the impact of north american shale - iploca · the impact of north american shale iploca 46th...
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1
The Impact of North American ShaleIPLOCA 46th Annual Convention
Istanbul September 2012
2BENTEKENERGY.COM
Agenda
Strong Production Continues to Drive U.S. Market Dynamics Resulting in a Second Wave of Infrastructure Build Out.
2007-2012 saw in Excess of $30B in Long-haul Build out
Estimates For The Next 5 Years May Be as High as $70B
Can the momentum continue? What does 2017-2022 look like?
3BENTEKENERGY.COM
30
35
40
45
50
55
60
65
70
Bcf
/d D
ry P
rodu
ctio
n
33% in Dry NG Production Since 2007
Emergence of Giant Shale Plays
Advanced Drilling and Well Completion
Technology
Horizontal Well Drilling
Lower Prices
Source: BENTEK Pipeline Flow Data --- Daily Supply and Demand Report: Aug 2, 2012Incremental Growth = Avg. Jan. 2005 to Avg. Aug 2012
Current Dry Production Levels At All Time Highs
Faye
ttevi
lle
Hay
nesv
ille
Mar
cellu
s
Eagl
e Fo
rd
Bar
nett
Woo
dfor
d
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There has been $30B in Long Haul Build Out Since 2007in North America
Trunk ETX to WLA .835 Bcf 1
GS ETX to MS 1.5 Bcf2
NGPL 0.2 Bcf3
4 GulfSouth SE Exp 1.2 Bcf 87 10CP .316 Bcf9
ETC Cleburne to Carthage .5 Bcf
18
13
ETC Maypearl to Malone, 0.6 Bcf infrastructure designed to get more gas out of Ft. Worth basin to feed Carthage and South to STX (Ship area) 14
16 1719
Kinder Morgan Texas Goodrich Expansions, designed to get Bossier Sands gas into KM Texas system in Polk Cty
15
GulfSouth Gulfstream Exp 0.25 Bcf 12
ETC Cleburne to Tolar, 0.4 Bcf infrastructure designed to get more gas out of Ft. Worth basin to feed in ETC’s 42” lines going to Carthage and South to STX
20
TGT Fayetteville Lateral 0.85 Bcf22
21
26
27
25
23
29
28
Creole PL from Sabine Pass LNGCheniere 2.0 Bcf
InterconnectsNPGL, Transco, Bridgeline, Tenn, FGT,
Sabine, Targa, Varibus, GulfSouth, Transco,Trunkline, TETCO
32
DCP Carthage 0.1 Bcf
34
31
33
30
Destin 0.38 B
cf
ETC Texas Indep 1.1 Bcf
39
36
38
37
40Tennessee 800 0.3 Bcf
41
42
Elba Island Expansion of 0.9 BcfTotal Sendout increases to 2.1 Bcf
54
58
49
50
TGT Fayetteville Lateral 0.45 Bcf
4851
53
Transco Station 85 South to Mobile Bay to feedGulfstream (in Open Season) 0.254 Bcf
Transco Station 85 North 0.09 Bcf
56
E-W Eagle Ford 0.1 Bcf
46
Whi
te K
itche
n .1
Bcf
47
CP E. AK .1 Bcf 57Fayetteville Exp 0.542 Bcf62
CP .340 Bcf
52Lo
gans
port
.45
Bcf
61
Regency Exp 1.15Bcf
44
50
59GS Haynesville/Perryville .556 Bcf
4564
67 ETC/KM Fayetteville Express 1.458 Bcf
SONAT Exp .123 Bcf
75
76
77
TGT Supply Lateral 0.165 Bcf
79
Transco Pascagoula0.81 Bcf
78
Transco Mid-South Exp.225 Bcf/d
56
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1,375 2,370
490
1,450
405
1,295
1,535120
3,370
540
0 5 10 15 20 25 30 35 40 45 50
…
86 Processing Projects Combine for ~$6.5 Billion of
Potential Investment over the next 3 years
U.S. Shale Infrastructure Boom Resulting in More than 13 Bcf/d of New Processing Infrastructure Between Today and 2015
Source: BENTEK Facilities Databank – Expansions expected through 2014, MMcf/d
Rockies
Bakken
Anadarko
Permian
Eagle Ford
Utica/Marcellus
02468
1012141618
Bcf
/d
U.S. Gas Processing Capacity Additions (2010-2015)
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Proposed U.S. Export Projects Total 18.8 Bcf/d of Capacity
Sabine Pass
Freeport
Lake Charles
Cameron
Cove Pt.
