shale gas & tight oil economic and policy considerations...percent of tight oil and shale gas...
TRANSCRIPT
Shale Gas & Tight Oil – Economic and Policy Considerations
Northwestern University – April 30 – May 1, 2013
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Congressional Research Service Nonpartisan, analytical, research and reference arm of the Library of Congress
Work directly for Members, Committees, and Staff on a confidential basis
Goals of confidentiality, responsiveness, timeliness, and objectivity
Does not advocate policy
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Contact Information
Michael Ratner
Specialist in Energy Policy
Congressional Research Service
101 Independence Avenue, SE, Washington, DC 20540
Office: 202-707-9529
E-mail: [email protected]
Where are the Resources?
Shale gas deposit
Northwestern -4
High Prices Drive Innovation
U.S. gas prices volatile since 2000
Price peaks above $12/MMBtu in 2005 and 2008
Shale gas pushed price below $2/MMBtu, but currently over $4/MMBtu – Will production respond?
Rise of Shale Gas
Source: EIA
Northwestern -5
Technology Unlocks U.S. Gas Reserves
• Geologic imaging
• Advanced drill bits and metallurgy
• Directional drilling
• Hydraulic fracturing
New Technology:
Shale gas deposit
Source: U.S. Department of Energy
Northwestern -6
Shale Gas Growing in Importance
Perspective on supply key factor for future
Drives LNG exports and manufacturing renaissance
Environmental concerns rise with production
Potential Gas Committee ups estimate again in 2012
Source: EIA
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tcf
Shale Gas Other
A change in policy would change the projection up or down
Domestic Price Impacts a Key Unknown
Supply-Demand Balance
Increase in demand due to exports or manufacturing (D1→D2)
Same supply (S1)
Domestic price may rise (P1→P2)
How much will production rise (Q1→Q2)
Slope of lines is key to price rise
Northwestern -8
Gas Production Grows Despite Prices
Production rising, but industry assets now shifting away from gas Dec. 2011/12 convergence
U.S. becomes #1 global gas producer in 2009
Source: EIA
Northwestern -9
1.20
1.40
1.60
1.80
2.00
2.20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
tcf
2012
2011
2010
2009
2008
2007
Recession hits
U.S. Gas and Oil Prices De-coupled
Prior to 2008, gas and oil prices moved in tandem
U.S. gas prices now independent of oil price
Price gap is driving “wet” gas plays (and tight oil)
Source: Bloomberg New Energy Finance
Northwestern -10
Oil Production Follows Gas
2012 could be the start of things to come
More industry assets moving to oil
Energy independence really an oil issue
Imports down
Source: EIA
Northwestern -11
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
MM
b/
d
2012
2011
2010
2009
2008
2007
Percent of Tight Oil and Shale Gas
Shale Gas projected to be 50% of production by 2036
Tight oil production peaks at 39% in 2024/25
Source: EIA
Northwestern -12
0%
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60%2005
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% tight oil % shale gas
Projected U.S. Tight Oil Production
Tight oil production sparks independence possibility
U.S. could become largest oil producer
Source: EIA
Northwestern -13
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MM
b/
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Tight Oil Other
Changes in policy could change the projection up or down
Continued Dependence on Fossil Fuels
Fracking concerns
Potential impact on water resources
Will LNG exports drive more fracking?
Will oil production drive more fracking?
New infrastructure required
Greenhouse gas issues
Natural gas a cleaner fuel than coal
Burning gas still produces CO2
Fugitive methane emissions also bad
Cheap gas undercuts renewable energy
Northwestern -14
Unconventional Oil and Gas: Selected Federal Studies USEPA: Study of the Potential Impacts of Hydraulic fracturing on Drinking Water Resources. Progress report published 12/2012. Final draft report of findings expected in 2014. http://www.epa.gov/hfstudy
DOE, DOI, EPA: Multi-Agency Collaboration on Unconventional Oil and Gas Research Initiative established under a 2012 MOU. Research plan expected to be available 7/2013. (http://unconventional.energy.gov/)
DOE: The Secretary of Energy Advisory Board, Shale Gas Production Subcommittee, Second Ninety Day Report, 11/2011 (http://www.shalegas.energy.gov/)
In 2011, DOE Secretary charged the Secretary of Energy Advisory Board (SEAB) Natural Gas Subcommittee to make recommendations to improve the safety and environmental performance of natural gas hydraulic fracturing from shale formations.
DOE, National Renewable Energy Lab: Natural Gas and the Transformation of the U.S. Energy Sector: Electricity, 11/2012 (http://www.nrel.gov/docs/fy13osti/55538.pdf
USGS: Shallow Groundwater Quality and Geochemistry in the Fayetteville Shale Gas-Production Area, North-Central Arkansas, 2011. http://pubs.usgs.gov/sir/2012/5273/
Northwestern -15
Infrastructure Changes
U.S. natural gas and oil infrastructure designed to move supply to demand
Supply centers have changed
New pipelines and other transportation modes
Northwestern -16
Source: Natural Gas Week
Policy Concerns
Natural Gas
28 bills introduced
Exports vs. Manufacturing
• Geopolitics
Prices
The Economy
• Trade
Oil
99 bills introduced
Independence/Security
• Imports
Military posture
Environment
Hydraulic fracturing
Dependency on hydrocarbons
Fugitive methane emissions
Cheap gas undercuts renewable energy
Northwestern -17