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Tinker, 2014
Bureau of Economic Geology Jackson School of Geosciences, The University of Texas at Austin
Microseismic February, 2014
US Shale Gas Reserve and
Production Forecasts and
Implications for Shale Oil
Scott W. Tinker
John Browning, Svetlana Ikonnikova, Gürcan Gülen, Eric Potter,
Frank Male, Qilong Fu, Katie Smye, Susan Horvath, Tad Patzek, Ken Medlock, Forrest Roberts and William Fisher
Tinker, 2014
U.S. Shale Gas Reserves and Production Forecasts
The Impact of Shale on US and Global Gas and Oil Markets
Above Ground Challenges and Implications
Outline
Tinker, 2014
BEG 3-Year Study Shale Gas Reserve & Production Forecasting
3-year project, funded by the Alfred P. Sloan Foundation
Four plays: Barnett, Fayetteville, Haynesville, Marcellus
Multidisciplinary team of geoscientists, engineers, and economists.
Goal: Objective understanding of the capability of
U.S. shale gas to contribute to natural gas supply
for the next 20 years
Tinker, 2014
Framing Questions
What is the original resource base in place?
What portion of the resource is technically recoverable?
What portion of the technically recoverable resource is economically recoverable?
What impact will these levels of production have on infrastructure, roads, water, regulation, jobs, taxes…
Tinker, 2014
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Tier 7 Tier 8 Tier 9 Tier 10
Barnett Low Btu
Barnett High Btu
Fayetteville Shallow
Fayetteville Medium
Fayetteville Deep
Haynesville
Breakeven Economics 10% IRR
Economics by Tier (Bcf)
Tinker, 2014
“Bottom Up”
Well Recovery
Drainage Areas
Infill Drilling Potential
Drainage areas
of the existing
wells
Ikonnikova S., et al. 2013. SPE Res. Eval & Eng (resubmitted)
Tinker, 2014
Barnett: • Variable leases
• Multiple operators
• Wide range of
completion types
Ikonnikova S., et al. 2013. SPE Res. Eval & Eng (resubmitted)
Tinker, 2014
Parameters Considered Economic Well Life Limit (mmcf/d)
Basis to Henry Hub ($/mmbtu)
Royalty Rate (%)
Severance Tax Rate (%)
Marginal Tax Rate (%)
Inflation Rate (%)
Drilling Cost (CAPEX)
Related CAPEX Factor (%)
Expense/Well/Year
Gathering, Compression, Treatment
NGL Transport Cost
Water Cut (bbl/mcf)
Water Disposal Cost
Oil Yield
GPL Yield
Gas Shrinkage
Processing Fee
Lease Cost/acre
Spacing (ac)
Depletion Cost
Abandonment Cost
Basis to Henry Hub
WTI Price
GPL/WTI Ratio
Developable Acreage Ceiling
• Partly Drained
• Undrilled
Annual Technology Improvement
Annual Well Cost Improvement
Minimum Completions in a Year
Attrition
Tinker, 2014
Barnett Production Outlook
Model forecast
was accurate
for 2011-2012
~15,000 wells ~11,000 wells ~3,000 wells
Browning, J. et al. 2013. SPE Econ & Mgmt
Tinker, 2014
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
0
0.5
1
1.5
2
2.5
1995 2000 2005 2010 2015 2020 2025 2030
He
nry
Hu
b $
20
10
Tcf
pe
r Y
ea
r
Tcf per Year (Base Case Sensitivity to Price)
Tcf @ $10 HH
Tcf @ $6 HH
Tcf @ $4 HH
Tcf @ $3 HH
Henry Hub $2010
Barnett
Production Forecast
Tinker, 2014
Economic Production Distribution
Monte Carlo
0.000
0.005
0.010
0.015
0.020
0.025
0.030
0.035
0.040
0.045
0.050
29 34 39 44 49 55 60 65 70
Re
lati
ve
Fre
qu
en
cy
Cumulative Production (Tcf)
Barnett
0.000
0.005
0.010
0.015
0.020
0.025
0.030
0.035
0.040
0.045
0.050
29 34 39 44 49 55 60 65 70
Re
lati
ve
Fre
qu
en
cy
Cumulative Production (Tcf)
35 Tcf
56 Tcf
45 Tcf
Browning, J. et al. 2013. SPE Econ & Mgmt
Tinker, 2014
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
2005 2010 2015 2020 2025 2030
He
nry
Hu
b $
20
10
Tcf
pe
r ye
ar
Tcf per Year (Base Case Sensitivity to Price)
Tcf @ $10 HH
Tcf @ $6 HH
Tcf @ $4 HH
Tcf @ $3 HH
HH $2010
Fayetteville
Production Forecast
Tinker, 2014
