AAPG Distinguished Lecture SeriesPresents the

J. Ben Carsey Lecture

Energy Trends of the Future

Matthew J. TelferBorder to Border Exploration, LLCAustin, Texas

Three Themes

Getting Accurate Information

Rapid Advances in Technology and Circumstances

Environment, Politics and Economics

Oil and Gas

Coal

Hydro and Nuclear

Wind, Solar, Biomass

EIA 2010

2005 2040

100

50

0

Quadrillions of BTUs per Year – U.S.A.

2005 2010 2015 2035203020252020

50

100

Oil and Gas

Coal

Hydro and Nuclear

Wind, Solar, Biomass

EIA 2010

2005 2040

50 50

0

Quadrillions of BTUs per Year – U.S.A.

2005 2010 2015 2035203020252020

Oil - Liquid Fuels – (Ethanol) and Natural Gas

??

100100

AAPG Distinguished Lecture Series1984

“In the oil business, every ten years, half of what you know is

obsolete”Bob Weimer CSM

Environment

Economics

Politics

Cost vs. Benefit

Republicans vs. Democrats

Free Market Supply and DemandCheap Commodities Lead to Inefficiency and Waste

Cost Controls and Mandates Lessen Innovation and Motivation

Polarization and Extremism, A Race to see who can Handout the Most to Build Their Constituencies

Politics

Where’s the Balance?

CO

World Emissions29.7 Billion Tons/Year 201042.4 Billion Tons/Year 2035

2

7 Billion People on the PlanetEIA 2010, National Geographic 2011

Source: EIA Energy-Related Carbon Dioxide Emissions May 2010

Coal

Liquid Fuels

Natural Gas

World Energy-Related Carbon Dioxide Emissions By Fuel Type 1990-2035 Billion Metric Tons

International Energy Agency IEA – Forward View World Energy Outlook 2010

Kyoto Protocol – 1997, Copenhagen Accord – 2009Objective set: Limit change in Earth Temperature to 2 degrees Celsius = CO2 Concentration of 450 ppmv

Keeling Curve1960 2010 2011 2050 315 ppmv 385 391 450 ppmv

• Current Policy Scenario – 1.4 % Energy Growth

• New Policies Scenario – 1.2% Energy Growth (If present plans are implemented)

• 450 Scenario - .7% Energy Growth

450 Scenario would take: $18 Trillion between 2010-2035, “rate of technological transformation would be unprecedented“

What Will the Effects of CO2 be on Climate?

How Long Will the Increase in CO2 Last?

Need Answers –

A Lot is at Stake

Wikipedia

Sink 5

Sink 3

Sink 4

Sink 2

Sink 1

CO2Studies of Carbon Cycle from Pulsed Models

• Various Sinks Work at Different Rates, with Different Degrees of Effectiveness

• Higher Concentrations of Atmospheric CO2 are Dissolved into Ocean Surface Waters on the order of 200 to

2,000 years – • BUT, Leave the Atmosphere with Elevated CO2 Levels.

These are Drawn Down Further via Mixing with Deep Oceanic Waters and Dissolution of Minerals on Timescales of 3,000 to 10,000 Years.

• Paleocene-Eocene Climate Event: 150,000 years to Return to Pre-Event Levels Archer, et al 2009 Annual Review of

Earth and Planetary Sciences

The Effects of CO2?Shifts in vegetative zones, Regional climate changes,

Rise in sea levels, Stronger storms, Ocean acidification, Buffer to climatic change

How Long Will the Increase in CO2 Last?Thousands of Years

What Can Be Done??? Or, Do We Have to Live With, and Adapt to

Climate Change? 81,000,000 tons of CO2/day Perhaps 800,000 tons Removed by US Efforts

If the US Replaces 5 Quadrillion BTUs of Energy use with Renewables, out of 500 Quads used worldwide

each year, 1% of worldwide output of is CO2 Reduced

81,000,000 tons of CO2/day Perhaps 800,000 tons Removed by US Efforts

Is That a Solution?

2012 – Drew Shindell, et al of NASA2007 - Mark Jacobson of Stanford

Actual Global Warming – CO2 48%Soot 16%Methane 14%

Halocarbons 9.7%Ozone 8.6%

Nitrous Oxide 4.6%

US efforts controlling CO2 less impactful on Global warming? Are Soot and Methane easier to contain?

Is The Quest to Prevent Climate Change?

Is the Agenda to Replace Oil Companies?

Is the Agenda to Provide Abundant Energy

Is the Agenda to Get Funding for Research?

Is the Agenda to Build Constituencies to Get Elected?

Is the Agenda to Make Money?

Energy SourcesOil

Natural Gas Natural Gas Liquids

Coal Nuclear

Hydropower Geothermal

Biomass Wind

Solar

Renewables Renewable, But not CO2 Neutral

Electricity???