Existing Import + Proposed Export
Source: BENTEK
Gulf Coast Export Terminals:Freeport LNG I&II – 2.8 Bcf/dLake Charles – 2 Bcf/dSabine Pass – 2.4 Bcf/dCameron – 1.6 Bcf/dCorpus Christi – 1.8 Bcf/dGulf Coast LNG – 2.8 Bcf/dGulf LNG – 1.4 Bcf/d
Cove Point Exports:0.9 Bcf/d Outlet for Marcellus Gas off TCO, DTI, Transco?
KitimatHN DC LNG
LNG Canada
Proposed Export
Canadian Exports:Up to 3.3 Bcf/d combined capacity
targeting Asian LNG markets
Gulf Coast LNG
Jordan Cove
Corpus Christi
Oregon LNG
West Coast Exports:Jordan Cove– 0.8 Bcf/dOregon LNG– 1.3 Bcf/d
Elba Island0.5 Bcf/d
Excelerate – Lavaca Bay
Elba Island
Offshore Exports:Excelerate FLNG – 0.4 Bcf/d
Gulf LNG
$42B In Projected Spend From Just 7 of These Potential Facilities
7BENTEKENERGY.COM
North American Projects Are Cost CompetitiveCase Study: Japanese Market
Kitimat Sabine Pass
(Phase 1)
Freeport(Phase 1)
CorpusChristi
Cove Point
Cameron Lake Charles
Gorgon Gladstone Ichthys
Location WestCanada
U.S. - Gulf U.S. -Gulf
U.S. -Gulf
U.S. - NE U.S. -Gulf
U.S. -Gulf
Australia Australia Australia
Capacity 10 MTpa1.3 Bcf/d
9 MTpa1.2 Bcf/d
10.5 MTpa1.4 Bcf/d
13.5 MTpa1.8 Bcf/d
5MTpa0.7 Bcf/d
10.5 MTpa1.4 Bcf/d
15 MTpa2 Bcf/d
15 MTpa2 Bcf/d
8 MTpa1 Bcf/d
8.4 MTpa1.1 Bcf/d
CapEx $5.5 B $ 4.75 B $4 B $11.9 B $3 B * $6 B $7 B * $43 B $ 16 B $ 34 B
Feedstock Cost ($/MMBtu)
$3.97(AECO )
$4.00(2017 HH
Projection)
$4.00(2017 HH
Projection)
$4.00(2017 HH
Projection)
$4.00(2017 HH
Projection)
$4.00(2017 HH
Projection)
$4.00(2017 HH
Projection)
N/A(Included In ProjectCost)
N/A(Included In ProjectCost)
N/A (Included In Project Cost)
FOB (Freight on Board) Cost ($/MMBtu)
$6.86 $6.47 $5.80 $7.68 $6.01 $6.21 $6.10 $7.03 $5.03 $9.93
Transportation Cost to Japan($/MMBtu)
$1.34 $3.11 $3.11 $3.11 $3.23 $3.11 $3.11 $1.26 $1.29 $1.26
DES (Delivered Ex Ship)Cost to Japan($/MMBtu)
$8.20 $9.58 $8.91 $10.79 $9.24 $9.32 $9.22 $8.29 $6.29 $11.19
* BENTEK Estimate
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$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00
$/M
MB
tu
NYMEX Forward Curve Expectations
Forward Curve – August 31, 2012
BENTEK Forecast –September2012
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Drill Time(Days)
Wells Per Yr.Per Rig
Avg. LateralLength ( Feet)
30 Day Ave.Prod Rate
(Mcfd)
IP AdditionsPer Rig PerYr. (Mcf/d)
Drill &Complete
Costs ($MM)
1st Quarter 2007
1st Quarter 2008
1st Quarter 2010
4th Quarter 2011
20
7
18
50
2,104
4,703
1,006 $2.8
2,606
18,360
130,300
$2.6
Southwestern Energy’s Rig Productivity Gains
Fayetteville Shale
+124%
-64%
+159%
+8%+174%
+610%
Source: Southwestern Energy Financials
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$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
Hen
ry H
ub ($
/MM
Btu
)
Henry Hub $/MMBtu Yearly Average
The Shale Revolution Drives Down Prices
$8.85$6.74 $6.93 $3.92$8.87 $4.37 $3.97 $2.45
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$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$/M
MB
tuEq
uiva
lent
WTI $/MMBtu HH Gas $/MMBtu MB NGL Ave. $/MMBtu
