APEC Energy Working Group Workshop on Unconventional Gas

1. Shale Gas Resource Estimates in the2011 Annual Energy Outlook of the U.S. Energy Information Administration APEC Energy Working Group Workshop on Unconventional Gas Vancouver, British Colombia, Canada, 10 May 2011 Jeff Skeer, U.S. Department of Energy, APEC Energy Working Group Aloulou Fawzi, Energy Economist, U.S. Energy Information Administration

2. Overview • U.S. shale gas resource estimates • AEO2011 shale gas sensitivity cases • Shale gas resource estimates in 14 regions outside the United States: An initial assessment APEC EWG-41 Unconvnetional Gas Workshop , Vancouver, May 10, 2011

3. U.S. Shale Gas Resource Estimates

4. Shale Gas Plays, Lower 48 States Source: Energy Information Administration based on data from various published studies.

5. Recent AEO Natural Gas Resource Projections U.S. dry natural gas resources Trillion cubic feet Source: EIA, Annual Energy Outlook 2011 and earlier editions 2543 Unproved shale gas 827 Unproved other gas (including Alaska and offshore) 1472 Proved reserves (all types & locations) 245

6. AEO2011 Reference Case U.S. Natural Gas Supply U.S. dry natural gas Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011 History 2009 Projections 1% Net imports 11% 45% 14% Shale gas 20% Non-associated onshore 8% 9% Non-associated offshore 8% 28% Tight gas 22% 8% Coalbed methane 7% 2% 9% Alaska Associated with oil 7%

7. AEO2011 Reference Case U.S. Gas Consumption U.S. dry natural gas Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011 * Includes lease and gas plant fuel ** Includes pipeline fuel Projections Industrial* Electric Power Residential Commercial Transportation**

8. Total Unproved Technically Recoverable Shale Gas Resource Is Estimated at 827 Tcf • This includes approximately 750 Tcf of discovered shale gas resource • 20.1 Tcf of inferred reserves • 56 Tcf of undiscovered resource (with the majority in the Washington/Oregon area) • The largest concentrations of shale gas are contained in the Northeast region which contains the Marcellus Shale and the Gulf Coast region containing the Haynesville Shale

9. AEO2011Shale Gas Sensitivity Cases

10. AEO2011 Shale Gas Resource Determinants The key determinants of the AEO2011 technically recoverable shale gas resource base are: (1) the estimated ultimately recovery (EUR) per well, and (2) the formation acreage from which natural gas can be produced. Shale gas cases were created by varying the reference case resource EUR and recovery factors by +/- 50%, which is consistent with USGS 95 and 5 percent probability range. Shale cases are meant to be illustrative of the shale gas resource uncertainty and do not represent confidence intervals or expected probability distributions.

11. U.S. High Shale Gas Cases • High EUR case. The estimated ultimately recovery (EUR) per shale gas well is assumed to be 50 percent higher than in the AEO2011 Reference case. Well spacing remains unchanged. Each well is recovering 50% more gas from the same acreage. The formation’s productive acreage remains unchanged. • High Recovery case. Fifty percent (50%) more natural gas can be recovered from the shale formation than in the Reference case, with 50 percent more productive acreage. The EUR per well is unchanged. Fifty percent (50%) more wells would be drilled to fully recover the shale gas in each play. • In both cases, the technically recoverable unproved shale gas resource potential increases from 827 Tcf to 1,230 Tcf.

12. U.S. Low Shale Gas Cases • Low EUR case. The estimated ultimately recovery (EUR) per shale gas well is assumed to be 50 percent lower than in the AEO2011 Reference case. Well spacing remains unchanged. Each well is recovering 50% less gas from the same acreage. The formation’s productive acreage remains unchanged. • Low Recovery case. Fifty percent (50%) less natural gas can be recovered from the shale formation than in the Reference case, with 50 percent less productive acreage. The EUR per well is unchanged. Fifty percent (50%) less wells would be drilled to fully recover the shale gas in each play. • In both cases, the technically recoverable unproved shale gas resource potential decreases from 827 Tcf to 423 Tcf.

13. Implications of U.S. Shale Gas Cases • High/Low EUR cases vary the cost of producing shale gas on a per unit basis by varying the volume of gas that can be recovered from a well at a fixed capital cost per well. These cases exhibit the greatest variability in gas prices, consumption, and supply. • High/Low recovery cases vary the area of the shale gas resource endowment, but do not affect the cost of producing gas within the productive area. Gas prices increase as the less expensive shale gas formations are depleted first. These cases exhibit less variability in gas prices, consumption, and supply.

14. Shale gas production Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

15. Total U.S. Natural Gas Production Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

16. Net U.S. Natural Gas Imports Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

17. Total U.S. Natural Gas Consumption Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

18. U.S. Natural Gas Consumption for Electricity Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

19. Henry Hub Spot Natural Gas Prices Dollars per million Btu in 2009 constant dollars Source: EIA Annual Energy Outlook 2011

20. Conclusions on U.S. Shale Gas Potential • The ultimate size of the shale gas resource base will have a significant impact on natural gas supply, consumption, and prices. • Reducing shale gas production costs is more important than expanding shale gas productive acreage.

