the unconventional oil and gas market outlook...the unconventional oil and gas market outlook the...

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The Unconventional Oil andGas Market Outlook

The future of oil sands, shale gas, oilshale and coalbed methane

Report Price: $2875Publication Date: July 2010

The Unconventional Oil and Gas Market Outlook

The future of oil sands, shale gas, oil shale and coalbed methane

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Report overview

Oil sands, shale gas, oil shale, and coalbed methane (CBM) are theprimary unconventional oil and gas resources in the world today. Theseresources are called unconventional as they are extracted, processed, andrefined in a manner that is different from the conventional. Typically,unconventional resources are difficult-to-extract, expensive to refine, andhave more impact on the environment. Sustained high oil and gas pricesuntil mid-2008 led to the development of these resources asgovernments across the world became concerned about dwindlingenergy supplies amid rising demand. Technological advancementsfurther aided their development. Volatility in commodity prices adds tothe uncertainty in unconventionals development. Rise in environmentalconcerns over extraction and development of unconventional resourcesmay likely slow down the growth of the industry.

This report analyzes the growth of the unconventional oil and gasresources worldwide, discusses the drivers and resistors of the industry, and includes production forecasts forkey regions.

The report documents statistical data on reserves, production including projections until 2030 for primarymarkets.

Pages 93

Figures 25

Tables 18

“Use this report to gain anoverview of the globalunconventional oil and gasmarket with focus on keyregions such as NorthAmerica, Europe, and Asia-Pacific.”



Key findings

Use this report to...

In 2009, 1.4m barrels of oil per day wereestimated to be produced from Canadian oil

sands projects, which grew at a CAGR of 8.9% from1m barrels of oil per day in 2005.

According to the US EIA, the shale gas provenreserves in the US totaled 32,825 bcf by the

end of 2008. Industry estimates put US natural gasreserves to last for 100 years at 2008 productionrates.

Shale gas production in the US grew at aCAGR of 21.2% to reach 1.49 tcf in 2008 from

0.69 tcf in 2004. Its share in total US natural gasproduction increased from 3.7% in 2004 to 7.3% in2008. By 2035 shale gas is anticipated to supply25.8% of the consumption needs of the US.

According to Royal Dutch Shell, Europe’sunconventional gas reserves may total 1,200

tcf, approximately five times the proven conventional gas reserves.

According to the China National Petroleum Assessment (2003–07), China has recoverable CBMreserves of 11 tcm.

Figure 1.1: Geographic concentration of oil sandsdeposits, 2010

“The world’s largest oil sands deposits exist in Canada with asmuch as 173bn barrels of proven reserves, making the countrythe second largest holder of oil reserves after Saudi Arabia.Apart from Canada, oil sands deposits exist in 21 countries withlargest amounts of deposits in Kazakhstan, Russia, and Africa;with heavy oil deposits in Venezuela.”

• Achieve a quick and comprehensiveunderstanding of the global unconventionaloil and gas industry.

• Assess the emerging trends in each of theunconventional resources – oil sands, shalegas, oil shale, and CBM.

• Quantify reserves and production in keymarkets such as the US, Canada, Australia,and China.

• Understand the major issues surroundingthe development of unconventionalresources in important regions of the world.

• Predict and identify growth potential byresource globally.



Explore issues including...

Discover...

Energy security: Concerns over energy security forced countries such as the US to invent newtechnologies to tap resources that were previously inaccessible.

Technological developments: Technological developments in bitumen upgradation, horizontal drillingand hydraulic fracturing enabled the exploitation of unconventional resources. Continued technological

advancements are helping to reduce the carbon footprint and overall environmental impact while increasing theefficiency of exploration and development operations.

High cost of extraction and development: Unconventional oil and gas resources need high crude oiland natural gas prices in the international market to be economically viable due to relatively high cost of

extraction and development. Volatility in commodity prices adds to the uncertainty in unconventionalsdevelopment.

