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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…
Tinker, 2014
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
Environmental Impact
1000’s of Feet of Rock
Drawn to Scale
Tinker, 2014
Environmental 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
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
Unconventional Resource Plays
Modified from: EIA and National Geographic QAei2915
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
Marcellus
Fayetteville
Haynesville
Barnett
Bakken
Eagle Ford
Permian
Basin
Tinker, 2014
Unconventional Resource Plays
Modified from: EIA and National Geographic QAei2915
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
Marcellus
Fayetteville
Haynesville
Barnett
Bakken
Eagle Ford
Permian
Basin
Tinker, 2014
Unconventional Resource Plays
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
Cumulative Production (Tcf)
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
Cumulative Production (Tcf)
24 Tcf 62 Tcf
Haynesville Monte Carlo Production Distribution
OGIP 489 Tcf
BEG Shale Reserves and Production Project
Tinker, 2014
1712 Tcf OGIP free
BEG Shale Reserves and Production Project
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 ($4) Stacked Production
BEG Shale Reserves and Production Project
45 TcF
37 TcF 17 TcF
U.S. Consumption
~ 25 TcF/Year
Tinker, 2014
EIA Price Case Stacked Production
0
2
4
6
8
10
12
0
2
4
6
8
10
12
1995 2000 2005 2010 2015 2020 2025 2030
He
nry
Hu
b P
rice
($
20
12
/M
MB
tu)
TC
F
Marcellus
Haynesville
Fayetteville
Barnett
HH $2012
BEG Shale Reserves and Production Project
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
BEG Shale Reserves and Production Project
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
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%
The Future Electricity Mix
Tinker, 2014
The Future Electricity Mix
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
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
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
The Future Electricity Mix
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%
The Future Electricity Mix
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
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%
The Future Electricity Mix
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
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 Energy Security
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
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
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
~3 billion
people
Tinker, 2014
Energy and the Economy
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
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
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