coga august, 2003 decarbonization: the coming natural gas economy scott w. tinker bureau of economic...

COGA August, 2003

Decarbonization:The Coming Natural Gas

Economy

Scott W. Tinker

Bureau of Economic GeologyJohn A. and Katherine G. Jackson School of Geosciences

The University of Texas at AustinScott Tinker, DirectorBureau of Economic GeologyAugust 4, 2003

The four EEEEs — Energy, Environment, Economy,

and Education — are inextricably linked. We

have a unique opportunity to positively impact the global 4-E balance in the

21st century.

The four EEEEs — Energy, Environment, Economy,

and Education — are inextricably linked. We

have a unique opportunity to positively impact the global 4-E balance in the

21st century.Scott Tinker, DirectorBureau of Economic GeologyAugust 4, 2003

1. ENERGY2. WATER3. FOOD4. ENVIRONMENT 5. POVERTY6. TERRORISM & WAR7. DISEASE8. EDUCATION9. DEMOCRACY10. POPULATION

1. ENERGY2. WATER3. FOOD4. ENVIRONMENT 5. POVERTY6. TERRORISM & WAR7. DISEASE8. EDUCATION9. DEMOCRACY10. POPULATION

Humanity’s Top Ten Problems

for next 50 years

Nobel LaureateDr. Richard Smalley, 2003

Scott Tinker, DirectorBureau of Economic GeologyAugust 4, 2003

QAd1023

Outline

• Global DecarbonizationGlobal Decarbonization• Why the Trend Towards GasWhy the Trend Towards Gas• Creating a Global Gas EconomyCreating a Global Gas Economy• Challenge of Meeting DemandChallenge of Meeting Demand• OpportunitiesOpportunities


QAc9841c

after Hefner, 1993

100

80

60

40

20

0

Per

cen

tag

e o

f to

tal

mar

ket

Year

1850 1900 1950 2000

World Energy Consumption

WW

I

WW

II

Oil

Em

bar

goSolids

Gases

Liquids

U.S. ConsumptionGases (Natural Gas, Hydrogen, Nuclear, Renewables)

Solids (Wood, Coal)

Liquids (Oil)

U.S. Data: Annual Energy Review 1999 (EIA, 2000)World Data: International Energy Annual 1999 (EIA, 2000)


U.S. Data: Annual Energy Review 1999 (EIA, 2000)World Data: International Energy Annual 1999 (EIA, 2000)

20

30

40

50

1980 1985 1990 1995

En

erg

y co

nsu

mp

tio

n (

per

cen

t)

Year

Energy Demand

World oil

World coal

World gas, nuclear,hydro, renewables


1910191519201925193019351940194519501955196019651970

197519801985199019952000

U.S. Energy Consumption

100

90

80

70

60

50

40

30

20

10

100

90

80

70

60

50

40

30

20

10

100 90 80 70 60 50 40 30 20 10

Liquids (Oil)

Solids (Wood, Coal) Gases (Natural Gas, Hydrogen, Nuclear, Renewables)

Historical U.S. Energy Consumption

0%

20%

40%

60%

80%

100%

1845 1850 1855 1860 1865 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Perc

enta

ge o

f Mar

ket S

hare

Solids

Liquids

Gases + Renewables

Data: EIA

Data: EIA

1973

Supply InstabilityPrice VolatilityGovernmental PolicyTechnology

1973

U.S. Energy Consumption

0

20

40

60

80

100

120

1845

1870

1895

1920

1945

1953

1958

1963

1968

1973

1978

1983

1988

1993

1998

Qu

ad

BT

U

Renewable Energy

Hydroelectric

Nuclear Energy

Natural Gas

Oil Imported

Oil Produced

Coal

Wood and Waste

U.S. Energy Consumption Forecast

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1845

1860

1875

1890

1905

1920

1935

1950

1965

1980

1995

2010

2025

2040

% o

f Tot

al M

arke

tGases and Renewables

Liquids

Solids


0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1845

1860

1875

1890

1905

1920

1935

1950

1965

1980

1995

2010

2025

2040

% o

f Tot

al M

arke

tGases and Renewables

Liquids

Solids


0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Qua

d B

TU

Gases and Renewables

Liquids

Solids

QAd1023QAd1023

1 Quad Btu ~ 1 Tcf Gas

Tinker Forecast


QAd1023

Why the Long-Term Trend Towards Natural

Gas?• EfficiencyEfficiency• EconomyEconomy• EnvironmentEnvironment• AvailabilityAvailability


Why Natural Gas?Efficiency

QAd1023


Why Natural Gas? Economy/Efficiency

Per

cap

ita

inco

me

0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

0 5 10 15 20 25 30

Per-capita oil consumption (bbl/yr)

Saudi Arabia

India

China

Indonesia

RussiaBrazil

Mexico

United KingdomFrance

Italy

Japan

Canada

United States

Germany

Note: 15 largest economies shown in red.

