A source of renewal, as unconventional techniques are used in ... energy security implications. 2 .... Source: IHS Energ
JULY 2014
GOING GLOBAL: TIGHT OIL PRODUCTION Leaping out of North America and onto the World Stage
Jamie Webster, Senior Director Global Oil Markets
[email protected]
GOING GLOBAL: TIGHT OIL PRODUCTION
1
Key Message: Tight Oil Will Have Unconventional Effects
Tight Oil Production will change in the coming decades. It will be:
More global, as it leaps out of North America
More inclusive, as companies come to the US for experience and US companies go international for production A source of renewal, as unconventional techniques are used in conventional fields
The United States will continue to be an important laboratory for global development of tight oil and unconventional techniques Global tight oil production has significant energy security implications GOING GLOBAL: TIGHT OIL PRODUCTION
2
Top Ten Countries with Largest Shale Oil Resources
bbl
Top 10 Countries By Technically Recoverable Shale Oil Resources
80 70 60 50 40 30 20 10
0
Shale Oil (billion barrels) 60 - 80
20 - 40
40 - 60
0 - 20
Source: EIA Report, June 10 2013
Shale oil resources are concentrated in Russia and the United States – their resources are almost equal to those of the other eight countries combined. GOING GLOBAL: TIGHT OIL PRODUCTION
US Success Factors in Tight Oil: Internationally Repeatable?
Key factors in US tight oil success:
Resource Base Quality Resource Base Quantity Cooperative Government
Property Rights Innovation via competition Service sector capacity
Financial markets Functioning and available market The US focused on natural gas first, then switched to oil as gas prices fell. The opposite is likely to occur in many other countries.
GOING GLOBAL: TIGHT OIL PRODUCTION
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Typical Risk Progression and Investment Impact on Investors Typical Risks Faced by Operators High
•Higher Gov’t Take •Alter Contract Type/Terms •Create NOCs and Regulatory Agencies •Export Restrictions
Seeking Value-Added
Capacity Building
•Low Gov’t Take •Quick Approval Risk •Lack of NOCs or Institutions •Low Regulatory Burden
•Build Greater Capacity •Value-added Investments •Local Content •Nationalization
Favorable Terms
Favorable Terms Low Frontier Exploration
Source: Petroleum Risk Manager, IHS GOING GLOBAL: TIGHT OIL PRODUCTION
Ramp-up
Plateau
Production Cycle
Mature
High Risk
Countries identified by the EIA with the largest unconventional resources vary widely in terms of overall above-ground risk – but those in the top ten for both shale gas and shale oil are mostly found in the top half of the risk range. Canada United Kingdom Australia Norway United States Greenland Uruguay Qatar UAE French Guiana Trinidad & Tobago Chile Cyprus China Malaysia Brazil Peru Thailand Oman Cuba Timor-Leste Saudi Arabia Colombia Ghana Bahrain Russia Guyana Madagascar Mexico Azerbaijan Equatorial Guinea South Africa Congo Brazzaville Kuwait Philippines Gabon Mozambique Kazakhstan Kurdistan (Iraq) India Tanzania Angola Turkmenistan Papua New Guinea Lebanon Bolivia Vietnam Kenya Mauritania Indonesia Sao Tome & Principe Algeria Uganda Cote d'Ivoire Argentina Egypt Suriname Cambodia Iraq Bangladesh Libya Pakistan Myanmar Yemen Ecuador South Sudan Iran Chad Venezuela Sudan Syria DRC Nigeria
Top 10 Shale Oil and Gas Resources: Span the Gamut of Above-Ground Risk
Low Risk 10
9
Petroleum Risk Manager Overall Risk Scores
8 Top 10 Shale Oil and Gas
7 Top 10 Shale Oil
6
5
4
3
2
1
0
Source: Petroleum Risk Manager, IHS
GOING GLOBAL: TIGHT OIL PRODUCTION
Tight/Shale oil plays will exhibit the same wide range of breakeven economics as in the US $/barrel $225
Non-US Tight/Shale Oil Breakeven Cost Estimates PV10
$200
Range
Average
$175 $150 $125 $100 $75 $50 $25 $0
