1.
U.S. Energy & The Role of
Rocky Mountain Natural Gas:Clean Domestic Energy For a Growing America(2005)
2. There is no economy, be it new, old or even futuristic, that would exist without reliable, accessible and affordable energyBasic Energy Facts
3. There is no economy, be it new, old or even futuristic, that would exist without reliable, accessible and affordable energyBasic Energy FactsOver the past 25 years U.S. demand for energy has increased by 35% while our supply has only increased by 17%
4. There is no economy, be it new, old or even futuristic, that would exist without reliable, accessible and affordable energyBasic Energy FactsWe import 14% of the gas and 53% of the oil we useOver the past 25 years U.S. demand for energy has increased by 35% while our supply has only increased by 17%
5. Polls demonstrate that the American public:Source: COGA Flowline, Vol. 17, #3Basic Energy Facts 1. Takes energy for granted
6. Polls demonstrate that the American public:Source: COGA Flowline, Vol. 17, #3Basic Energy Facts 1. Takes energy for granted 2. Neither understands nor appreciates how cheap our energy is in constant dollars or in comparison to other consumer nations
7. Polls demonstrate that the American public:Source: COGA Flowline, Vol. 17, #3Basic Energy Facts 1. Takes energy for granted 2. Neither understands nor appreciates how cheap our energy is in constant dollars or in comparison to other consumer nations3. Seems to believe the mistaken notion that energy production necessarily entails unacceptable environmental impact
8. In Colorado about 2,000 drilling permits are issued annually compared to about 50,000 housing permitsSource: COGA Flowline, Vol. 17, #3Basic Energy Facts
9. OIL
10. Total U.S. Energy Consumption byPrimary Energy Source 2001Source: EIAPetroleum
39.4%Natural Gas
22.8%Coal
23.1%Other - 3.9%Hydro - 2.5%Nuclear - 8.4%
11. World Petroleum Demand25.9%76.0 MMbodSource: EIA
12. In the last 5 years the world consumed 27 billion barrels/year, but the industry discovered only 3 billion barrels/year
Therefore: used 135 billion barrels of oil while discovering 15 billion barrels of oilSource: USGSBasic Energy Facts
13. World Top Oil Producing Countries in 2001 U.S. 9.0 MMbo/d
Russia 8.8 MMbo/d
Saudi Arabia 8.0 MMbo/d
North Sea (UK, Norway, Denmark) 6.3 MMbo/d
Iran 3.7 MMbo/d
Mexico 3.6 MMbo/d
China 3.3 MMbo/d
Venezuela 2.9 MMbo/d
Canada 2.8 MMbo/d
Iraq 2.4 MMbo/dSource: EIA
14. U.S. Petroleum Products Production vs. U.S. Petroleum DemandProduction -25%Demand +24%Source: EIA
16. Top Suppliers of Crude Oil to U.S. in 2001 Saudi Arabia 1,611 Mbo/d
Mexico 1,394 Mbo/d
Canada 1,356 Mbo/d
Venezuela 1,291 Mbo/d
Nigeria 842 Mbo/d
Iraq 795 Mbo/dSource: EIA
17. NATURAL GAS
18. Total U.S. Energy Consumption byPrimary Energy Source 2001Source: EIAPetroleum
39.4%NaturalGas
22.8%Coal
23.1%Other - 3.9%Hydro - 2.5%Nuclear - 8.4%
19. U.S. Natural Gas Consumption in 200122.0 TcfSource: Groppe, Long & LittellResidential
22%Commercial
15%Industrial
26%Electric Utilities
26%Chemicals and Materials
3%Other
9%
20. U.S. Natural Gas Consumption vs. Dry ProductionSource: EIA01020304050607019731977198119851989199319972001BcfdConsumptionProduction
21. U.S. Shortfall in Production vs. ConsumptionSource: EIAIn 2001 U.S. consumption was6 Bcfd greater than U.S. production!
