Tinker, 2014

URTeC
Aug, 2014

Unconventional Reservoir Future

Science, Technology and Economics

Scott W. Tinker
Bureau of Economic Geology
The University of Texas at Austin, Austin
 Tinker, 2014

Acknowledgements

 BEG Shale Reserves & Production Team

 Dr. Svetlana Ikonnikova, co-PI
 The Alfred P. Sloan Foundation
 IHS & DrillingInfo for database access
 For potential conflicts of interest see
http://www.beg.utexas.edu/info/shale_rsrvs_prod.php
 Tinker, 2014

Outline

 Unconventional Reservoirs
 U. S. Shale Gas and Shale Oil
 Science, Technology & Economics
 Tinker, 2014

Global Natural Gas

Resources v. Cost
15
Global Consumption
Production cost (2008 $/Mbtu)

115 Tcfy
10

Deep Water
Arctic
Coal Bed
Methane
Sour
Tight Shale
Conventional

5 LNG
Produced

0
0 3,000 6,000 9,000 12,000 15,000 18,000 21,000 24,000 27,000 30,000

Resources (TcF)
Source: IEA World Energy Outlook (2009)
QAe980
 Tinker, 2014

Global Oil
Resources v. Cost
140
Arctic
Global Consumption
120 31 Bby
Production cost (2008 $)

EOR
Deepwater and
100 ultra-deepwater
Oil shales Coal
Shale oil to
80 liquids
CO2 EOR
Heavy Gas
60 to
Other oil
conventional & liquids
oil bitumen
40

20 Pro-
MENA
duced

0
0 2000 4000 6000 8000 10,000
Resources (billion barrels)
Source: IEA World Energy Outlook (2009)
 Tinker, 2014

U.S. Natural Gas

Production and Reserves
30 300

25
Annual 250
U.S. Production
Marketed Production (Tcf)

Proved Reserves (Tcf)

20 200

15 150

10 100
End-of-Year
U.S. Proved Reserves
5 50

0 0

Data: BP World Energy 2012

 Tinker, 2014

U.S. Natural Gas

Production (TcF)
25
23 TcF

20

Shale gas
15
14 TcF Coalbed methane

Tight gas
10
Non-associated
offshore
Alaska
5 9 TcF
Associated with oil

0 Non-associated
1990 1995 2000 2005 2010 onshore

http://www.eia.gov/energy_in_brief/about_shale_gas.cfm
 Tinker, 2014

U.S. Natural Gas

Production (TcF)
25 An Anticipated Evolution
From a 2004 Tinker Talk to the IPAA 23 TcF
US Natural Gas 2004 forecast
20
Total Natural Gas
Conventional Gas
Unconventional Gas Shale gas
15
Annual Natural Gas Production (Bcf)

25,000 25 TcF 14 TcF Coalbed methane

20,000 Tight gas

10
15,000 15 TcF Non-associated
offshore
10,000 10 TcF
Alaska
5 9 TcF
5,000
Associated with oil
0

0
1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 2015
Non-associated
EIA (1949-1990) and NPC (1991-2015)
1990 1995 2000 2005 2010 onshore

http://www.eia.gov/energy_in_brief/about_shale_gas.cfm
 Tinker, 2014

Shale Gas Forecast vs. Actual

Model: Rice University, Medlock, 2012

Actual

H
F
B
 Tinker, 2014

Annual US Oil Production

Thousand barrels/year

From: James D. Hamilton, Working Paper 17759, NATIONAL BUREAU OF ECONOMIC RESEARCH, 2012
 Tinker, 2014
2010 U.S. SHALE LIQUIDS
PROJECTION
5
United States ~ 1.4 Bby from
U.S shale liquids projected growth

4
Consumption shale by 2022 Monterey
Woodford/Anadarko
~ 7 Bby 10% IRR: $68/bbl
Utica
Barnett
10% IRR: $51/bbl Uinta
3 Niobrara
Permian Midland
(Mbpd)

10% IRR: $50/bbl

Actual 10% IRR: $44/bbl Permian Delaware
Granite wash
2
EF 10% IRR: $50/bbl Eagle Ford

1 B
Bakken
10% IRR: $44/bbl
PB
0
2010 2012 2014 2016 2018 2020 2022

After Morse et. al., 2012, Energy 2020: North America, the new Middle QAe465
East: Citi GPS: Global Perspectives & Solutions, figure 14, p. 17. IRR Source: Rystad Energy
 Tinker, 2014

Annual US Oil Production

U.S. Production
Thousand barrels/year

~ 3.1 Bby Today!