Global natural gas surplus: An unexpected rise in natural gas production and reserves in the US led to aglobal supply surplus, which could threaten the development of unconventionals in Asia and Europe.

Impact on environment: Development of unconventional resources is increasingly clouded byenvironmental concerns, which could hamper the growth of the industry.

• What are the primary unconventional oil andgas resources in the world today at present?

• What are the technologies used in exploringand developing unconventional resources suchas oil sands and shale gas?

• What are the key drivers of unconventionals ingeneral and key drivers in specific regions?

• What is the status of development ofunconventionals across continents – NorthAmerica, South America, Europe, Africa andAsia-Pacific?

• Which unconventional resources are set togrow strongly and where?



Table of Contents

EXECUTIVE SUMMARY

• Market development

• North America

• Europe

• Asia Pacific

• Other regions

• Future outlook

CHAPTER 1 MARKET DEVELOPMENT

• Summary

• The unconventional oil and gas resources- Oil sands- Shale gas- Oil shale- Coalbed methane

• Drivers of unconventional oil and gas resources- Energy security- Technological developments- High conventional oil and gas prices

• Resistors of unconventional oil and gas resources- High cost of extraction and development- Global natural gas supply surplus- Impact on environment

CHAPTER 2 NORTH AMERICA

• Summary

• Introduction

• Key unconventional resources- Oil sands

- North America oil sands production

- Shale gas- North American shale gas production

- Coalbed methane- North America coal-bed methane production

- Oil shale

• Drivers- New pipelines to drive demand for oil-sands derived

crude- Advances in drilling technologies make shale gas

production viable

• Resistors- Environmental concerns impact on oil sands projects- Environmental regulations could limit growth of shale

gas

• Key players- Oil sands- Shale gas

CHAPTER 3 EUROPE

• Summary

• Introduction

• Key unconventional resources- Oil sands- Shale gas

• Drivers- Prospects for shale gas increased with technological

developments

• Resistors- Unfavorable geology and infrastructure shortages- Competition from conventional gas- Environmental concerns

• Key players

CHAPTER 4 ASIA PACIFIC

• Summary

• Introduction

• Key unconventional resources- Coalbed methane

- China- Indonesia- Australia

- Shale gas

• Drivers- Government drive to develop CBM in China and

Indonesia- Technology and increasing natural gas demand drive

CBM in Australia

• Resistors- Lack of technical expertise slow development of

unconventionals in Asia- LNG flows at competitive prices dampen

unconventional gas in Asia

• Key players

CHAPTER 5 OTHER REGIONS

• Summary

• Introduction

• South America- Oil sands/ Heavy oil- Shale gas

• Africa- Oil sands- Coalbed methane

• The Middle East



Table of Contents

- Oil Shale

• Drivers- Declining production from conventional energy

resources- High dependence on energy imports

• Resistors- Political instability and regulations- Environmental concerns surround oil sands

