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COGA August, 2003 Decarbonization: The Coming Natural Gas Economy Scott W. Tinker Bureau of Economic Geology

COGA August, 2003 Decarbonization: The Coming Natural Gas Economy Scott W. Tinker Bureau of Economic Geology John A. and Katherine G. Jackson School of Geosciences The University of Texas at Austin. Scott Tinker, Director Bureau of Economic Geology August 4, 2003.

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COGA August, 2003 Decarbonization: The Coming Natural Gas Economy Scott W. Tinker Bureau of Economic Geology

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  1. COGA August, 2003 Decarbonization: The Coming Natural Gas Economy Scott W. Tinker Bureau of Economic Geology John A. and Katherine G. Jackson School of GeosciencesThe University of Texas at Austin Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  2. 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, Director Bureau of Economic Geology August 4, 2003

  3. Humanity’s Top Ten Problemsfor next 50 years • ENERGY • WATER • FOOD • ENVIRONMENT • POVERTY • TERRORISM & WAR • DISEASE • EDUCATION • DEMOCRACY • POPULATION Nobel Laureate Dr. Richard Smalley, 2003 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  4. Outline • Global Decarbonization • Why the Trend Towards Gas • Creating a Global Gas Economy • Challenge of Meeting Demand • Opportunities Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  5. Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  6. 1 0 0 8 0 Solids 6 0 Oil Embargo Percentage of total market Solids (Wood, Coal) WW II 4 0 WW I Liquids (Oil) U.S. Consumption 2 0 Gases (Natural Gas, Hydrogen, Nuclear, Renewables) Liquids Gases 0 1850 1900 1950 2000 QAc9841c Year after Hefner, 1993 World Energy Consumption U.S. Data: Annual Energy Review 1999 (EIA, 2000) World Data: International Energy Annual 1999 (EIA, 2000) Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  7. 50 World oil 40 Energy consumption (percent) World gas, nuclear, hydro, renewables 30 World coal 20 1980 1985 1990 1995 Year U.S. Data: Annual Energy Review 1999 (EIA, 2000) World Data: International Energy Annual 1999 (EIA, 2000) Energy Demand Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  8. U.S. Energy Consumption Forecast U.S. Energy Consumption Forecast U.S. Energy Consumption Forecast U.S. Energy Consumption 1 1 160.00 120 0.9 0.9 Renewable Energy 1973 1973 140.00 100 0.8 0.8 Hydroelectric 120.00 0.7 0.7 80 Nuclear Energy 100.00 Gases and Renewables Liquids (Oil) Gases and Renewables Gases and Renewables 0.6 0.6 Natural Gas % of Total Market Quad BTU Quad BTU 80.00 Liquids 60 % of Total Market 0.5 0.5 Liquids Liquids 100 Oil Imported 60.00 Solids 0.4 0.4 Solids Solids 10 40 Oil Produced 90 0.3 0.3 40.00 Coal 20 0.2 0.2 20 20.00 80 Wood and Waste 0.1 0.1 30 0 0.00 l 1975 l 1910 0 0 70 l 1980 l 1915 l 1985 1845 1860 1875 1890 1905 1920 1935 1950 1965 1980 1995 2010 2025 2040 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 1845 1870 1895 1920 1945 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 l 1990 40 l 1920 1845 1860 1875 1890 1905 1920 1935 1950 1965 1980 1995 2010 2025 2040 l 1995 l 1925 60 l 2000 l 1930 50 l 1935 50 l 1940 l 1945 l Supply Instability Price Volatility Governmental Policy Technology 60 l l l l l l 1950 l l 40 l 1955 l l l l l l l 1960 l 70 l l 1965 l l 30 l l 1970 l l l 80 l 20 l l l 90 l l 10 l l l 100 l l l l l l l l l l l l 100 90 80 70 60 50 40 30 20 10 Solids (Wood, Coal) Gases (Natural Gas, Hydrogen, Nuclear, Renewables) U.S. Energy Consumption Tinker Forecast 1 Quad Btu ~ 1 Tcf Gas Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023 QAd1023