From: James D. Hamilton, Working Paper 17759, NATIONAL BUREAU OF ECONOMIC RESEARCH, 2012
 Tinker, 2014

Outline

 Unconventional Reservoirs
 U. S. Shale Gas and Shale Oil
 Science, Technology & Economics
 Tinker, 2014

Unconventional Resource Plays

Niobrara Fm

Bakken Utica
Cody

Heath Fm
Antrim
Gammon
Mowry Utica-
Collingwood Utica
Niobrara- Mowry
HilliardBaxterMancos-Niobrara Antrim
Antrim Marcellus
Niobrara Fm

Manning Canyon Mancos

Kreyenhagen Hermosa NewAlbany

Monterey-
Temblor Pierre- Excello-Mulky
Gothic-Hovenweep Niobrara
Lewis Woodford Chattanooga
Monterey Fayetteville
Bend Chattanooga
Woodford-Caney Conasauga
Avalon-Bone SpringWolfberry
Cline Floyd-Neal
Floyd-Chattanooga
Wolfcamp (Delaware) Barnett Haynesville
Barnett-
Woodford Wolfcamp
(Midland) Tuscaloosa

Pearsall
Eagle Ford

Cenozoic Mesozoic Paleozoic

Miocene Cretaceous Permian Mississippian-Devonian Tight sands
Miocene-Oligocene Jurassic Pennsylvanian Devonian Basins
Eocene Trassic Mississippian-Penn Ordovician
Mississippian Cambrian Modified from: EIA and National Geographic
QAei2915
 Tinker, 2014

Unconventional Resource Plays

Bakken

Marcellus

Fayetteville

Permian Barnett
Basin
Haynesville

Eagle Ford

Cenozoic Mesozoic Paleozoic

Miocene Cretaceous Permian Mississippian-Devonian Tight sands
Miocene-Oligocene Jurassic Pennsylvanian Devonian Basins
Eocene Trassic Mississippian-Penn Ordovician
Mississippian Cambrian Modified from: EIA and National Geographic
QAei2915
 Tinker, 2014

Unconventional Resource Plays

Bakken

Marcellus

Fayetteville

Permian Barnett
Basin
Haynesville

Eagle Ford

Cenozoic Mesozoic Paleozoic

Miocene Cretaceous Permian Mississippian-Devonian Tight sands
Miocene-Oligocene Jurassic Pennsylvanian Devonian Basins
Eocene Trassic Mississippian-Penn Ordovician
Mississippian Cambrian Modified from: EIA and National Geographic
QAei2915
 Tinker, 2014
Middle
Unconventional Resource Plays
Devonian
Bakken

Laurentia
& Marcellus
Baltica

Fayetteville

Bakken
Permian Barnett
Basin
Haynesville

Eagle Ford

From Blakey; http://cpgeosystems.com/paleomaps.html

 Tinker, 2014

Bureau of Economic Geology

U.S. Shale Gas Integrated Study

 What is the total resource base in place?

 What portion is technically recoverable?
 What potion is economically recoverable?
 What is the long-term production outlook?
 Tinker, 2014

Barnett
Productivity
Tiers

Ikonnikova S., et al. 2013. SPE Res. Eval & Eng

 Tinker, 2014

Well Profiles Vary by Tier

Barnett
• Variable leases
• Multiple operators
• Wide range of
completion types

BEG Shale Reserves and Production Project

 Tinker, 2014

Barnett Drilling by Tier

BEG Shale Reserves and Production Project

 Tinker, 2014

Gas Price $4.00/mcf

45 Tcf

BEG Shale Reserves and Production Project

 Tinker, 2014

Barnett
Production Forecast
2.5 $10
Tcf @ $10 HH Tcf per Year
(Base Case Sensitivity to Price) $9
Tcf @ $6 HH

2 Tcf @ $4 HH $8

Henry Hub $2010 $7

Henry Hub $2010

1.5 $6
Tcf per Year

$5

45 Tcf
1 $4

$3

0.5 $2

$1

0 $-
1995 2000 2005 2010 2015 2020 2025 2030
BEG Shale Reserves and Production Project
 Barnett Tinker, 2014

Monte Carlo Production Distribution

0.050

0.045 OGIP 444 TcF

0.040 35 Tcf
0.035
Relative Frequency

0.030
56 Tcf
0.025

0.020

0.015

0.010

0.005

0.000
29 3444 39 49 55 60 65 70
Cumulative Production (Tcf)
Browning, J. et al. 2013. SPE Econ & Mgmt
 Tinker, 2014
Fayetteville
Productivity Tiers
 Tinker, 2014

Fayetteville
Production Forecast

BEG Shale Reserves and Production Project

 Tinker, 2014

Fayetteville
Production Forecast
1.2 Tcf per Year $10
(Base Case Sensitivity to Price) Tcf @ $10 HH
1.1 $9
Tcf @ $6 HH
1.0
Tcf @ $4 HH $8
0.9
HH $2010 $7

