight sands. •
The shift to liquids-rich shale and tight sand plays portends the onset of massive new NGL productive capacity (in MB/D) from the Eagle Ford, Permian, Granite Wash and other such plays.
•
Natural gas liquids productive capacity from shales and tight sands, currently at 1.4 MMB/D is projected to increase to 3.8 MMB/D by 2020 and to 4.9 MMB/D by 2030.
Eagle Ford Permian* Anadarko* Others** Total
2011
2012
2015
2020
2030
128 30 195 1,054 1,407
200 40 270 1,180 1,690
510 110 430 1,740 2,790
690 210 710 2,220 3,830
900 350 860 2,770 4,880
*Includes both shales and tight sands **Includes Barnett Combo, Marcellus, Utica, Cotton Valley, Piceance/Uinta, among others
28
JAF2012_027.PPT
April 3rd, 2012
JAF2012_021.XLS
NCAC Annual Energy Policy Conference
The Fate of Dry Gas Production In pursuit of better economics offered by liquids-rich plays, operators have curtailed drilling in dry gas plays like the Barnett and Haynesville. Don’t be alarmed. •
From 170 rigs in BOY 2009, the Barnett rig count has dropped precipitously, beginning 2012 with about 40 rigs. A similar trend is evident in the Haynesville (though not in the Fayetteville or Marcellus).
•
These rigs are moving to the less gassy Permian, Anadarko and Eagle Ford shales and tight gas sand plays.
•
While the “conventional wisdom” suggests that dry gas production will fall significantly due to this shift in rights, the liquids-rich plays also provide significant volumes of natural gas. Natural Gas Productive Capacity from Liquids-Rich Plays, Dry (Bcfd)
Bakken/Three Forks Eagle Ford Anadarko Permian Others Total 29
JAF2012_027.PPT
April 3rd, 2012
2011 0.1 0.9 1.8 0.1 1.0 3.9
Dry Gas Production 2012 2015 2020 0.1 0.2 0.3 1.3 2.4 2.9 2.4 3.3 5.1 0.1 0.3 0.7 1.3 2.3 4.1 5.2 8.5 13.0
2030 0.3 4.8 6.2 1.1 5.3 17.7
NCAC Annual Energy Policy Conference
4. Conclusions/Observations
30
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April 3rd, 2012
NCAC Annual Energy Policy Conference
Conclusions/Observations • The potential of Liquids-rich shales was discovered by a number of innovative firms that did not restrain themselves with conventional dogmas. (Sounds like the Shale Gas Revolution…..) • The resource contained in already discovered plays is vast (100+ Billion barrels), and includes more than just oil. • 44 Billion Barrels of Oil, 57 Billion Barrels of NGLs, with 300+ Tcf of Dry Gas in the liquids-rich plays alone. •
More exists in undeveloped plays.
• The economic boost given these plays by high oil prices makes these plays very economic in a low gas price environment. • Robust economics and highly productive wells allow for significant productive capacity. • These plays could provide almost 9 million B/d of oil and NGLS and 18 Bcfd of natural gas by 2030. 31
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
Conclusions/Observations • The opportunity provided by liquids rich shales is unprecedented in scale, and can enable a significant reduction in our dependence on imported petroleum. • “To whom much has been given, much shale be expected”. • To address the tidal wave of NGL productive capacity, massive investments in NGL processing and gathering systems are required. • Then there’s the problem of finding markets for all those products!