22. Projected Natural Gas DemandSource: EIATcf per year
23. U.S. manufacturing is based on affordable and reliable supplies of natural gas.
At these prices, it is unlikely the U.S. will attract new manufacturing capital.
Today’s gas prices are forcing manufacturers to consider production overseas.Source: Industrial Energy Consumers of America
24. ELECTRICITY
25. U.S. highway fuel market totals 11-12 MMbopd making it the single largest petroleum market in the world
However the energy content creating Kilowatts in the U.S. is almost twice as large as the highway fuel market!Electricity – Basic Energy Facts
26. Basic Energy FactsIn 2001 nearly 42% of the energy consumed in the U.S. was used to generate electricity.Source: Groppe, Long & Littell
27. U.S. Electricity Supply by Source in 2001Source: EIANatural Gas16.5%Coal51.5%Other Gaseous Fuels - 0.5% Geothermal, Solar, Wind - 2.1% Petroleum - 3.4% Hydro - 5.8%Nuclear20.3%
28. From end of WWII to start of 2000 residential and commercial electrical use increased 51 out of 53 years
Yet no significant new power plants were built between 1990 and 2000
29. Basic Energy FactsIn 2000, PC’s and electronics consumed 13% of our nation’s energy supply. By 2020, these uses are expected to consume 25% of the nation’s energy supply.
40% of the country’s electricity is used to power air conditioners.
30. U.S. Electricity Net GenerationSource: Groppe, Long & Littell012341975198019851990199520002001Billion Kilowatt Hours1.6% CAGR
31. U.S. Electricity Supply by Source in 2001Source: EIANatural Gas16.5%Nuclear20.3%Coal51.5%Other Gaseous Fuels - 0.5% Geothermal, Solar, Wind - 2.1% Petroleum - 3.4% Hydro – 5.8%
32. U.S. Hydroelectric Power ProductionSource: EIA 05101520251973197619791982198519881991199419972000Quadrillion Btu2001
33. Over the past 25 years U.S. demand for energy has increased by 35% while our supply has only increased by 17%Basic Energy Facts
34. Basic Energy FactsOil, gas and hydro production are flat to down – so what has increased energy supply?Over the past 25 years U.S. demand for energy has increased by 35% while our supply has only increased by 17%
35. U.S. Electricity Supply by Source in 2001Source: EIANatural Gas16.5%Nuclear20.3%Coal51.5%Other Gaseous Fuels - 0.5% Geothermal, Solar, Wind - 2.1% Petroleum - 3.4% Hydro - 5.8%
36. U.S. Nuclear Electric Power Production25051015201973197619791982198519881991199419972000Quadrillion BtuThree Mile
Island2001Source: EIA
37. U.S. Electricity Supply by Source in 2001Source: EIANatural Gas16.5%Nuclear20.3%Coal51.5%Other Gaseous Fuels - 0.5% Geothermal, Solar, Wind - 2.1% Petroleum - 3.4% Hydro - 5.8%
38. U.S. Electric Power Production from CoalSource: EIACoal05101520251973197619791982198519881991199419972000Quadrillion Btu2001
39. Can’t store electricity like you can oil and gas – so excess capacity is essential!
The nation is now adding gas fired power plants at an unprecedented rateElectricity – Basic Energy Facts
40. Easier to permit
More cost efficient
Take years less to construct
Distributed location
Clean (50% of coal and oil power plant emissions)Why Gas Fired Power Plants?
45. Rockies represent the single largest untapped
onshore natural gas basin in the U.S.Source:
National Petroleum CouncilRockies
41%Gulf Coast
23%Mid-Continent
36%Estimated Proven and Potential Gas Reserves in the U.S. (1,135 Tcf)Why the Rockies?
