going global: tight oil production - u.s. energy ... · pdf filegoing global: tight oil...

GOING GLOBAL: TIGHT OIL PRODUCTION

Leaping out of North America and onto the World Stage

JULY 2014


Jamie Webster, Senior Director

Global Oil Markets

[email protected]

1


Key Message: Tight Oil Will Have Unconventional Effects

Tight Oil Production will change in the

coming decades. It will be:

More global, as it leaps out of North

America

More inclusive, as companies come to

the US for experience and US companies

go international for production

A source of renewal, as unconventional

techniques are used in conventional fields

The United States will continue to be an

important laboratory for global development of

tight oil and unconventional techniques

Global tight oil production has significant

energy security implications

2


Top Ten Countries with Largest Shale Oil Resources

Shale oil resources are concentrated in Russia and the United States –

their resources are almost equal to those of the other eight countries

combined.

60 - 80

40 - 60

20 - 40

0 - 20

Shale Oil

(billion barrels)

0

10

20

30

40

50

60

70

80

bbl Top 10 Countries By Technically Recoverable Shale Oil Resources

Source: EIA Report, June 10 2013


US Success Factors in Tight Oil: Internationally Repeatable?

Key factors in US tight oil success:

Resource Base Quality

Resource Base Quantity

Cooperative Government

Property Rights

Innovation via competition

Service sector capacity

Financial markets

Functioning and available market

The US focused on natural gas first, then

switched to oil as gas prices fell. The

opposite is likely to occur in many other

countries.

4


Typical Risk Progression and Investment Impact on Investors

Risk

Production Cycle

Frontier Exploration

Low

High

Mature

Favorable

Terms

Favorable

Terms

Typical Risks Faced by Operators

Capacity

Building

Seeking

Value-Added

•Build Greater Capacity

•Value-added Investments

•Local Content

•Nationalization

Plateau Ramp-up

•Low Gov’t Take

•Quick Approval

•Lack of NOCs or

Institutions

•Low Regulatory

Burden

•Higher Gov’t Take

•Alter Contract

Type/Terms

•Create NOCs and

Regulatory Agencies

•Export Restrictions

Source: Petroleum Risk Manager, IHS


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Petroleum Risk Manager Overall Risk Scores

Top 10 Shale Oil and Gas Resources: Span the Gamut of Above-Ground Risk

Countries identified by the EIA with the largest unconventional resources vary widely in terms

of overall above-ground risk – but those in the top ten for both shale gas and shale oil are

mostly found in the top half of the risk range.

Low Risk

High Risk

Top 10 Shale Oil and Gas

Top 10 Shale Oil

Source: Petroleum Risk Manager, IHS


Tight/Shale oil plays will exhibit the same wide range of breakeven economics as in the US

$0

$25

$50

$75

$100

$125

$150

$175

$200

$225

Non-US Tight/Shale Oil Breakeven Cost Estimates PV10

Range Average

$/barrel

Source: IHS Energy © 2014 IHS

• Incubating a play requires a very high oil price. Sustaining a known play only

needs a fraction of that price.

7


By end of decade, up to 10% of tight oil production could come from

outside North America

8

0

1

2

3

4

5

6

7

8

9

2000 2005 2010 2015 2020 2025 2030 2035 2040

China Mexico Colombia Australia Libya Algeria Tunisia

Global tight oil production outlook

Source: IHS Energy Annual Strategic Workbook 2014 © 2014 IHS

Mil

lio

n b

arr

els

pe

r d

ay

Argentina

United States

Canada Russia


Companies coming to North America to learn techniques, US companies to go international for production

2020 new source production by asset type of internationalizing Asian NOCs

Conventional Onshore

& Shallow Water

LNG

© 2014 IHS

Source: IHS National Oil Company service

Thailand 0

50

100

150

200

250

300

350

2020 International New Source International by Asset Type

Oil Sands

Unconventional

ConventionalOnshoreConventionalShallowDeepwater

mboe/d


Applying unconventional techniques to conventional plays

Concept is still in early stages – but has potential

to renew old oil fields in new ways, while helping

to increase recovery factors - critical in meeting

future supply

Low-productivity conventional reservoirs,

horizontal wells:

Allow access to thinner zones where vertical wells

were not commercially productive.

Can connect compartmentalized portions of the

reservoir with one well instead of many vertical wells.

Hydraulic fracturing may or may not be used

It may not be practical or necessary in conventional

reservoirs that have higher permeability than shales.

Horizontal wells decline faster than vertical wells,

but decline rates are highly variable—typically

between 40% and 90% in the first year.

Thin target zone

Disconnected target zones

Controlled

fractures


Tight Oil has Significant Energy Security Impacts

Tight oil production growth impacts:

A barrel of oil anywhere increases

energy security everywhere

Can radically change the import/export

balance of a country

Has the potential to disrupt OPEC as it

collapses the signal to production time


Tight oil, and particularly responsive tight oil, can disrupt OPEC’s control – an event that could add price volatility

0%

10%

20%

30%

40%

50%

60%

70%

2005 2008 2011 2014 2017 2020 2023

OPEC Non-OPEC Biofuels Tight Oil

Share of Oil Demand by Type

Source: IHS © 2014 IHS

% s

hare

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2005 2008 2011 2014 2017 2020 2023

OPEC Tight Oil

Short-Term Responsive Oil Production

Source: IHS © 2014 IHS

millio

ns o

f b

arr

els


Key Messages: Global tight oil production is coming – and will disrupt like the US

Tight oil production will be more global in

the future.

Countries will unlock their recipe for

allowing tight oil production as they gain

from the US laboratory

Companies will see big opportunities-

potentially reversing the trend towards less

international openness

The continuation of the US laboratory is

critical for global success of tight oil

Energy security will be improved- but

within it is the potential for price volatility if

OPEC power is disrupted

© 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal

client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal

notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor

are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or

expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at [email protected], +1 800 IHS CARE

(from North American locations), or +44 (0) 1344 328 300 (from outside North America). All products, company names or other marks appearing in this publication are

the trademarks and property of IHS or their respective owners. V1.1-24.03.14

Americas:

+1.800.IHS.CARE (+1.800.447.2273);

[email protected]

Europe, Middle East, and Africa:

+44.(0).1344.328.300;

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Asia and the Pacific Rim:

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