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Unconventional Resources:Unconventional Resources:Unconventional Resources:Unconventional Resources:Turning Conventional Paradigms Turning Conventional Paradigms Turning Conventional Paradigms Turning Conventional Paradigms
Upside DownUpside DownUpside DownUpside Down
Richard Richard Richard Richard ChuchlaChuchlaChuchlaChuchlaSenior Corporate Strategic AdvisorSenior Corporate Strategic AdvisorSenior Corporate Strategic AdvisorSenior Corporate Strategic Advisor
Exxon Mobil CorporationExxon Mobil CorporationExxon Mobil CorporationExxon Mobil Corporation
Unconventional Resources:Unconventional Resources:Unconventional Resources:Unconventional Resources:Unconventional Resources:Unconventional Resources:Unconventional Resources:Unconventional Resources:Turning Conventional Paradigms Turning Conventional Paradigms Turning Conventional Paradigms Turning Conventional Paradigms Turning Conventional Paradigms Turning Conventional Paradigms Turning Conventional Paradigms Turning Conventional Paradigms
Upside DownUpside DownUpside DownUpside DownUpside DownUpside DownUpside DownUpside Down
Richard Richard Richard Richard Richard Richard Richard Richard ChuchlaChuchlaChuchlaChuchlaChuchlaChuchlaChuchlaChuchlaSenior Corporate Strategic AdvisorSenior Corporate Strategic AdvisorSenior Corporate Strategic AdvisorSenior Corporate Strategic AdvisorSenior Corporate Strategic AdvisorSenior Corporate Strategic AdvisorSenior Corporate Strategic AdvisorSenior Corporate Strategic Advisor
Exxon Mobil CorporationExxon Mobil CorporationExxon Mobil CorporationExxon Mobil CorporationExxon Mobil CorporationExxon Mobil CorporationExxon Mobil CorporationExxon Mobil Corporation
OutlineOutlineOutlineOutlineOutlineOutlineOutlineOutline
•• DefinitionsDefinitionsDefinitionsDefinitionsDefinitionsDefinitionsDefinitionsDefinitions
•• Historical Context and ImportanceHistorical Context and ImportanceHistorical Context and ImportanceHistorical Context and ImportanceHistorical Context and ImportanceHistorical Context and ImportanceHistorical Context and ImportanceHistorical Context and Importance
•• WhatWhatWhatWhatWhatWhatWhatWhat’’’’’’’’s Unconventional About Unconventional Resources? s Unconventional About Unconventional Resources? s Unconventional About Unconventional Resources? s Unconventional About Unconventional Resources? s Unconventional About Unconventional Resources? s Unconventional About Unconventional Resources? s Unconventional About Unconventional Resources? s Unconventional About Unconventional Resources?
•• ChallengesChallengesChallengesChallengesChallengesChallengesChallengesChallenges
•• Pace of Discovery, Production and InnovationPace of Discovery, Production and InnovationPace of Discovery, Production and InnovationPace of Discovery, Production and InnovationPace of Discovery, Production and InnovationPace of Discovery, Production and InnovationPace of Discovery, Production and InnovationPace of Discovery, Production and Innovation
•• OutlookOutlookOutlookOutlookOutlookOutlookOutlookOutlook
DefinitionsDefinitionsDefinitionsDefinitionsDefinitionsDefinitionsDefinitionsDefinitions
• unununun⋅⋅⋅⋅conconconcon⋅⋅⋅⋅venvenvenven⋅⋅⋅⋅tiontiontiontion⋅⋅⋅⋅alalalal [[[[uhnuhnuhnuhn----kkkkuh nnnn----ven ----shshshshuh----nlnlnlnl]]]] : not conforming to existing rule
• unununun⋅⋅⋅⋅conconconcon⋅⋅⋅⋅venvenvenven⋅⋅⋅⋅tiontiontiontion⋅⋅⋅⋅alalalal rererere⋅⋅⋅⋅sourcesourcesourcesource [[[[uhnuhnuhnuhn----kkkkuh nnnn----ven ----shshshshuh----nlnlnlnlree-sawrs, -sohrs, -zawrs, -zohrs, ri-sawrs, -sohrs , -zawrs, -zohrs ]: an oil and gas resource ]: an oil and gas resource ]: an oil and gas resource ]: an oil and gas resource not bound by or conforming to conventional geologic rule or precede nt
• Stubborn rocks (low permeability)Stubborn rocks (low permeability)Stubborn rocks (low permeability)Stubborn rocks (low permeability)- e.g. tight gas (TG), shale gas (SG)e.g. tight gas (TG), shale gas (SG)e.g. tight gas (TG), shale gas (SG)e.g. tight gas (TG), shale gas (SG)- require physical stimulation (fracturing)require physical stimulation (fracturing)require physical stimulation (fracturing)require physical stimulation (fracturing)
