1. The information and data sources for this document include the Energy Information Agency (EIA) of the US Dept. of Energy, Advanced
Resources International (ARI), Wood Mackenzie, Barclays, The Oil & Gas Journal, Rig Zone, Bloomberg, The Motley Fool, Seeking Alpha,
and other sources including Annual Reports and investor presentations from the companies discussed in this presentation. Some of the
commentary is cited verbatim from those sources. All of the information contained in this document is confidential and proprietary to
National Oilwell Varco. Under no circumstances should this information be released, published, copied or distributed to any other party
without the express written consent of National Oilwell Varco.
MARKET RESEARCH & ANALYSIS
INTERNATIONAL SHALE ANALYSIS
AN OVERVIEW OF GLOBAL SHALE ACTIVITY
August 14, 2014
Contact: christopher.shero@nov.com
2. Slide 2
Overview of Global Shale Activity
• Global shale development in a context of energy supply and
demand
• Major shale basins
– Current stages of development
– Expected timeline for development
– Potential size and productivity
– Obstacles to development
– Key operators
3. North American Natural Gas Contribution by Basin
Source: smartplanet.com
Slide 3
• 7,800 Tcf of gas and 335 Bbls of
oil technically recoverable
global resources
• Successful shale gas
exploitation in the United
States indicates the potential
that shale resources can hold
Overview of Global Shale Activity
4. The Future of Shale
Slide 4
Source: BP Energy Outlook 2030 Source: BP Energy Outlook 2030
8. Bbls – Billion barrels of oil
Bcf – Billion cubic feet of gas
bls – Barrels of oil
boe – Barrels of oil equivalent
cf – Cubic feet of gas
cfe – Cubic feet of gas equivalent
Mbls(boe) – Thousand barrels of oil (equivalent)
Mcf(e) – Thousand cubic feet of gas (equivalent)
MMbls(boe) – Million barrels of oil (equivalent)
MMcf(e) – Million cubic feet of gas (equivalent)
Tcf(e) – Trillion cubic feet of gas (equivalent)
/d – Per day
Slide 8
Abbreviations/Units
10. • Largely gas dominated
• Most of Europe opposes fracing:
– In eastern Europe, Ukraine only country allowing E&D
– UK institutes 18 month fracing moratorium after possible fracing-caused
earthquake
– 400+ Spanish towns declare “frac-free zones”
– Germany lifts fracing moratorium
– Poland most favorable infrastructure and public support
• Russia most “fracing friendly” with best geology
– Most shale oil reserves in the world at 75 Bbls
– Bazhenov shale is Russia’s most attractive play
– Western IOCs assisting Russian NOCs with shale techniques
Slide 10
European Shale
Activists in an anti-
fracing
demonstration
outside the European
Commission Building.
12. • Located in Russia between the Ural Mountains and
Yenisey River.
• Largest basin in the world
– 850,000 square miles
– Bakken is 200,000 square miles
• Oil dominated basin
– Not enough public information to determine recoverable
resources
• Northern region not considered prospective:
– Depth greater than 5,000 meters
– Bazhenov Formation most prospective area
Slide 12
West Siberian Basin
A drill site in Russia’s West Siberian Basin
13. Slide 13
Rosneft*
ExxonMobil JV
Surgutnefte-
gaz*
GazpromNeft* Lukoil*
TNK-BP*
(Rosneft)
Acreage N/A N/A N/A 640,000 N/A
Shale Well
Count
Production
Rates - - - - -
IP Rates - - - - -
EUR 18 Bbls 30 MMbls (1P) - - 4.5 Bbls
Still in
exploration
phase
Plans to commence
shale
production in 2015
Plans to invest $150
million to develop
Bazhenov shale
Working on 7
projects with 6
more projects
planned
* Indicates operator not commercially producing shale hydrocarbons yet
No plans for
shale
production
Bazhenov Formation Operators
15. • Located in northern region of Timan-Pechora Basin
– Remote location in extreme weather environment
• 122,000 square miles
• Oil rich shale
– Insufficient data to estimate recoverable resources
• Favorable mineralogy (<10% clay)
– Correlated to Duvernay Formation in Canada
Slide 15
Domanik Formation
A Drill site in Russia’s Domanik Shale
Formation in the Timan-Pechora Basin
16. Slide 16
Rosneft*
BP JV
Rosneft*
Statoil JV
