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Golden Rules for a

Golden Age of Gas


World Energy Outlook
Special Report on Unconventional Gas

Golden Rules for a


Golden Age of Gas
World Energy
gy Outlook
Sp
Spec
Special
ecia
iall Re
Repo
Report
port
rt on
on Unconventional
Unco
Un
conv
nven
enti
tion
onal
al Gas
Gas
Natural gas is poised to enter a golden age, but this future
hinges critically on the successful development of the
worlds vast unconventional gas resources. North American
experience shows unconventional gas notably shale gas
can be exploited economically. Many countries are lining up to
emulate this success.
But some governments are hesitant, or even actively opposed.
They are responding to public concerns that production might
involve unacceptable environmental and social damage.
This report, in the World Energy Outlook series, treats these
aspirations and anxieties with equal seriousness. It features two
new cases: a Golden Rules Case, in which the highest practicable
standards are adopted, gaining industry a social licence to operate;
and its counterpart, in which the tide turns against unconventional
gas as constraints prove too difcult to overcome.
The report:
Describes the unconventional gas resource and what is involved

in exploiting it.
Identies the key environmental and social risks and how they

can be addressed.
Suggests the Golden Rules necessary to realise the economic and

energy security benets while meeting public concerns.


Spells out the implications of compliance with these rules for
governments and industry, including on development costs.

Assesses the impact of the two cases on global gas trade


patterns and pricing, energy security and climate change.

For more information, and the free download of this report,


please visit: www.worldenergyoutlook.org
WEO-2012 to be released 12 November 2012

Golden Rules for a


Golden Age of Gas
World Energy Outlook
Special Report on Unconventional Gas

INTERNATIONAL ENERGY AGENCY


The International Energy Agency (IEA), an autonomous agency, was established in November 1974.
Its primary mandate was and is two-fold: to promote energy security amongst its member
countries through collective response to physical disruptions in oil supply, and provide authoritative
research and analysis on ways to ensure reliable, affordable and clean energy for its 28 member
countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among
its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports.
The Agencys aims include the following objectives:
Secure member countries access to reliable and ample supplies of all forms of energy; in particular,
through maintaining effective emergency response capabilities in case of oil supply disruptions.
Promote sustainable energy policies that spur economic growth and environmental protection
in a global context particularly in terms of reducing greenhouse-gas emissions that contribute
to climate change.
Improve transparency of international markets through collection and analysis of
energy data.
Support global collaboration on energy technology to secure future energy supplies
and mitigate their environmental impact, including through improved energy
efciency and development and deployment of low-carbon technologies.
Find solutions to global energy challenges through engagement and
dialogue with non-member countries, industry, international
organisations and other stakeholders.

IEA member countries:


Australia
Austria
Belgium
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Japan
Korea (Republic of)
Luxembourg
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
OECD/IEA, 2012
Spain
International Energy Agency
9 rue de la Fdration
Sweden
75739 Paris Cedex 15, France
Switzerland
www.iea.org
Turkey
United Kingdom
United States
Please note that this publication
is subject to specific restrictions
that limit its use and distribution.
The terms and conditions are available
online at www.iea.org/about/copyright.asp

The European Commission


also participates in
the work of the IEA.

Acknowledgements
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Table of Contents

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Acknowledgements
Executive Summary
The Golden Rules
Introduction

3
9
13
15

Addressing environmental risks

17

The environmental impact of unconventional gas production


Shale and tight gas developments
Coalbed methane developments
Water use
Treatment and disposal of waste water
Methane and other air emissions
Golden Rules to address the environmental impacts
Measure, disclose and engage
Watch where you drill
Isolate wells and prevent leaks
Treat water responsibly
Eliminate venting, minimise flaring and other emissions
Be ready to think big
Ensure a consistently high level of environmental performance
Complying with the Golden Rules
Implications for governments
Implications for industry