• The current practice of flaring produced gas, currently over 100MMcfd of wet gas in the Bakken, is environmentally unacceptable (over 2 MM tons of CO2 emissions annually) and a destruction of a valuable commodity ($350 Million of value up in smoke). Still more flaring is ongoing in frontier plays like the Niobrara and Eagle Ford. 32
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
Advanced Resources International www.adv-res.com
33
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April 3rd, 2012
Office Locations Washington, DC 4501 Fairfax Drive, Suite 910 Arlington, VA 22203 Phone: (703) 528-8420 Fax: (703) 528-0439
Houston, Texas 11490 Westheimer, Suite 520 Houston, TX 77042 Phone: (281) 558-6569 Fax: (281) 558-9202
The Revolution will be Quantified: Understanding the Tight Oil/Liquids Revolution Prepared for:
NCAC
16th
Annual Energy Policy Conference Prepared By:
Tyler Van Leeuwen [email protected] ADVANCED RESOURCES INTERNATIONAL, INC. Arlington, VA USA April 3, 2012
1
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
The Tight Oil Revolution: Outline for Discussion 1. How Did We Get Here? Building the Foundation for the Revolution
2. Where is Here? The Liquids-Rich Landscape 3. Where are We Going? Our Productive Capacity Forecast for Liquids 4. Conclusions/Observations
2
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
1. How Did We Get Here? Building the Foundation for the Liquids Revolution
3
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
First, there was the Bakken….. Horizontal drilling into the Upper Bakken member had been ongoing since 1987, but was only successful when wells encountered oil bearing natural fracture systems. Low oil prices in the 1990’s effectively killed the play.
4
•
The Bakken “Shale” re-emerged as a viable horizontal oil play in 2000, when Lyco Energy (later purchased by Enerplus) targeted the “Middle Bakken” carbonate member in the (structurallydefined) Elm Coulee oilfield in Montana. By 2005, 300 wells had been drilled into the Elm Coulee field, enabling oil production to reach 40,000 B/D.
•
Next, EOG Resources demonstrated the much greater potential offered by Middle Bakken in North Dakota by using long-lateral massively-fractured Hz wells developed in shale gas plays.
•
Today, over 4,000 wells have been drilled into the ND and MT Bakken and Three Forks formations, with production averaging 375 MB/D in 2011 and exiting the year at 520 MB/D.
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
First, there was the Bakken….. Annual oil production from the Bakken Shale
Lyco Energy drills first horizontal well into the Middle Bakken member of the Elm Coulee field 5
JAF2012_027.PPT
April 3rd, 2012
EOG Drills Nelson Farms 1-24 H Well, demonstrating Elm Coulee-like potential exists in North Dakota
Source: NDIC, MBOGC
NCAC Annual Energy Policy Conference
Building the Foundation for the Liquids Revolution Despite the success in the Bakken, industry was skeptical that oil could be economically produced from other shale formations. As with the “Shale Gas Revolution,” the “Shale Liquids Revolution” required overcoming conventional wisdom: 1. “Oil molecules are too big to pass through the pore matrices of tight shale reservoirs.” 2. “Oil production will only be from natural and induced fractures near the wellbore -- production will be very short lived.” 3. “Retrograde condensation will kill permeability as liquids drop out in the reservoir.”
The Bakken Shale, in which oil is produced from a more permeable carbonate layer sandwiched between shale source rocks, was seen as a “oneoff” “exception to “conventional wisdom.” Enter EOG Resources, again. 6
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
It’s the Pore Throat Distribution! EOG hypothesized that microdarcy shale formations, such as the Barnett and Eagle Ford, contain pore throats of sufficient size to allow for the release of oil molecules.
Source: EOG 7
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
It’s the Pore Throat Distribution! Using scanning electron microscopy, EOG confirmed its hypothesis -- that microdarcy shale formations, contain pore throats of sufficient size to pass oil molecules, and posses significant interconnected pore networks.
Source: EOG 8
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
It’s Not Just Fracture Drainage EOG also determined that production data from vertical wells showed hyperbolic decline in the Eagle Ford and Barnett combo plays, suggesting oil was coming from both fractures and the shale matrix. In an important test of its conjectures, EOG began drilling horizontal wells into a true shale, the oil prone area of the Barnett Shale.