• Stubborn Stubborn Stubborn Stubborn ““““fluidsfluidsfluidsfluids”””” (high viscosity to solid (high viscosity to solid (high viscosity to solid (high viscosity to solid kerogenkerogenkerogenkerogen))))- e.g. heavy oil (HO), oil shale (OS)e.g. heavy oil (HO), oil shale (OS)e.g. heavy oil (HO), oil shale (OS)e.g. heavy oil (HO), oil shale (OS)- require thermal stimulationrequire thermal stimulationrequire thermal stimulationrequire thermal stimulation
�TechnologyTechnologyTechnologyTechnology----leveraged resourcesleveraged resourcesleveraged resourcesleveraged resources�Stimulation to achieve commercial productionStimulation to achieve commercial productionStimulation to achieve commercial productionStimulation to achieve commercial production
Oil-
Eq
uiv
alen
t B
arre
ls (
Bill
ion
)*
Seeps, Surface Exploration
CDP Seismic3D Seismic
Deep Water
US DominatedExploration
GlobalExpansion
Post WWIIGrowth
OPEC/Nationali-
zation
Globali-zation /Mergers
DISCOVERED OIL
GASDEMAND
OILDEMAND
Increased Recovery
New
Discoveries
DISCOVERED GAS
0
10
20
30
40
50
60
70
80
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
ProducedOil
ProducedGas
Single Fold Seismic
Context / Discovery HistoryContext / Discovery HistoryContext / Discovery HistoryContext / Discovery HistoryContext / Discovery HistoryContext / Discovery HistoryContext / Discovery HistoryContext / Discovery History
Context / Global Wildcats and Discoveries >250MBOEContext / Global Wildcats and Discoveries >250MBOEContext / Global Wildcats and Discoveries >250MBOEContext / Global Wildcats and Discoveries >250MBOEContext / Global Wildcats and Discoveries >250MBOEContext / Global Wildcats and Discoveries >250MBOEContext / Global Wildcats and Discoveries >250MBOEContext / Global Wildcats and Discoveries >250MBOE
Data courtesy of IHS, 2006
0
500
1000
1500
2000
2500
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
New
-Fie
ld W
ildca
ts/y
ear
0
10
20
30
40
50
60
Dis
cove
ries
>250
MO
EB
/yea
r
Wildcats
60-70’sPeak
Discoveries
80’sDecline
90-00’sImprovedEfficiency
Discoveries > 250 MOEB
Context / Energy Demand to 2030Context / Energy Demand to 2030Context / Energy Demand to 2030Context / Energy Demand to 2030Context / Energy Demand to 2030Context / Energy Demand to 2030Context / Energy Demand to 2030Context / Energy Demand to 2030
• Economic growth Economic growth Economic growth Economic growth
will drive will drive will drive will drive
increasing demand increasing demand increasing demand increasing demand
for energyfor energyfor energyfor energy
• Oil and gas are Oil and gas are Oil and gas are Oil and gas are
indispensableindispensableindispensableindispensable
– Unconventional oil Unconventional oil Unconventional oil Unconventional oil
and gas will be and gas will be and gas will be and gas will be
important important important important
contributors to contributors to contributors to contributors to
our energy futureour energy futureour energy futureour energy future
(2009)
BOEB
resource typeresource distribution
0
40
80
YE '08
Americas
Europe
Russia / Caspian
Africa
72
Asia Pacific
Middle East
LNG
unconventionalgas
conventional
deepwater
arctic
heavy oil
acid / sourgas
ExxonMobil Resource BaseExxonMobil Resource BaseExxonMobil Resource BaseExxonMobil Resource BaseExxonMobil Resource BaseExxonMobil Resource BaseExxonMobil Resource BaseExxonMobil Resource Base
Year(EIA, NPC)
Total Natural Conventional GasUnconventional Gas
Total Natural Conventional GasUnconventional Gas
0
5,000
10,000
15,000
20,000
25,000
1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 2015
Annual Natural Gas Production (Bcf)
Emergence of Unconventional GasEmergence of Unconventional GasEmergence of Unconventional GasEmergence of Unconventional GasEmergence of Unconventional GasEmergence of Unconventional GasEmergence of Unconventional GasEmergence of Unconventional Gas
“Peak Gas”?!