  9. Why the Long-Term Trend Towards Natural Gas? • Efficiency • Economy • Environment • Availability Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  10. Why Natural Gas? Efficiency Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  11. $30,000 $25,000 $20,000 United States $15,000 Canada France Japan Germany United Kingdom Italy $10,000 Per capita income $5,000 Note: 15 largest economies shown in red. Saudi Arabia Indonesia 0 Mexico 0 5 10 15 20 25 30 Brazil Russia China India Source: JPT, May 2001 Per-capita oil consumption (bbl/yr) QAd1023 QAd1023 Why Natural Gas? Economy/Efficiency Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  12. 10.00% $35.00 GDP Growth Crude Oil Domestic Wellhead Price 8.00% $30.00 6.00% $25.00 4.00% $20.00 GDP Growth (% change from previous year) Crude Oil Domestic Wellhead Price ($/bbl) 2.00% $15.00 0.00% $10.00 1973 1976 1979 1982 1988 2000 1970 1985 1991 1994 1997 -2.00% $5.00 -4.00% $0.00 Why Natural Gas?Economy Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  13. Other Units Gas-Fired Units Petroleum-Fired Units Coal-Fired Units U.S. Electricity Generation by Fuel Source 3,500,000,000 U.S. Carbon Dioxide Emissions from Energy Consumption by End-Use Sector 3,000,000,000 Other Renewables Non-Electricity Generation in Residential, Commercial and Industrial 2,500,000,000 1,600 Hydro Transportation 2,000,000,000 Nuclear Electricity Generation Natural Gas Mkwh 1,500,000,000 Petroleum 1,000,000,000 Coal 1,200 500,000,000 0 1950 1960 1990 2000 1970 1980 Data, EIA, 2000 800 MM Metric Tons of Coal Carbon Dioxide Emissions from Electricity Generation 3,000,000,000 400 2,500,000,000 2,000,000,000 Short Tons 1,500,000,000 0 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 1,000,000,000 500,000,000 Data: EIA, 2002 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Data, EIA, 2000 Why Natural Gas? Environmental Quality Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  14. Known Resources Cumulative Production (811) Increasing development costs, technology needs, uncertainty, and decreasing concentration Reserves (157) Reserve Growth (305) Undiscovered, Unconventional Reserves (1,004) Historical U.S. Composition of Total Natural Gas Discoveries (1977-2001) 25,000 Unassessed Unconventional Reserves (400) Reserve Growth New Fields 20,000 Geopressured Brine (Up to 24,000) 15,000 Data: EIA (2002) U.S. Dry Gas Total Discoveries (Bcf) 10,000 Gas Hydrate (Up to 300,000) Not Assessed by NPC 5,000 0 1977 1980 1983 1986 1989 1992 1995 1998 2001 Why Natural Gas? Resource Availability 1999 NPC Study (NPC, 1999b) Recoverable Portion of In-Place Gas Resource (Tcf) Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  15. Creating a Global Gas Economy • Enhance Reserves • Create Resources • Transport • Sequester Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  16. Natural Gas Decline for the Past Decade Source: EOG, Baker Hughes 160.00 140.00 120.00 100.00 Gases and Renewables 80.00 Liquids Quad BTU 60.00 Solids 40.00 20.00 0.00 1970 1960 1980 1990 2010 2020 2030 2040 2050 1950 2000 Enhance U.S. Consumption Forecast Enhance Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  17. EnhanceKey Technologies of the 90’s Deep-water, Sub-sea, FPSO Horizontal Drilling, Geosteering, & Rotary Steering Systems 3D Seismic, Computer Assisted Exploration Source: Bates, 2002, GCAGS Baker Hughes Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  18. Enhance Enhanced Gas Recovery Excellent Insignificant Portfolio of EGR Field Studies Overall EGR technologies in these seven fields yielded incremental production response of 231 Bcf. Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  19. Create 160.00 140.00 120.00 100.00 Gases and Renewables Enhance 80.00 Liquids Quad BTU 60.00 Solids 40.00 20.00 0.00 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Create New Resources U.S. Consumption Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  20. 30,000 Demand Deepwater+Subsalt Offshore L48 Unconventional Onshore L48 Unconventional Onshore 25,000 Shallow Offshore $3 L48 Conventional Onshore 20,000 Wellhead Price ($/mcf) $2 Annual Natural Gas Production (Bcf) 15,000 10,000 $1 5,000 0 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 Year Create U.S. Natural Gas Production “Conventional” Unconventionals Tight (Low Permeability) Shale Coalbed Methane Tight Gas, Shale Gas, CBM >50% “Unconventional” Unconventionals Deep (>15,000 ft) Subsalt Ultra-Deep Water Methane Hydrates Associated and High-Perm Gas EIA (1949-1990) and NPC (1991-2015) Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  21. *Advanced Stimulation Technology *Greater Green River Basin Shale Gas *Piceance Basin $3 State of Texas Tight Gas Incentives GRI Federal Alternative Fuels Production Credit for Unconventional Gas $2 Wellhead Price ($/Mcf) DOE $1 Private Sector Create Tight Gas 4,000.0 3,500.0 3,000.0 2,500.0 2,000.0 Bcf 1,500.0 11 Tcf Incremental Gas 1,000.0 500.0 0.0 1970 1975 1980 1985 1990 1995 Scott Tinker, Director Bureau of Economic Geology August 4, 2003 GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. QAd1023