development in Congo

• Key players

CHAPTER 6 FUTURE OUTLOOK

• Summary

• Introduction

• Key unconventional resources- Oil sands- Shale gas- Oil shale- Coalbed methane

• Glossary

• Index

LIST OF FIGURES

• Geographic concentration of oil sands deposits, 2010

• Geographic concentration of shale gas deposits, 2010

• Geographic concentration of oil shale deposits, 2010

• Geographic concentration of Coalbed methane deposits,2010

• Canada oil sands regions

• Crude oil production from Canadian oil sands (‘000bbl/d), 2005–09

• US shale gas basins

• US Shale gas production (tcf), 2004–08

• US coalbed methane fields

• US CBM production (tcf), 2004–08

• US oil shale basins

• North America proposed crude oil and natural gaspipeline expansions, 2008

• Canada’s GHG emissions (kilo tons of CO2 equivalent),

2003–07

• Proposed natural gas pipelines to Europe

• Location of Australia’s CBM reserves and gasinfrastructure, 2010

• Venezuela crude oil production and exports (‘000 bbl/d),1990–2008

• Argentina natural gas production and consumption(bcf/d), 2004–08

• Crude oil production from Canadian oil sands forecast(‘000 bbl/d), 2009–25

• Crude oil production from China oil sands forecast (‘000bbl/d), 2015–30

• US Shale gas production forecast (tcf), 2009–35

• US Shale gas production forecast (tcf), 2009–35

• Crude oil production from US oil shales forecast (‘000bbl/d), 2010–30

• Crude oil production from China oil shales forecast (‘000bbl/d), 2010–30

• US CBM production forecast (tcf), 2010–30

• China CBM production forecast (bcm), 2010–30

LIST OF TABLES

• Crude oil production from Canadian oil sands (‘000bbl/d), 2005–09

• US shale gas production (tcf), 2004–08

• US CBM production (tcf), 2004–08

• US market demand for western Canadian crude oil, actualand estimated (‘000 bbl/d), (2008–15)

• Canada’s GHG emissions (kilo tons of CO2 equivalent),

2003–07

• Major companies with Shale gas exploration acreage inEurope, 2010

• Select US shale gas stake acquisitions

• Major CBM-to-LNG projects in Australia, 2010

• Venezuela crude oil production, consumption, andexports (‘000 bbl/d), 1990–2008

• Argentina natural gas production and consumption(bcf/d), 2004–08

• Crude oil production from Canadian oil sands forecast(‘000 bbl/d), 2009–25

• Crude oil production from China oil sands forecast (‘000bbl/d), 2015–30

• US shale gas production forecast (tcf), 2009–35

• US natural gas supply by source forecast (tcf), 2009–35

• Crude oil production from US oil shales forecast (‘000bbl/d), 2010–30

• Crude oil production from China oil shales forecast (‘000bbl/d), 2010–30

• US CBM production forecast (tcf), 2010–30

• China CBM production forecast (bcm), 2010–30

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under high pressure into a shale formation to generate cracks in the formation. The

advent of horizontal drilling and hydraulic fracturing technologies led to increased

development of shale gas in the US.

Shale gas deposits are anticipated to be found widely across the world, but at present

are largely unexplored. Apart from proved reserves in the US and Canada, some of the

well-known shale gas deposits are found in southwestern Argentina, parts of Western

Europe, and southeastern China as shown in Figure 1.2.

Figure 1.2: Geographic concentration of shale gas deposits, 2010

Source: Lambert Energy Advisory; FT.com !"#$%&##'(%#$)*+#',+-

The US pioneered the technology to produce natural gas from shale rock. The

successful exploitation of shale gas resource in the US led to increased interest in the

resource in Canada, Europe, Africa, and Asia. In fact, shale gas is termed as a “game-

changer” by industry players as it is expected to widely influence the global natural gas

industry dynamics. However, at present shale gas development is at an early stage

development in most regions of the world except in the US. The US produced as much

as 1.49 tcf of shale gas in 2008 representing 7.3% of its total production.

Advancements in drilling technology are expected to drive down cost of development

27

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Unconventional oil and gas resources need high crude oil and natural gas prices in the

international market to be economically viable, due to relatively high cost of extraction

and development. Volatility in commodity prices adds to the uncertainty in

unconventionals development. While technological advances and government could

assist the development of unconventionals, they are still largely dependent on prices in

the international market for project viability.

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An unexpected rise in natural gas production and reserves in the US led to a global

supply surplus, which could threaten the development of unconventionals in Asia and

Europe. Many of the LNG liquefaction plants that are being commissioned during

2010–15 in the Middle East and Africa are being built with the intension to supply to

supply the growing US market. However, as the US reached self-sustainability in gas

production, its imports reduced resulting in diversion of LNG cargoes to Europe and

Asia. In addition, European and Asian countries are increasingly trying to exploit their

own unconventional resources, exerting further downward pressure on natural gas

prices. LNG overcapacity and eagerness of resource-rich countries to supply efficiently

to demand centers by building new pipelines will likely hamper the growth of

unconventionals. For example, shale gas development in Europe could be challenged

by cheap LNG inflows from Africa and the Middle East in addition to Russia’s

eagerness to supply piped-gas at competitive prices through trouble-free transit routes.