Electricity is not Energy

Electricity only transports power that was generated elsewhere

Renewables

Wind Solar

Geothermal Hydropower

Biomass/Ethanol**

RenewablesGovernment-Backed

• 30 States have Enforceable Renewable Portfolio Standards (RPS)

• Producers Earn Renewable Energy Credits• Sell to Energy Distribution Companies• Paid for in the Rate Base or by Surcharges, and• Federal Production Tax Credits - 1.1 – 2.2c/KwH

American Jobs Creation Act (2004) - renewables• Support Renewable Energy Act (2010) (DOE)

Wikipedia, DOE website

Federal Government

State Governments

Environmental Protection Agency

Private Industry

Municipal Governments

Rest of the World

Environmental Concerns

Economic Concerns

Power to Promulgate Regulations and Enforce Them Based on Mandates and Authority Given to it by the

Federal Government

NOW – CO2

Federal Government

State Governments

Environmental Protection Agency

Private Industry

Municipal Governments

Rest of the World

Environmental Concerns

Economic ConcernsLos Alamos, Bell Lab-style R&D

$$$$$$

Department of Energy

Power to Promulgate Laws Based on Mandates and Authority Given to it by the Federal Government

Federal Government

State Governments

Environmental Protection Agency

Private Industry

Municipal Governments

Rest of the World

Environmental Concerns, including Global Warming

Economic Concerns

Power to Promulgate Laws Based on Mandates and Authority Given to it by the

Federal Government

$$$

JOBSTaxes

Department of Energy

Wind• Abundant Supply, Requires Significant

Infrastructure, Including Redundancy • Currently 1.9% of Electric Supply • Government Mandates, Subsidies

- Federal Production, Investment Tax Credits; Interest Free Financing (via Energy Bonds to Gov. Entities) and Loan Guarantees (Farmers, Ranchers and Rural Businesses)

Wind Turbine Locations – Wind Power and Renewable Portfolio Supply Demand

Source:EIA

Solar• Abundant Supply• Applications: Thermal and Direct to Electric

Lower Prices from Chinese Manufacturers• Competitive Weakness Against Cheap

Energy - Low Oil Price is Bad for Solar• Government Mandates, Subsidies• 3 Recent Bankruptcies =

Culling High Cost Makers Solyndra, Evergreen and Spectrawatt

GeoThermal

Better Plants at Existing Sites

Hydroelectric

Best Sites in U.S. have been Developed

More Foreign Sites Will Be Developed

Source: IEA Annual Energy Outlook 2011

Effect of Renewables

By 2035, Only 5 to 10% of all of CO2 Input from U.S. has Been

DiminishedIs That a Solution to the

Problem of CO2?

Biomass

Corn to Ethanol Cellulose to Ethanol

Wood Products Used in Electric CoGen*

* Not CO2 Neutral, Based on Long Atmospheric Residence Times

Federal EPAClean Air Act, 1970, as amended

- RFG reformulated gasoline- RVP Reid Vapor Pressure (Summer)- Winter Oxygenated Fuel (CO control)

Energy Independence and Security Act 2007 - EISA- Fuel Pathways to Provide “Appropriate Greenhouse Gas Reductions”- RFS 1 7.5 B Gallons by 2005- RFS 2 36 B Gallons by 2022 (21 B Gallons non-corn starch) - Expanded to include Diesel

2009 - Application by GrowthEnergy to increase E10 to E15Granted October 2010 for model years 2001 and younger

Allows a Significant Expansion of Ethanol for Motor Fuel

Ethanol

Explosive Growth Industry Located in Rural America

600,000 BEPD

Renewable Fuels Association• 10% of Current Gasoline Market• Gearing up to Export Ethanol• 70,000 Direct Jobs• Worldwide Asset Base is Rich and Complex• RFS – Renewable Fuel Standards • - Mandates by 2022 21 B Gallons of the 36 B Gallons of

Renewable Fuels use be from non-corn starch Feedstocks• Grasses, Woody Biomass, Garbage and Algae

• Volumetric Ethanol Excise Tax Credit (VEETC)• - .45c/Gallon – 1 Year Extension 2011 = $6 B• Agriculture Subsidies Counted? • Tariffs on Brazilian Ethanol - .54c/Gallon• 2.3 Units of LIQUID Energy per 1 Unit Energy Input

Renewable Fuel Association Website

GrowthEnergy – Driver Behind Ethanol

• Goal: Replace 90% of US Gasoline Usage with Ethanol

• Ethanol Boost Direct Engine (EBDE)

• “Live Green, Go Yellow”

• Well Organized, Politically Savvy

• Spokesman: General Wesley Clark

• USDA, Energy Department, Navy - $510 MM Drop-in Aviation and Marine Biofuels

• White House Rural CouncilGrowthEnergy.Org 2011

Source: GrowthEnergy.org

20 years

Ethanol = Liquid Energy

Coal (US)