Source: IHS Energy
© 2014 IHS
• Incubating a play requires a very high oil price. Sustaining a known play only
needs a fraction of that price. GOING GLOBAL: TIGHT OIL PRODUCTION
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By end of decade, up to 10% of tight oil production could come from outside North America Global tight oil production outlook
Million barrels per day
9 8 7
Argentina Russia
6
Canada
5 4 United States
3 2 1 0 2000 China
2005 Mexico
2010
Colombia
Source: IHS Energy Annual Strategic Workbook 2014
GOING GLOBAL: TIGHT OIL PRODUCTION
2015
2020 Australia
2025 Libya
2030 Algeria
2035
2040 Tunisia © 2014 IHS
8
Companies coming to North America to learn techniques, US companies to go international for production 2020 new source production by asset type of internationalizing Asian NOCs mboe/d
2020 International New Source International by Asset Type
350 300 250
OilOnshore Sands Conventional & Shallow Water
200
Unconventional
150 100
LNG 50
Conventional Onshore Conventional Shallow Deepwater
Thailand
0
Source: IHS National Oil Company service
GOING GLOBAL: TIGHT OIL PRODUCTION
© 2014 IHS
Applying unconventional techniques to conventional plays Concept is still in early stages – but has potential to renew old oil fields in new ways, while helping to increase recovery factors - critical in meeting future supply
Controlled fractures
Low-productivity conventional reservoirs, horizontal wells: Allow access to thinner zones where vertical wells were not commercially productive. Can connect compartmentalized portions of the reservoir with one well instead of many vertical wells.
Thin target zone
Hydraulic fracturing may or may not be used It may not be practical or necessary in conventional reservoirs that have higher permeability than shales.
Horizontal wells decline faster than vertical wells, but decline rates are highly variable—typically between 40% and 90% in the first year.
GOING GLOBAL: TIGHT OIL PRODUCTION
Disconnected target zones
Tight Oil has Significant Energy Security Impacts
Tight oil production growth impacts:
A barrel of oil anywhere increases energy security everywhere
Can radically change the import/export balance of a country
Has the potential to disrupt OPEC as it collapses the signal to production time
GOING GLOBAL: TIGHT OIL PRODUCTION
Tight oil, and particularly responsive tight oil, can disrupt OPEC’s control – an event that could add price volatility Share of Oil Demand by Type
Short-Term Responsive Oil Production 4,000
60%
3,500 millions of barrels
70%
% share
50% 40%
3,000 2,500 2,000
30% 1,500 20%
1,000
10%
500
0%
0 2005 2008 2011 2014 2017 2020 2023
2005 2008 2011 2014 2017 2020 2023 OPEC
Non-OPEC
Source: IHS
GOING GLOBAL: TIGHT OIL PRODUCTION
Biofuels
Tight Oil © 2014 IHS
OPEC Source: IHS
Tight Oil © 2014 IHS
Key Messages: Global tight oil production is coming – and will disrupt like the US
Tight oil production will be more global in the future. Countries will unlock their recipe for allowing tight oil production as they gain from the US laboratory Companies will see big opportunitiespotentially reversing the trend towards less international openness The continuation of the US laboratory is critical for global success of tight oil Energy security will be improved- but within it is the potential for price volatility if OPEC power is disrupted
GOING GLOBAL: TIGHT OIL PRODUCTION
Contact us Americas: +1.800.IHS.CARE (+1.800.447.2273);
[email protected]
Europe, Middle East, and Africa: +44.(0).1344.328.300;
[email protected]
Asia and the Pacific Rim: +604.291.3600;
[email protected]
© 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at
[email protected], +1 800 IHS CARE (from North American locations), or +44 (0) 1344 328 300 (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners. V1.1-24.03.14