Gas, Oil and NGL Price Comparison: MMBTU Equivalent
Source: ICE, EIA
Value Gap
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10/+2
225/+144
55/+27
76/+0
16/+5
5/-1
35/-94
40/+15
29/-1
29/+20
92/+54
11/-18
1/-2
14/-9
259/+199
23/+19
6/-2
47/+29
27/+12
10/+7
Active rig count: August 10, 2012 / Change in rig count from Jan. 1, 2010
Rig Increases Dry Gas Focused Areas
Rig Increases Liquids-Rich/Oil Focused Areas
Rig Declines Source: BENTEK, August 2012
Plays With High Returns Attract Drilling Rigs
2/-10
96/+12
73/+14
40/+22
78/-31
18/-19242/+119
506/+287
37/-56
2130+744
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U.S. NGL Production to Increase 49% over the next Five Years
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2005 2007 2009 2011 2013 2015 2017
Raw
Mix
Pro
duct
ion,
MM
b/d
PADD I PADD III PADD II PADD IV PADD V
1.2 Million Barrel per day Change in Raw Mix Supply
14BENTEKENERGY.COM
60 Mb/d
+630
+300+60
Pipeline Capacity
Fractionation Capacity(Mb/d)
Infrastructure Is Required To Maintain NGL Growth
Announced Increases Through 201413 NGL Pipeline Projects & 27 Fractionator Expansions Combine for ~$9 Billion of Potential Investment in Next 5Years
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0200400600800
1,0001,2001,4001,6001,8002,000
Rig
Cou
nt
Gas Oil
Oil Rig Count Tests New Highs
1,727
364
Source: BENTEK, RigData July 2012
~1,500
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0
50
100
150
200
250
300
350
400
1 7 13 19 25 31 37 43 49 55 61 67 73
b/d
Months on Production
2010 2011 Model
Eagle Ford Oil-Oriented Decline Curves Improving Drastically
50%35%25%25%10%10%10%10%10%10%
Source: BENTEK, HPDI
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+1067
+250
+275
+783
+1218
Bakken
Niobrara
Anadarko
Permian
Eagle Ford
Unconventional Oil Plays – Turning The Corner
Growth 2011 – 2016 4.1 MMb/d
+131
Utica Growth 2017 – 2022 1.4 MMb/d
+429
+125
+118
+379
+176
+54
Source: BENTEK Crude Awakening Part 6; BENTEK Crude Oil PADD Balances
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Gateway 525
+837
+254
+200
+858
+916
Bakken
Niobrara
Anadarko
Permian
Eagle Ford
+1,227Canada
Note: 2011 Average to 2017 Average (MB/d)
Source: Petroleum Project TrackerNot All Projects Shown
344
345
200
Barge
Rail
Sea
way
700
Refinery Expansion
33
350
Dock Terminal
450
Refinery Closure
698+13250
Utica
New Infrastructure to Reshape North American Oil Markets
Pipeline Projects Combine for Over $15B of Potential Investment over in the Next 5 Years
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Waterborne imports get squeezed out, accounting for just 1.0 Mb/d or 6% of total U.S. supply in 2022
0%
10%
20%
30%
40%
50%
60%
70%
80%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
MB
/d
Domestic Production Canadian ImportsNon-Canadian Imports % Non Canadian Imports
Source: BENTEK, EIA
20BENTEKENERGY.COM
N. American Crude Could Grow Another 1.4 MMb/d Between 2017 and 2022 Requiring New Infrastructure
+492
+125
+80
+379 +22
+176
Mb/d
+689
Note: 2017 Average to 2022 Average
+126
(105)
+54?
?
?
?
?
?
??
?
?