  22. Rocky Mountain Foreland (13.7 Tcf) Midcontinent (16.9 Tcf) Appalachian (18.3 Tcf) N Permian Basin (19.5 Tcf) Arkla-Tex (29.8 Tcf) 0 4 0 0 m i Texas Gulf Onshore (9.1 Tcf) 0 6 0 0 k m B u r e a u o f E c o n o m i c Q A c 9 7 1 5 c G e o l o g y MAJOR PRODUCTIVE TIGHT GAS BASINS (Technically Recoverable Resources) San Juan (5.6 Tcf)* 78 Tcf 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) Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  23. GRI $2 Wellhead Price ($/Mcf) Private Sector $1 Create Shale Gas Antrim Shale Research Appalachian Basin Shales 350.0 300.0 250.0 200.0 Bcf 150.0 2.2 Tcf Incremental Gas 100.0 DOE (1976-1992) 50.0 0.0 1980 1985 1990 1995 Scott Tinker, Director Bureau of Economic Geology August 4, 2003 GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. QAd1023

  24. M i c h i g a n A n t r i m ( 1 6 . 9 T c f ) A p p a l a c h i a n I l l i n o i s ( 2 3 . 4 T c f ) N e w A l b a n y ( 2 . 9 T c f ) Cincinnati N A r c h ( 2 . 2 T c f ) F t . W o r t h B a r n e t t S h a l e ( 7 . 2 T c f ) 0 4 0 0 m i 0 6 0 0 k m B u r e a u o f D a t a : N P C ( 2 0 0 0 ) E c o n o m i c Q A c 9 7 1 2 c G e o l o g y MAJOR PRODUCTIVE DEVONIAN SHALE BASINS Technically Recoverable Resources 40 Tcf Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  25. GRI DOE Federal Alternative Fuels Production Credit for Unconventional Gas Private Sector Create Coalbed Methane 1,200.0 1,000.0 800.0 $2 600.0 Bcf Wellhead Price ($/Mcf) 400.0 4.5 Tcf Incremental Gas 200.0 $1 0.0 1980 1985 1990 1995 Scott Tinker, Director Bureau of Economic Geology August 4, 2003 GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. QAd1023

