The Role of Shale Gas in North American and Global Power ...€¦ · Shale gas Coalbed methane Tight gas Non-associated offshore Alaska Associated with oil Non-associated onshore

Tinker, 2014

GCPA Oct, 2014

Scott W. Tinker Bureau of Economic Geology

The University of Texas at Austin, Austin

The Role of Shale Gas

in North American and Global

Power Markets

Tinker, 2014

A majority of the educated public do not know how electricity is made… nor do they really care.

As a result, the public is free to “not like” everything.

We need to take the energy conversation to a different place.

Framing Conundrum

Tinker, 2014

Global Demand

Shale Gas and Electricity

Market Implications

Outline

Tinker, 2014

Global Population and Energy

http://www.eia.gov/iea/wecbtu.html QAe874

Source: BP Statistical Review of World Energy, 2012

0

Po

pu

lati

on

(m

illi

on

s)

1000

2000

3000

4000

5000

6000

7000

8000

Year

2010 2005 2000 1995 1990 1985 1980

Source: US Census Bureau Int’l Database, June 2011

1.8%

1.1%

Global Population Growth Rate

0

100

200

300

400

500

Pri

ma

ry e

ne

rgy (

qu

ad

s)

Tinker, 2014

Global Population and Energy

Source: From the UN, as appeared in The Economist, August 23, 2014

4

10

12

8

6

2

0

1950 1970 1990 2010 2030 2050 2070 2100

Asia

Africa

Rest of World

Tinker, 2014

Population 2015 ~1 billion people per color

More people live

inside the circle

than outside…

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Energy Mix

1017

820

468

207 156 57

302

149 28

5

166

16

880

975

517

267

191 99

376

371

10 5

167

111

98

3 24 1

1389

562 2609

78 289 64

(MTOE)

Tinker, 2014

Energy Demand

1017

820

468

207 156 57

302

149

28 5

166

16

880

975

517

267

191 99

376

371

10

5

167

111

98

3

24

1

1389

562 2609

78 289

64

(MTOE)

Tinker, 2014

Global Demand

Shale Gas and Electricity

Market Implications

Outline

Tinker, 2014

(2008 US Quads)

Wind 0.51

0.51

Nuclear 8.45

8.45 Solar 0.09

0.01

0.08

Hydro 2.45

2.43

0.01

Coal 22.42

20.54

0.06

1.79

Geothermal 0.35

0.31

0.2

0.1

9.18

6.86

19.15

6.96

Energy services

42.15

Energy Flows

QAd8174

0.67

Natural gas 23.84

4.99

3.20

8.14

6.82

Residential 11.48

Commercial 8.58

Industrial 23.94

Transportation 27.86

0.02

3.35

4.61

4.70

12.68

Net electricity Imports

0.11

Electricity generation

39.97

Source: Lawrence Livermore National Laboratory and U.S. DOE based on Annual Energy Review, 2008 (EIA, 2009)

From National Academies Press, America’s Energy Future, 2009

Electricity

Tinker, 2014

Global Natural Gas Production

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

1970 1975 1980 1985 1990 1995 2000 2005 2010

BcF/D

ay

Year

OECD Non-OECD

Source: BP Statistical Review 2012

Tinker, 2014

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

1970 1975 1980 1985 1990 1995 2000 2005 2010

BC

F/D

ay

Total North America Total S. & Cent. America Total Europe & Eurasia

Total Middle East Total Africa Total Asia Pacific

Global Natural Gas Production

115 Tcfy

Source: BP Statistical Review 2012

Tinker, 2014

0 3,000 6,000 12,000 9,000 15,000 30,000 18,000 21,000 24,000 27,000

Resources (TcF)

Pro

du

cti

on

co

st

(2008 $

/Mb

tu)

LNG

Sour

Arc

tic

De

ep

Wate

r

Shale C

oal

Bed

M

eth

an

e

Pro

du

ced

Co

nven

tio

na

l

Tight

15

10

5

0

Global Natural Gas

Resources v. Cost

QAe980

Source: IEA World Energy Outlook (2009)

Tinker, 2014

5

10

15

20

25

30

Ma

rke

ted

Pro

du

cti

on

(Tc

f)

0 0

50

100

150

200

250

300

Pro

ve

d R

es

erv

es

(Tc

f)

