Overview of oil, gas, electricity; drill-down on shale gas current production and estimated future supplies

1. Climate Reality Check Call
April 5, 2017 at 3p ET
(12n PT, 1p MT, 2p CT)
Nancy LaPlaca
nancy@ncwarn.org
www.ncwarn.org
480-359-8442
Big Picture on Oil, Gas, Electricity; and
Shale Gas: Could U.S. Shale Gas
Production Peak By 2018-2020?
1

2. Agenda – page 1
Big Picture on Oil, Gas, Electricity
• Percentage of oil imported v exported in U.S.
• $$ spent importing oil into the U.S./year
• U.S. oil production in decline; fracking now half of U.S. oil
production
• total US spending on oil/year (imports v domestic supply)
and how it's changed over the years (NOTE: compare w
spending on electricity)
• - total amount US spends on electricity/yr
• - total amount US utilities spend on coal, and natural gas/yr
• - total amount spent by electric and gas industry/yr - ~$930
BILLION
2

3. Agenda – page 2
Dive Deeper: Natural Gas and Shale Gas
• - Difference btwn natgas and shale gas
• - what NG is used for in US
• - what is cost, how has it changed?
• - how much gas is fracked v conventional?
• - how many natgas power plants in U.S. v coal, solar, wind,
hydro?
• - How many new natural gas plants are planned?
• - Methane leakage is a big problem
3

4. Oil Imports v Exports and Dollars Spent
by U.S.; and U.S. Oil Production is in
Decline; Fracking is Now HALF of U.S.
Total Oil Production
4

5. U.S. Petroleum Imports: 1949-2016
https://www.eia.gov/totalenergy/data/monthly/pdf/sec3_8.pdf 5

6. U.S. Petroleum Imports By Country
https://www.eia.gov/totalenergy/data/monthly/pdf/sec3_8.pdf 6

7. https://www.eia.gov/tools/faqs/faq.php?id=727&t=6 7

8. Top Net Importers of Oil by Country
1 Net imports equals imports minus
exports.
2 Oil includes crude oil, all other
petroleum liquids, and biofuels.
https://www.eia.gov/tools/faqs/faq.php?id=709&t=6
8

9. https://www.eia.gov/todayinenergy/detail.php?id=25772 9

10. http://www.greenlifestylechanges.com/how-much-oil-did-the-us-import-in-2013/
U.S. Imports of Crude by
Year
https://www.census.gov
/foreign-
trade/statistics/historical
/petr.pdf
10

11. 11

12. http://www.treehugger.c
om/corporate-
responsibility/the-us-
imports-15-billion-
barrels-of-oil-a-year-
from-dangerous-or-
unstable-nations.html
12

13. Fracking Accounts for 50% of Current
U.S. Crude Production
https://www.eia.gov/todayinenergy/detail.php?id=25372 13

14. https://www.eia.gov/todayinenergy/detail.php?id=25292 14

15. U.S. Crude Oil Production 2016
https://www.eia.gov/todayinenergy/detail.php?id=30412&src=email 15

16. U.S. Electricity - Big Picture
16

17. Overview of U.S. Electricity
• Total U.S. spending on electricity (all sectors):
https://www.eia.gov/electricity/monthly/pdf/epm.pdf (Table 5.2. Revenue
from Sales of Electricity to Ultimate Consumers)
2014: $393 billion 2015: $391 billion 2016: $381 billion
• Total amt spent on coal, natural gas, uranium for electricity 2014
https://www.eia.gov/state/seds/data.php?incfile=/state/seds/sep_sum/ht
ml/sum_ex_eu.html&sid=US
– Coal $39 billion
– Natural gas $42.4 billion
– Uranium $1.8 billion
– Oil $3.7 billion
TOTAL value of U.S. electric and gas industry in 2016
per Edison Electric Instit: $930 billion/year
http://www.eei.org/resourcesandmedia/newsroom/Pages/Press%20Rele
ases/EEI%20to%20Wall%20Street%20The%20Promise%20of%20Tomorro
w.aspx
17

18. The U.S. Electricity Industry Will Spend
a Stunning $120 BILLION in 2016
• With generation
expenditures
one-third of total
per EEI
http://www.eei.org/
resourcesandmedia/
industrydataanalysis
/industryfinancialan
alysis/Documents/
Wall_Street_Briefing
.pdf
18

19. Natural Gas Issues
What is natural gas?
• Mostly methane, CH4
• Very potent, warms the atmosphere 86x more than
CO2 over a 20 yr period per IPCC 2013 report
Explain ‘conventional’ v ‘shale’ or fracked gas
• ‘conventional’ natural gas comes from wells drilled
vertically; while ‘shale’ gas comes from wells drilled
horizontally, i.e. ‘fracked,’
• EIA definition: “Crude oil and natural gas that is
produced by a well drilled into a geologic formation in
which the reservoir and fluid characteristics permit the
oil and natural gas to readily flow to the wellbore.”
19

20. Fracked Gas Production To Increase
Dramatically, Per EIA
Source: US Energy Information Administration
20

21. What Is
Natural Gas
Used For?
21

22. Natural Gas Spot Prices 1997-2016
22

23. NatGas Commodity Futures Increased
~60% During 2016
Source: https://www.eia.gov/todayinenergy/detail.php?id=29392 23

24. Fracked Gas: Now 67% of Total U.S.
Gas Production, Up From 7% in 2000
http://www.eia.gov/todayinenergy/detail.cfm?id=26112
24

