Autumn Seminar. Retos del gas no convencional. Mr. Ian Cronshaw

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© OECD/IEA 2013

The Role of Unconventional Gas

Ian Cronshaw

Madrid October 2014

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Overview

1. Key Findings From the World Energy Outlook 2013

2. The Gas World Changes, Moving Towards a Global market

3. Unconventional Gas and its Impacts

4. Golden Rules for the Golden Age of Gas

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The world energy scene today

Some long-held tenets of the energy sector are being rewritten

Countries are switching roles: importers are becoming exporters…

… and exporters are among the major sources of growing demand

New supply options reshape ideas about distribution of resources

But long-term solutions to global challenges remain scarce

Renewed focus on energy efficiency, but CO2 emissions continue to rise

Fossil-fuel subsidies increased to $544 billion in 2012

1.3 billion people lack electricity, 2.6 billion lack clean cooking facilities

Energy prices add to the pressure on policymakers

Sustained period of high oil prices without parallel in market history

Large, persistent regional price differences for gas & electricity

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The engine of energy demand growth moves to South Asia

Primary energy demand, 2035 (Mtoe)

China is the main driver of increasing energy demand in the current decade, but India takes over in the 2020s as the principal source of growth

4%

65%

10%

8%

8% 5%

OECD

Non-OECD Asia

Middle East

Africa

Latin America

Eurasia

Share of global growth 2012-2035

480

Brazil 1 540

India

1 000 Southeast

Asia

4 060

China

1 030

Africa

2 240 United States 440

Japan

1 710

Europe 1 370

Eurasia

1 050 Middle East

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A mix that is slow to change

Growth in total primary energy demand

Today's share of fossil fuels in the global mix, at 82%, is the same as it was 25 years ago; the strong rise of renewables only reduces this to around 75% in 2035

500 1 000 1 500 2 000 2 500 3 000

Nuclear

Oil

Renewables

Coal

Gas

Mtoe

1987-2011

2011-2035

the strong rise of renewables only reduces this to around 75% in 2035

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‘Carbon budget’ for 2 °C 1750-2011

Non-OECD

OECD

Emissions off track in the run-up to the 2015 climate summit in France

Cumulative energy-related CO2 emissions

Non-OECD countries account for a rising share of emissions, although 2035 per capita levels are only half of OECD; the 2 °C carbon budget is being spent much too quickly

200

400

600

800 Gt

1900 -1929

1930 -1959

1960 -1989

1990 -2012

2013 -2035

2012-2035

‘Carbon budget’ for 2 °C

Remaining budget

OECD

Non-OECD

Total emissions 1900-2035

51%

49%

the 2 °C ‘carbon budget’ is being spent much too quickly

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Reductions in net oil imports in the United States in the New Policies Scenario, by source

0

1

2

3

4

5

6

7

8

9

10

mb

/d

2011 2015 2020 2025 2030 2035

Demand-side efficiency

Biofuels use in transport

Natural gas use in transport

Increased oil supply

Reductions due to:

2011 net oil import level

Projected net imports

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Gas Markets—Towards a more Global Market?

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Current market conditions vary markedly across the world

Natural gas demand and production growth in selected regions, 2005-2012

Regional differences in gas prices have also grown, with potential implications for investment decisions and company strategies in energy-intensive industries

bcm

Russia

China

Qatar

Rest of Middle East

United States

Pro

du

ctio

n

-60 -30 0 30 60 90 120 150 180

European Union

Japan and Korea

China

United States

Middle East

Dem

and

bcm

-60 -30 0 30 60 90 120 150 180

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Regional Gas Prices Continue to Diverge

Henry Hub blue, NBP brown, German purple, Japan green

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Gas growth strongest in emerging markets

Natural gas demand

The biggest absolute increases in demand are in China & the Middle East, where gas use overtakes that of the European Union before 2020

100 200 300 400 500 600 700 800

Japan

India

China

Russia

European Union

Middle East

United States

2035

2011

bcm

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Air pollution issues encourages gas use in China

Gas demand in China will gain 150 bcm, 2 times UK’s gas consumption

All sectors contribute to the demand additions, in particular the power generation sector and the transport sector

Natural gas, together with nuclear and renewable energies will contribute to dampen coal’s demand increase in the power generation sector

The use of gas in road and maritime transport is promoted by the imperative to improve air quality in big cities

China’s gas demand by sector, 2000-19

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A new diversity in gas supply

Change in annual natural gas production

Natural gas production increases in every region of the world between 2011 and 2035, with the exception of Europe

-30 0 30 60 90 120 150 180 210 240

Algeria

Iran

Turkmenistan

Brazil

Iraq

Qatar

Australia

Russia

United States

China

2011-2020

2020-2035

bcm

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Unconventional Gas—The game changer?