(Updated from Fisher, 2002)
22002000
18001600
140012001000
800
600
400200
0
1975 1980 1985 1990 1995 2000 2005 2010
* (Several estimates for lower 48 only)Estimates adjusted for production since date of estimate
U. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURNatural Gas (TCF)
USGS
USGS
USGS
PGCPGC
PGC
PGC
PGCPGC
PGC
PGC
Shell
ShellMobil
Hubbert
Hefner
NRC
Exxon
ExxonUSGS
PGC
PGCPGC
PGC
Smith & Lidsky
SohioHubbertNehring
GRI
GRI
GRI
NRC
DOI
NPC
EIA
EIA
EIA
EIA
GRI
Enron
EnronAAPG
DOE
DOI
Enron
Trend line
NPC
PGC
NPC
Barnett Shale:• USGS (1996): ~3 TCF• ARI (2006): 39 TCF
PGC
PGC ‘09
+DOE proved
100 years of production
1985 1990 1995 2000 2005
since date of estimate
U. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RURU. S. Gas RUR
USGS
PGC
PGCPGC PGC
ShellExxon
PGC
PGCPGC
PGC
Smith & Lidsky
SohioHubbertNehring
GRI
GRI
GRI
NRC
DOI
NPC
EIA
EIA
EIA
EIA
GRI
Enron
EnronAAPG
DOE
DOI
Enron
Trend line
NPC
PGC
NPC
GasGas
U. S. Annual Gas ProductionU. S. Annual Gas ProductionU. S. Annual Gas ProductionU. S. Annual Gas ProductionU. S. Annual Gas ProductionU. S. Annual Gas ProductionU. S. Annual Gas ProductionU. S. Annual Gas Production
0
25
50
75
Billion Cubic Feet per Day
Exxon Mobil Production OutlookExxon Mobil Production OutlookExxon Mobil Production OutlookExxon Mobil Production OutlookExxon Mobil Production OutlookExxon Mobil Production OutlookExxon Mobil Production OutlookExxon Mobil Production Outlook
Shale gas, tight gas and CBM
Conventional
XOM CERA*
EIA*
2005 2008 2020
Unconventional Gas / Impact on U. S. LNG BusinessUnconventional Gas / Impact on U. S. LNG BusinessUnconventional Gas / Impact on U. S. LNG BusinessUnconventional Gas / Impact on U. S. LNG BusinessUnconventional Gas / Impact on U. S. LNG BusinessUnconventional Gas / Impact on U. S. LNG BusinessUnconventional Gas / Impact on U. S. LNG BusinessUnconventional Gas / Impact on U. S. LNG Business
Existing Capacity
Existing Capacity
Existing Capacity
Existing Capacity
Proposed
Proposed
Proposed
Proposed
Additions
Additions
Additions
Additions
Data Source: Wood MacKenzie
0000
2222
4444
6666
8888
10101010
12121212
14141414
4Q074Q074Q074Q07 1Q081Q081Q081Q08 2Q082Q082Q082Q08 3Q083Q083Q083Q08 4Q084Q084Q084Q08 1Q091Q091Q091Q09 2Q092Q092Q092Q09 3Q093Q093Q093Q09 4Q094Q094Q094Q09 1Q101Q101Q101Q10 2Q102Q102Q102Q10 3Q103Q103Q103Q10
GCFD
GCFD
GCFD
GCFD
US Historic LNG ImportsUS Historic LNG ImportsUS Historic LNG ImportsUS Historic LNG Imports
Pre
Pre
Pre
Pre-- -- 2008
2008
2008
2008
2008
2008
2008
2008
)
Green River Fm.
