An Introduction To Shale Oil & Gas - IOGP

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An introductionto shale oil &gasPhilippe Charlez, IOGPShale drilling site in Pennsylvania - Photo Helge Hansen - Statoil

IOGP members produce half of theworld’s oil and a third of the natural gasOur main objective: promote safe, responsible and sustainable operationsNorth AmericaEuropeAnadarkoAPIBaker HughesCAPPChevronCNR InternationalConocoPhillipsDevon EnergyExxonMobilHess CorporationHusky EnergyAfren plcASSOMMINERARIABG GroupBPCairn EnergyDONG EnergyE.ON Ruhrgas ASEnergy InstituteIADCIAGCKosmos EnergyMarathon OilNexen Inc.Noble EnergyPemexSchlumbergerSuncorTalisman EnergyEniFairfield EnergyGALP EnergiaGdF SuezIOOAIPIECAMaersk OilMOL plcNOGEPANorwegian Oil & GasOil Gas DenmarkOil & Gas UKOMVPerenco HoldingsPremier OilRepsolRWE Dea AGShellStatoilTotalTullow OilWEGWintershall43 members active in region36 members active in regionRussia & Caspian regionJSOC BashneftAfricaSouth AmericaARPELIBPPan AmericanSasolNCOC21 members active in regionSonangol41 members active in regionPetrobrasPLUSPETROL31 members active in regionMiddle EastADNOCDolphin EnergyDragon OilKuwait OilQatar PetroleumRasGasYemen LNG33 members active in regionAsia & AustraliaAPPEABHPBillitonCairn IndiaCNOOCINPEXOrigin EnergyPapuan Oil SearchPetronasPTTEPWoodside32 members active in region

1. The US shale revolutionBakkenIn the 1990s and 2000s,the US is increasinglydependent on oil & gasimports. Prices are on anupward trend.It’s the trigger of an energyrevolution:Entrepreneurialexperimentation in theBarnett Shale proveseconomic viability andtriggers an energyrevolution andmanufacturing renaissance.MarcellusBarnettEagle-FordHaynesville

The shale revolution turns the US into oneof the top global oil & gas producersOil production peaks:from now on, USproduction falls1970First oilcrisisSecond oilcrisisOil countershock197319791986Energy dependency (%)The US becomes thePeak oil import:the US has never largest gas producer in theworld and the secondimported aslargest oil producermuch oil20062014Gas dependency (%)Oil dependency (%)20%70%75%Dependency 0%0%40%19172533BP outlook 2014135BP outlook 2014791113

Shale drives down natural gas prices,giving the US economy a competitive edge20Gas prices ( /MBTU)JapanEnergy-intensive industries benefit s in the chemical industry drop,boosting productionUSOperating costs (US /pound)0135791113BP outlook 2014Source: IFRI1.0Europe2012Jobs are created (direct, indirect, induced)2006Source: IHS CERA0.6USEuropeUS0.2100Production (Bn Pounds)200

US power generation moves to gas fromcoal, lowering GHG emissionsRenewables have continued to grow, notcrowded out by gasGHG (Bn tons/year)Meanwhile, the EU moves in the opposite direction:Coal consumption (Mn tons/year)6.660040%Coal55030%GHG -13%6.2Gas and coalin the US power mix5005.8450Gas and coal in theEuropean power mix20%Gas10%Coal -21%5.4Source: Pétrole et gaz informations N 18314001357911131990BP outlook 2014See also -ghg-emissions-trends2012

2. Some science about shale oil and gasShale oil and gas areexactly the same productsas oil and natural gas fromconventional extraction.

How oil & gas are formedOil and gas are chemicalsmade just of two elements:carbon and hydrogen.The microscopic plants andanimals that lived in theocean millions of years agosank to the bottom of the sea.Buried deeper and deeperunder the surface of theearth, heat transformed theminto hydrocarbons.

Shale gas is natural gas!Shale oil and gas are exactly the same product as oiland natural gas from conventional extraction.Land surfaceThe difference is the source: conventional exploitsreservoir, shale exploits source rockOverburdenTrapConventional hydrocarbons are found in reservoirs:ReservoirSeal1.Coarse grains2.High permeability3.Limited extension (at most as large as Greater London)Hydrocarbons migrate from source rockand are sometimes trapped in a reservoirSource rockShale is found in the source rock:Basement1.Very fine grains2.Very low permeability3.Very large extension (it could be as large as half of France)

Technology made shale oil & gaseconomically viableConventionalEconomic productionEconomicpermeabilityNon economic productionShale oil & gasGeologists have knownabout gas from shalefor decades, but formany yearsdevelopment was noteconomically viable.Economic productionUneconomicpermeabilityNon economic productionThe first hydraulic fracturing happened in Oklahoma in 1947.More than two million have been carried out by now in the US.In the late 1990s, acombination of twoproven technologies –horizontal drilling andhydraulic fracturing –and advanced IT madegas from shalecommercially viable.