Henry Hub $2010

0.8
0.7 $6

0.6 $5
Tcf per year

0.5
0.4
17 Tcf $4

$3
0.3
$2
0.2
0.1 $1

0.0 $-
2005 2010 2015 2020 2025 2030
BEG Shale Reserves and Production Project
 Tinker, 2014
Fayetteville
Monte Carlo Production Distribution
0.05
OGIP 80 TcF
0.04
Relative Frequency

0.03 23 Tcf
13 Tcf
0.02

0.01

0
10 12 14
17 19 21 23 26 28
BEG Shale Reserves and Production Project Cumulative Production (Tcf)
 Tinker, 2014
Haynesville
Productivity Tiers
 Tinker, 2014

Haynesville Production Forecast

BEG Shale Reserves and Production Project

 Tinker, 2014

Haynesville Production Forecast

37 Tcf

BEG Shale Reserves and Production Project

 Haynesville Tinker, 2014

Monte Carlo Production Distribution

0.055

0.05 OGIP 489 TcF

0.045

0.04
Relative Frequency

0.035
62 Tcf
0.03 24 Tcf
0.025

0.02

0.015

0.01

0.005

0
14 24 33 43 52 62 72 81
Cumulative Production (Tcf)
BEG Shale Reserves and Production Project
 Tinker, 2014

Economics by Tier (Bcf)

$18
$16 Breakeven Economics
$14
10% IRR
Barnett Low Btu
$12 Barnett High Btu
$10 Fayetteville Shallow
Fayetteville Medium
$8
Fayetteville Deep
$6 Haynesville
$4
$2
$4 Base Case
$0
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Tier 7 Tier 8 Tier 9 Tier 10

BEG Shale Reserves and Production Project

 Tinker, 2014

Economics by Tier (Bcf)

$18
$16 Breakeven Economics
$14
10% IRR
Barnett Low Btu
$12 Barnett High Btu
$10 Fayetteville Shallow
Fayetteville Medium
$8
$6 Case Fayetteville Deep
$6 Haynesville
$4
$2
$0
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Tier 7 Tier 8 Tier 9 Tier 10

BEG Shale Reserves and Production Project

 Tinker, 2014
Marcellus OGIP
1712 Tcf OGIP free FVille
OGIP 80

HVille
OGIP 489
Barnett
OGIP 445

All Maps Shown with Common Distance Scale BEG Shale Reserves and Production Project
 Tinker, 2014
Marcellus OGIP
1712 Tcf OGIP free FVille
OGIP 80

HVille
OGIP 489
Barnett
OGIP 445

All Maps Shown with Common Distance Scale BEG Shale Reserves and Production Project
 Tinker, 2014

Base Case ($4) Stacked Production

12 12
Marcellus
U.S. Consumption
Haynesville
~ 25 TcF/Year
10 Fayetteville 10

Henry Hub Price ($2012/MMBtu)

Barnett
HH $2012
8 8
TCF

6 6

4 4
37 TcF
2
17 TcF 2

45 TcF
0 0
1995 2000 2005 2010 2015 2020 2025 2030

BEG Shale Reserves and Production Project

 Tinker, 2014

EIA Price Case Stacked Production

12 U.S. Consumption 12
Marcellus
Haynesville
~ 25 TcF/Year
10 Fayetteville 10

Henry Hub Price ($2012/MMBtu)

Barnett
HH $2012
8 8
TCF

6 6

4 4
37 TcF
2
17 TcF 2

45 TcF
0 0
1995 2000 2005 2010 2015 2020 2025 2030

BEG Shale Reserves and Production Project

 Tinker, 2014

$6 Case Stacked Production

12 U.S. Consumption 12
Marcellus
Haynesville
~ 25 TcF/Year
10 Fayetteville 10

Henry Hub Price ($2012/MMBtu)

Barnett
HH $2012
8 8
TCF

6 6

4 4
37 TcF
2
17 TcF 2

45 TcF
0 0
1995 2000 2005 2010 2015 2020 2025 2030

BEG Shale Reserves and Production Project

 Tinker, 2014

Forecast vs. Actual

Model: Rice University, Medlock, 2012

EIA
BEG
EIA price deck
 Tinker, 2014

Global Natural Gas

Resources v. Cost
15
Production cost (2008 $/Mbtu)