6 Trillion Tons in Place Recoverable US Reserves – 260 B Tons

222 Years Supply at Present Rate

DOE, US Mining Association

American Coal Foundation Website

US – 260 Bn sTons - 222 Years at Current Production Levels

A Critical Resource

Nuclear• Siting Plants is Critical • Fukushima Earthquake and Tsunami

• Refocused on Risk of Natural

Disasters: Earthquakes, Hurricanes, Tornados, Terrorism

• Also, Radioactive Waste Products• = No Significant Additions

Recessions

Nafta

Net Manufacturing Employment 1994-2007 -3,654,000 - Wikipedia

Energy Sources for Electrical Production

Trends of the Past give us Perspective for the Future

Petroleum

NuclearCoal

Nat. Gas

Nat. Gas

Rural Electrification

Hydro

Wind

Source: NaturalGas.Org

Our Products

Oil Natural Gas

Natural Gas Liquids

Production Stream Gas Condensate Well

Porous Rock Formation

Dew Point

Pipeline

Gas

Oil

Refinery

Processing Plant

Pipeline Quality Gas - Methane

Natural Gas Liquids

Burnertip

Fractionation PlantEthane Butane Propane Pentane

Gasoline, Petrochemicals

Oil

99% of all Transportation Runs on Oil

Liquid Energy

OilPetrochemicals

Detergents, Fertilizers, Medicine, Paints, Synthetic Fibers, Rubber, Asphalt, Lubricants, Roofing Compounds, Tars, Creosotes, High Viscosity Liquids…………………………………………………….

Natural Gas

Energy in a Vapor 900 out of the next 1,000

Power PlantsHuge New SuppliesTransportation???

Natural Gas Liquids• Ethane – Plastics• Butane – Liquid Fuel• Propane – Liquid Fuel• Pentane – Solvents, Organic

Compounds• Hexane – Solvents, Gasoline

UPDATE: Halliburton Profit Surges

54% On North America Growth

The Five Reservoir Fluids

Black Oils Volatile Oils

Retrograde Gases (Gas Condensates)Wet Gases

Dry Gases McCain, 1990

The Properties of Petroleum Fluids

The Five Reservoir FluidsVolatile Oils

McCain, 1990The Properties of Petroleum Fluids

• Pressure Drop in the Reservoir,

• Bubble Point is Reached,

• Drive Mechanism results from Gas Expansion

• Relatively Low Recoveries

The Five Reservoir FluidsRetrograde Gases (Gas Condensates)

McCain, 1990The Properties of Petroleum Fluids

• Initially – Fluid is in a gas phase in the reservoir

• As pressure decreases – Volumetric Expansion, Liquid condenses in the reservoir

• Initial Gas to Oil Ratios of 3,300 to 50,000 scf/STB

• 40 to 60 gravity API

The Five Reservoir FluidsWet Gases

McCain, 1990The Properties of Petroleum Fluids

• Initially – Fluid is in a gas phase in the reservoir

• As pressure decreases - Liquid DOES NOT condense in the reservoir

• Volumetric Expansion

• High Gravity Liquids at Surface

All Reservoir Drive Mechanisms are the Result of Pressure Drops

The Further the Distance from the Pressure Drop, the More Likely there will be a

Barrier to Flow= Less Recovery

Horizontal Drilling With Hydraulic Fracturing

Distributes the Pressure Drop Effectively over Many Times the Volumes of

Reservoir Reached by Other Methods

Truly a “BlockBuster” Technology

Energy from Shale.org

Porosity, Permeability and Drive Mechanisms - Hydrocarbon Phase is Just as Important

Shale Reservoirs with Gas-Condensate Phases are Being Exploited Now = OILGas

Source: NaturalGas.Org; fromEIA 2011

Thought it was Over for Gas

Tight Gas

Conventional Gas

Offshore

Source: NaturalGas.Org; fromEIA 2011

Thought it was Over for Gas

Marcellus Shale Reserve Estimates

84 TCFG 3.4 BBO mean144 TCFG 6.2 BBL high side

Other Estimates – 516 TCFG

USGS; Engeler, Penn State

EIA

Northeastern Pennsylvania Drilling Results

Cabot Petroleum13 MCFGPD

10 BCFG per wellAVERAGE!!?

3,189 Drillsites (400 acre spacing) = 32 TCFG – 2 Counties

Utica Shale

Partly in the Wet Gas and Gas/Condensate Hydrocarbon Phases

Probably, the Entire Eastern Half of Ohio will be an Oil/Gas Field.

12,000 Square Miles 160 acre spacing 48,000 wells

1,000,000 BOPD?