Acreage Exploration phase Exploration phase
Shale Well
Count - -
Production
Rates - -
IP Rates - -
EUR - -
* Indicates operator not commercially producing shale hydrocarbons yet
Domanik Formation Operators
18. • Geologic conditions resemble North America
• Slow development due to remote locations
• Cooper basin already has infrastructure and processing
facilities
– Higher clay contents yield fracing uncertainty
– Higher CO2 levels add risk
– Favorable faulting
Slide 18
Australian Shale
Overlooking Sydney and Sydney Harbor
20. • Located in Australia at the South Australia/Queensland
border
• Approximately 50,000 square miles
• Estimated recoverable resources in the region are 93 Tcf
gas and 1.6 Bbls oil
• Resources at depths between 5,000 and 10,000 feet
• Prime location to service large populations in southeast
Australia
– Infrastructure already in place
Slide 20
Cooper Basin
A drill site in Australia’s
Cooper Basin
21. Slide 21
Beach Energy*
Cooper Energy JV
Senex* Drillsearch*
BG Group JV
Santos*
Acreage N/A N/A 5.7 million acres 63.4% basin assets
Shale Well Count N/A 20 planned for 2014 3 exploration
Production Rates 23,000 boe/d -
Exploration stage
One well cased &
suspended
Exploration phase
IP Rates 400 Mcf/d - 1.8 – 2 MMcf/d 2.5 MMcf/d
30-day avg
EUR 91 MMboe - 12.2 MMboe (1P) 1.5 Bcf/well
* Indicates operator not commercially producing shale hydrocarbons yet
Evaluating prospects: 23
of 25 exploration wells
cased/suspended
Cooper Basin Operators
23. • Above average shale richness in all basins
• Argentina has the most prospective shale in
the world other than North America
• Colombia has put in place preferential terms
for shale operators:
– 40% reduction in royalties
– Higher oil prices
Slide 23
South American Shale
Torres del Paine National
Park in the Patagonia
region of South America
25. • Home of the Vaca Muerta shale
• Located in west-central Argentina
• 67,000 square miles
• Most shale in basin between 8,000 and 14,500 feet
• Estimated recoverable resources of 583 Tcf gas and 19.7
Bbls oil
• Neuquen Basin predicted to be the location of the next big
oil/gas boom
Slide 25
Neuquen Basin
Drill pads under completion in
Argentina’s Neuquen Basin
26. YPF SA
Chevron JV
EOG Resources* Americas Petrogas*
Acreage 203,350 net 95,000 960,000
Shale Well Count 161 producing 3 gross 10-15 gross
Production Rates 20,000 boe/d
Still in testing/exploration
phase
IP Rates 200 bls/d - 972,000 cf/d
30-day test
EUR 750 MMboe - 6.7 Bbls (P50)
Slide 26 * Indicates operator not commercially producing shale hydrocarbons yet
Evaluating exploration wells.
Intends to proceed cautiously in
the region
Neuquen Basin Operators
28. • Located in Central Colombia
• 13,000 square miles
• Shale located at depths between 3,000 and
15,000 feet
• Recoverable resources of 18 Tcf gas and 4.6 Bbls
oil
Slide 28
Middle Magdalena Valley Basin
A drill site in
Colombia’s Middle
Magdalena Valley
Basin
29. Slide 29
EcoPetrol* Canacol*
Conoco/Shell/Exxon JV
Nexen* (CNOOC) Sintana Energy*
Acreage 2.7 MM
250,000 total
62,000 sweet spot
1.5 MM 53,750
Shale Well Count
11 wells, 5 fracks
planned thru 2015
11 exploration wells
planned thru 2015
Long-term investments
depend on results of
exploration wells
Production Rates $117 MM CapEx - -
IP Rates - 7,500 bls/d
test - -
EUR 31.7 Tcf N/A - 210 MMbls
$250 MM CapEx
* Indicates operator not commercially producing shale hydrocarbons yet
Exploration
phase in
ExxonMobil JV
Middle Magdalena Valley Operators
30. • Excellent potential for developing shale oil & gas resources
• Eagle-Ford shale extending through south Texas border is most
prospective shale
• Geology more complex in southeast areas
• PEMEX is the only operator allowed in the country
– Mexican gov plans to open drilling to IOCs in 2015 or 2016
• Shale wells have been very costly:
– $20-$25 million per well
– Modest initial flow rates with very steep decline
• Mexico’s shale development constrained by several factors:
– Limits on upstream investment
– Poor capabilities of local service sector
– Public security concerns in many shale areas
Slide 30