Source: JPT, May 2001QAd1023QAd1023

World Energy Consumption per Capita

0

50

100

150

200

250

300

350

400

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

Ene

rgy

Con

umpt

ion

(Qua

d bt

u)/P

opul

atio

n (b

illion

s)

World excluding U.S.

U.S.

World Energy Consumption per GDP Share

2.0

2.5

3.0

3.5

4.0

4.5

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

Ene

rgy

cons

umpt

ion

shar

e of

the

wor

ld

(Q

uad

btu)

/GD

P

World excluding U.S.

U.S.

QAd1023


Why Natural Gas? Economy

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

GD

P G

row

th (

% c

ha

ng

e f

rom

pre

vio

us

ye

ar)

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

Cru

de

Oil

Do

me

sti

c W

ell

he

ad

Pri

ce

($

/bb

l)

8.00%

10.00%GDP Growth

Crude Oil Domestic Wellhead Price

QAd1023


U.S. Carbon Dioxide Emissions from Energy Consumption by End-Use Sector

0

400

800

1,200

1,600

1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999

Non-Electricity Generation in Residential, Commercial and IndustrialTransportationElectricity Generation

Data: EIA, 2002

MM

Metr

ic T

on

s o

f C

oal

U.S. Electricity Generation by Fuel Source

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

Mkw

h

Other Renewables

Hydro

Nuclear

Natural Gas

Petroleum

Coal

Data, EIA, 2000

1950 1960 1970 1980 1990 2000

Why Natural Gas? Environmental Quality

QAd1023

Carbon Dioxide Emissions from Electricity Generation

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Other Units

Gas-Fired Units

Petroleum-Fired Units

Coal-Fired Units

Data, EIA, 2000

Sh

ort

Ton

s


1999 NPC Study (NPC, 1999b)Recoverable Portion of In-Place Gas Resource (Tcf)

Reserves (1,004)

Reserve Growth (305)

Undiscovered, Unconventional

Unassessed Unconventional Reserves (400)

Geopressured Brine (Up to 24,000)

Gas Hydrate (Up to 300,000) Not Assessed by NPC

Increasing developmentcosts, technology needs,

uncertainty, and decreasing concentration

Why Natural Gas? Resource Availability

QAd1023

Cumulative Production (811)

Reserves (157)Known Resources

Reserve GrowthNew Fields

Historical U.S. Composition of Total Natural Gas Discoveries (1977-2001)

0

5,000

10,000

15,000

20,000

25,000

1977 1980 1983 1986 1989 1992 1995 1998 2001

U.S

. D

ry G

as

To

tal

Dis

co

ve

rie

s (

Bc

f)

Data: EIA (2002)


QAd1023

• Enhance ReservesEnhance Reserves• Create ResourcesCreate Resources• TransportTransport• SequesterSequester

Creating a Global Gas Economy


0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Qua

d B

TU Gases and Renewables

Liquids

Solids

EnhanceU.S. Consumption Forecast

QAd1023

Natural Gas Decline for the Past DecadeSource: EOG, Baker Hughes

Enhance


EnhanceKey Technologies of the 90’s

3D Seismic,Computer Assisted Exploration

Deep-water,

Sub-sea,FPSO

Horizontal Drilling,

Geosteering, &

Rotary Steering Systems

Source: Bates, 2002, GCAGS Baker Hughes


EnhanceEnhanced Gas Recovery

Production Decline Curve Forecast of Waha Field

y = 832, 425. 9936e-0.0008x

400,000

600,000

800,000

1,000,000

1,200,000

0 24 48 72 96 120 144

Months since 1990

SGR project starts

J uly 1995

SGR project ends

March 1998

2 year lag of results

I ncremental product ion of 12% between

start of project and 2 year lag af ter

project complet ion = 5 Bcf

Production Decline Curve Forecast of Lockridge Field

y = 821,265.2536e-0.0042x

400,000

600,000

800,000

1,000,000

0 24 48 72 96 120 144

Months since 1990

SGR pr oject star ts

J uly 1995

SGR pr oject ends

Mar ch 1998


I ncremental product ion of 4% between

start of project and 2 year lag af ter

Production Decline Curve Forecast of Boonsville Field

y = 5, 241, 606. 2868e-0.0046x

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

0 24 48 72 96 120 144

Months since 1990

SGR project starts

May 1993

SGR project ends

J une 1995

No significant incremental production observed.

P roduction decline curve forecast remains

unchanged.

Production Decline Forecast of Stratton Field

y = 2, 266, 021. 5631e-0.0033x

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

0 60 120 180 240 300

Months since 1980

SGR project starts

J anuary 1990

SGR project ends

April 1993

Since increasing production trend started prior to

project start , incremental production not claimed.