18
21
28
30
32
38
42
43
44
45
45
46
47
48
49
49
52

The Golden Rules Case and its counterpart

63

Paths for unconventional gas development


Golden Rules and other policy conditions
Unconventional gas resources
Development and production costs
Natural gas prices
Other assumptions

64
65
68
71
73
75

Table of Contents

The Golden Rules Case


Demand
Supply
International gas trade, markets and security
Investment and other economic impacts
Climate change and the environment
The Low Unconventional Case
Demand
Supply
International gas trade, markets and security
Investment and other economic impacts
Climate change and the environment

OECD/IEA, 2012

76
76
81
86
88
91
92
92
93
96
98
99

Country and regional outlooks

101

United States
Canada
Mexico
China
Europe
Australia

102
108
111
115
120
130

ANNEXES

137

Annex A. Units and conversion factors

137

Annex B. References

139

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Figure 1.8 Indicators of best practice as unconventional gas
developments grow in size
FDP to include water
management, infrastructure,
abandonment
and regional impacts

Well plan to include


environmental
impact assessment

Minimal trucked water


Minimal diesel emissions

Measures taken

FDP to include water


management, infrastructure
and abandonment

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Pad drilling
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Chapter 2
The Golden Rules Case and its counterpart
How might unconventional gas re-shape energy markets?
Highlights

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Figure 2.2 World primary energy demand by fuel in the Golden Rules Case
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2010

2020

2035

2010-2035*

1 601

1 756

1 982

0.9%

680

717

787

0.6%

K

104

130

137

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1 670

2 225

3 130

2.5%

448

486

560

0.9%

1 199

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United States

Japan
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Russia

China

110

323

593

7.0%

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63

100

201

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644

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2010

2020

2035

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power plants in selected regions in the Golden Rules Case, 2020


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2010

2020

2035

Share of
unconv*

Share of
unconv*

1 183

36%

1 347

Canada

160

39%

Mexico

50

3%

609

OECD


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Poland
K
Australia
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Russia

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Share of
unconv*

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1 546

60%

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174

57%

177

67%

0.4%

52

12%

87

43%

2.2%

59%

726

67%

821

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11%

37%

34

90%

7.1%

49

11%

115

51%

170

65%

5.1%

2 094

2%

2 635

7%

3 567

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2.2%

0.8%

637

3%

718

4%

784

6%

China

97

12%

246

45%

473

83%

6.6%

India

51

2%

75

21%

111

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3.2%

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88

106

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153

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53

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72

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3 982

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160

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165

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Chapter 2 | The Golden Rules Case and its counterpart

81

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Figure 2.4 Unconventional natural gas production by type in the Golden

bcm

Rules Case
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Shale

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40%

750

30%

500

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(right axis)

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Figure 2.5 Ten largest unconventional gas producers in the Golden Rules

Case, 2035
0%

20%

40%

60%

80%

100%
Shale

United States
China

Coalbed methane

Canada
Tight

Australia

Share of unconvenonal
in total producon
(top axis)

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Indonesia
Russia
Mexico
Argenna
Poland
0

100

200

300

400

500

600
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Figure 2.6 Natural gas net trade by major region in the Golden Rules Case

Net importer

Net exporter

2010

E. Europe/Eurasia

Addional
to 2035

Africa
Middle East
OECD Oceania
Lan America
OECD Americas
India
China
OECD Asia
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200

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Figure 2.7 Cumulative investment in natural gas-supply infrastructure by
type in the Golden Rules Case, 2012-2035 (in year-2010 dollars)
Upstream: $6.9 trillion (2010)

Total: $9.7 trillion (2010)


Upstream:
convenonal

7%
22%
42%

OECD/IEA, 2012

88

2021-2035

36%

44%

Upstream:
unconvenonal
Transmission
and distribuon

29%

2012-2020

64%

56%

LNG chain

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Net importer

major region and type in the Golden Rules Case, 2012-2035


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convenonal

OECD Americas*
OECD Europe

Upstream:
unconvenonal

China
India

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and distribuon

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Low Unconventional Case relative to Golden Rules Case,
2010-2035
Coal
Oil