Mexican Shale
A PEMEX drill site in
Mexico’s Burgos
Basin
32. • Located in the northeastern part of Mexico’s Coahuila
State
• 24,200 square miles
• Recoverable resources: 517 Tcf gas and 6.3 Bbls oil
• Average shale depth of 11,500 feet
• PEMEX currently only operator in Mexico
– Predicts commercial shale operations to begin in 2015
• Government plans to bring in IOCs by 2016
Slide 32
Burgos/Tampico Basins
A PEMEX drill site in Mexico’s Tampico Basin
33. Slide 33
PEMEX*
Acreage All
Shale Well Count 175 total after 2014
Production Rates N/A
IP Rates N/A
EUR N/A
* Indicates operator not commercially producing shale hydrocarbons yet
Burgos/Tampico Operators
35. • Majority of shale is “hot shale”
– High uranium content
• Shale is immature in the north, but matures southward
• Libya an important hydrocarbons producing country
– Assessment of shale reserves halted during the 2012 uprising
– Chairman suggested plans to assess Libya’s shale reserves and
bring in IOCs with unconventional resource extraction
technology
• Most shale activity taking place in the Tunisian sector of
Ghadames Basin
Slide 35
North African Shale
A caravan makes its way past
the Pyramids of Giza in
northern Egypt
37. • Located in Algeria and Tunisia
– Nearly all shale operations in Tunisia
• 2,500 square miles in Tunisia
• 351 Tcf gas and 12.3 Bbls oil technically recoverable
resources across entire basin
– 23 Tcf gas and 1.5 Bbls oil in Tunisian sector
• Shale located between 8,000 and 14,500 feet
Slide 37
Ghadames Basin
A convoy of seismic trucks makes its
way through the northern Sahara
Desert on its way to a survey site
38. Slide 38
Cygam Energy* Chinook Energy* Serinus Energy* Perenco Tunisia*
Acreage 1.5 MM 1.4 MM 247,000 38,000
Shale Well Count
8 new wells planned
for 2014
Exploration wells
underway
13 producing
1 well drilled/fraced
in 2010
Production Rates 2,300 bls/d 1,345 boe/d 10,000 boe/d
Conventional production
IP Rates Exploration phase - N/A
Not producing shale
resources as of 2012
EUR N/A N/A 11.5 MMboe (2P) N/A
* Indicates operator not commercially producing shale hydrocarbons yet
Agreed on sale of
Tunisia assets to
MedcoEnergi (June 16,
2014)
Ghadames Basin Operators
39. Karoo Basin
370 Tcf
V. South Africa
0
100
200
300
400
TcfGas
Resource
Potential
Slide 39
40. • Karoo Basin:
– Igneous intrusions and complex geology create significant
risks
• Moratorium on fracing lifted in 2012
• Government will not allow exploration until more
environmental studies are competed
Slide 40
South African Shale
A group of cheetahs relax in the South African sun
42. • 236,400 square miles in central to east South Africa
• Recoverable resources of 370 Tcf gas
– Depths between 6,000 and 10,000 feet
• Fracing not permitted until further environmental tests
are completed
– Operators have claimed their stakes in the region and are
waiting to start E&D
Slide 42
Karoo Basin
A team of geologists prepare for a
seismic survey in South Africa’s
Karoo Basin
43. Slide 43
Falcon Oil & Gas*
Chevron JV
Shell Oil*
Challenger
Energy*
Sasol*
Chesapeake/Statoil JV
Acreage 7.5 MM 45.7 MM 800,000 21.8 MM
Shale Well Count
Production Rates
IP Rates
EUR
* Indicates operator not commercially producing shale hydrocarbons yet
NO SHALE PRODUCTION, EXPLORATION, OR
DEVELOPMENT CURRENTLY ALLOWED IN
REGION
Karoo Basin Operators
45. • 285 shale wells as of YE 2013
– 7 Bcf shale gas produced in 2013
• Shale oil tends to be waxy and stored in lacustrine-deposited shales
– Clay rich
– Less favorable for hydraulic stimulation
• Sichuan Basin:
– quartz rich, black shales
– Roughly comparable to North American analogs
– Shales tend to be very faulted
• PetroChina’s first well took 11 months to drill
– Current exploration focusing on southwest quadrant
• Relatively less faulted and low in H2S
– Hydraulic fractures grow planar due to high stress
• Most shale basins located in remote parts of the country
– Development slowed due to lack of infrastructure and processing facilities
– Lack of water
Slide 45
Chinese Shale
Looking east near the
Chinese city of Dali
Overlooking
Linfen, China;