25. Source: http://www.npr.org/2015/09/10/319535020/coal-gas-nuclear-hydro-how-your-state-generates-power
25

26. 26

27. 27

28. Southeastern U.S. Adds Huge Amount
of Gas Plants 2006-2015
Source: https://emp.lbl.gov/sites/all/files/2015-windtechreport.final_.pdf
28

29. 284,360 MW of NatGas Plants Added
from 2000 to 2015
Source: http://www.utilitydive.com/news/eyes-wide-open-despite-climate-risks-
utilities-bet-big-on-natural-gas/426869/
29

30. NatGas Plants: 70% of Total Utility-
Scale Capacity Added 2000-2015
• Plants are expected to have 30-35 year
lifetime, or longer
• Fuel is a very large percentage of total lifetime
costs, and future fuel costs are guesstimates
• Another 144,000 MW of natural gas expected
to be built over the next
30

31. EIA Estimates ~144,000 MW of New
NatGas Plants up to 2040
Source: https://www.eia.gov/outlooks/aeo/pdf/0383%282017%29.pdf 31

32. EIA: Planned NG Capacity
• Estimated 11.2 gigawatts (GW) NG capacity to
be added in 2017
• Estimated 25.4 GW NG capacity to be added
in 2018
• Coal capacity fell by ~47.2 GW 2011-2016, a
15% reduction in the coal fleet over 5 yrs
https://www.eia.gov/todayinenergy/detail.php?
id=29732
32

33. EIA: Adding 10 GW NatGas in 2017,
Plus 25 GW in 2018
33

34. Combustion Turbine (CT) or Combined
Cycle (CC)? Mostly CC
34

35. EIA: Electric Capacity Additions and
Retirements 2002-2016
Source: https://www.eia.gov/todayinenergy/detail.php?id=30112 35

36. The Shale Play Life Cycle
• Discovery followed by leasing frenzy.
• Drilling boom follows to meet “held-by-production” lease requirements.
• Sweet spots identified, targeted and drilled off. Companies always drill
their best locations first.
• Production rises rapidly and is maintained for cash-flow despite
potentially uneconomic full-cycle costs.
• Sweet spots become saturated and well quality and field production
decline.
• Plays like the Haynesville become middle aged after just five years.
© Hughes GSR Inc, 2014
36

37. 0
1000
2000
3000
4000
5000
6000
7000
8000
1 6 11 16 21 26 31 36 41 46
GasProduction(Thousandcubicfeet/day)
Months on Production
Haynesville Average Gas Well Decline Curve
3-Year Decline = 89%
First Year = 59%
Second Year = 54%
Third Year = 39%
Fourth Year = 23%
© Hughes GSR Inc, 2016 (data from Drillinginfo, March, 2016)
37

38. 0
2000
4000
6000
8000
10000
12000
0
2
4
6
8
10
12
14
2000 2004 2008 2012 2016 2020 2024 2028 2032 2036 2040
NumberofProducingWells
GasProduction(Billioncubicfeetperday)
Year
EIA AEO2015 excess
Most likely Production
EIA AEO2015
Most likely Wells
Haynesville Gas Production in Most Likely Rate Scenario through
2040 compared to EIA 2015 Projection
© Hughes GSR Inc, 2015 (data from Drilling Deeper, 2014;EIA AEO2015 Reference Case Projection)
EIA AEO2015
Recovery 2014-2040 = 79 tcf
An Extra 50 tcf (174%)
Recovery 2014-2040 = 29 tcf
Peak 2011
38

39. 39

40. - Shale has been a game-changer in the short-term, but projections
of long-term sustainability at low prices are highly questionable.
Shale Gas: Implications
- Assuming long term sustainability of production at low prices is folly
for energy policy. The shale revolution is a temporary windfall and
should be viewed as such.
- High quality shale plays are not ubiquitous – and plays are not
uniform. Sweet spots are exploited early in the development process.
The best parts of major plays are being drilled NOW.
- High well decline rates require a drilling treadmill and high capital
inputs to sustain production and offset field declines, along with
associated environmental impacts.
40

41. Methane is a Big Problem, and Natural Gas Isn’t a ‘Bridge
Fuel,’ It’s a Gangplank
Natural gas emits less CO2
than coal when burned, but
methane is 86x more potent a
greenhouse gas (GHG) than
CO2 over 20 yrs (IPCC 2013),
or 100 times worse over10
years
If more than ~2% of gas is
leaked (or vented) rather than
burned, gas is worse for the
climate than coal
Best estimates: ~10% of shale
(fracked) gas is leaked
Source: Dr. Robert Howarth, Cornell University
41

42. Some Good News!
• Cost of wind and solar plummeting
• Advocates are getting smarter, utilities are
viewed as stopping clean energy – and they
ARE!
• Financing options increasing
• More people understanding clean energy is a
climate solution that’s affordable and
achievable
42

43. Cost of Solar Dropping FAST, Including
the Southeast
43

44. Wind Power Saved $1 BILLION in Fuel
Costs During 2014 ‘Polar Vortex’
Source: AWEA
44

45. Production of Both Natural Gas AND
Oil Are Down from 2015 to 2016!
45