U.S. Natural Gas Production and Reserves

Data: BP World Energy 2012

End-of-Year

U.S. Proved Reserves

Annual

U.S. Production

Tinker, 2014

U.S. Natural Gas Production (TcF)

http://www.eia.gov/energy_in_brief/about_shale_gas.cfm

0

5

10

15

20

25

1990 1995 2000 2005 2010

Shale gas

Coalbed methane

Tight gas

Non-associatedoffshoreAlaska

Associated with oil

Non-associatedonshore

14 TcF

9 TcF

23 TcF

Tinker, 2014

U.S. Natural Gas Production (TcF)

http://www.eia.gov/energy_in_brief/about_shale_gas.cfm

0

5

10

15

20

25

1990 1995 2000 2005 2010

Shale gas

Coalbed methane

Tight gas

Non-associatedoffshoreAlaska

Associated with oil

Non-associatedonshore

14 TcF

9 TcF

23 TcF

Conventional Gas

Total Natural Gas

From a 2004 Tinker Talk to the IPAA US Natural Gas 2004 forecast

Unconventional Gas

1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 2015

0

5,000

10,000

15,000

20,000

25,000

An

nu

al

Na

tura

l G

as P

rod

ucti

on

(B

cf)

EIA (1949-1990) and NPC (1991-2015)

15 TcF

10 TcF

25 TcF

An Anticipated Evolution

Tinker, 2014

3,000 to

10,000+ feet

3,000 – 10,000 feet

Shale

Hydraulic Fracturing

“Fracking” Water

Proppant

Friction Reducers: always (polyacrylmide)

Biocides: often (glutaraldehyde, chlorine)

Scale Inhibitors: sometimes (phosphonate)

Surfactants: sometimes (soaps and cleaners)

3 – 6 million gallons

Near Surface

Tinker, 2014

Environmental Impact

Not to Scale! After JP Nicot, Bureau of Economic Geology

Tinker, 2014


1000’s of Feet of Rock

Drawn to Scale

Tinker, 2014


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Environmental Issues Regulatory Considerations

after Rao, 2012

1. Mandatory baseline data

2. Cement all gas producing zones

3. Full disclosure of chemicals

4. Minimize fresh water use on the front end

5. Handle flowback and produced water

6. Manage potential induced seismicity

7. Minimize methane emissions and flaring

8. Minimize surface impact

Tinker, 2014

Environmental Issues Regulatory Considerations

after Rao, 2012

1. Mandatory baseline data

2. Cement all gas producing zones

3. Full disclosure of chemicals

4. Minimize fresh water use on the front end

5. Handle flowback and produced water

6. Manage potential induced seismicity

7. Minimize methane emissions and flaring

8. Minimize surface impact

Tinker, 2014

Unconventional Resource Plays

Modified from: EIA and National Geographic QAei2915

Utica

HilliardBaxterMancos-Niobrara

Cody

Heath Fm

Hermosa

Mancos

Lewis

Niobrara Fm

Mowry

Monterey- T emblor Pierre- Niobrara

Monterey

Manning Canyon

Kreyenhagen

Gothic-Hovenweep

Miocene

Miocene-Oligocene

Eocene

Cenozoic

Cretaceous

Jurassic

T rassic

Mesozoic

Permian

Pennsylvanian

Mississippian-Penn

Mississippian-Devonian

Devonian

Ordovician

Mississippian Cambrian

Paleozoic

T ight sands

Basins

Utica

Marcellus

Bakken

Cline

W oodford

Bend

W olfcamp

Eagle Ford

New Albany

Niobrara Fm

Excello-Mulky

Fayetteville

Niobrara- Mowry

Gammon

(Midland)

Pearsall

W oodford-Caney

Chattanooga

Utica- Collingwood

Antrim

Antrim

Antrim

T uscaloosa

Haynesville

Floyd-Neal

Conasauga

Floyd-Chattanooga

Chattanooga

Barnett

A valon-Bone Spring W olfberry

W olfcamp (Delaware)

Barnett- W oodford

Tinker, 2014



Miocene

Miocene-Oligocene

Eocene

Cenozoic

Cretaceous

Jurassic

T rassic

Mesozoic

Permian

Pennsylvanian

Mississippian-Penn


Devonian

Ordovician


Paleozoic

T ight sands

Basins

Marcellus

Fayetteville

Haynesville

Barnett

Bakken

Eagle Ford

Permian

Basin

Tinker, 2014



Miocene

Miocene-Oligocene

Eocene

Cenozoic

Cretaceous

Jurassic

T rassic

Mesozoic

Permian

Pennsylvanian

Mississippian-Penn


Devonian

Ordovician


Paleozoic

T ight sands

Basins

Marcellus

Fayetteville

Haynesville

Barnett

Bakken

Eagle Ford

Permian

Basin

Tinker, 2014


Marcellus

Fayetteville

Haynesville

Barnett

Bakken

Eagle Ford

Permian

Basin

Middle

Devonian

From Blakey; http://cpgeosystems.com/paleomaps.html

Laurentia

&

Baltica

Bakken

Tinker, 2014

Bureau of Economic Geology

U.S. Shale Gas Study

What is the total resource base in place?