Shale is normally at least 1,000 metresdeeper than fresh water aquifersMultiple layers of steel and concrete isolatethe well from the freshwater aquifers0m500Hydraulic fracturing happens thousands ofmetres underground.A fracture’s maximum diameter is about600 metres.1,500Fracture profilesAquifer of potable water10002,000After Warpinski et alDepth (m)9 Eiffel towers11 Eiffel towers1,0002,500600 m3,000200030004000Fracture topsFracture bottomsDepth of fracturing stages6000 fracturation stages

Life-cycle water usage and radioactivityCompared with conventional gas, shale gasrequires only 1.7% additional water.Industry can use fresh water, but also brackishand sea water.EnergyNuclearCoalGasShale gasWater in storage before useForbidden ( 20)Full body scanner (10)3M /MWh2.11.911.017Admitted ( 20)Advised ( 1/yr)Barnett (0.1/yr)RT Paris New-York (0.08)Living in a shale gas basin like the Barnett in the USexposes a person to as much radiation as flying around trip from Paris to New York City.One medical scanner is equivalent to living for 100years in the Barnett basin.

Fracturing fluids are 90% water, 9% sand,1% chemicalsThe industryvoluntarily disclosesthe chemicals ituses for hydraulicfracturing in the EU:www.ngsfacts.orgAdditionalinformation onchemical disclosurefor Polish wells canbe found atwww.opppw.plSand 9% - 1,500 to 2,000 tons keeps the fissures in the rocks openand allows the gas to flow to the wellChemicals 0.5-1%- used to viscosifythe fluid, removebacteria andprevent corrosionWater 90% - 10,000 to 20,000 m3/well (5 to 10pools) - no need of high quality water: sea water orwater from salted aquifers also works

Produced water is handled carefully andcan be reusedFugitiveemissions36%1. The water flowing backfrom the well to thesurface is treated and itcan be fully reused.2. Treatment captures themethane mixed in thewater, avoiding GHGemissions.Drilling fracturing logistics4%Flaring& venting7%Electricalgeneration53%3. The reduction of methaneflaring and venting furtherreduces GHG emissions.JA Costa (2011) Total , T. Stephenson (2012) IPIECAJ. Broderick, et al (2012)Tyndall Centre University of ManchesterAllen T et al (2013)

Low footprint: a shale gas pad has theextension of two football fieldsPad 2x100 mHorizontalmultifracturedDepSolar panelsWind millsTo produce an equivalent amount of energy with wind mills orsolar panels, we would need 10 to 30 times the surfacePad during drilling (lasts about 1 year)Source: Lane Energy, PolandPad in production (lasts about 20 years)Source: html

Earthquakes: less than the vibrationsfrom a truckSource: International Gas UnionIndustrial activities induce lowintensity seismic events: Mining, dams Geothermal energy Oil & gas extractionIn shale gas, vibrations aregenerally lower than a truckpassing by.Truck vibrationHydraulicfracturingBlackpool* 2.3* In 2011 there were small tremors at Preese Hall near Blackpool,UK, where hydraulic fracturing operations were taking place.The Paris metrovibrations areequivalent to 7timesBlackpool

Shale is a global phenomenon!CountryNotional additional resourcesConventionalShale oil & gasAdditional omaniaDenmarkUKNetherlandsOthersTotal769749Shale gasShale icoMature stage?744213627Argentina2,5875BrazilPilot stageNon-mature stageSource : EIA 2013RussiaGas18663140SouthAfricaAustralia1,381Oil

The EU has potentially significant shaleresourcesEurope’s shale gas resources arewithin the Top 10 worldwideSources EIA 2014Main shale gas resource areas in Europe

Production could contribute to EUsecurity of supply, employment, growthBenefits could be significant, even without being revolutionaryProduction (bcf/day)204 daily French consumption15Shale gas boomIn 2035, the EU is expected to import1089% of its gas. Shale gas can cutthat to as little as 62%2 daily French consumption5Some shale gasIt could mean up to 1.1million newjobs created by 2050.01112131415150 years productionSource: Poyry/IOGP 2013It could also mean up to 3.8trillioneuros added to the economybetween 2020 and 2050.A 30-year development would require: 23,000 to 50,000 wells 450 mln m3 to 1 bln m3 water* 230 km2 to 500 km2* in 2012, France used 33 Gm3Lower energy prices comparedwith a no-shale gas scenario: higheravailable income for households and amore competitive industry.Source: Poyry/IOGP 2013

IOGP activities on shale gas NGS Facts (chemicals disclosure website): IPIECA/IOGP Good Practice Guidelines, Dec. 2013: IOGP Fact Sheets: Chemicals, Seismicity, Emissions,Water: Shale FAQs 1.2 high.pdf Studies: Poyry/Cambridge Econometrics – Estimating the macroeconomic potential ofshale gas in Europe: public report ogp v5 0(1).pdf ERM – Recovered water management study in shale wells: OGP Final Report 2(2).pdf

For more information please contact:Alessandro TorelloCommunications Manager, IOGPat@iogp.orgwww.iogp.orgRegistered OfficeLevel 5209-215 Blackfriars RdLondon SE1 8NLUnited KingdomT 44 (0)20 3763 9700F 44 (0)20 3763 9701reception@iogp.orgBrussels OfficeBd du Souverain,1654th FloorB-1160 BrusselsBelgiumT 32 (0)2 566 9150F 32 (0)2 566 9159

Dragon Oil. Kuwait Oil. Qatar Petroleum. RasGas. Yemen LNG. Middle East. 33 members active in region. IOGP members produce half of the world’s oil and a third of the natural gas. Our main objective: promote safe, responsible and sustainable operations

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