North American Natural Gas Landscape › pdfs... · U.S. Natural Gas » Natural Gas Supply Projections As recently as 2008, some gas industry representatives believed supply was limited
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D I S P U T E S & I N V E S T I G AT I O N S • E C O NO M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
As recently as 2008, some gas industry representatives believed supply was limited and would be unable to respond to new gas demand. W
» The Natural Gas Council (INGAA, AGA, IPAA, NGSA) said major increases in demand could only be served by imports of foreign LNG or by opening up restricted drilling areas.
» Conventional wisdom was ‘we were running out of gas in North America’.
» Then in 2009, the Energy Information Administration reported a 24 percent or 6.2 Bcfd average annual adjustment in deliverability of unconventional onshore gas for 2010‐2030 in their Annual Energy Outlook 2009 compared to their AEO 2008.
Industry/Governmental Associations Have Subsequently Confirmed What Navigant First Identified Years Ago.
The National Petroleum Council included in its national resource assessment of gas and oil and in its ‘Study Update – One Year Later’ on August 1, 2012, key conclusions that:
1. The potential supply of natural gas is far greater than thought even just a few years ago.
2. The potential supply of oil is also far greater than previously thought (the International Energy Agency has indicated the U.S. will become the biggest oil producer in the world by 2017 – ahead of Saudi Arabia.)
3. The US needs the oil and gas resources even as efficiency reduces demand and alternatives become more economically available.
4. That the benefits of natural gas and oil will require environmentally responsible development.
» Various environmental concerns must be resolved.– Hydraulic Fracturing: water use, contamination and disposal– Fugitive Methane – Methane Migration
» These are significant challenges to overcome given the industry was ‘behind’ in getting in front of the issues at the outset.
» Regulatory & operational best practices can mitigate the risks – Ensuring gas, water and chemicals can’t enter other formations– Minimizing water use– Treating and disposing water appropriately– Limiting gas venting
» The gas industry is committed to safe and responsible development. Out of necessity. It is their future too.
In the end, we have seen that any scenario for resolution could add costs to production and could slow development—but not to the point of seriously diminishing supply growth. Not in the face of –
• every technological advance increases production levels.• even when producers turn to oil drilling, they are producing large amounts of associated gas.• In‐other‐words, even with more regulation, the gas will be there.
» In Europe, industry and whole countries have recognized the unconventional gas revolution is spreading – beyond the US
» The International Energy Agency (IEA) has suggested a ‘Golden Age of Gas’» Potential environmental risks have swayed some countries to adopt moratoria or outright bans on the production of shale gas, particularly fracking – FRANCE
» The potential of US LNG exports has already caused changes in European energy supply, affecting matters of energy security.
» Which in 2012 lead to a situation where Europe had a reduction in gas demand, more coal consumption and higher GHG’s ‐ at odd’s with EU climate and energy policies.
» Of even more concern in Europe is the impact of the ‘shale gale’ on the increase in overall economic competitiveness of the US and its industries vs Europe industry!
» How will Europe be able to compete? How will other countries and regions?
» A lot of focus currently on North America gas!
In Europe from a recent visit ‐ the Risk is Increasingly Seen in NotExploiting Gas Shale Resources
Oil at $98.00 per BBl or $15.60 per MMBtu (Heat Value Equivalent) and Natural Gas at $3.80 per MMBtu, Oil is about 3.8 Times the Price of Natural Gas. Natural Gas Is the Least Expensive (competitive now with coal) and by Far the Most Environmentally Clean Fossil Fuel!
» According to the CEC, California oil production is expected to decline in the future by 2.2% to 3.1% per year through 2030.
» Not including any forecasts for oil shale production in the Monterey basin using hydraulic‐fracking and advanced‐technology drilling!
» Might the Monterey change this profile of California oil production decline towards an economic revitalization of the State while contributing to California and US energy security?
Oil Production in California has Been in Decline – Since 1985
Oil – the Next Best Thing to Natural Gas as a Substitute for Foreign Oil!
» Currently California consumes the largest volume of gas and diesel in the country – 35% more than the next highest state (Texas) in 2013.
» 96% of California transportation is petroleum based
» As California and Alaska production declines have occurred, this has meant more foreign oil has been required in California since 2000 to a point where foreign oil now exceeds 50% of total oil used in the state.
» This despite overall reduced gasoline and diesel demand in CA – on better gas mileage vehicles and growth of alternative vehicles.
» The EIA/ BP have estimated by 2040, 80% of our energy will still be fossil‐fuel based –renewables will grow but still be a small part of the overall energy supply mix.
» The Monterey oil shale seems to offer an option to California to reduce imports of foreign oil to the state thereby increasing security.
Unfortunately, California is a Huge Oil Consumer
Oil – The Next Best Thing to Natural Gas as a Substitute to Foreign Oil
» It started in Texas gas fields, migrated to Arkansas, Oklahoma, Virginia, West Virginia and Pennsylvania then to North Dakota – where the technology of hydraulic fracturing combined with horizontal drilling was shifted to oil development.
» What do these states have in common besides geology? Answer. Federal land holdings are small and mineral rights are in private hands.
» In California where private lands area smaller part of the landscape but are still potentially significant in helping to ‘spread the wealth’.
» Ample supplies of oil and gas, combined with taxpayer fatigue over green subsidies mean a range of costly and heretofore uncompetitive technologies such as biofuels (renewable natural gas) and even electric cars may face the prospect of additional challenges.
» On April 5, 2013, the EIA reported energy related CO2 emissions as the lowest since 1994. Why? Due to coal‐to‐gas switching for power generation ‐ to the least carbon‐intensity fossil fuel there is – natural gas.
» Currently, US net petroleum imports have also fallen from 60% of total consumption in 2005 to 42% in 2013. Good for energy security – good for the economy!