What portion is technically recoverable?

What potion is economically recoverable?

What is the long-term production outlook?

Tinker, 2014

0.000

0.005

0.010

0.015

0.020

0.025

0.030

0.035

0.040

0.045

0.050

29 34 39 44 49 55 60 65 70

Re

lati

ve

Fre

qu

en

cy

Cumulative Production (Tcf)

35 Tcf

56 Tcf

OGIP 444 Tcf

Browning, J. et al. 2013. SPE Econ & Mgmt

Barnett Monte Carlo Production Distribution

Tinker, 2014

0

0.01

0.02

0.03

0.04

0.05

10 12 14 17 19 21 23 26 28

Re

lati

ve

Fre

qu

en

cy


Fayetteville Monte Carlo Production Distribution

13 Tcf 23 Tcf

OGIP 80 Tcf

BEG Shale Reserves and Production Project

Tinker, 2014

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

0.045

0.05

0.055

14 24 33 43 52 62 72 81

Re

lati

ve

Fre

qu

en

cy


24 Tcf 62 Tcf

Haynesville Monte Carlo Production Distribution

OGIP 489 Tcf


Tinker, 2014

1712 Tcf OGIP free


Marcellus OGIP

Barnett

OGIP 444

HVille

OGIP 489

FVille

OGIP 80

All Maps Shown with Common Distance Scale

Tinker, 2014

Model: Rice University, Medlock, 2012

Shale Gas Forecast vs. Actual

B

F

H

M

Actual

Production

Tinker, 2014

0

2

4

6

8

10

12

0

2

4

6

8

10

12

1995 2000 2005 2010 2015 2020 2025 2030

He

nry

Hu

b P

rice

($

20

12

/M

MB

tu)

TC

F

Marcellus

Haynesville

Fayetteville

Barnett

HH $2012

Base Case ($4) Stacked Production


45 TcF

37 TcF 17 TcF

U.S. Consumption

~ 25 TcF/Year

Tinker, 2014

EIA Price Case Stacked Production

0

2

4

6

8

10

12

0

2

4

6

8

10

12

1995 2000 2005 2010 2015 2020 2025 2030

He

nry

Hu

b P

rice

($

20

12

/M

MB

tu)

TC

F

Marcellus

Haynesville

Fayetteville

Barnett

HH $2012


45 TcF

37 TcF 17 TcF

U.S. Consumption

~ 25 TcF/Year

Tinker, 2014

$6 Case Stacked Production

0

2

4

6

8

10

12

0

2

4

6

8

10

12

1995 2000 2005 2010 2015 2020 2025 2030

He

nry

Hu

b P

rice

($

20

12

/M

MB

tu)

TC

F

Marcellus

Haynesville

Fayetteville

Barnett

HH $2012


45 TcF

37 TcF 17 TcF

U.S. Consumption

~ 25 TcF/Year

Tinker, 2014

Model: Rice University, Medlock, 2012

EIA

BEG EIA price deck

Forecast vs. Actual

Tinker, 2014

Global Demand

Shale Gas Electricity

Market Implications

Outline

Tinker, 2014

Natural Gas Prices

Tinker, 2014

Passionate

Confusion

Shale Drivers

Business

Bus Demand

Supply Supply

Private

Ownership

Craton!