  26. Powder River (24.0 Tcf) Uinta & Piceance (5.5 Tcf) Hanna-Carbon (4.4 Tcf) Northern Appalachian and PA Anthracite (10.6 Tcf) Raton-Mesa (3.7 Tcf) SW Coal Region (5.8 Tcf) San Juan (10.2 Tcf) Black Warrior (4.4 Tcf) N 0 4 0 0 m i 0 6 0 0 k m B u r e a u o f Alaska (Bering River, North Slope, Chignik and Herendeen Bay) (57.0 Tcf) D a t a : P G C ( 2 0 0 1 ) E c o n o m i c Q A c 9 7 1 4 c G e o l o g y MAJOR PRODUCTIVE COALBED METHANE BASINS (Total Most Likely Resources) 81 Tcf Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  27. Montana Folded Belt (5.2 Tcf) Wind River (5.0 Tcf) Greater Green River (8.4 Tcf) Appalachian (5.0 Tcf) San Joaquin (9.0 Tcf) Anadarko, Palo Duro (17.7 Tcf) N Permian (12.9 Tcf) LA, MS, AL Salt (15.8 Tcf) Louisiana Gulf Coast (14.5 Tcf) 0 4 0 0 m i Texas Gulf Coast (14.3 Tcf) 0 6 0 0 k m B u r e a u o f D a t a : P G C ( 2 0 0 1 ) E c o n o m i c Q A c 9 7 1 3 c G e o l o g y MAJOR PRODUCTIVE DEEP (>15,000 FT) GAS BASINS (Total Most Likely Resources) 62 Tcf Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  28. Pacific Slope (8.9 Tcf) N Louisiana Slope (12.4 Tcf) Texas Slope (4.3 Tcf) 0 4 0 0 m i 0 6 0 0 k m Eastern Gulf Slope (7.6 Tcf) Gulf of Mexico OCS (47.7 Tcf) B u r e a u o f D a t a : P G C ( 2 0 0 1 ) E c o n o m i c Q A c 9 7 1 6 c G e o l o g y MAJOR PRODUCTIVE DEEP-WATER GAS BASINS (Total Most Likely Resources) 71 Tcf Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  29. 30,000 Deepwater+Subsalt Offshore L48 Unconventional Onshore 25,000 170 Tcf 20,000 Annual Natural Gas Production (Bcf) 15,000 10,000 5,000 0 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 Year Technology Investment = Resource Creation 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 Tcf EIA (1949-1990) and NPC (1991-2015) Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  30. 17% 25 U.S. Natural Gas 20 15 Quadrillion Btu 10 Natural Gas Consumption 5 Natural Gas Production Trinidad 1 Tcf Gas = 1 Quadrillion Btu 0 1949 1976 1994 1952 1955 1958 1961 1970 1973 1982 1985 1988 1991 1997 1964 1967 1979 2000 Data: EIA Transport North America Natural Gas Transports (Bcf) Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  31. 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. Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  32. Monitor Injector “A” “B” BEG Texas Frio Pilot Project “C” 440 ft 100 ft Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  33. Challenge of Meeting Natural Gas Demand Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  34. 120 5 1998 $ 100 80 4 Private Sector Billion $ DOE O&G Million $ Fuel Cells and Gas Turbines removed from 1996-1999 for comparison 60 3 40 20 2 2004 1998 2000 2002 1992 1994 1996 Private Sector Data: Chris Ross, World Energy (2001, v. 4, no. 2) Year Meeting Demand Oil and Gas R&D Funding Note Scale Difference Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  35. Meeting Demand Oil Company Employment 1,800 Largest 25 Oil Companies 1,400 Number of employees (thousands) 1,000 600 1974 1978 1982 1986 1990 1994 1998 Year Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  36. 20,000 Geoscience Graduate Students 10,000 Petroleum Engineering QAd1731c Source: AGI Meeting Demand UNIVERSITY ENROLLMENTS Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  37. Demand, esp. Natural Gas Technology Requirements O&G R&D Funding University Enrollments O&G Employment The Challenge Time Scott Tinker, Director Bureau of Economic Geology August 4, 2003

  38. 160.00 140.00 120.00 100.00 Gases and Renewables 80.00 Liquids Quad BTU 60.00 Solids 40.00 20.00 0.00 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Summary 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. The global economy and environment will benefit from a transition to natural gas. Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  39. Global Opportunities& Benefits 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. Scott Tinker, Director Bureau of Economic Geology August 4, 2003 QAd1023

  40. Thank You! Scott Tinker, Director Bureau of Economic Geology August 4, 2003

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