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Unconventional resources are widely distributed

Remaining unconventional gas resources in selected regions, end-2012 (tcm)

Resources of unconventional gas are globally abundant, but there are numerous obstacles to developing these resources at the scale seen in North America

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Unconventionals account for half of gas output growth

Growth in unconventional gas production by type

Unconventional gas development spreads well beyond North America, notably after 2020, with China and Australia major contributors to global production growth

2011-2020

2020-2035

Shale gas

Coalbed methane

United States

Canada India

China

Australia

Indonesia Mexico

Algeria European Union

India

Argentina

Canada

China

United States

0 bcm

20 40 60 80 100 120 140 160

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US Dry Natural Gas Production 1990-2040

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US Monthly Shale Gas Output

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Marcellus Region just keeps growing

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Shale Gas Drives Prices Lower but not everywhere…..

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China: No 1 Technically Recoverable Shale Gas Reserves Globally

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Australia Too….

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Two OECD regions contribute Big Chunks of the additional LNG supply

150 bcm of LNG export capacity is under construction, much of it in Australia

LNG liquefaction capacity, existing and under construction

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LNG from the United States can shake up gas markets

Indicative economics of LNG export from the US Gulf Coast (at current prices)

New LNG supplies accelerate movement towards a more interconnected global market, but high costs of transport between regions mean no single global gas price

Average import price

Liquefaction, shipping & regasification

United States price 3

6

9

12

15

18

To Asia

$/MBtu

3

6

9

12

To Europe

$/MBtu

but high costs of transport between regions mean no single global gas price

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Most of the new LNG will be consumed by Asia

Consequently, global LNG trade will rise from 320 bcm in 2013 to 450 bcm in 2019.

LNG imports, 2013-19

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Golden Rules for a Golden Age

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Golden Rules for a Golden Age of Gas

The “Golden Rules” are principles that can allow key stakeholders to address environmental & social impacts of unconventional gas:

1. Measure, disclose & engage

2. Watch where you drill

3. Isolate well & prevent leaks

4. Treat water responsibly

5. Eliminate venting, minimise flaring & other emissions

6. Be ready to think big

7. Ensure a consistently high level of environmental performance

They are “Golden Rules” because their application can ensure operators have a “social license to operate”, paving the way for a golden age of gas

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IEA Unconventional Gas Forum

WEO-2009 with natural gas focus

WEO-2011 special report: Are we entering a Golden Age of Gas?

WEO-2012 special report Golden Rules for a Golden Age of Gas

Inaugural Unconventional Gas Forum in Paris 22 March 2013

2nd Forum in Calgary 26 March 2014

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Some Concluding Thoughts

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3×

4×

5×

2003

Regional differences in natural gas prices narrow from today’s very high levels but remain large through to 2035; electricity price differentials also persist electricity price differentials also persist

2013 2035

Reduction from 2013

Who has the energy to compete?

Ratio of industrial energy prices relative to the United States

United States

2×

Japan European Union

China

Electricity Natural gas

2003

Japan European Union

China

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An energy boost to the economy?

Share of global export market for energy-intensive goods

The US, together with key emerging economies, increases its export market share for energy-intensive goods, while the EU and Japan see a sharp decline

Today 36% 10% 7% 7% 3% 2%

European Union

United States China India Middle East

Japan

-3%

-10%

+3%

+2% +2% +1%

while the EU and Japan see a sharp decline

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Orientation for a fast-changing Gas world

China drives the growing dominance of Asia in global energy and gas demand & trade

Technology is opening up new gas resources, first in North America, then Australia, China…but who else? And when?

Regulation is a key part of the Industry—and much to be learned from other countries

Regional price gaps & concerns over competitiveness are here to stay, but there are ways to react – with efficiency first in line