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Development of unconventional resources is increasingly clouded by environmental

concerns, which could hamper the growth of the industry. While oil sands in Canada

continue to face strong opposition from environmental groups, the so far successful

shale gas development in the US is attracting accusations that it results in

contamination of ground water. The US Environmental Protection Agency (EPA)

started investigations on the environmental impact of shale gas development, which

85

Excess LNG in the global market could head to the US at low prices and may compete

with US domestically produced natural gas.

Table 6.14: US natural gas supply by source forecast (tcf), 2009–35 2009 2010 2015 2020 2025 2030 2035 Source (tcf) Net imports 2.76 2.82 2.38 2.57 2.17 1.84 1.46 Associated with oil 1.91 2.01 2.23 2.35 2.15 2.07 2.04 Non-associated offshore 2.12 2.01 2.12 2.55 2.56 2.96 3.33 Non-associated onshore 11.66 10.81 8.92 8.41 8.00 8.13 8.11 Coalbed methane 2.19 2.07 1.89 1.88 1.77 1.85 1.93 Shale gas 2.36 2.75 3.85 4.51 4.94 5.50 6.00 Alaska 0.36 0.35 0.29 0.27 1.88 1.88 1.87 Total production 20.60 20.01 19.29 19.98 21.31 22.38 23.27

Source: Annual Energy Outlook, 2010; EIA !"#$%&##'(%#$)*+#',+-

Figure 6.21: US Shale gas production forecast (tcf), 2009–35

0

5

10

15

20

25

30

2009 2010 2015 2020 2025 2030 2035

Nat

ural

gas

sup

ply

(tcf)

Net imports Associated with oilNon-associated offshore Non-associated onshoreCoalbed methane Shale gasAlaska

0

5

10

15

20

25

30

2009 2010 2015 2020 2025 2030 2035

Nat

ural

gas

sup

ply

(tcf)

Net imports Associated with oilNon-associated offshore Non-associated onshoreCoalbed methane Shale gasAlaska

Source: Annual Energy Outlook, 2010; EIA !"#$%&##'(%#$)*+#',+-

;$/(#3./"(

According to the US EIA’s Annual Energy Outlook 2010, commercial crude oil

production from the country’s oil shale deposits will likely start in 2023. Production

88

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The US EIA, in its Annual Energy Outlook 2010, estimates the production from CBM

deposits in the country to remain stable or decrease at a CAGR of -0.6% to 1.85 tcf in

2030 from 2.07 tcf in 2010, as shown in Table 6.17. CBM production is expected to

remain flat as reserves in the US are confined largely to the Rocky Mountain region.

Table 6.17: US CBM production forecast (tcf), 2010–30 2010 2015 2020 2025 2030 CAGR 2010–30 (%) Production (tcf) 2.07 1.89 1.88 1.77 1.85 Growth (%) -8.7 -0.5 -5.9 4.5 -0.6

Source: US EIA’s Annual Energy Outlook, 2010 !"#$%&##'(%#$)*+#',+-

Figure 6.24: US CBM production forecast (tcf), 2010–30

1.6

1.7

1.8

1.9

2.0

2.1

2010 2015 2020 2025 2030

Pro

duct

ion

(tc

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-10

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-2

0

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%)

Production Growth

1.6

1.7

1.8

1.9

2.0

2.1

2010 2015 2020 2025 2030

Pro

duct

ion

(tc

f)

-10

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row

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%)

Production Growth

Source: US EIA’s Annual Energy Outlook, 2010 !"#$%&##'(%#$)*+#',+-

According to the China National Petroleum Assessment (2003–07), China’s CBM

production will reach nearly 30 bcm by 2030 from an anticipated production of 5 bcm

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