21. World Shale Gas Resources: An Initial Assessment

22. Initial assessment of shale gas resources in 48 major shale basins in 32 countries indicates a large potential • Source: U.S. Energy Information Administration

23. Approach • EIA sponsored and reviewed the work. • Advanced Resources International, Inc. (ARI) performed the work. • Representatives from the Departments of Energy, Commerce, Interior and State also reviewed the work.

24. Methodology • Conducted preliminary geologic and reservoir characterization of shale basins and formation(s). • Established the areal extent, thickness and key reservoir properties of the major shale gas formations. • Defined the prospective area of each shale gas formation. • Estimated the risked shale gas in-place. • Calculated technically recoverable shale gas resource.

25. Findings • The initial shale gas technically recoverable resource (TRR) estimates for 32 economiesoutside the U.S. is 5,760 Tcf. • More than six times EIA’s 862 Tcf TRR estimate for U.S. shale gas. • Including the U.S. shale gas raises estimated world natural gas TRR by over 40 percent to 6,622 Tcf. • These are moderately conservative ‘risked’ estimates. • Not probabilistic estimates • The methodology employed recognizes the sparseness and uncertainty of the data and includes conservative discounting of the potential resource. • The U.S. State Department launched the Global Shale Gas Initiative (GSGI) in April 2010 to assist ecoomiesassessing their shale gas resources with the help of the U.S. Geological Survey. The expected results could be more definitive.

26. Findings (continued) • Economies dependent on imports but have been estimated to have significant shale gas resources relative to their production or consumption. • France, Poland, Turkey, Ukraine, South Africa, Morocco, Chile. • Economies that already produce a substantial amount of natural gas and are currently estimated to have a large amount of shale gas. • U.S., Canada, Mexico, China, Australia, Libya, Algeria, Argentina, Brazil.

27. Technically recoverable shale gas resource estimates (trillion cubic feet) * Not including the U.S. Source: EIA ARI World Shale Gas Resources

29. Canada’s Shale Gas Resources and Basins • Even with recent declines, Canada is still the world’s third largest producer of natural gas, with production at nearly 5.63 Tcf. • After years of decline, Canada’s proved reserves of 62 Tcf have stabilized. • Development of the abundant shale gas resources of Western and Eastern Canada (plus CBM and tight gas sands) could reverse the decline, as shown below: Source: EIA ARI World Shale Gas Resources 29

30. Shale Gas Reservoir Properties and Resources of Western Canada

31. Shale Gas Reservoir Properties and Resources of Western Canada (continued)

32. Gas Shale Reservoir Properties and Resources of Eastern Canada

33. Mexico’s Shale Gas Resources and Basins • While still an important producer, Mexico is today a net importer of natural gas: • Production: 1.77 Tcf • Consumption: 2.15 Tcf • Mexico’s remaining proved natural gas reserves of 12 Tcf are modest. • However, Mexico has major potential for new reserves from its multiple gas shale basins. • Technically recoverable resources estimated at681 Tcf. Source: EIA ARI World Shale Gas Resources 33

34. Shale Gas Reservoir Properties and Resources of Mexico

35. Shale Gas Reservoir Properties and Resources of Mexico (continued)

36. China’s Shale Gas Resources and Basins Onshore shale gas basins of China While China is the 10th largest natural gas producer in the world, with 2.93 Tcf (in 2009), its consumption of natural gas at 3.08 Tcf exceeds its production. China’s natural gas reserves have been static, at 107 Tcf, for the past several years. China’s top two priority basins - - Tarim and Sichuan - - together contain an estimated 1,275 Tcf of technically recoverable resource. Source: EIA ARI World Shale Gas Resources 36

37. Southern South America’s Shale Gas Resources and Basins Close to APEC economies Chile and Peru: Argentina produced 1.46 Tcf of natural gas in 2009 but became a net importer in 2008. Argentina’s assessed basins hold a cumulative risked recoverable resource of 774 Tcf allocated in the following basins: • 164 Tcf in the Chaco basin • 408 Tcf in the Nequen basin • 95 Tcf in the San Jorge basin • 108 Tcf in the Austral-Magallanes basin. Brazil holds 226 Tcf ; Chile 64 Tcf; Uruguay 21 Tcf; Paraguay 62 Tcf and Bolivia 48 Tcf Source: EIA ARI World Shale Gas Resources 37

38. For more information U.S. Energy Information Administration home page | www.eia.gov Short-Term Energy Outlook | www.eia.gov/steo Annual Energy Outlook | www.eia.gov/aeo International Energy Outlook | www.eia.gov/ieo Monthly Energy Review | www.eia.gov/mer World Shale Gas Resources: An Initial Assessment | www.eia.gov/analysis/studies/worldshalegas/ EIA Information Center • (202) 586-8800 | email: InfoCtr@eia.gov • Live expert from 9:00 a.m. – 5:00 p.m. EST • Monday – Friday (excluding Federal holidays)