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0
5
10
15
20
25
30
35
40
45
50
PattersonUTI
Precision Helmerich& Payne
Nabors EnsignUSA
Trinidad Unit PioneerDrilling
Union
Num
ber o
f Hor
izon
tal R
igs
2011 2012
Signs of Growth: U.S. Drilling Fleet Added 135 Horizontal Capable Rigs Between June 2011 and June 2012
Drilling Manufacturers Added Rigs at Rate of 11.6 Rigs Per Month
23BENTEKENERGY.COM
U.S. Market Key TakeawaysStrong Production Continues to Drive U.S. Market DynamicsNA has seen CAPEX in Excess of $30B in the last 5 Years on Long Haul Build outThe Next 5 Years Show Potential for an Incremental $70B 2017 and Beyond – Currently Underdeveloped Plays Will Lead to Incremental Infrastructure RequirementsNorth American Production Will Look for Exit. Growth Will Continue to be Contingent Upon Demand
24BENTEKENERGY.COM
IPLOCA Convention Istanbul I September 2012
POTENTIAL FOR SHALE GAS IN
EUROPEBy Andrew Lukas
24
25BENTEKENERGY.COM
Why Look for Gas in Europe?Numerous Under Explored Basins and Identified Opportunities with similarities to NA Resource Plays
Favourable Terms and Conditions in Politically Stable Democracies
World Class Pipeline Infrastructure With Access to a Wide Range of Markets
New EU Rules Requiring Liberalization of Gas Markets to New Entrants
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Price Spread Is The Big Driver
$0$2$4$6$8
$10$12$14$16$18$20
NBP Month-Ahead Henry Hub Platts JKM
Global Energy Prices
27BENTEKENERGY.COM
Shale Gas Basins in Europe
Europe has 639 TCF Shale Gas Compared to US 862 TCF With Geologic Similarities
28BENTEKENERGY.COM
Current Shale Exploration
www.BentekEnergy.com 29
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Case Study – Drilling Today –Bowland Shale - Lancashire
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Cuadrilla UK Licences
BOWLAND SHALE GAS PLAY
BOLNEY / KIMMERIDGE SHALE OIL PLAYAND PORTLAND SAND GAS PLAY
BALCOMBE Hz GREAT OOLITE OIL PLAY
32BENTEKENERGY.COM
Comparison With Key US Shale Plays
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Maturity v Organic Content
Note: Ro is vitrinite reflectance. It's a measure of the maturity of kerogens
34BENTEKENERGY.COM
Bowland In SummaryBowland Basin is Significant with >200TCF
Good Quality Gas - Minimum CO2
Public-Political Accord is Evolving For Success Development
Very Close to Major Pipeline Infrastructure
European Markets Are Ready For This Gas
35BENTEKENERGY.COM
European Conclusions
There are World Class Shales To Be Developed
European Shale Development is Safe and Well Regulated
Supply Basins are Close to Markets and Pipeline Infrastructure is Well Developed
European Shale Will Reduce Imports and Increase Independence
36BENTEKENERGY.COM
Thank YouThis presentation has been compiled by Andrew Lukas from
sources he believes to be reliable. However, it is not warranted as to its completeness or accuracy.
This presentation is not an offer to sell or a solicitation to buy any securities.
As it is prepared for general circulation, all readers must use their own judgment and seek their own advice before relying on
anything in this presentation.
Andrew Lukas
36
37BENTEKENERGY.COM
BENTEK Energy
BENTEK is an energy market analytics company focused on the natural gas, liquids, crude oil and power sectors.
Suzanne MinterEnergy Analyst/Account [email protected]
Contact Any Analyst at 303.988.1320
DISCLAIMER. THIS REPORT IS FURNISHED ON AN “AS IS”BASIS. BENTEK DOES NOT WARRANT THE ACCURACY OR CORRECTNESS OF THE REPORT OR THE INFORMATION CONTAINED THEREIN. BENTEK MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE USE OF ANY INFORMATION CONTAINED IN THIS REPORT IN CONNECTION WITH TRADING OF COMMODITIES, EQUITIES, FUTURES, OPTIONS OR ANY OTHER USE. BENTEK MAKES NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANT- ABILITY OR FITNESS FOR A PARTICULAR PURPOSE.RELEASE AND LIMITATION OF LIABILITY: IN NO EVENT SHALL BENTEK BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFIT) ARISING OUT OF OR RELATED TO THE ACCURACY OR CORRECTNESS OF THIS REPORT OR THE INFORMATION CONTAINED THEREIN,WHETHER BASED ON WARRANTY, CONTRACT, TORT OR ANY OTHER LEGAL THEORY.