Wasatch Fm.
Mancos Shale
Uinta Fm..
Wasatch “G”
Rollins
Proximal
Braided Stream
Corcoran
-Sego-Castle
gateWilliam
s Fork F
m.
Iles
Fm.
ME
SA
VE
RD
E
Ohio Creek
0 10 miles
Green River Fm.
Wasatch Fm.
Rollins
Proximal
Braided Stream
William
s Fork F
m.
William
s Fork F
m.
LlesFm.
ME
SA
VE
RD
EM
ES
AV
ER
DE
Ohio Creek
0 10 miles
Mancos Shale
A Conventional PerspectiveA Conventional PerspectiveA Conventional PerspectiveA Conventional PerspectiveA Conventional PerspectiveA Conventional PerspectiveA Conventional PerspectiveA Conventional Perspective
REGIONAL W-E CROSS SECTION
PICEANCECREEKFIELD
F27X-8GSULPHURCREEKFIELD
Green River Fm.
Wasatch Fm.
Uinta Fm..
Wasatch
Proximal
Braided Stre
am
Corcoran-Sego
-Castlegate W
illia
ms
For
k F
m.
Iles Fm.
ME
SA
VE
RD
E
Ohio Creek
Green River Fm.
Wasatch Fm.
Mancos Shale
Uinta Fm.
Wasatch ‘’G’’
Proximal
Braided Stre
am
Will
iam
s F
ork
Fm
.W
illia
ms
For
k F
m.
Iles Fm.
ME
SA
VE
RD
EM
ES
AV
ER
DE
Ohio Creek
0 10 miles
0’ SS
-2,000
-4,000
-6,000
-8,000
-10,000
0’ SS
-2,000
-4,000
-6,000
-8,000
-10,000
Woodward-1
Geologic Paradigms Turned Upside DownGeologic Paradigms Turned Upside DownGeologic Paradigms Turned Upside DownGeologic Paradigms Turned Upside DownGeologic Paradigms Turned Upside DownGeologic Paradigms Turned Upside DownGeologic Paradigms Turned Upside DownGeologic Paradigms Turned Upside Down
0.000001
0.00001
0.0001
0.001
0.01
0.1
1
10
100
1000
10000
k (m
d)Conventional Reservoirs
Concrete Sidewalk
Shale Rock
Tight Gas Sand (Piceance)
Unconventional Gas Challenges / PermeabilityUnconventional Gas Challenges / PermeabilityUnconventional Gas Challenges / PermeabilityUnconventional Gas Challenges / PermeabilityUnconventional Gas Challenges / PermeabilityUnconventional Gas Challenges / PermeabilityUnconventional Gas Challenges / PermeabilityUnconventional Gas Challenges / Permeability
Tight Gas Pore Space
Shale Gas Pore Space
Conventional Gas Pore Space
100 microns
20 microns
50 nano
meters
Diameter of average human hair is about 100 microns
Unconventional Gas Challenges / PorosityUnconventional Gas Challenges / PorosityUnconventional Gas Challenges / PorosityUnconventional Gas Challenges / PorosityUnconventional Gas Challenges / PorosityUnconventional Gas Challenges / PorosityUnconventional Gas Challenges / PorosityUnconventional Gas Challenges / Porosity
1.5 mile
Horizontal wellbore
Drainage area
Frac
Well Pad
1 mile
Approx. 250-300 foot deep separation
between two reservoirs
Unconventional Gas Challenges / ProductionUnconventional Gas Challenges / ProductionUnconventional Gas Challenges / ProductionUnconventional Gas Challenges / ProductionUnconventional Gas Challenges / ProductionUnconventional Gas Challenges / ProductionUnconventional Gas Challenges / ProductionUnconventional Gas Challenges / Production
Marcellus ShaleMarcellus ShaleMarcellus ShaleMarcellus ShaleIndustry acreage position: >7.5M acres
• Average well cost: $4.00M• Average EUR: 4 GCF/well• Average well spacing: 80 acres
Assume half of the industry acreage might be productive�~50,000 well locations�~190 TCF of gas ultimately produced�$190 billion (for drilling and completions only)
Unconventional Gas Challenges / Level of InvestmentUnconventional Gas Challenges / Level of InvestmentUnconventional Gas Challenges / Level of InvestmentUnconventional Gas Challenges / Level of InvestmentUnconventional Gas Challenges / Level of InvestmentUnconventional Gas Challenges / Level of InvestmentUnconventional Gas Challenges / Level of InvestmentUnconventional Gas Challenges / Level of Investment
www.bing.comwww.bing.comwww.bing.comwww.bing.com
• Old Paradigm- “Australia gas”synonymous with the NWS or Gippsland
- Eastern Australia CBM is modest-sized resource