Source: EOG 9
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
Vindication After demonstrating the success of liquids production from the oil rich portion of the Barnett shale, EOG launched it’s Eagle Ford “coup,” leasing 500,000 acres in the condensate-rich north-eastern area of this marine shale play. Up from essentially zero in 2007, oil and condensate production from the Eagle Ford reached an average rate of almost 140,000 B/D last year. The Age of Tight Oil had arrived! Oil production from the Eagle Ford Shale
Source: TXRRC 10
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
2. Where is Here?: The Current Tight Liquids Resource Landscape
11
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
The Liquids-Rich Landscape Encouraged by EOG’s success in producing significant volumes of oil from the Bakken and Eagle Ford shales and impoverished by falling gas prices, industry has identified a robust, evergrowing landscape of oiland liquids-rich shale and tight gas plays.
Bakken Utica
Niobrara
Marcellus Mississippian Lime
Anadarko Basin Complex Barnett Combo Wolfcamp/ Bone Springs
12
JAF2012_027.PPT
April 3rd, 2012
Eagle Ford
NCAC Annual Energy Policy Conference
The Liquids-Rich Landscape Several important “liquids-rich plays,” such as the Granite Wash, Eagle Ford, and SW Marcellus, are considered “Transitional” and contain significant volumes of NGLs and gas.
Liquid-Rich Unconventional Plays with Significant Development Region
Play Wolfcamp Shale Permian Bone Springs Avalon Shale East Texas Barnett Combo South Texas Eagle Ford Granite Wash Marmaton Mid-Continent Cleveland/Tonkawa Woodford Cana Mississippian Lime Rockies Niobrara Nothern Great Plains Bakken SW Marcellus Appalachia Utica 13
JAF2012_027.PPT
April 3rd, 2012
Type Oil-Dominated Oil-Dominated Oil-Dominated Transitional Transitional Transitional Transitional Transitional Transitional Oil-Dominated Oil-Dominated Oil-Dominated Transitional TBD
NCAC Annual Energy Policy Conference
The “Transitional” Liquids-Rich Eagle Ford Shale Play Wells in the central and northern portions of the play produce significant amounts of condensate and liquids-rich natural gas. Wells along the southern border of the play produce primarily dry gas.
1414
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
State of the Liquids Revolution Several important “liquids-rich plays,” such as the Eagle Ford, Wolfcamp Shale and Granite Wash, contain significant volumes of NGLs and gas. Composition of Production (Btus)
Granite Wash Liquids Rich Gas Play – Washita County
15
JAF2012_027.PPT
April 3rd, 2012
Wolfcamp Shale Oil Play – Delaware Basin
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified Several important “liquids-rich plays,” such as the Eagle Ford, Wolfcamp Shale and Granite Wash, contain significant volumes of NGLs and gas. • Yes, but what do I mean by significant? How much resource exists in these plays?? • First, some words on our methodology
16
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified We use the following sophisticated math to calculate recoverable resources: Detailed Geologic Evaluation
17
JAF2012_027.PPT
April 3rd, 2012
Play Area * Risk Factor = Developable Area
NCAC Annual Energy Policy Conference
Eagle Ford Gas Shales: Depth Map
Using depth and other geologic parameters, we divide the Eagle Ford shale into 7 distinct plays
1818
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified We use the following sophisticated math to calculate recoverable resources: Developable Area Well Mapping/ Performance evaluation “Type Well” Construction/ Hyperbolic Curvefitting
19
JAF2012_027.PPT
April 3rd, 2012
* Well Spacing/Well Success Rate = Successful Wells * Well EUR
NCAC Annual Energy Policy Conference
Eagle Ford Shale: Play 2 Well Performance (Oil) We use actual well data to develop a “type curve,” then fit a hyperbolic trend line to the data to develop a 30 year EUR.
