Shale Gas

Revolution or evolution of global gas

market?

Agenda:
Importance
History
USA story
Rest of the world
Main players
Eco issues

Why we are talking about shale gas?

Source: IEA

2010 - 77 billions dollars

were added to USA GDP
by shale gas

2015 111,2 billions dollars

expected

When it began?

1821 First US commercial natural gas well in

Fredonia, NY, produces natural gas from shale;

1821 First US commercial natural gas well in

Fredonia, NY, produces natural gas from shale;

After 160 years of development and experiments

1980s Department of Energy spearheads
research in micro seismic and other 3dimensional mapping techniques that proved
critical to shale gas recovery;

1821 First US commercial natural gas well in

Fredonia, NY, produces natural gas from shale;

After 160 years of development and experiments

1980s Department of Energy spearheads
research in micro seismic and other 3dimensional mapping techniques that proved
critical to shale gas recovery;

2000s natural gas holds steady

in United States with the highest
annual increase in production of
any energy technology modern
natural gas boom

Development of technology

How it works?

443 m

Source: Visual Capitalist www.visualcapitalist.com

Shale formation are fine-grained

sedimentary rocks with gas
trapped in them. Shale has low
permeability and gas does not
flow through it easily.

443 m

Source: Visual Capitalist www.visualcapitalist.com

Producers drill down to the

level of shale,
And then drills then turn
horizontal to
go along shale

443 m

Source: Visual Capitalist www.visualcapitalist.com

Producers drill down to the

level of shale,
And then drills then turn
horizontal to
go along shale

Water, proppants and chemical

additives are injected into the
shale at a high pressure to
create fracture pathways that
increase flow of the well.

443 m

Source: Visual Capitalist www.visualcapitalist.com

Producers drill down to the

level of shale,
And then drills then turn
horizontal to
go along shale

Water, proppants and chemical

additives are injected into the
shale at a high pressure to
create fracture pathways that
increase flow of the well.

Gas and wastewater flows

443 m
back to surface. Wastewater
it
stored in steel tanks until it
can be stored log-term by deep
injection into oil and gas waste
well
Source: Visual Capitalist www.visualcapitalist.com

The shale gas

revolution in USA

Shale development has made US gas reserves the largest in

the world

$77
billion in
2010

600,000
jobs

$926
savings per
household

$23,16
hourly
wage rate

The shale gas impact to petrochemical market

Source: American Chemistry Council

The shale gas impact to petrochemical market

Source: American Chemistry Council

The shale gas impact to petrochemical market

Source: American Chemistry Council

Expected impact for US economy

More than 1.6 Million Jobs

Expected impact for US economy

More than 1.6 Million Jobs

$231 Billion in Total Value Added

Expected impact for US economy

More than 1.6 Million Jobs

$231 Billion in Total Value Added

$933 Billion in
Tax Revenues

Whos next?

China preparing for opportunity

Chinese policymakers and state behemoths are laying the groundwork to begin
extracting the countrys apparently mighty shale gas resources.

China has set itself an ambitious target of producing 229.5 billion cubic feet of shale gas a year
by 2015.

China activities for shale gas production

Before 2004 - Study foreign shale gas exploration technology
From 2005 to 2007: Shale gas resource exploitation.
In 2008: Exploitation of the Upper Yangtze region and
planning shale gas project.
In 2009: Evaluating shale gas resource potential and defining
favorable exploration targets in key areas.
In 2011: Defining areas of probable shale gas reserves in
China
June 2011, China conducted the first round of shale gas
exploration competitive bidding and invited six state-owned
enterprises to participate in bidding.