Total primary
energy demand

Gas
Nuclear
Renewables

Power and heat


generaon

Electricity
and heat

Total nal
consumpon*

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-2 000

2 000

4 000

6 000
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d


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Chapter 2 | The Golden Rules Case and its counterpart

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Low Unconvenonal
Case

Tight

2010
2020

Golden Rules Case

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methane

2035
2010
2020
2035

Shale

2010
2020
2035
0

100

200

300

400

500

600

700

800

900 1 000
bcm

OECD/IEA, 2012

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94

World Energy Outlook | Special Report

Figure 2.11 Change in natural gas production by selected region in the

Low Unconventional Case relative to the Golden Rules Case


2020

China
United States
European Union
India
Canada
Poland*
Argenna
Mexico
Indonesia
Ukraine
Australia
Qatar
Iran
Turkmenistan
Russia
-300

Addional
to 2035

-250

-200

-150

-100

-50

50

100

150
bcm

dWh

Box 2.4 What could lead to a Low Unconventional Case in China?


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World Energy Outlook | Special Report

Figure 2.12 Major natural gas net importers by case

1
European Union

2020

2010

China
OECD Asia

Low Unconvenonal
Case

India

Golden Rules
Case

OECD Americas

2035

Other
Low Unconvenonal
Case
Golden Rules
Case
0

250

500

750

1 000

1 250

1 500
bcm

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OECD/IEA, 2012

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Chapter 2 | The Golden Rules Case and its counterpart

97

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s>h
        


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Figure 2.13 Natural gas-import bills by selected region and case


250

2010

200

2035:
Golden Rules
Case

150

2035:
Low Unconvenonal
Case

100
50
0

OECD/IEA, 2012

-50

98

United
States

India

Japan

China

European
Union

World Energy Outlook | Special Report

/'W
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Figure 2.14 Spending on net-imports of natural gas as a share of real GDP
at market exchange rates by case
1.0%

European Union*
Japan*

0.8%
China*
United States*

0.6%
0.4%
0.2%
0%
-0.2%
1990

2000

2010

2020

2030

2035

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Chapter 2 | The Golden Rules Case and its counterpart

99

Figure 2.15 World power generation mix by case

2010

4 572 TWh

Low Unconvenonal
Case

21 201 TWh

36 700 TWh

2035

7 100 TWh

Golden Rules
Case

36 700 TWh

8 780 TWh

0%

20%
Coal

40%
Oil

Gas

60%
Nuclear

80%

100%

Renewables

Edt

OECD/IEA, 2012

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100

World Energy Outlook | Special Report

Chapter 3
Country and regional outlooks
Are we moving towards a world of Golden Rules?
Highlights

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101

United States
Z
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type in the United States
W

Recoverable resources (tcm)


End-2011
h

2005

2010

Share of total
(2010)

^

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OECD/IEA, 2012

Share of total



Total

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511

609

100%

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102

World Energy Outlook | Special Report

Figure 3.1 Major unconventional natural gas resources in North America


Horn
River

Montney

Mannville
Group (CBM)

CANADA

Colorado Group
Belly River (CBM)

Horseshoe
Canyon (CBM)

Frederick Brook
Bakken
Utica

Horton
Bluff

Powder River (CBM)


Antrim
Niobrara

UNITED STATES OF AMERICA

Uinta (CBM)

Piceance (CBM)

New Albany

Raton (CBM)

Monterey

Fayetteville
San Juan (CBM)
Barnett/
Woodford

Woodford

Marcellus
Devonian
Utica

Barnett Haynesville
Tuscaloosa
Eagle
Ford

Eagle Ford,
La Casita

MEXICO
Pimienta

Current shale plays


Prospective shale plays

Maltrata

Current coalbed
methane (CBM)
Prospective coalbed
methane (CBM)

This document and any map included herein are without prejudice to the status of or sovereignty over any territory,
to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