Type Well Match Max Rate (B/D):
300
Ai:
4.5
b:
1.05
B/d
300
250
Gas:Condensate Ratio (Mcf/Bbl):
200
Year of Data:
150
Months of Data:
25
Number of Wells:
34
EUR (MBbls)
130
100 50
0 0
2
4
6
8
10 12 14 16 18 20 22 24 26 28 Months on Production
Actual Data
Type Curve
Note: Data in “type curve” are from aggregate 2009-2010 wells. 2020
JAF2012_027.PPT
April 3rd, 2012
24 2009-2011
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified We use the following sophisticated math to calculate recoverable resources: Detailed Geologic Evaluation
Well Mapping/ Performance evaluation “Type Well” Construction/ Hyperbolic Curvefitting 21
JAF2012_027.PPT
April 3rd, 2012
Play Area * Risk Factor = Developable Area
* Well Spacing/Well Success Rate = Successful Wells * Well EUR
=
Recoverable Resources
NCAC Annual Energy Policy Conference
State of the Liquids Revolution: The Revolution will Be Quantified Based on our current analysis, the liquids resource contained in U.S. unconventional plays is:
100+ Billion Barrels 44 Billion Barrels of Oil and….
57 Billion Barrels of NGLs The liquids rich plays alone contain 316 Tcf of dry gas, almost all of which is economic to produce at today’s prices, thanks to liquids.
22
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
Liquids-Rich Plays on the Horizon Numerous new and emerging liquids-rich shale gas plays will add to domestic gas and liquids productive capacity also show potential
23
•
Gulf Coast Tuscaloosa Marine Shale (EnCana: 2 Hz w/30 day IP of 690 B/D; 10 wells in 2012).
•
Louisiana/Mississippi Lower Smackover Brown Dense Shale (Southwestern Energy: 6 wells w/first well marginally productive; others: 8 wells).
•
Michigan Basin Collingwood Shale, A-1 Carbonate and Utica/Pt. Pleasant Shale (EnCana: 2 Hz w/7 day IP of 3.1 and 6.5 MMcfd; 90 Bbls of NGL per MMcf; Devon: 1 well w/mixed results, 15 wells in 2012 w/Sinopec JV)).
•
Montana Heath Shale (Endeavor: 4 well pilot; Others: 20 tests wells).
•
California “Monterey Shale” (15 billion barrels recoverable (EIA, 2011); Oxy: 140 shale wells in 1st half 2012).
•
Alaska shales (2 billion barrels recoverable (USGS, 2012); Great Bear: 4 test wells this winter).
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
3. Where Are We Going?: Liquids-Rich Productive Capacity Forecast
24
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
Methodology for Estimating Domestic Natural Gas Productive Capacity Our unconventional gas production projections are based on our internal resource data base and supply model (MUGS). Our current forecast uses the AEO 2012 Reference Case (Early Release) for the natural gas and oil price track. The Advanced Resources’ Unconventional Gas Supply And Technology Model (MUGS)
Resource Base and Productivity Module Activity, Production and Reserves Module
Technology Impacts and Timing Module
INTEGRATED ASSESSMENTS OF SUPPLY AND PRODUCTION
Costs and Economic Module*
Drilling and Capital Allocation Module
Production, Reserve Additions and Reserves Accounting Module
*MUGS contains a series of cost-price factors that relate costs to changes in natural gas prices. 25
JAF2012_027.PPT
April 3rd, 2012
NCAC Annual Energy Policy Conference
EIA AEO 2012: Reference Case Natural Gas and Oil Prices Natural Gas Prices (Henry Hub, $2010/MMBtu)
26
JAF2012_027.PPT
April 3rd, 2012
Oil Prices (Average Wellhead, $2010/Barrel)
NCAC Annual Energy Policy Conference
Tight Oil Productive Capacity Based on our current resource and economic evaluations, liquids rich plays could provide 4MM Bbls/day of crude oil supply by 2030. •
Last year’s tight oil and associated condensate production of 656,000 barrels per day was primarily from the Bakken and Eagle Ford shales.
•
While the Bakken remains the largest tight oil source through 2030, peaking at 1.45 MM BBls/day in 2020, Permian Basin oil plays exhibit the fastest growth – increasing from 56MB/d in 2011 to over 800 MB/d in 2030.