Production Decline Curve Forecast of Seeligson Field

y = 4, 088, 984. 0166e-0.0102x

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

0 60 120 180 240 300

M onths s i nc e 1980

SGR project starts

September 1988

SGR project ends

December 1991


I ncremental production of 19% between

start of project and 2 year lag af ter project

Production Decline Curve Forecast for McAllen Ranch Field

y = 6, 770, 143. 3703e-0.0195x

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

0 24 48 72 96 120 144 168

M onths s i nc e 1988

SGR project starts

March 1989

SGR project ends

February 1992

2 year lag of resultsI ncremental production of 113% between

start of project and 2 year lag af ter project

Production Decline Curve Forecast of Lake Creek Field

y = 402, 571. 4706e-0.0319x

0

200,000

400,000

600,000

800,000

1,000,000

0 24 48 72 96 120 144 168

Months since 1988

SGR project starts

September 1989

SGR project ends

December 1992


I ncremental production of 159%

between start of project and 2 year lag

Excellent Insignificant

Portfolio of EGR Field Studies

Overall EGR technologies in these seven fields yielded incremental production response of

231 Bcf.QAd1023


QAd1023

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Qua

d B


Liquids

Solids

Create New Resources

Create

Enhance

U.S. Consumption


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

L48 Conventional Onshore

Associated and High-Perm Gas

Shallow Offshore

L48 Unconventional Onshore Tight Gas, Shale Gas, CBMDeepwater+Subsalt Offshore

0

5,000

10,000

15,000

20,000

25,000

30,000

1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013

Year

An

nu

al N

atu

ral G

as P

rod

uct

ion

(B

cf)

$2

$3

$1 Wel

lhea

d P

rice

($/

mcf

)

>50%

L48 Unconventional Onshore

CreateU.S. Natural Gas Production

Demand

“Conventional” Unconventionals

Tight (Low Permeability)

Shale

Coalbed Methane

“Unconventional” Unconventionals

Deep (>15,000 ft)

Subsalt

Ultra-Deep Water

Methane HydratesQAd1023


0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

1970 1975 1980 1985 1990 1995

Bcf

11 Tcf Incremental Gas

GRI, 1999, GRI’s Gas Resource Database. DOE personal communication.

$2

$3

$1

Wel

lhea

d P

rice

($/

Mcf

)

*Advanced Stimulation Technology*Greater Green River Basin Shale Gas*Piceance Basin

DOE

GRI

Federal Alternative Fuels Production Credit for Unconventional Gas

State of Texas Tight Gas Incentives

CreateTight Gas

QAd1023

Private Sector


600 km0

400 mi0

N

QAc9715c

Burea uo fEc onomi c

Geo logy

MAJOR PRODUCTIVE TIGHT GAS BASINS(Technically Recoverable Resources)

Data: NPC (2000), * Based on estimates of NPC (1993), San Juan Basin tight gas resource included with oil field reserve appreciation and new fields in NPC (2000)

Rocky MountainForeland(13.7 Tcf)

Midcontinent(16.9 Tcf)

Arkla-Tex(29.8 Tcf)

Appalachian(18.3 Tcf)

Permian Basin(19.5 Tcf)

Texas GulfOnshore(9.1 Tcf)

San Juan(5.6 Tcf)*

78 Tcf

QAd1023


0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

1980 1985 1990 1995

Bcf

2.2 Tcf Incremental Gas


$2

$1

Wel

lhea

d P

rice

($/

Mcf

)

Antrim Shale ResearchAppalachian Basin Shales

DOE(1976-1992)

GRI

CreateShale Gas

QAd1023

Private Sector


600 km0

400 mi0

N

QAc9712c

Ft. WorthBarnett Shale

(7.2 Tcf)

IllinoisNew Albany

(2.9 Tcf)Cincinnati

Arch(2.2 Tcf)


Data: NPC (2000)


Geo logy

Michigan Antrim(16.9 Tcf)

MAJOR PRODUCTIVE DEVONIAN SHALE BASINSTechnically Recoverable Resources

40 Tcf

QAd1023


0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1980 1985 1990 1995

Bcf

DOE

GRI


$2

$1

Wel

lhea

d P

rice

($/

Mcf

)

4.5 Tcf Incremental Gas

Federal Alternative Fuels Production Credit for Unconventional Gas

CreateCoalbed Methane

QAd1023

Private Sector


600 km0

400 mi0

N

QAc9714c


Geo logy

Powder River(24.0 Tcf)

Hanna-Carbon (4.4 Tcf)Uinta & Piceance(5.5 Tcf)

San Juan(10.2 Tcf)

Northern Appalachianand PA Anthracite

(10.6 Tcf)