U.S. Shale Gas Reserves and Production Forecasts
The Impact of Shale on US and Global Gas and Oil Markets
Above Ground Challenges and Implications
Outline
Tinker, 2014
Population ~1 billion people per color
More people live
inside the circle
than outside…
Tinker, 2014
Global Energy Mix and Demand
1017
820
468
207 156 57
302
149 28
5
166
16
880
975
517
267
191 99
376
371
10 5
167
111
98
3 24 1
1389
562 2609
78 289 64
(MTOE)
Tinker, 2014
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
1970 1975 1980 1985 1990 1995 2000 2005 2010
BC
F/D
ay
Total North America Total S. & Cent. America Total Europe & Eurasia
Total Middle East Total Africa Total Asia Pacific
Global Natural Gas Production
115 Tcfy
Source: BP Statistical Review 2012
Tinker, 2014
Natural Gas Supply
Resources and Cost
QAe980
Source: IEA World Energy Outlook (2009)
0 100 200 400 300 500 1,000 1,100 600 700 800 900
Resources (trillion cubic meters)
Pro
du
cti
on
co
st
(200
8 $
/Mb
tu)
LNG
Sour
Arc
tic
De
ep
Wa
ter
Shale C
oa
l B
ed
M
eth
an
e
Pro
du
ce
d
Co
nv
en
tio
na
l
Tight
15
10
5
0
4X
Tinker, 2014
5
10
15
20
25
30
Mark
ete
d P
rod
ucti
on
(Tcf)
0 0
50
100
150
200
250
300
Pro
ved
Reserv
es (T
cf)
U.S. Natural Gas Production and Reserves
Data: BP World Energy 2012
End-of-Year
U.S. Proved Reserves
Annual
U.S. Production
Tinker, 2014
U.S. Natural Gas Production (TcF)
http://www.eia.gov/energy_in_brief/about_shale_gas.cfm
0
5
10
15
20
25
1990 1995 2000 2005 2010
Shale gas
Coalbed methane
Tight gas
Non-associated offshore Alaska
Associated with oil
Non-associated onshore
14 TcF
9 TcF
23 TcF
Tinker, 2014
Conventional Gas
Total Natural Gas
From a 2004 Tinker Talk to the IPAA US Natural Gas 2004 forecast
Unconventional Gas
1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 2015
0
5,000
10,000
15,000
20,000
25,000
An
nu
al
Na
tura
l G
as P
rod
ucti
on
(B
cf)
EIA (1949-1990) and NPC (1991-2015)
15 TcF
10 TcF
25 TcF
http://www.eia.gov/energy_in_brief/about_shale_gas.cfm
14 TcF
9 TcF
23 TcF An Anticipated
Evolution!
Tinker, 2014
0
30
35
2007 2009 Year
2011 2013
25
20
Billio
n c
ub
ic f
eet
per
day
10
5
15
Woodford (OK)
Bakken (ND) Eagle Ford (TX)
Rest of US
Fayetteville (AR)
Haynesville (LA and TX)
Barnett (TX) Antrim (MI, IM, and OH)
Marcellus (PA and WV)
10
TcF
/Year
5
2013 Dry Shale Gas Production
QAe2255 Source: U.S. Energy Information Administration
Model: Rice University, Medlock, 2012
Actual
10
Tinker, 2014
Model: Rice University, Medlock, 2012
Global Shale Gas
Negative
Neg Positive
Positive Positive
Mixed Positive
Positive
Tinker, 2014
Options to “Fracking” for Power I. Coal
o Available, affordable to generate, reliable
o Dirty, expensive to build
II. Nuclear
o Efficient, no emissions, affordable generation
o Expensive to build, waste, safety
III. Wind
o Simple, affordable, no emissions
o Intermittent, land and visual, transmission
IV. Solar
o Simple, no emissions, local
o Expensive, intermittent, land
V. Hydro
o Efficient, affordable to generate, no emissions
o Water, land, drought
VI. Geothermal
o Affordable where concentrated, no emissions
o Geology
Tinker, 2014
0.46
26.33
0.57
8.58
1.17
Petroleum 37.13
Wind 0.51
0.51
Nuclear 8.45
8.45 Solar 0.09
0.01
0.08
Hydro 2.45
2.43
0.01
Coal 22.42
20.54
0.06
1.79
Biomass 3.88
0.42
0.49
0.83
2.03
0.10
Geothermal 0.35
0.31
0.2
0.1
9.18
6.86
19.15
6.96
Energy services
42.15
U. S. Energy Flows
QAd8174
0.67
Natural gas 23.84
4.99
3.20
8.14
6.82
Residential 11.48
Commercial 8.58
Industrial 23.94
Trans- portation
27.86
0.02
3.35
4.61
4.70
12.68
Net electricity Imports
0.11
Electricity generation
39.97
Source: Lawrence Livermore National Laboratory and U.S. DOE based on Annual Energy Review, 2008 (EIA, 2009)
From National Academies Press, America’s Energy Future, 2009
(2008 Quads)
Tinker, 2014
U.S.
