International Consultants Ltd Andrew Leung Shale Revolution in the Golden Age of Gas Andrew K P Leung, SBS, FRSA A presentation to the Low Carbon Earth Summit 2013 Qujiang International Conference Centre, Xi’an, China 27 September, 2013 1
Are we entering a Golden Age of Gas? • Natural gas 45% less CO2 emission @ btu < coal; 30% < oil; US gas use – 35% industry, 30% power, 20% residential. 15% commercial, transportation etc. • Natural gas use to rise by 50% to 25% of global energy demand by 2035 . • Global conventional gas resources equal to 120 years of current energy consumption • Unconventional at least as large ( shale, tight gas (in sandstones and rocks of low permeability), coal-bed methane (CBM), artic, and gas hydrates - crystallized solids with methane molecules in permafrost and deep seabeds (still uncertain but potential > all other carbon fuels combined). Now 60% of total U.S. gas production (deregulated 1978). CBM growing in Australia. China, India and Indonesia to follow. • Best practice mitigates environmental cost of hydraulic fracking – excessive water use, contamination and disposal. • Total resources plus unconventional – 250 years consumption; but discovery to production could take decades; all major regions recoverable – at least 75 years consumption • By 2035, global primary gas demand to reach 5.1 tcm, increasing proportion in energy mix from 21% to 25%, overtaking coal; 80% due to non-OECD . China’s demand = Germany 2010 to equate entire EU ; ME to double =China; India x4. Mainly power generation also industry, transport and buildings • Overall global gas demand = 3x Russia current production. 40% to be met by unconventional • Strongest producing regions - North America (NA), Russia, ME, Caspian, China and Africa • Natural gas markets , despite isolation (notably NA ), to show greater convergence . Global trade evenly split between pipeline and LNG ; Cumulative investment in gas infrastructure $8 trillion; need for more LNG capacity in some regions 2
IEA World Energy Outlook 2012 • China, India and ME = 60% of increase in global OIL demand by one-third to 2035 . Increase from China, India and MENA > OECD reductions. To reach 99.7 mb/d by 2035 > 87.4 mb/d in 2011. Transport ½ global oil consumption (40% due to trucks (lower fuel efficiency standards). Crude import price to rise to $215 nominal terms by 2035 ($125/b, 2011 prices) • After 2020, OPEC output to rise from 42% of world to 50% by 2035 , rest of global production driven entirely by UNCONVENTIONAL OIL (light tight oil + natural gas liquids). By 2020, US to be largest oil producer overtaking Saudi Arabia until mid-2020s; to become net oil exporter by 2030. • IRAQ to exceed 6 mb/day in 2020 rising to 8 mb/day in 2035 > Russia; to become 2ND LARGEST OIL PRODUCER BY 2035 , selling to Asia mainly China (gaining 5 trillion revenue or $200 billion p.a.). • US GAS TO OVERTAKE OIL IN ENERGY MIX BY 2030. Now >1/2 of world’s drilling fleet. Natural gas production growth robust in China, India and MENA. CHINA TO EXPAND GAS USE from 130 bcm/d in 2011 to 545 bcm/d in LARGER THAN CURRENT EU BY 2035. • Lower-priced gas (1/5 of import prices in Europe and 1/8 of Japan’s) frees up US COAL FOR EXPORT TO EUROPE, displacing Europe’s higher-priced gas imports and hastening retreat from nuclear power • UNCONVENTIONAL GAS ½ of GLOBAL GAS PRODUCTION TO 2035. Still formative years. Non-OPEC unconventional oil production (light tight oil in US, oil sands Canada, natural gas liquids, Brazil deep-water) to a plateau > 53 mb/d in 2015 from 49 mb/d 9n 2011, falling back to 50 mb/d in 2035. • Last decade , COAL ½ of global energy demand rise. China electricity demand growth to exceed US + Japan combined by 2033. Coal-fired output nearly = all renewables combined. China to peak in 2020 to 2035 . India to overtake US as second largest coal consumer by 2025. FOSSIL FUELS