- Need to sell CBM to local gas markets
+ Local gas markets are saturated
- Gas is too dry, ramp-up too long for LNG feedstock
•New Paradigm- Eastern Australia CBM is a very large resource
- Look for markets outside Australia
�Export via LNG
Production History
0
100
200
300
400
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
MC
FD
Challenging Unconventional Dogma / Commercial ModelsChallenging Unconventional Dogma / Commercial ModelsChallenging Unconventional Dogma / Commercial ModelsChallenging Unconventional Dogma / Commercial ModelsChallenging Unconventional Dogma / Commercial ModelsChallenging Unconventional Dogma / Commercial ModelsChallenging Unconventional Dogma / Commercial ModelsChallenging Unconventional Dogma / Commercial Models
Barnett Shale Historical Daily ProductionBarnett Shale Historical Daily ProductionBarnett Shale Historical Daily ProductionBarnett Shale Historical Daily Production(as of 2/2009)(as of 2/2009)(as of 2/2009)(as of 2/2009)
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20100
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
TimeTimeTimeTime
Daily Production Rate (KCFGD)
Daily Production Rate (KCFGD)
Daily Production Rate (KCFGD)
Daily Production Rate (KCFGD)
Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:5.1 TCF5.1 TCF5.1 TCF5.1 TCF5.1 TCF5.1 TCF5.1 TCF5.1 TCF
Daily Production:Daily Production:Daily Production:Daily Production:Daily Production:Daily Production:Daily Production:Daily Production:4.9 GCFPD4.9 GCFPD4.9 GCFPD4.9 GCFPD4.9 GCFPD4.9 GCFPD4.9 GCFPD4.9 GCFPD
Discovery well (vertical, CO 2 ,nitrogen foam frac)Massive hydraulic fracs
First horizontal well; first 3D seismicFirst light sand (slickwater) frac
Refrac Simul-fracs
Emergence of Unconventional Gas / Barnett ShaleEmergence of Unconventional Gas / Barnett ShaleEmergence of Unconventional Gas / Barnett ShaleEmergence of Unconventional Gas / Barnett ShaleEmergence of Unconventional Gas / Barnett ShaleEmergence of Unconventional Gas / Barnett ShaleEmergence of Unconventional Gas / Barnett ShaleEmergence of Unconventional Gas / Barnett Shale
(Data Source: IHS, 2009)
Horizontal Wells / IP Gas vs Time
0
2000
4000
6000
8000
10000
12000
3/15/00 7/28/01 12/10/02 4/23/04 9/5/05
TIME
IP m
cfgd
2003 2004 2005 2006 2007 2008 20090
200,000
400,000
600,000
800,000
1,000,000
Fayetteville Shale Daily ProductionFayetteville Shale Daily ProductionFayetteville Shale Daily ProductionFayetteville Shale Daily Production
Time
Daily Production Rates (KCFGD
(Data Source: IHS, 2009)
Emergence of Unconventional Gas / Fayetteville ShaleEmergence of Unconventional Gas / Fayetteville ShaleEmergence of Unconventional Gas / Fayetteville ShaleEmergence of Unconventional Gas / Fayetteville ShaleEmergence of Unconventional Gas / Fayetteville ShaleEmergence of Unconventional Gas / Fayetteville ShaleEmergence of Unconventional Gas / Fayetteville ShaleEmergence of Unconventional Gas / Fayetteville Shale
Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:Cumulative Production:
280 GCF280 GCF280 GCF280 GCF280 GCF280 GCF280 GCF280 GCF
Daily Production: Daily Production: Daily Production: Daily Production: Daily Production: Daily Production: Daily Production: Daily Production:
843 MMCFPD843 MMCFPD843 MMCFPD843 MMCFPD843 MMCFPD843 MMCFPD843 MMCFPD843 MMCFPD
1995199519951995 1997199719971997 1999199919991999 2001200120012001 2003200320032003 2005200520052005 2007200720072007
0
100
200
300
400
500
600
700
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
(Courtesy of IHS, 2008)
Operation Operation Operation Operation PlowsharePlowsharePlowsharePlowshare
RulisonRulisonRulisonRulison field field field field discoverydiscoverydiscoverydiscovery
• Mesaverde tight gas potential recognized in early 1950’s (Rulison field discovery)