Tinker, 2014

Options to Natural Gas for Power I. Coal

o Available, affordable to generate, reliable

o Dirty, expensive to build

II. Nuclear

o Efficient, no emissions, affordable generation

o Expensive to build, waste, safety

III. Wind

o Simple, affordable, no emissions

o Intermittent, land and visual, transmission

IV. Solar

o Simple, no emissions, local

o Intermittent, land, transmission

V. Hydro

o Efficient, affordable to generate, no emissions

o Water, land, drought

VI. Geothermal

o Affordable where concentrated, no emissions

o Geology

2012/Resource Wind.mp4

2012/Resource Coal.mp4

2012/Resource Nuclear.mp4

2012/Resource Hydro.mp4

2012/Resource Geothermal.mp4

2012/Resource Solar.mp4

Tinker, 2012

Global Investment in Clean Energy

*Excludes corporate and government R&D

Source: Bloomberg New Energy Finance, The Economist, April 26, 2014 QAe2822

New investment*, $bn 80

70

60

50

40

30

20

10

02010 11 12 13 14

Solar OtherBiofuelsWind

Tinker, 2014

Electricity Generation by Fuel

North America

120

Europe

1980 2005 2030

100

80

60

0

20

40

Asia Pacific

1980 2005 2030

100

80

60

0

20

40

1980 2005 2030

100

80

60

0

20

40

120 120

Nuclear

Coal

Gas Oil

Renewables

Quadrillion BTUs

ExxonMobil Corporation, 2010, The outlook for energy: a view to 2030: ExxonMobil report, 53 p.

The Future Electricity Mix

Tinker, 2014

US Electricity Generation by Fuel, All Sectors

Source: US EIA Short Term Energy Outlook 2011.

14,000

12,000

10,000

8000

6000

4000

2000

0

Th

ou

san

d m

eg

aw

att

ho

urs

pe

r d

ay

Coal

Natural gas

Petroleum

Nuclear

Hydropower

Renewables

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Forecast

30.8% 30.1%17.9% 18.8% 20.1% 21.6% 21.4% 23.3% 24.8%23.9%

36.7% 36.8%49.8% 49.6% 49.0% 48.5% 48.2% 44.5% 42.2%44.8%


Tinker, 2014


1800

1600

1400

1200

1000

800

600

400

200

02010200820062004200220001998199619941992 2012

Millio

n m

etr

ic t

on

s

Source: EIA QAe2823

U.S. First Quarter Total Carbon Dioxide Emissions

Tinker, 2014


North America

120

Europe

1980 2005 2030

100

80

60

0

20

40

Asia Pacific

1980 2005 2030

100

80

60

0

20

40

1980 2005 2030

100

80

60

0

20

40

120 120

Nuclear

Coal

Gas Oil

Renewables

Quadrillion BTUs



Tinker, 2014

50

40

30

20

10

0 0

100

200

300

400

500

2008 2009 2010 2011 2012

ET

S

ca

rbo

n p

ric

e (E

UA

)

(Eu

ro p

er

ton

ne

)

Co

al c

on

su

mp

tio

n O

EC

D E

uro

pe

(millio

n t

on

nes

)

Thomson Reuters; IEA


Tinker, 2014


North America

120

Europe

1980 2005 2030

100

80

60

0

20

40

Asia Pacific

1980 2005 2030

100

80

60

0

20

40

1980 2005 2030

100

80

60

0

20

40

120 120

Nuclear

Coal

Gas Oil

Renewables

Quadrillion BTUs



Tinker, 2014



14,000

12,000

10,000

8000

6000

4000

2000

0

Th

ou

san

d m

eg

aw

att

ho

urs

pe

r d

ay

Coal

Natural gas

Petroleum

Nuclear

Hydropower

Renewables

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Forecast

30.8% 30.1%17.9% 18.8% 20.1% 21.6% 21.4% 23.3% 24.8%23.9%

36.7% 36.8%49.8% 49.6% 49.0% 48.5% 48.2% 44.5% 42.2%44.8%


Sources: US DOE, The Wall Street Journal

Energy-related carbon-dioxide emissions by

geography, and net change since 2005

Country/area

China

India

Russia

Japan

Canada

UK

Germany

Europe

US

2011 emissions

8715 million metric tons

1726

1788

1181

553

497

748

4305

5491

Net change in annual emissions from2005 to 2011, million metric tons

544

201

-71

-86

-99

-370

-61

-509

3252

Tinker, 2014

50

40

30

20

10

0 0

100

200

300

400

500

2008 2009 2010 2011 2012

ET

S

ca

rbo

n p

ric

e (E

UA

)

(Eu

ro p

er

ton

ne

)

Co

al c

on

su

mp

tio

n O

EC

D E

uro

pe

(millio

n t

on

nes)