Source: Chesapeake

Source: EnergyIndustryPhotos.com

Bakken Dolomitic Siltstone and Shale Play,Along with Underlying Three Forks

North Dakota, Montana and Canada

• Continental Resources Estimates 24 B BO Recoverable

• Continuous Over-Pressured Accumulation

• 1,000,000 BOPD? “Guess and Guess Often” – Jack Stark

Eagle Ford Horizontal PlaySouth Texas

Massive Continuous Accumulation

All Hydrocarbon Phases Represented

Estimated to Reach 750,000 BOPD

Energy Tomorrow

Canadian Bitumen and Heavy Oil Plays

1.7 Trillion BO in Place

Projected to Reach 5,000,000 BOPD

Pipeline Dependent – Keystone XL to Gulf Coast

Gateway – Oil to AsiaIHS CERA, WEA

Canadian Bitumen and Heavy Oil Plays

Becoming More Environmentally Friendly with “ A Wave of Technological Advances”

In-Situ RecoverySteam Assisted Gravity Drainage

SAGD – 60% Recovery

Source: Wikipedia

Shell Oil Company

Deep Water Gulf of MexicoEocene (Wilcox-age) Sands

New Discoveries and Extensions

Midcontinent, Permian BasinExploitation with Horizontal Drilling

Oil Shales Piceance, Unita and Green River Basins

4.24 Trillion Barrels of Oil in PlaceUSGS

The region encompasses about 12 million square miles—just 6% of the earth's land mass. But it is estimated to contain the oil and natural-gas equivalent of 412 billion barrels of oil, about 22% of the world's undiscovered oil and gas.

“More recently, thinning ice has made it easier to work in some parts of the Arctic. And the persistently high price of oil, ...”

Arctic Riches Lure ExplorersExxon, Rosneft, Shell Set to Pour Billions Into Potentially Huge, Risky Prospects

Polar Oil Rush

Gas – Alaska, Canada

Oil -Canada, North Dakota

Ethanol

Condensate -Utica,MarcellusEagle Ford

Wind

Oil - Mexico

Oil –Deep WaterGulf of Mexico

Conclusions

On One Hand, We Have Lost

On the Other Hand We Have Won

Conclusions

1. CO2, is a Difficult Issue. We are Going to Have to Live with Climate Change. If Climate Change Happens at the Current Level of CO2, We can Only Expect More.

2. We are Using Precious Resources of Time and Capital to Fight CO2– Are we Better Off Using that Capital Elsewhere and Let Economics Dictate Energy Use - ?

Conclusions4. North America can be Energy Independent.- Just have to Include our most Strategic Trading Partners in the Box.

5. Would Create a Huge Geopolitical Shift Away from US Dependency on the Middle East and Reverse the Connection to Global Markets.

6. This Creates a Major Strategic Advantage: Economic Energy Allows for the Competitive Re-Industrialization of the U.S. and Real Solutions will be Found out of a Position of Economic Strength

Conclusions

The Stronger We Make Our Economy the Faster We Solve Energy Issues

http://upload.wikimedia.org/wikipedia/commons/b/b5/Carbon_sequestration-2009-10-07.svg

How are Sources of Energy Used???

To Generate Electricity Electricity and Natural Gas are Used:

Industry, Residential, Commercial Liquid Fuels are Used: Transportation

Electricity, Heat or Transportation

Undiscovered OilBillions of Barrels

>101-10<1

Source: Wikipedia

Source: Wikipedia

Natural Gas Liquids

Ethane Butane

Propane Pentane

Hexane

Highly Over-Pressured Oil Shales

• Pressure Drop Allows Oil to Migrate Out• Bakken Shales In the Williston Basin

How is Energy Measured?BTU = heat energy

Watt = power Power is energy expended through time, the rate it is

transferred1 Kilowatt = 3,412 BTU/hr

How is Energy Measured?302 GigaWatts =

1 BCFG

How is Energy Measured?1,000 Watts = Kilowatt

1,000 Kilowatts = Megawatt1,000,000 Kilowatts = Gigawatt 301 Kilowatts = 1 MCFG

1 Gigawatt = 3,311 MCFG

Figure 4. Schematic representing various steps included in a Structured Decision Making process. Modified from U.S. Fish and Wildlife Service (2008).

Structured Decision Making

Source: Wikipedia

Final Volumes for 2011

Actual Volume Ethanol Equivalent Volume

Cellulosic biofuel 6.6 mill gal 6.0 mill gal

Biomass-based diesel 0.80 bill gal 1.20 bill gal

Advanced biofuel 1.35 bill gal 1.35 bill gal

Renewable fuel 13.95 bill gal 13.95 bill gal

= 393,000,000 Barrels of Ethanol?

600,000 Barrels of Ethanol per day = less than numbers above 219 MM BE

Still a Lot!!

Public PerceptionHow Can This be Changed?

What do we Change it to and How?Appreciation of Value, Conservation

and EfficiencyChange in Consumption Habits

USEPA, IPCC