Global Shale Energy Development: Expanding Economics, Trends, and Implications
Global Shale Energy Development: Expanding
Economics, Trends, and Implications
New and Historic Energy Direction
with Shale • Increasing share of U.S. natural gas
production. 50%? 70%? (2040)
– Energy security
– Geopolitical
• Workforce
– E&P, manufacturing, and beyond
• Environmental benefits-power gen.
– GHG advantage over coal
– Strategic fit with renewables
• Balance of trade benefit –LNG export
• Opportunity for technical innovation
– Research to mitigate environmental and
commercial risk
Marcellus Center for Outreach and
Research • Research
– Down hole technical
issues
– Above ground risk(s)
• Air emissions
• Community impacts
– Socio-economic
• Agriculture, tourism
– Environmental
– Water – lifecycle impacts
– Workforce
– Business dev’l
– Regulatory
– Governance
Geopolitics
• Importance of energy increasing in global politics
– Russian/Ukraine dynamic
– Iran/Middle East less of focus?
• Increasing shale energy emphasis in EU nations
– 470 tcf estimated reserve (80% of U.S. estimates –EIA)
– Collectively --Parliamentary directives
– Individually --Poland/UK
• U.S. LNG policy –impact on Russian gas strategy
• Federal initiatives
– UGTEP program –State Dept
– Four continents
– Partnerships with DOE, EPA, Interior
– Federal trade mission programs --USTDA
U.S. vs. International
• Different scale
• Availability of equipment, trained crews, etc.
• Gas transmission capacity
• Markets
• Demand potential
– Power generation switching (coal to gas and back)
– Mexico and Canada
– Industrial use/petrochemicals –quick ramp up
• Ownership of minerals
• Technical data, i.e. seismic
Marcellus Center for Outreach and
Research • Outreach
– Stakeholder engagement
• Elected officials
• NGOs
• Industry
• Regulators (training)
• “Social License”
• General Public
– 64% polled favor but…
– A conversation about “risk”
– “Translating” the science
• Process
• Technologies
• Regulations
• Global experiences
• “Current moment”
Conveying Benefit vs. Risk
• What are the reasons for
producing the energy
– Demand for all energy
– Economic rewards
– New commercial and industrial
dev’l --utilization
– Workforce opportunities
– “Bridge” to something else
• Fossil vs. renewables
• “all the above” strategy
– Geopolitical opportunity
• Energy security
• Balance of payments
• What are the risks
– Separating possible
vs. probable risk with
all energy dev’l
– Wellbore integrity
– Water contamination
• Chemicals
• Methane
– Air emissions
– Health
– Gaps in research??
Unconventional Development in NE U.S.
Unconventional Gas Production in
Pennsylvania
NE U.S. Production Changes
• Northeast U.S.is largest
NG demand market in
North America.
• Estimated increase to
34bcf/d by 2035*
• Several in Bcf/d group
• Will displace pipeline
flow by 5.5+ bcf/d
• $4-5 for 5 years?
• Region will become net
gas supplier to other
regions of U.S.
– South
– Eastern Canada *Source: ICF International
Marcellus Production
PA Production Declines
Emerging Shale Targets
Marcellus Shale one of the largest
shale gas reservoir in the world with an
estimated 500 TCF of recoverable
gas…a 20-year supply for the entire US
Utica Shale
Utica Wet vs. Dry Gas
Regional Permitting
• Rigs
– Utica 43(OH)
– Marcellus 55(PA)
• Wells
– OH Utica 1092
– PA Marcellus 8000+
Utica Production
• Pipeline constraints
– Additional capacity
– Line reversal to NB/NS
– New political will?
• Record prices 1Q 14
• Increasing NG
demand
• Decreasing
coal/oil/nuclear
• Hydro from Quebec
• LNG?
• Historical change
Source: Range Resources
New Transmission Projects
• Western Marcellus
• Diamond East
– 2-3 bcf/d addition
– 450 miles of new pipe
• PennEast
– 1 bcf/d
– 100 miles
• Atlantic Coast
– 1-2 bcf/d
– 550 miles
Utica Midstream Build-out
NGL Gathering Capacity Demand
Larger/Permanent Investment
New Energy Dynamics with NGS
• Production vs. utilization
• Adding value to the commodity?
