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International Shale Presentation
- 1. The information anddata 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 ofGlobal 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 NaturalGas 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 ofShale Slide 4 Source: BP Energy Outlook 2030 Source: BP Energy Outlook 2030
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- 7. Slide 7 Source: carbonbrief.org MMboe/d Whyare Unconventional Resources Important?
- 8. Bbls – Billionbarrels 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
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- 10. • Largely gasdominated • 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.
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- 12. • Located inRussia 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
- 14. Slide 14 Domanik Formation Timan- Pechora Basin ArcticCircle Timan-Pechora Basin
- 15. • Located innorthern 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* StatoilJV Acreage Exploration phase Exploration phase Shale Well Count - - Production Rates - - IP Rates - - EUR - - * Indicates operator not commercially producing shale hydrocarbons yet Domanik Formation Operators
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- 18. • Geologic conditionsresemble 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
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- 20. • Located inAustralia 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* CooperEnergy 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
- 22. Burgos Basin 393 Tcf 6.3 Bbls TampicoBasin 124 Tcf Middle Magdalena Valley 18 Tcf 4.6 Bbls Maracaibo Basin 202 Tcf 14.9 Bbls Parana Basin 84 Tcf 4.3 Bbls Neuquen Basin 583 Tcf 19.7 Bbls III. Latin America 0 200 400 600 800 Burgos Tampico MMV Maracaibo Parana Neuquen Marcellus TcfGas Resource Potential Slide 22
- 23. • Above averageshale 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
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- 25. • Home ofthe 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 EOGResources* 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
- 27. Slide 27 Middle MagdalenaValley Basin
- 28. • Located inCentral 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/ExxonJV 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 potentialfor 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
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- 32. • Located inthe 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 ShaleWell 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
- 34. Tindouf Basin 43 Tcf 0.3Bbls Timimoun Basin 209 Tcf Ghadames Basin 351 Tcf 12.3 Bbls Sirte Basin 53 Tcf 18.2 Bbls IV. North Africa 0 100 200 300 400 Tindouf Timimoun Ghadames Sirte Marcellus TcfGas Resource Potential Slide 34
- 35. • Majority ofshale 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
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- 37. • Located inAlgeria 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
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- 42. • 236,400 squaremiles 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
- 44. South China/Yangtze Platform Sichuan Basin 626Tcf Junggar Basin 36 Tcf 12.1 Bbls Tarim Basin 216 Tcf 8.6 Bbls Songliao Basin 16 Tcf 11.5 Bbls VI. China 0 200 400 600 800 Sichuan Junggar Songliao Tarim Marcellus TcfGas Resource Potential Slide 44
- 45. • 285 shalewells 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
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- 47. • 74,500 squaremiles • 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
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- 50. • Located innorthwest 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 Acreage200,000 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
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- 53. • China’s largestoil 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 JilinOilfield 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
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- 56. • China’s largeston-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
- 57. Slide 57 The BigPicture: Supply and Demand
- 58. 0 1 2 3 4 5 6 0 200 400600 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 shalegaining 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