10

Deep Water
Arctic
~5,600 Coal Bed
Methane
Sour
Tight Shale
Tcf
Conventional

5 LNG
Produced

Barnett Fayetteville Haynesville Marcellus Total

BEG Original
0 Gas in Place (Tcf) 444 80 489 1712 2725
0 3,000– 2050
BEG ($4) Production 6,000 9,000 12,000 15,000 18,000 21,000 24,000 27,000 30,000
*Marcellus through 2070 45 Resources (TcF)
17 37
Source: IEA World Energy Outlook (2009)
Field Wide Recovery % 10% 21% 8% QAe980
 Tinker, 2014

Outline

 Unconventional Reservoirs
 U. S. Shale Gas and Shale Oil
 Science, Technology & Economics
 Tinker, 2014

The 5E Waltz
Environment

Education
Efficiency

Energy Economy
 Tinker, 2014

The Radical Middle

Academia/NGO

The
Radical
Middle
Government Industry
 Tinker, 2014

Some Key Questions

• Can we re-complete existing wells economically?
• Will technology and economics allow for development of the large
OGIP and OOIP in middle tiers?
• Can we improve facilities and manage flaring, choking of wells and
other operational limitations?

• Can we improve fracture characterization and increase the number of

contributing stages?
• Do we understand rock mechanics and what creates surface area?
• Can we forecast and manage decline of production and improve our
estimates of EUR?
• Can we drill fewer wells from fewer pads?
• Can we use less water?

• What controls induced fracture morphology and can we improve our

imaging of fracture networks?
• Can we improve characterization of hydraulic fractures by deploying
smart nanosensors?
• Can we improve our understanding of adsorbed gas? Porosity?
Permeability?
 Tinker, 2014

The Radical Middle

Recompletions
Economics Middle Tiers
Facilities

Contributing Stages
Rock Mechanics
Manage Decline
Fewer Wells
Less Water Success
Technology Science
Porosity
Adsorption
Permeability
Characterization
Fracture Imaging
 Tinker, 2014

Energy and the Economy

9,000
TPER = Total Primary Energy Requirement.
Energy needed to facilitate Total Final United States
8,000 Consumption (TFC does not include
conversion and transmission losses).

7,000
Australia
6,000
TPER per capita

5,000

4,000
Korea
3,000
Japan
2,000 World
China
1,000
Brazil
India
0
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
GDP per capita
After: Rice World Gas Trade Model
Medlock, 2012 QAe963
 Tinker, 2014

Energy and the Economy

9,000
TPER = Total Primary Energy Requirement.
Energy needed to facilitate Total Final United States
8,000 Consumption (TFC does not include
conversion and transmission losses).

7,000
Australia
6,000
TPER per capita

5,000

4,000
Korea
3,000
Japan
2,000 World
China
~3 billion
1,000
people Brazil
India
0
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
GDP per capita
After: Rice World Gas Trade Model
Medlock, 2012 QAe963
 Tinker, 2014
Energy and the Economy
A Global Challenge
9,000
TPER = Total Primary Energy Requirement.
Energy needed to facilitate Total Final Developed Nations
United States
8,000 Consumption (TFC does not include
conversion and transmission losses). • Balance of Trade
7,000  Exports
 Imports Australia
6,000
• Regulation and Planning
TPER per capita

5,000  Infrastructure
Developing Nations  Resources
4,000 • Food
Korea  Permitting
3,000 • Housing • Emissions, Climate, Environment
Japan
• Clothing • Energy Security
2,000 World
• Education
1,000 • Healthcare
• Electricity Brazil
India
0
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
GDP per capita
After: Rice World Gas Trade Model
Medlock, 2012 QAe963
 Tinker, 2014

Oil “Frontiers”
Unconventional Technology for Conventional Reservoirs
140
Arctic
120
Production cost (2008 $)

EOR
Deepwater and
100 ultra-deepwater
Oil shales Coal
Shale oil to
80 liquids
CO2 EOR
Heavy Gas
60 to
Other oil
conventional & liquids
oil bitumen
40

20 Pro-
MENA
duced

0
0 2000 4000 6000 8000 10,000
Resources (billion barrels)
Source: IEA World Energy Outlook (2009)
 Tinker’s Top Ten
Tinker, 2014

1. Governments, industry and academe must work together; we

all play a role in objective, balanced energy education.
2. The scale of energy demand is difficult to comprehend; energy
transitions take many, many decades.
3. Energy security — affordable, available, reliable, sustainable —
drives the energy mix and should be the goal of energy policy.
4. Energy efficiency is underappreciated; individuals matter!
5. Diverse energy portfolios are inevitable and healthy.
6. Renewables are growing but will remain regional supplements
until major advances are made in energy storage.
7. Shale will play a global role in the energy future; “above
ground” challenges are as important as “below ground.”
8. Natural gas and nuclear are the new foundational energies.
9. Oil and coal are abundant at the right price, and difficult to
replace as transportation and electricity fuels.
10. Energy, the economy and the environment are linked.