• Massive nuclear and hydraulic fracsdeemed unsuccessful
• Increased drilling activity due to increased gas price and advancement of frac technology
• Exponential growth in production starting in 1995
• Production has been limited by take-away capacity and attendant low price
Best fit exponential y=1E-210e0.2409x
R2=0.9846
Emergence of Unconventional Gas / Emergence of Unconventional Gas / Emergence of Unconventional Gas / Emergence of Unconventional Gas / Emergence of Unconventional Gas / Emergence of Unconventional Gas / Emergence of Unconventional Gas / Emergence of Unconventional Gas / PiceancePiceancePiceancePiceancePiceancePiceancePiceancePiceance BasinBasinBasinBasinBasinBasinBasinBasin
Deepwater / New FrontiersDeepwater / New FrontiersDeepwater / New FrontiersDeepwater / New FrontiersDeepwater / New FrontiersDeepwater / New FrontiersDeepwater / New FrontiersDeepwater / New Frontiers
Ultra deep water
2000-3000 m
Post-salt sediments
Variable salt thickness
5000-6000 m
Heterogeneous carbonate reservoir
+ variable permeability
Brazil Santos SubBrazil Santos SubBrazil Santos SubBrazil Santos Sub----SaltSaltSaltSalt
TD: 8000 m (>25,000’)
Ultra deep water
1200-3000 m
Post-salt sediments
Complex salt geometry
5000-7000 m
Turbidite sandstone reservoir
+ low permeability
+ moderate porosity
+ overpressure
Gulf of Mexico Lower TertiaryGulf of Mexico Lower TertiaryGulf of Mexico Lower TertiaryGulf of Mexico Lower Tertiary
TD: 9000 m (<30,000’)
Rugose sea floor
The Pace of Innovation / Water Depth CapabilityThe Pace of Innovation / Water Depth CapabilityThe Pace of Innovation / Water Depth CapabilityThe Pace of Innovation / Water Depth CapabilityThe Pace of Innovation / Water Depth CapabilityThe Pace of Innovation / Water Depth CapabilityThe Pace of Innovation / Water Depth CapabilityThe Pace of Innovation / Water Depth Capability
0
500
1,000
1,500
2,000
2,500
1940 1950 1960 1970 1980 1990 2000 2010
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Fixed PlatformTLP / CT / SparFPSO / SSDW Production (IHS)
0
500
1000
1500
2000
2500
1940 1950 1960 1970 1980 1990 2000 2010
(Wat
erD
epth
in m
eter
s)
Year
Pro
duct
ion
(Mill
ion
Bar
rels
/Day
)
Exponential Relationship:
y=3E-73e0.087x
R2 = 0.97
Linear Extrapolation: 1985 to 2005
MOOREMOOREMOOREMOOREMOOREMOOREMOOREMOORE’’’’’’’’S LAWS LAWS LAWS LAWS LAWS LAWS LAWS LAW
01970 1975 1980 1985 1990 1995
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
Pentium II
Pentium I
Intel 486
Intel 386
40048008
80808086
Intel 286
The Inexorable Pace of Innovation The Inexorable Pace of Innovation The Inexorable Pace of Innovation The Inexorable Pace of Innovation The Inexorable Pace of Innovation The Inexorable Pace of Innovation The Inexorable Pace of Innovation The Inexorable Pace of Innovation
TIME (linear)
CA
PA
BIL
ITY
(lin
ear)
- “Breakthrough”
The Learning CurveThe Learning CurveThe Learning CurveThe Learning CurveThe Learning CurveThe Learning CurveThe Learning CurveThe Learning Curve
• Exponential, Exponential, Exponential, Exponential, accelerating growthaccelerating growthaccelerating growthaccelerating growth
• Succession of SSuccession of SSuccession of SSuccession of S----curvescurvescurvescurves– Each succeedingcurve has shorterbase, longer ramp
(data from Intel, 2007)
10,000,000,000
1970 1975 1980 1985 1990 1995 2000 2005
1,000,000,000
100,000,000
10,000,000
1,000,000
100,000
10,000
1,000
transistors
Itanium 2 ProcessorItanium Processor
Pentium 4 ProcessorPentium III Processor
Pentium II ProcessorPentium Processor
486 Processor
386 Processor286
8086
80808008
8004
Linear scale Semi-log scale
• “Materiality” - Large opportunities available
• “Security” - In politically stable countries