Main players in China shale market

Sinopec Group, China's second largest oil and gas producer, has
launched its first shale gas project and plans to develop production
capacity of 300-500 million cubic meters a year by the end of this yeard

In January 2010, Sinopec and BP cooperated to develop a shale gas

block in Guizhou.
Yanchang Petroleum has drilled 12 exploration wells and evaluation
wells, strives to produce 20 million cu m/year of gas by 2012, and aims
to produce 500 million cu m/year by 2015.
CNPC started shale gas exploration and development in 2006,
becoming the first Chinese company to begin work in the sector.
CNPC has obtained North Yunnan-Guizhou mineral rights and drilled a
shale gas data well in the Sichuan basin in 2009.
In March 2010, CNPC and Schlumberger signed a 2010-12 cooperation
agreement on logging services.
In April 2011, CNPC and Total SA agreed to invest $2 billion in Inner
Mongolia Province to develop unconventional gas.

India Shale of the century?

Excitement about a potential Indian shale gas boom is building. As yet, there is not
enough evidence to justify the hype.

India Shale of the century?

In January 2011 Indias

state-owned Oil and Natural
Gas Corporation (ONGC)
found the countrys first
shale gas at an exploratory
site near the city of
Durgapur in West Bengal.

India Shale of the century?

In January 2011 Indias

state-owned Oil and Natural
Gas Corporation (ONGC)
found the countrys first
shale gas at an exploratory
site near the city of
Durgapur in West Bengal.

Oil and Natural Gas

Corporation (ONGC) has
called
in
international
expertise to help with
exploration by partnering
the worlds biggest oil
services
company,
Schlumberger

India Shale of the century?

In January 2011 Indias

state-owned Oil and Natural
Gas Corporation (ONGC)
found the countrys first
shale gas at an exploratory
site near the city of
Durgapur in West Bengal.

Oil and Natural Gas

Corporation (ONGC) has
called
in
international
expertise to help with
exploration by partnering
the worlds biggest oil
services
company,
Schlumberger

The Indian government is

finalizing its shale gas
exploration policy and
expects to launch its first
auction of shale gas blocks
by December 2013

Poland The next Norway?

Shale gas gives Poland a chance to bypass Russiamaybe.

Poland The next Norway?

Oil and gas investment is

flooding into the region in
amounts not seen since the
fall of the Berlin Wall.
Anglo-Dutch giant Royal
Dutch Shell, France's Total
and ConocoPhillips of the
U.S.
have
acquired
exploration rights in Poland

Poland The next Norway?

Oil and gas investment is

flooding into the region in
amounts not seen since the
fall of the Berlin Wall.
Anglo-Dutch giant Royal
Dutch Shell, France's Total
and ConocoPhillips of the
U.S.
have
acquired
exploration rights in Poland

Poland has granted 112

shale exploration licensees
to international firms such
as Chevron, ConocoPhillips
and Marathon Oil.
Exxon Mobil decided to quit
Poland market.

Poland The next Norway?

Oil and gas investment is

flooding into the region in
amounts not seen since the
fall of the Berlin Wall.
Anglo-Dutch giant Royal
Dutch Shell, France's Total
and ConocoPhillips of the
U.S.
have
acquired
exploration rights in Poland

Poland has granted 112

shale exploration licensees
to international firms such
as Chevron, ConocoPhillips
and Marathon Oil.
Exxon Mobil decided to quit
Poland market.

The countrys government is

preparing draft legislation
for development of shale
gas resources, expecting to
start natural gas production
in late 2014

Argetina untapped potential

Unconventional hydrocarbons meet familiar problems in Argentina as in USA

Argetina untapped potential

In May 2011 Argentina

announced that it would
become the site of the first
large-scale development of
oil from
an unconventional reservoir
outside of the US and
Canada.

Argetina untapped potential

In May 2011 Argentina

announced that it would
become the site of the first
large-scale development of
oil from
an unconventional reservoir
outside of the US and
Canada.

Repsol, a Spanish oil major,

announced
that
its
Argentinian
subsidiary,
Yacimientos
Petrolferos Fiscales (YPF),
will drill 17 new wells and
fracture 14 existing ones
this year in the Vaca
Muerta

Argetina untapped potential

In May 2011 Argentina

announced that it would
become the site of the first
large-scale development of
oil from
an unconventional reservoir
outside of the US and
Canada.