China
The Future Transportation Mix
BP Statistical Review of World Energy, CIA World Factbook, Census Bureaus, Marc Faber Limited, RJ Estimates
From Raymond James and Associates, Inc., August 2, 2010
Millions of oil-equivalent barrels per day 25
20
15
5
10
0
ExxonMobil Corporation, 2013 The Outlook for Energy: A View to 2040, page 20.
2000 2020 2040 2000 2020 2040 2000 2020 2040
Europe North
America
Gasoline
Other
Natural gas
Fuel oil Jet fuel
Biodiesel Diesel
Ethanol
Asia
Pacific
Tinker, 2014
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
1965 1975 1985 1995 2005
10
00
s B
bl
Da
y
Total North America Total S. & Cent. America Total Europe & Eurasia
Total Middle East Total Africa Total Asia Pacific
Global Oil Production
Source: BP Statistical Review 2012
30.5 BBY
Tinker, 2014
Long-Term Oil Supply Resources and Cost
0 2000 4000 10,000 6000 8000
140
20
0
Resources (billion barrels)
Pro
du
cti
on
co
st
(2
00
8 $
)
MB
/d
Coal
to
liquids
Gas
to
liquids
Oil shales
Shale oil
Pro-
duced MENA
Other conventional
oil
Deepwater and
ultra-deepwater
40
60
80
100
120
Heavy
oil
&
bitumen
EOR
Arctic
CO2 EOR
140
100
120
Source: IEA World Energy Outlook (2009)
2X
Tinker, 2014
Th
ou
sa
nd
ba
rre
ls/y
ear
From: James D. Hamilton, Working Paper 17759, NATIONAL BUREAU OF ECONOMIC RESEARCH, 2012
Annual US Oil Production Annual US Oil Production
Tinker, 2014
Monterey Woodford/Anadarko
Utica Barnett
Uinta Niobrara
Permian Midland
Permian Delaware Granite wash
Eagle Ford
Bakken
2010 U.S. SHALE LIQUIDS
PROJECTION 5
4
3
2
1
0
2010
U.S
sh
ale
liq
uid
s p
roje
cte
d g
row
th
.(M
bp
d)
2012 2014 2016 2018 2022 2020
After Morse et. al., 2012, Energy 2020: North America, the new Middle
East: Citi GPS: Global Perspectives & Solutions, figure 14, p. 17.
QAe465
3.8 mmbod by 2022…
10% IRR: $44/bbl
10% IRR: $50/bbl
10% IRR: $68/bbl
10% IRR: $44/bbl
10% IRR: $50/bbl
10% IRR: $51/bbl
IRR Source: Rystad Energy
Tinker, 2014
Annual US Oil Production
From: James D. Hamilton, Working Paper 17759, NATIONAL BUREAU OF ECONOMIC RESEARCH, 2012
1.4 Bby
shale oil
by 2022
Th
ou
sa
nd
ba
rre
ls/y
ear
Tinker, 2014
U.S. Shale Gas Reserves and Production Forecasts
The Impact of Shale on US and Global Gas and Oil Markets
Above Ground Challenges and Implications
Outline
Tinker, 2014 Unconventional Summary
“Trade Offs” Environmental Risks and Impacts
Traffic/noise/light
Surface
Groundwater
Quakes
Health
Local and atmospheric emissions
Energy Security and Economic Benefits Available
Affordable
Reliable
Jobs and Taxes
These are not mutually exclusive!
Tinker, 2014
Environmental Issues Regulatory Considerations
I. Mandatory baseline data
II. Cement all gas producing zones
III. Minimize fresh water use on the front end
IV. Full disclosure and adaptation of chemicals
V. Handle flowback and produced water
a. Treat and reuse
b. Induced seismicity
VI. Minimize methane emissions
VII. Minimize surface impact after Rao, 2012
Tinker, 2014
• Balance of Trade
Exports: Natural gas, liquids, products
Imports: Oil
• Regulation and Planning
Infrastructure
Resources
Permitting
• Emissions
• Energy Security
Unconventional Reservoirs Implications
Tinker, 2014
Shale will be a big part of the future and “above ground” challenges must be addressed.
Diverse energy portfolios are inevitable, and for the most part desirable; efficiency is part of the energy portfolio.
Energy security — affordable, available, reliable, sustainable — drives energy mix.
The global energy transition will take time; let’s come out of our corners to The Radical Middle, where things get done.
Global Context
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