Www.geohelp.ab.ca Resource Development Model Dave Russum Geo-Help Inc.

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Resource Development Model

Dave Russum

Geo-Help Inc.

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Concept

• Simple method to look at resource development

• Applicable to all non-renewable resources• Applicable to renewable resources where

production exceeds sustainable levels• Can be applied to a single project or to a total

world assessment of a resource• Provides some predictability to future trends

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Renewable and Non-Renewable Resources

• Renewable – the resource is constantly being replaced eg. Timber, fish– Production could be sustained forever

• Non-renewable – the resource is not being replaced in the normal timeframe of man’s activities eg. Oil, gas– When used it is gone forever

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Resource Development Model – 8 Stages

1. Discovery

2. Evaluation

3. Development

4. Expansion

5. Hey-day

6. Denial

7. Reality

8. Abandonment

TIME

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Stage 1: Discovery

• Idea

• Exploration

• Recognition of the Resource

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Stage 2: Evaluation

• Determination of the economic viability of the resource

• Decision to proceed

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Stage 3: Development

• Bringing the resource into production – Creating the infrastructure – Creating ability to process the resource

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Stage 4: Expansion/Growth

• The initial discoverer and others recognize the potential for expansion.

• Competition creates rapid growth.

• Cost may escalate

• Hasty investment decisions may be made

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Stage 5: Hey-day

• Intense production to profit from the resource. • Production accelerates beyond reasonable

levels. • Related industry may develop close to the

resource rather than shipping all the product to a distant market

• Decisions tend to be based on a herd mentality and the assumption of virtually unlimited future production

• Technology helps sustain activity

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Stage 6: Denial

• Limits to resource ignored • Companies, workers, politicians, regulators and

consumers predict and expect continued growth in production (and pay cheques)

• Spending based on unrealistic future expectations

• Early investors may quietly exit• Costs to maintain production increase• Opinions that all is not rosy are ignored or not

welcome

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Stage 7: Reality

• Limitations of resource recognized, • Quotas or regulations may be applied

to extend the life of the resource • generally too little to late.

• Remaining quality resources become a cash cow

• Small, low cost operators pursue remaining marginal resources.

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Stage 8: Decline/Abandonment

• Remaining resource is not economically viable and man moves on.

• Restoration often does not occur because it is not economically viable creating the “ghost towns” that are common in any natural resource area.

• Resource not completely produced; it is simply not economically viable to extract what remains or a more viable alternative have been discovered.

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Reserve Growth

1 2 3 4 5 6 7 8

Stages

Reserves

Predictions

Unbridledoptimism

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Production

1 2 3 4 5 6 7 8

Stages

RapidGrowth

Technology and $’s

Steepdecline

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Texas Onshore gas production

0

2000

4000

6000

8000

10000

12000

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Pro

du

cti

on

in

Bc

f/d

ay

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

# P

rod

uc

ing

We

lls

Gas Production

Producing Gas Wells

CurrentStage: 7(Reality)7

Real6

Den5

Hey4

Expan

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Alberta gas production and gas wells (CAPP Data)

0

2000

4000

6000

8000

10000

12000

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Bc

f/Y

ea

r

0

10000

20000

30000

40000

50000

60000

70000

# P

rod

uc

ing

ga

s w

ells

AB Gas Production

AB Gas Wells

2 3 4 5

CurrentStage: 6(Denial)- RapidlyMoving to Reality

6

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Texas Remaining Reserves

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

195019

5219

5419

5619

5819

6019

6219

6419

6619

6819

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

00

Res

erve

s B

cf

0.0

5.0

10.0

15.0

20.0

25.0

30.0

R/P

Natural Gas Reserves

R/P

PeakProduction

Peak(1971):

Reserves >120Tcf,R/P = 15

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Alberta Remaining Reserves and R/P

0

10000

20000

30000

40000

50000

60000

70000

195019

5219

5419

5619

5819

6019

6219

6419

6619

6819

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

02

Res

erve

s B

cf

0

5

10

15

20

25

30

35

R/P

Alberta Reserves

R/P

PeakProd’n

Peak(2001):

Reserves 42 Tcf,R/P 8.5

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Texas vs. Alberta StatisticsTexas Alberta

Area (sq. miles) 269,000 255,000

Prodn. 1956-2002 319 Tcf 109 Tcf

Rem. Reserves (2002)

43 Tcf 40 Tcf

2002 Production 5600 Bcf 4900 Bcf

2002 Gas wells 65,686 70,000

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Stages

• Not consistent in length

• Will be some overlap of stages

• Stage may be skipped or take hundreds of years

• New technology or price may rejuvenate an existing project/resource

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Resource Development Model – WELSH COALFIELDS