Repsol, a Spanish oil major,

announced
that
its
Argentinian
subsidiary,
Yacimientos
Petrolferos Fiscales (YPF),
will drill 17 new wells and
fracture 14 existing ones
this year in the Vaca
Muerta

Companies worldwide are

showing
interest
in
Argentina
shale
gas
projects, and investment in
shale gas production is
expected to reach US $1
billion in 2012. Joint
ventures are currently the
preferred
model
for
financing development
activities.

South Africa Game changer?

Shell and other shale gas contenders meet stiff resistance in South Africa, which has
the continents most promising reserves of the gas.

South Africa Game changer?

In August 2011 the South

African
government decided to
extend
a
six-month
moratorium on licensing for
shale gas exploration for
another half-year perioda
disappointment for those
circling what are thought to
be the worlds
fifth-largest
shale
gas
resources.

South Africa Game changer?

In August 2011 the South

African
government decided to
extend
a
six-month
moratorium on licensing for
shale gas exploration for
another half-year perioda
disappointment for those
circling what are thought to
be the worlds
fifth-largest
shale
gas
resources.

South Africas shale gas

could be a game changer.
The country depends on
imports (of oil and some
gas) and does not generate
enough electricity to satisfy
demand.

South Africa Game changer?

In August 2011 the South

African
government decided to
extend
a
six-month
moratorium on licensing for
shale gas exploration for
another half-year perioda
disappointment for those
circling what are thought to
be the worlds
fifth-largest
shale
gas
resources.

South Africas shale gas

could be a game changer.
The country depends on
imports (of oil and some
gas) and does not generate
enough electricity to satisfy
demand.

2012 Sep. 7 South Africa

has lifted a moratorium on
shale gas exploration in the
Karoo region

Shale gas provides opportunity for countries

Decrease gas prices;

Collect more taxes;
Become more independent from import;
Attract investments;
Create new jobs and new industry;

BUT

Source: Visual Capitalist www.visualcapitalist.com

Source: Visual Capitalist www.visualcapitalist.com

Source: Visual Capitalist www.visualcapitalist.com

Communities actively protesting against

fraking because of danger to environment

Bulgaria - after a nationwide protest in January

2012, the government decided to ban the hydraulic
fracturing technology.
Denmark - a critical view is reflected in national
media, and national campaigns against shale gas
have started.
France - Hydraulic fracturing was banned in France
in 2011 after public pressure.

UK - Though not officially suspended, the process

was unofficially suspended for nearly a year in the
UK from June 2011 over safety concerns, but an
expert report in April 2012 said that its safe

US - This method of drilling has become

controversial because of the complaints, from
some residents of the areas, about pollution, and
health effects, and a sense that their lives and their
community have been ruined by the system.

Main players in shale gas industry

Worlds largest producer of shale gas

Revolution or evolution?

EUROPE
Europe, with higher population
density, higher environmental
hurdles and increased levels of
government coordination, will likely
see a shale evolution. Europe will
require more environmentally
friendly materials and more advanced
horizontal drilling technology.

The net effects are:

A flatter geology-specific shale
gas learning curve.
Slower aggregate growth in
proved reserves and production.
A more R&D focused approach
with longer play timelines.
Delloite.

CHINA
Chinas lower population density in regions with shale gas
potential, less restrictive environmental concerns, centralized
government planning and willingness to invest enables replication of
the US manufacturing-style shale development. The likely result will
be a shale revolution as China progresses rapidly along the shale
gas learning curve.
Delloite.

SOUTH AMERICA
Shale reserves in Brazil are estimated to
be one of the biggest in the region, but
there has been little interest or investment
in exploring this resource. Argentina is the
only South American country that seems
set to embark on full-scale shale gas
production, primarily in the Neuqun Basin.
Development of shale gas in Argentina will
be valuable to the country and occur at
reasonable prices. Further, given the
Argentine government's willingness to
support these projects, we expect that
shale gas field development will continue to
be allowed.

KPMG

Many ways Australia is in a similar emerging position

to where the North American shale industry was
several years ago. As the resource in Australia
becomes better defined and clear routes to market
identified, then the transaction values could increase
significantly.
Norton Rose

Questions?