Thomson Reuters; IEA



14,000

12,000

10,000

8000

6000

4000

2000

0

Th

ou

san

d m

eg

aw

att

ho

urs

pe

r d

ay

Coal

Natural gas

Petroleum

Nuclear

Hydropower

Renewables

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Forecast

30.8% 30.1%17.9% 18.8% 20.1% 21.6% 21.4% 23.3% 24.8%23.9%

36.7% 36.8%49.8% 49.6% 49.0% 48.5% 48.2% 44.5% 42.2%44.8%


Sources: US DOE, The Wall Street Journal

Energy-related carbon-dioxide emissions by

geography, and net change since 2005

Country/area

China

India

Russia

Japan

Canada

UK

Germany

Europe

US

2011 emissions

8715 million metric tons

1726

1788

1181

553

497

748

4305

5491

Net change in annual emissions from2005 to 2011, million metric tons

544

201

-71

-86

-99

-370

-61

-509

3252

50

40

30

20

10

0 Sp

ain

Germ

an

y

Au

stra

lia

Italy

Jap

an

UK

Fra

nce

Nig

eria

Bra

zil

US

A

Ru

ssia

S.A

frica

Can

ad

a

Mexic

o

Ch

ina

Ind

ia

Den

mark

Sources: IEA, EIA, national electricity boards, OANDA, shrinkthatfootprint.com

Average national electricity prices (in 2011 US cents/kWh)

41

35

30292826

20191817

121110101088

Data: average prices from 2011 converted at

mean exchange rate for that year

Tinker, 2014

Affordable Cost

Price Volatility: stable or fluctuating

Infrastructure: Cost to build the plant

Available Access: substantial resources

Reliable Intermittent: source consistent or variable

Safe: natural/human causes

Sustainable Clean: air and atmospheric emissions

Dense: land footprint

Dry: fresh water use/risk

Energy Security

Tinker, 2014

Affordable Cost









Energy Security Energy Security

Affordable Cost









The Three Es

Economy

Environment

Tinker, 2014

The 4th E

Energy Economy

Environment

Efficiency

Tinker, 2014

Efficiency

Challenges Incentivize producers to produce less

Expensive to install

Requires a cultural change

Benefits Save energy

Lower emissions

Less water

Less infrastructure

Less land

Save $

Tinker, 2014

The 5E Waltz

Energy Economy

Environment

Efficiency

Education

Tinker, 2014

The Radical Middle

Academia/NGO

Government

Industry

The

Radical

Middle

Tinker, 2014

Energy and the Economy

QAe963

Korea

Australia

Brazil

World

China

United States

0

TP

ER

pe

r cap

ita

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

GDP per capita

India

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

After: Rice World Gas Trade Model

Medlock, 2012

TPER = Total Primary Energy Requirement.

Energy needed to facilitate Total Final

Consumption (TFC does not include

conversion and transmission losses).

Japan

Tinker, 2014


QAe963

Korea

Australia

Brazil

World

China

United States

0

TP

ER

pe

r cap

ita

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

GDP per capita

India

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000


Medlock, 2012





Japan

~3 billion

people

Tinker, 2014


A Global Challenge

QAe963

Korea

Australia

Brazil

World

United States

0

TP

ER

pe

r cap

ita

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

GDP per capita

India

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000


Medlock, 2012





Japan

Developed Nations • Balance of Trade

Exports

Imports

• Regulation and Planning

Infrastructure

Resources

Permitting

• Emissions, Climate, Environment

• Energy Security

Developing Nations • Food

• Housing

• Clothing

• Education

• Healthcare

• Electricity

Tinker, 2014

1. Governments, industry and academe must work together; we all play a role in objective, balanced energy education.

2. The scale of energy demand is difficult to comprehend; energy transitions take many, many decades.

3. Energy security — affordable, available, reliable, sustainable — drives the energy mix and should be the goal of energy policy.

4. Energy efficiency is underappreciated; individuals matter!

5. Diverse energy portfolios are inevitable and healthy.

6. Renewables are growing but will remain regional supplements until major advances are made in energy storage.

7. Shale will play a global role in the energy future; “above ground” challenges are as important as “below ground.”

8. Natural gas and nuclear are the new foundational energies.

9. Oil and coal are abundant at the right price, and difficult to replace as transportation and electricity fuels.

10. Energy, the economy and the environment are linked.

Tinker’s Top Ten

The Role of Shale Gas in North American and Global Power ...€¦ · Shale gas Coalbed methane Tight gas Non-associated offshore Alaska Associated with oil Non-associated onshore

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