46. Source: AAPG Memoir 67, p. 286.Basin Center Gas (BCG)
47. Rocky Mountain BCGHuge and largely untapped “unconventional” natural gas resource
Abnormally pressured gas accumulations below normally pressured water system
Compartmentalized non-continuous gas columns
48. Usually low perm reservoirs but high perm areas do exist (sweetspots)
Complex poorly understood system which represents tremendous opportunityRocky Mountain BCG
49. These accumulations have defied exploitation by conventional techniques
A deep basin high potential “frontier” exists in mature provinceRocky Mountain BCG
50. Unconventional resource
1.4 TCFG produced annually >7% of U.S. gas production
Over 90% of CBM production came from Rockies in 2000Coal Bed Methane
51. Coal Bed Methane39.7 TCFG most likely recoverable from Rocky Mountain region
CBM potential of entire Rockies being reevaluated after success in Powder River, Uinta, Raton & Piceance Basins
52. Three of the four largest (?) U.S. onshore gas discoveries in last 25 years are in the Rockies
Producing
San Juan Basin CBM (1986) 2,000 MMcfd
Powder River Basin CBM (1991) 930 MMcfd
Barnett Shale (1981) 700 MMcfd
Jonah – BCG (1995) 650 MMcfd
53. U.S. Daily Gas Production 1972 - 1999Source: 2000 Potential Gas Committee Report-24%-36%518%010203040Gulf CoastMid-ContinentRockiesPacificN. CentralBcfd-24%-36%518%-21%700%19721999U.S. Gas Supply: Why the Rockies?
56. Volatile prices
Excessive regulations
Inefficient permitting procedures
Lack of land and lease accessibilityWhat is holding us back from growing our gas production?
57. Barriers to Meeting the Nation’s Demand for Natural Gas21
Tcf137
Tcf31
Tcf24
TcfSource: National Petroleum CouncilU.S. Lower-48 Natural Gas Reserves Subject to Access Restrictions
58. Lack of infrastructure
Lack of impactful new technology (“silver bullets”)
Lack of prospects?What is holding us back fromgrowing our gas production?
59. Most of our gas supply and drilling activity in last 10 years has come from extremely successful exploitation efforts
The problem is that this is a finite game
60. 05,00010,00015,00020,0001972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 # of Wells CompletedOilGasDry19727,551198117,50019867,15620002,076Source: APIHistory of U.S. Exploration Activity
61.
Price uncertainty
“Tired” mature basins
Lack of creative new ideas– where have all the prospectors gone?Why are exploration efforts so anemic?
62. Quarterly financial “street” expectations
Perception that domestic projects can’t compete with global opportunitiesWhy are exploration efforts so anemic?
63. Lack of consistent corporate commitment or fortitudeWhy are exploration efforts so anemic?
64. We must explore
for the good of our country
and the survival of our industry
65. WANTED:A New Supply of“Silver Bullets”
66. IP / EUR Logs!
Pipe set “dry holes” are tremendous waste of capital
Cost Effective (Cheap) Onshore 3D Seismic Acquisition!
Need “offshore-like” coverage in all of our basinsNeeded: New “Silver Bullets”
67. BOP’s That Can Drill With Air to Greater Than 5,000#
Efficient air drilling in horizontallaterals
“Canada-Like” Regulations Such That ALL Data Becomes Public Allowing Much More Efficient Data Farming
More Subsurface Hole with Less Surface ImpactNeeded: New “Silver Bullets”
68. Independents drill 85% of domestic oil and natural gas wells and produce approximately 75% of domestic natural gas
– This is not BIG OIL! – Source: Independent Petroleum Association of America
69. Independents Are the Nation’s “Energy Farmers” Price “takers,” not price “makers.”
Produce something that everyone needs.
Heavily dependent on the weather.
70. Where are the majors?
Majors need to step up and play a significant role in our nation’s gas supply growth efforts
71. The ability to produce clean burning domestic natural gas in adequate supply is critical to our nation’s economy and
self-sufficiencySource: COCA Flowline, Vol. 17, #3Conclusions:
72. The general public is clueless!
Get informed and tell others of the crucial role the natural gas industry plays in America’s future
Basic Energy Fact
73. Project Manager
Jim Lightner, Tom Brown
February 13, 2005