• Large energy consumers – Industrial
– Power
– Domestic/Cross-border
– Transportation
– Petrochemicals/Fertilizer
• New industrial renaissance? – “reshoring” of manufacturing
– Manufacturing costs 15% cheaper than Germany or France
– Implications for Asian trade?
– Increased investment in U.S.
• Chemical Industry – 17,000 direct jobs, 395,000 indirect jobs
– $100B capital investment w/$132.4B increase US economic output
• Ethylene Production – Capacity increase 30% increase (2011 to 2017)
– 5 new facilities (Dow, Shell, Chevron, Formosa, Sasol)
U.S. Energy Pricing
LNG Export
• Emerging capacity to export the commodity
– 4 permits issued for Gulf Coast
– Cove Point approved 9/14
– Jordan Cove 3/24/14
– Alaska permitted again
– Western/Eastern Canada
– 10+ bcf/d current. High level??
• Economics favorable?
– Pricing
• Spot, long-term contract, oil-linked
– Competitive environment
-East Africa, Australia, Canada, Qatar
• Federal permitting
– Political will increasing
– Geopolitical implications
• End markets
– Europe, Asia, Chile, Europe, Baltics
Canada
• British Columbia looking to be Canada’s
“Alberta” for nat gas
• Western Canadian gas looking to find home
– Asia
• Eastern markets finding Marcellus gas
– Maritimes?? Quebec??
– Exports of Marcellus via NE and Goldboro NS
• Export options
– NS/NB –regional supply/Marcellus
– Increasing supply in Newfoundland –mostly
offshore
Canadian Imports/Exports
Gas Exports to Mexico
Power Gen Trends
• Coal and NG trading spots for top U.S. power gen fuel – permanent??
– 9 new natural gas power plants planned in Pennsylvania
– 8,000 total megawatts
• 15% of coal gen offline by ‘16
• 20 yr low in CO2 emissions – mainly market driven
– regulatory impacts
• New residential heat trends – 43% gas
– 44% electric
• Greater onshore production – Reduced offshore extreme
weather price impacts
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Bradford Lycoming Tioga
20
00
80
41
1
24
71
16
00
84
1
47
67
54
19
21
30
43
21
74
05
57
30
81
50
66
70
84
96
78
00
87
32
40
88
Rai
l Tra
ffic
(#
cars
)
Counties
2008
2009
2010
2011
2012
2013
Rail Car Traffic
PA Shale Economic Impacts
According to PA Department of Labor through 2012:
• Approximately new 20,000 jobs in "core-related” industries (direct jobs)
• Approximately 200,000 jobs supported partially by industry
As of 4Q 2013 PA collected: • Approx. $800M in well impact fees by end
of 2014
• Approximately $2 billion in taxes from 2006-2012
Questions: • Externalities covered?
• Current tax protocols correct?
• Larger “public” share?
• Local jobs? Trained?
• Durability over time?
• Local business growth?
Challenges
• Lack of broad awareness
of energy use/need
• “Social license” to operate
in communities
– Impacts of social media
• Zoning and land use court
challenges
• Choke points in supply to
critical areas --NE U.S.
• Right of way access going
forward
• Governance/transparency
• Infrastructure needs in
roads, bridges, rail,
airports in rural areas
• Trained workforce
– Institutional capacity
– Lag in training vs.
demand –skill sets
• Cyber security concerns
• Political will
– Long-term energy policy
– Local/State/Federal levels
– $$$
Constraints?
• New regulatory oversight
– Federal vs. state state vs. state(NY/MD – PA/OH/WV)
– Regional initiatives –induced seismicity
– Water disposal
– Air emissions –fugitive methane
– Oil trains –20% of U.S. crude(1.6 M barrels/day)
• Taxation
– Severance in PA
• Size of company
– BP’s new shale unit
– Nimbleness?
OCTOBER 14-15, 20144TH ANNUAL NATURAL GAS UTILIZATION CONFERENCE
Hilton Garden Inn Southpointe, PA
WWW.2014UTILIZATION.ORG
PRESENTED BY
www.marcellus.psu.edu www.shaletec.org www.naturalgas.psu.edu
Contact Info:
Thomas B. Murphy
Director
Penn State Marcellus Center for Outreach and Research
320 EES Building
University Park, PA 16802
+1 (570) 916-0622 cell
+1 (814) 865-1587 office