remain dominant globally, supported by 6X more subsidies v renewables (+30% since 2010, mainly in MENA countries) • Worldwide ENERGY EFFICIENCY drives – China 16% cut in energy intensity by 2015; EU 20% cut in 2020 energy demand; US higher fuel economy standards, Japan 10% cut in electricity consumption by 2030; but > 4/5 potential for energy efficiency in buildings and > 50% in industry remain untapped. Full non-technological potential to halve global 2030 energy demand. • RENEWABLES to become 2 nd largest source of energy by 2015 (half of coal) and 1/3 of global electricity output by 2035 . Continued subsidies, falling technology costs, rising energy prices and carbon policies. Solar leading. Biomass, increasing 4X. Subject to good management, global bioenergy resources more than sufficient so as not to compete with food. • No more than 1/3 proven fossil fuel reserves (2/3 coal, 22% oil and 15% gas) can be consumed to achieve TWO_DEGREE TARGET BY 2050, barring wide CCS deployment. Goal of 2 degree difficult as 4/5 emissions allowable by 2035 already locked in existing power plants and buildings etc. Status quo long-term average global temperature by 3.6 d. C. Oil demand and CO2 emissions to peak by 2020 , 13 mb/d lower by 2035 (= production of Russia + Norway). Consistent with long-term temperature increase of THREE DEGREES. • 1.3 BILLION PEOPLE IN 10 COUNTRIES no electricity and 2.6 billion people no clean cooking fuel (4 in Asia and 6 in Sub-Sahara Africa) 3 • More water-intensive power-generation and biofuels TO INCREASE WATER CONSUMPTION by 85% to 2035. 2X the rate of energy demand increase.
New oil dynamics (IEA, Supply shock from North American oil rippling through global markets , 14. May, 2013) • North America to increase oil production by 3.9 mb/d 2012-18 (=2/3 of non-OECD growth); US oil production (e.g. N Dakota) > Saudi Arabia by 2017 , to become net oil exporter by 2030 • PWC – oil prices set to drop 40% to stabilize at lower longer-term levels. • Production cost threshold = $70 @barrel at present (Harvard Kennedy School) • World oil refining capacity to surge by 9.5 mb/d , led by China and ME • South China Sea alone has reserve of 200 billion barrels • Shale c ontributes to 30% of US oil and 40% gas production • US shale oil + Canadian tar sands to increase global capacity to 8.5 mb/d by 2018 > demand growth of 6.9 mb/d BUT – • Serious depletion of light-sweet crude (with little sulphur) and limited refining capacity for processing heavy sour grades into heavy crude such as diesel and fuel. • Mature OPEC fields now declining at 5 to 6 % p.a. Non-OPEC fields declining 8 to 9 % p.a . • Each marginal barrel more expensive to extract • Growth in U.S. tight oil from fracking (1 m barrels @day) offsets declining non-OPEC oil supplies • Society of Petroleum Engineers (SPE) - more wells to be drilled in next decade > last 100 years. • 10.5 billion barrels of oil estimated beneath coastal tundra of NE Alaska (Arctic National Wildlife Refuge (ANWR)) but U.S. uses 7.3 b barrels of oil a year (= < 1 ½ yr supply). • Since 2007, US has cut foreign crude import by 40% , or 5 mb/d. Preparing to export natural gas. China now imports 57% of oil, up from 48% 5 years ago. 22% natural gas imported 10x > 2007. 4
World Gas Reserves • Conventional recoverable = 120 yrs of current consumption • Total recoverable = 250 yrs • All major regions at least 75 yrs • Share of natural gas in global energy mix to increase from 21% to 25% overtaking coal by 2035, with non-OECD use = 80% of total increase • US gas price plunged from $13@1,000 cu.ft to $2 (2012) or $4 (2013) 5
Technically recoverable shale resources 2/3 of assessed, technically recoverable shale gas resource concentrated in six countries - U.S., China, Argentina, Algeria, Canada and Mexico. 6
Fracking technology 7
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