Bakken/Three Forks Eagle Ford Anadarko Permian Others Total JAF2012_021.XLS
27
JAF2012_027.PPT
April 3rd, 2012
2011 375 125 67 56 33 656
Tight Oil Production (MB/D) 2012 2015 2020 650 1,040 1,450 180 420 520 130 230 420 80 260 480 60 380 600 1,100 2,330 3,470
2030 1,250 580 560 820 860 4,070
NCAC Annual Energy Policy Conference
NGL Productive Capacity We anticipate a “tidal wave” of natural gas liquids productive capacity from liquids-rich shales and tight sands. •
The shift to liquids-rich shale and tight sand plays portends the onset of massive new NGL productive capacity (in MB/D) from the Eagle Ford, Permian, Granite Wash and other such plays.
•
Natural gas liquids productive capacity from shales and tight sands, currently at 1.4 MMB/D is projected to increase to 3.8 MMB/D by 2020 and to 4.9 MMB/D by 2030.
Eagle Ford Permian* Anadarko* Others** Total
2011
2012
2015
2020
2030
128 30 195 1,054 1,407
200 40 270 1,180 1,690
510 110 430 1,740 2,790
690 210 710 2,220 3,830
900 350 860 2,770 4,880
*Includes both shales and tight sands **Includes Barnett Combo, Marcellus, Utica, Cotton Valley, Piceance/Uinta, among others
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NCAC Annual Energy Policy Conference
The Fate of Dry Gas Production In pursuit of better economics offered by liquids-rich plays, operators have curtailed drilling in dry gas plays like the Barnett and Haynesville. Don’t be alarmed. •
From 170 rigs in BOY 2009, the Barnett rig count has dropped precipitously, beginning 2012 with about 40 rigs. A similar trend is evident in the Haynesville (though not in the Fayetteville or Marcellus).
•
These rigs are moving to the less gassy Permian, Anadarko and Eagle Ford shales and tight gas sand plays.
•
While the “conventional wisdom” suggests that dry gas production will fall significantly due to this shift in rights, the liquids-rich plays also provide significant volumes of natural gas. Natural Gas Productive Capacity from Liquids-Rich Plays, Dry (Bcfd)
Bakken/Three Forks Eagle Ford Anadarko Permian Others Total 29
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2011 0.1 0.9 1.8 0.1 1.0 3.9
Dry Gas Production 2012 2015 2020 0.1 0.2 0.3 1.3 2.4 2.9 2.4 3.3 5.1 0.1 0.3 0.7 1.3 2.3 4.1 5.2 8.5 13.0
2030 0.3 4.8 6.2 1.1 5.3 17.7
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4. Conclusions/Observations
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Conclusions/Observations • The potential of Liquids-rich shales was discovered by a number of innovative firms that did not restrain themselves with conventional dogmas. (Sounds like the Shale Gas Revolution…..) • The resource contained in already discovered plays is vast (100+ Billion barrels), and includes more than just oil. • 44 Billion Barrels of Oil, 57 Billion Barrels of NGLs, with 300+ Tcf of Dry Gas in the liquids-rich plays alone. •
More exists in undeveloped plays.
• The economic boost given these plays by high oil prices makes these plays very economic in a low gas price environment. • Robust economics and highly productive wells allow for significant productive capacity. • These plays could provide almost 9 million B/d of oil and NGLS and 18 Bcfd of natural gas by 2030. 31
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Conclusions/Observations • The opportunity provided by liquids rich shales is unprecedented in scale, and can enable a significant reduction in our dependence on imported petroleum. • “To whom much has been given, much shale be expected”. • To address the tidal wave of NGL productive capacity, massive investments in NGL processing and gathering systems are required. • Then there’s the problem of finding markets for all those products!
• The current practice of flaring produced gas, currently over 100MMcfd of wet gas in the Bakken, is environmentally unacceptable (over 2 MM tons of CO2 emissions annually) and a destruction of a valuable commodity ($350 Million of value up in smoke). Still more flaring is ongoing in frontier plays like the Niobrara and Eagle Ford. 32
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Advanced Resources International www.adv-res.com
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Office Locations Washington, DC 4501 Fairfax Drive, Suite 910 Arlington, VA 22203 Phone: (703) 528-8420 Fax: (703) 528-0439
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