OECD/IEA, 2012

Regulatory framework
        
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Figure 3.7

Major unconventional natural gas resources in Europe

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31 300 PJ (17.8%)

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96 601 PJ (51.8%)

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95 PJ (<0.06%)

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OECD/IEA, 2012

This document and any map included herein are without prejudice to the status of or sovereignty over any territory,
to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

            
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Annex A
Units and conversion factors
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Units
Emissions

Energy

Gas

OECD/IEA, 2012

Mass

K2-eq







K2/kWh






ppm
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Annex A| Units and conversion factors

137

Monetary

Oil

Power

$ million


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Annex B
References
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Chapter 3: Country and regional outlooks


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| eferences

1 3

WORLD
ENERGY
OUTLOOK
2012
OECD/IEA, 2012

RELEASE: 12 NOVEMBER 2012

WORLD ENERGY OUTLOOK 2012


Industry and government decision-makers and others with a stake in the
energy sector all need WEO-2012. It presents authoritative projections of
energy trends through to 2035 and insights into what they mean for energy
security, environmental sustainability and economic development.
Oil, coal, natural gas, renewables and nuclear power are all covered, including
the outlook for unconventional gas, building on the recent WEO special
report on the Golden Rules for a Golden Age of Gas. Global energy demand,
production, trade, investment and carbon dioxide emissions are broken down
by region or country, by fuel and by sector.
Special strategic analyses cover:
the Iraqi energy sector,
r examining its role both in satisfying the countrys
internal needs and in meeting global oil demand;

what unlocking the potential for energy efciencyy could do, country by
country and sector by sector, for oil security, the climate and the economy;
the cost of delaying action on climate change, as more and more carbonemitting facilities are built;
the water-energy nexus, as water resources become increasingly stressed
and access more contentious;
measures of progress towards providing universal access to modern
energy services; and
recent developments in subsidies for fossil fuels and renewable energy.
y

No-one can be sure today how the future energy system might evolve; but
many decisions cannot wait. The insights of WEO-2012 are invaluable to those
who must make them.

The Paris-based International Energy Agency is an intergovernmental body committed to advancing


security of energy supply, economic growth and environmental sustainability through energy policy and
technology co-operation. It was founded after the oil supply disruptions in 1973-1974 and consists of
28 industrialised countries, all members of the Organisation for Economic Co-operation and Development.

IEA/OECD, 2012

OECD/IEA, 2012

For more information, please visit our website: www.worldenergyoutlook.org

T
A
B
L
E

OECD/IEA, 2012

www.worldenergyoutlook.org

O
F
C
O
N
T
E
N
T
S

PART A
GLOBAL
ENERGY
TRENDS

PART B
FOCUS ON
ENERGY
EFFICIENCY

PART C
ENERGY
OUTLOOK
FOR IRAQ

PART D
SPECIAL
TOPICS
ANNEXES

OECD/IEA, 2012

UNDERSTANDING THE SCENARIOS

ENERGY PROJECTIONS TO 2035

OIL MARKET OUTLOOK

NATURAL GAS MARKET OUTLOOK

COAL MARKET OUTLOOK

POWER SECTOR OUTLOOK

RENEWABLE ENERGY OUTLOOK

CLIMATE CHANGE AND THE ENERGY OUTLOOK

THE OUTLOOK FOR ENERGY EFFICIENCY

PUSHING ENERGY EFFICIENCY TO THE LIMIT

10

UNLOCKING ENERGY EFFICIENCY AT THE SECTORAL LEVEL

11

IRAQS ENERGY SECTOR

12

ENERGY RESOURCES AND SUPPLY POTENTIAL

13

FUELLING RECONSTRUCTION AND GROWTH

14

IMPLICATIONS OF IRAQS ENERGY DEVELOPMENT

15

WATER FOR ENERGY

16

MEASURING PROGRESS TOWARDS ENERGY FOR ALL

17

ANNEXES

OECD/IEA, 2012

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