Black Warrior(4.4 Tcf)

Raton-Mesa (3.7 Tcf)

Alaska(Bering River, North Slope,

Chignik and Herendeen Bay)(57.0 Tcf)

SW Coal Region(5.8 Tcf)

Data: PGC (2001)

MAJOR PRODUCTIVE COALBED METHANE BASINS(Total Most Likely Resources)

81 Tcf

QAd1023


600 km0

400 mi0

N

QAc9713cData: PGC (2001)


Geo logy

MontanaFolded Belt

(5.2 Tcf)

Wind River(5.0 Tcf)

Greater Green River(8.4 Tcf)

San Joaquin(9.0 Tcf) Anadarko, Palo Duro

(17.7 Tcf)Permian(12.9 Tcf)


LA, MS, AL Salt(15.8 Tcf)

Louisiana Gulf Coast(14.5 Tcf)

TexasGulf Coast(14.3 Tcf)

MAJOR PRODUCTIVE DEEP (>15,000 FT) GAS BASINS(Total Most Likely Resources)

62 Tcf

QAd1023


600 km0

400 mi0

N

QAc9716c


Geo logy

MAJOR PRODUCTIVE DEEP-WATER GAS BASINS(Total Most Likely Resources)

Data: PGC (2001)

Pacific Slope(8.9 Tcf)

Louisiana Slope(12.4 Tcf)

Texas Slope(4.3 Tcf)

Eastern Gulf Slope(7.6 Tcf)Gulf of Mexico OCS

(47.7 Tcf)

71 Tcf

QAd1023


L48 Unconventional OnshoreDeepwater+Subsalt Offshore

Technology Investment = Resource Creation

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

0

5,000

10,000

15,000

20,000

25,000

30,000

1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013

Year

An

nu

al N

atu

ral G

as P

rod

uct

ion

(B

cf)

170 Tcf

Unc. Gas Major Basins

(Technically Recoverable)

Tight Gas 78 Tcf

Shale Gas 40 Tcf

CBM 81 Tcf

Deep Gas 62 Tcf

Deep Water 71 Tcf

332 TcfQAd1023


Source: A. Anderson/

Cambridge Energy Research Assoc.

North America

Natural Gas

Transports

(Bcf)

Tri

nid

ad

0

5

10

15

20

25

1949

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

Qu

ad

rill

ion

Btu

Natural Gas Consumption

Natural Gas Production1 Tcf Gas = 1 Quadrillion Btu

Data: EIA

17%

U.S. Natural Gas

Transport


Sequester

The sustainability of a hydrocarbon-fueled economy requires that we

support an environment and energy win-win.

Capture carbon dioxide and return it to

the subsurface for the economic benefit of enhanced hydrocarbon

recovery and the environmental benefit of reduced atmospheric carbon dioxide.


Injector

Monitor

“C”

“B”

“A”

440 ft

100 ft

BEG TexasFrio Pilot Project


QAd1023

Challenge of Meeting Natural

Gas Demand


21992 1994 1996 1998

3

4

5

Pri

vat

e S

ecto

rB

illi

on

$

Year

2000 2002 2004

Meeting DemandOil and Gas R&D Funding

Private Sector Data: Chris Ross, World Energy (2001, v. 4, no. 2)

1998 $

Note Scale Difference

DO

E O

&G

Mil

lio

n $

20

40

60

80

100

120

Fuel Cells and Gas Turbines removed

from 1996-1999 for comparison


1,800

1,000

600Nu

mb

er

of

emp

loy

ees

(th

ou

sa

nd

s)

1978 19981994199019861974Year

1982

1,400

Meeting Demand

Oil Company Employment

Largest 25 Oil Companies


QAd1731c

Source: AGI

10,000

20,000

Meeting Demand

UNIVERSITY ENROLLMENTS

Geoscience Graduate Students

Petroleum Engineering


Time

O&G R&D FundingUniversity

Enrollments O&G Employment

Demand, esp. Natural Gas

Technology Requirements

The Challenge


Summary

QAd1023

Global oil and coal consumption will remain at current levels for 30-50 years.Natural gas and other energy sources will need to fill the global demand gap.

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Qua

d B


Liquids

Solids

The global economy and environment will benefit from a transition to natural gas.


Global Opportunities& Benefits

QAd1023

Research and technology for a gas industry are different than for an oil industry.Unconventional sources will require significant geoscience and engineering advancements to be economically viable.

Sequestration of greenhouse gases will be required to handle atmospheric emissions, and will need geoscience and engineering understanding.


Thank You!


coga august, 2003 decarbonization: the coming natural gas economy scott w. tinker bureau of economic...

Documents

energy demandscott tinker

austinscott tinker

eeees energy

world energy consumptionu

annual energy review

international energy

world data

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