the world’s most
polluted city
47. • 74,500 square miles
• South-central China
• Recoverable resources 625.9 Tcf gas
– Depths between 3,280 and 16,400 feet
• Considerable work needed:
– Define geological sweet spots
– Develop service sector’s processing capacity
– Install infrastructure
• General estimates for the region (as of 2010) are:
– 3.3 MMcf/d IP rates
– 3.54 Bcf per well EURs
– $2.45 CapEx/Mcfe
– $4.58/Mcf breakeven
Slide 47
Sichuan Basin
A CNPC drill site in the Sichuan Basin
48. Slide 48
PetroChina
Shell JV
Sinopec
BP/FTS
International
JV
Shell* Conoco
Sinopec JV
BP*
Sinopec JV
ENI*
PetroChina JV
Exxon* Statoil* EOG
Acreage N/A N/A 850,000 1.5 MM 750,000 900,000
131,000
developed
Shale
Well
Count
N/A 30
5
exploration
wells
N/A
Exploration
phase - -
2 wells began
production in
2014,
6 wells planned
for 2014
Production
Rates
N/A 0.6 MMcf/d None yet
3 MMcf/d
713 MMcf/d
predicted
- - - - 7 MMcf/d
IP Rates N/A N/A 2 MMcf/d N/A - - - - N/A
EUR N/A N/A N/A N/A - - - - N/A
Has interest in
production/ex
ploration
blocks
Currently
evaluating
acreage
Negotiating
with
PetroChina for
shale block
* Indicates operator not commercially producing shale hydrocarbons yet
Sichuan Basin Operators
50. • Located in northwest China
• 62,000 square miles
• Not as remote as most Chinese basins
– Close to markets and region capitol, Urumqi
– Good infrastructure
• Untested, highly prospective shale deposits
– Rich shale
– Favorable geology
– Over-pressured
• Shale at depth of 10,000 feet
– 12.1 Bbls recoverable oil
– 36 Tcf recoverable gas
Slide 50
Junggar Basin
Overlooking the steppes of the Junggar Basin
51. Slide 51
HESS*
Shell/PetroChina JV
Petromin
Acreage 200,000
Shale Well
Count
One well completed
Further drilling planned for 2014
Production
Rates
Exploration phase
IP Rates -
EUR -
Pulled out of production sharing
agreement with PetroChina on
July 7, 2014
Believes PetroChina made several
infractions in the agreement and
is currently seeking damages
* Indicates operator not commercially producing shale hydrocarbons yet
Junggar Basin Operators
53. • China’s largest oil field
– 108,000 square miles
• Located in northeast China
• Recoverable resources 11.5 Bbls oil and 16 Tcf gas
– Located at depth of 5,500 feet
• Structurally complex basin
• Lucastrine sedimentary origin
– Clay rich shale
– Unsure how shale would respond to fracing
• Already possesses good infrastructure due to ongoing conventional
production
Slide 53
Songliao Basin
A CNPC drill site in
the Songliao Basin
An end-of-life conventional
well in the Songliao Basin
54. Slide 54
Hess*
Shell/PetroChina JV
Jilin Oilfield Co. (CNPC)*
Acreage 200,000 Southern region
Shale Well
Count
Exploration phase 10 gas wells drilled/fraced as of 2013
Production
Rates - Wells reported successful
IP Rates - N/A
EUR - N/A
* Indicates operator not commercially producing shale hydrocarbons yet
Songliao Basin Operators
56. • China’s largest on-shore sedimentary basin
– 234,000 square miles
• Located in western China’s Xinjiang Autonomous Region
– Dry, remote, lightly populated region
– Lacks infrastructure for transporting hydrocarbons
– Underground aquifers could supply frac water
• 261 Mbls/d conventional production (2011)
• 216 Tcf recoverable gas and 8.6 Bbls recoverable oil
• Most shale too deep for production (>5,000 m)
• TOC unfavorable at <2%
• Favorable geology with 7 distinct structural zones
Slide 56
Tarim Basin
Overlooking the
steppes of the Tarim
Basin
Travelling along a road
through the Tarim Basin
58. 0
1
2
3
4
5
6
0 200 400 600 800
LevelofRisk
Technically Recoverable Resources
Basin Prospectivity
West Siberian Basin
Timan-Pechora Basin
Cooper Basin
Neuquen Basin
Middle Magdalena Valley
Basin
Burgos/Tampico Basins
Ghadames Basin
Karoo Basin Sichuan BasinJunggar Basin
Songliao Basin
Tarim Basin
How the Plays Stack Up
Slide 58
59. • International shale gaining attention as conventional
production declines
• Operators beginning to make major shale investments all over
the globe
Slide 59
Why is Shale Important?
World Natural Gas Production by Source
Source: EIA
Source: EIA