• “Optionality” - “Piloting”, development pace allow for significant
reaction to learning and changing market conditions
• “Sustainability” - Scope for multi-decade production profiles
• “Commercial Viability” - Opportunities exist in countries importing gas,
offering existing infrastructure, attractive fiscal terms
and favorable business environment / outlook
+ Favorable early entry & lease holding costs, modest entry work program requirements
• “Technology” - Technology is a key value lever
Intrinsic Value of Unconventional ResourcesIntrinsic Value of Unconventional ResourcesIntrinsic Value of Unconventional ResourcesIntrinsic Value of Unconventional ResourcesIntrinsic Value of Unconventional ResourcesIntrinsic Value of Unconventional ResourcesIntrinsic Value of Unconventional ResourcesIntrinsic Value of Unconventional Resources
Unconventional Gas / An Outlook and Remaining ChallengesUnconventional Gas / An Outlook and Remaining ChallengesUnconventional Gas / An Outlook and Remaining ChallengesUnconventional Gas / An Outlook and Remaining ChallengesUnconventional Gas / An Outlook and Remaining ChallengesUnconventional Gas / An Outlook and Remaining ChallengesUnconventional Gas / An Outlook and Remaining ChallengesUnconventional Gas / An Outlook and Remaining Challenges
US Onshore Gas Rig Count
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Data Source: Baker Hughes
OutlookOutlookOutlookOutlook
• A A A A ““““breatherbreatherbreatherbreather”””” followed by continued followed by continued followed by continued followed by continued production growth in North America and production growth in North America and production growth in North America and production growth in North America and beyondbeyondbeyondbeyond– Unconventional gas will be competitive
with imported or other new indigenous conventional sources of gas
– Will provide material, strategically important resource
• Continued growth of global resource Continued growth of global resource Continued growth of global resource Continued growth of global resource base of unconventional gasbase of unconventional gasbase of unconventional gasbase of unconventional gas
Key ChallengesKey ChallengesKey ChallengesKey Challenges
• Develop a predictive understanding of Develop a predictive understanding of Develop a predictive understanding of Develop a predictive understanding of subsurface controlssubsurface controlssubsurface controlssubsurface controls– ““““Rock revivalRock revivalRock revivalRock revival””””– Focus on fundamental scienceFocus on fundamental scienceFocus on fundamental scienceFocus on fundamental science
• Innovate new technologies for detection, Innovate new technologies for detection, Innovate new technologies for detection, Innovate new technologies for detection, drilling, stimulation, enhanced recovery drilling, stimulation, enhanced recovery drilling, stimulation, enhanced recovery drilling, stimulation, enhanced recovery and water controland water controland water controland water control
• Reduce surface footprint and water Reduce surface footprint and water Reduce surface footprint and water Reduce surface footprint and water demanddemanddemanddemand
U.S. Natural Gas Wellhead Price(Dollars per Thousand Cubic Feet in 2009 $)
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Jan-
95
Jan-
97
Jan-
99
Jan-
01
Jan-
03
Jan-
05
Jan-
07
Jan-
09
Data Source: EIA
“The conventional view serves to protect us from the painful job of
thinking.”John Kenneth Galbraith
Grateful Acknowledgements to the team pursuing Unconventional Resources
“The conventional view serves to protect us from the painful job of
thinking.”John Kenneth Galbraith
Grateful Acknowledgements to the team pursuing Unconventional Resources