1. Discovery (Pre 1850)

2. Evaluation (2 years?)

3. Development (1850’s)

4. Expansion (1850-1880)

5. Hey-day (1880-1900)

6. Denial (1900-1970)

7. Reality (1965-1980)

8. Abandonment (1990s)

TIME

Current Stage: 8

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Resource Development Model – COD FISHERIES

1. Discovery (1700s)

2. Evaluation (1 year?)

3. Development (18th Century)

4. Expansion (19th Century)

5. Hey-day (19th- mid 20th Century)

6. Denial (1950-1990)

7. Reality (1990’s)

8. Abandonment (1990s)

TIME

Current Stage: 8

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Resource Development Model – Leduc

1. Discovery (1947)

2. Evaluation (1 month?)

3. Development (1947- 1950)

4. Expansion (1948-1955)

5. Hey-day (1950-70?)

6. Denial (1965-1975)

7. Reality (1975-Present)

8. Abandonment (2005?)

TIME

Current Stage: 7/8

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Resource Development Model – Ladyfern

1. Discovery (3 years)

2. Evaluation (1 week?)

3. Development (6 months)

4. Expansion (1.5 years)

5. Hey-day (1 day?)

6. Denial (1 day)

7. Reality (Present)

8. Abandonment

TIME

Current Stage: 7

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Resource Development Model – Alberta Tarsands

1. Discovery (1778)

2. Evaluation (to 1965)

3. Development (1967)

4. Expansion (1967-Present)

5. Hey-day (Present?)

6. Denial

7. Reality

8. Abandonment

TIME

Current Stage: 4/5

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Resource Development Model – Alberta Gas

1. Discovery (1880’s)

2. Evaluation (20 years?)

3. Development (1910- 1950)

4. Expansion (1950-1990)

5. Hey-day (1990-2000)

6. Denial (2000- Present)

7. Reality

8. Abandonment

TIME

Current Stage: 6

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Resource Development Model – Canada CBM

1. Discovery (1970’s?)

2. Evaluation (2000-2003?)

3. Development (2003 Onward)

4. Expansion

5. Hey-day

6. Denial

7. Reality

8. Abandonment

TIME

Current Stage: 2/3

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Resource Development Model – Canada Gas Hydrates

1. Discovery (1970 - 2002?)

2. Evaluation (2000-2025?)

3. Development (2025 Onward)

4. Expansion

5. Hey-day

6. Denial

7. Reality

8. Abandonment

TIME

Current Stage: 1/2

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Resource Development Model – BC Gas

1. Discovery (1948)

2. Evaluation (1950-1960?)

3. Development (1960’s)

4. Expansion (1970’s-1990’s)

5. Hey-day (Present)

6. Denial

7. Reality

8. Abandonment

TIME

Current Stage: 5

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Resource Development Model – Saskatchewan Gas

1. Discovery (1950’s)

2. Evaluation (1950-1990?)

3. Development (1990’s)

4. Expansion (Present)

5. Hey-day

6. Denial

7. Reality

8. Abandonment

TIME

Current Stage: 4

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Resource Development Model – Scotian Shelf Gas

1. Discovery (1960’s)

2. Evaluation (1960-1990’s)

3. Development (1999)

4. Expansion (Present?)

5. Hey-day

6. Denial

7. Reality

8. Abandonment

TIME

Current Stage: 4or 7?

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Resource Development Model – Mackenzie Delta Gas

1. Discovery (1970’s)

2. Evaluation (1970-Present)

3. Development

4. Expansion

5. Hey-day

6. Denial

7. Reality

8. Abandonment

TIME

Current Stage: 2/3

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Canada’s Hydrocarbon Stages Stage 1

Disc

2

Eval

3

Dev

4

Expn

5

Hey

6

Den

7

Real

8

Abn

AB Gas

BC Gas

Sask. Gas

E. Coast Gas ? ? ?

Mackenzie Gas ?

CBM

Gas Hydrates

AB Oil - Light

AB Oil - Heavy

Tar sands ?

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Resource Development Model – Alberta Coal (Mining)

1. Discovery (1800’s)

2. Evaluation (1850-80)

3. Development (1880’s)

4. Expansion (1880=1900)

5. Hey-day (1900-1920)

6. Denial (1930’s-1960)

7. Reality (1960’s)

8. Abandonment (1970’s)

TIME

Current Stage: 8

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Resource Development Model – Alberta Coal (Opencast)

1. Discovery (1800’s)

2. Evaluation (to 1950’s)

3. Development (1960’s?)

4. Expansion (1970’s)

5. Hey-day (Present)

6. Denial

7. Reality

8. Abandonment

TIME

Current Stage: 5Demand/price could move to Stage 4

?