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DPA AAPG/GSA/SPE Regional Meeting May, 2006. The Future of Global Energy Trends, Technology and Talent Scott W. Tinker Bureau of Economic Geology Jackson School of Geosciences The University of Texas at Austin. QAd2349x. Outline. Trends Technology Talent Tomorrow. 1. 0. 0. 8. 0. 6.

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QAd2349x

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  1. DPA AAPG/GSA/SPE Regional Meeting May, 2006 The Future of Global EnergyTrends, Technology and TalentScott W. TinkerBureau of Economic GeologyJackson School of GeosciencesThe University of Texas at Austin QAd2349x

  2. Outline • Trends • Technology • Talent • Tomorrow

  3. 1 0 0 8 0 6 0 Percentage of total market H/C<1 (Wood, Coal) 4 0 H/C~2 (Oil) 2 0 H/C>4 (Natural Gas, Hydrogen, Nuclear, Emerging) 0 Global Energy Consumption 1850 1900 1950 2000 U.S. Data: Annual Energy Review 1999 (EIA, 2000) World Data: International Energy Annual 1999 (EIA, 2000) Year QAc9841c

  4. Global Energy Consumption % Coal % Oil % Gas % Hydro % Nuclear % Geothermal, Biomass, Solar & Wind 50% 45% 40% 35% 91% 86% 30% % Total Consumption 25% 20% 15% 10% 5% 0% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Year

  5. 1999 Energy Use (ExaJoules) U.S. Energy Consumption U S Developing Asia 120 MJ/$GDP Conservation Sustainable Energy Western Europe Coal 100 Hydroelectric Eastern Europe/FSU Oil 80 Nuclear Energy Gas Japan & Australasia Nuclear Natural Gas Canada/Mexico 60 Quad BTU Other Oil Imported Middle East 40 Oil Produced C & S America Coal 20 Africa Wood and Waste 0 0 20 40 60 80 100 120 1845 1870 1895 1953 1963 1968 1973 1978 1998 1920 1945 1958 1983 1993 1988 (Data: EIA, 2000) Global Demand for Fossil Fuels Consumption and Efficiency Data, 2002, IEO.

  6. Oil Resources Tech-Progress Undiscovered Unconv. Oil Reserves Consumed Conv. Oil Int Panel on Climate Change, 2000 Ahlbrandt et al., 2005

  7. U.S. Oil Production/Consumption

  8. Global Oil Production/Consumption

  9. M Peak Oil The Conventional Liquids “Wedge” 35 MMBD new demand ExxonMobil, 2005. http://www.exxonmobil.com/Corporate/Citizenship/Corp_citizenship_energy_outlook.asp

  10. Source of Consumption: BP Statistical Review of World Energy Jun e 2004 Source of Population: Working Alliance on Serial Publications, T he Netherlands Oil Consumption Per Capita Bbl/Person/Year 25 U.S. 20 S. Korea Japan 15 If China and India each grow to 5 BY/person by 2030, that represents 48 MMBD of new demand 10 5 China 0 India 1965 1970 1975 1980 1985 1990 1995 2000 Japan S. Korea China India - 4

  11. Feeds into the Trans Alaska Pipeline System, which peaked in 1988 at 2.1 mbopd and today accounts for < 1 mmbopd (and falling) Insert Picture of North Slope and 35 mbopd Photos by Scott Tinker

  12. Conventional Oil Mitigation Mitigation OptionTime to InitiateImpact (+10 Yrs) (Yrs)(MM bpd) • Heavy Oils / Oil Sands 3 8 • Vehicle Efficiency 3 2 • Gas-To-Liquids 3 2 • Coal Liquids 4 5 • Enhanced Oil Recovery 5 3 • Shale Oil 10 2 22 Modified after Hirsch et.al, 2005

  13. M Peak Oil The Conventional Liquids “Wedge” Unconventionals Plus EOR ExxonMobil, 2005. http://www.exxonmobil.com/Corporate/Citizenship/Corp_citizenship_energy_outlook.asp

  14. Natural Gas Resources Coal (19 TBOE) Unconv. Gas Conv. Gas Tech-Progress Undiscovered Reserves Consumed Int Panel on Climate Change, 2000 Ahlbrandt et al., 2005

  15. Natural Gas Production 40 25,000 PRODUCTION RATE Observed Calculated Eastern Europe/ Former Soviet Union 20,000 Yikes! 30 15,000 Annual Natural Gas Production (Bcf) 10,000 Middle East Production (Tcf) 5,000 20 United States Western Hemisphere 0 1949 1961 1973 1985 1997 2009 10 Asia Pacific Africa Western Europe 0 1940 1960 1980 2000 2020 2040 2060 Year QAd3967x From Imam and others, Oil and Gas Journal, Aug. 16, 2004.

  16. Global Natural Gas Production/Consumption

  17. U.S. Natural Gas Production/Consumption

  18. Natural Gas Trade in 2002 Modified from BP Statistical Review of World Energy 2003: June 2003, London, England, BP, in Oilfield Review: Autumn 2003, Schlumberger, p.6.

  19. V o l g a - U r a l R e g i o n W e s t S i b e r i a n B a s i n N o r t h S e a G r a b e n ( 9 9 . 2 T c f ) ( 1 , 2 7 1 . 8 T c f ) ( 1 6 0 . 6 T c f ) N . C a s p i a n B a s i n A m u - D a r y a B a s i n N o r t h w e s t W e s t e r n G u l f ( 1 5 6 . 9 ) T c f ( 2 3 0 . 4 T c f ) G e r m a n B a s i n ( 2 5 1 . 6 T c f ) ( 1 4 1 . 7 T c f ) G r a n d E r g / A h n e t B a s i n G u l f C e n o z o i c O C S ( 1 1 4 . 2 T c f ) ( 1 4 0 . 3 T c f ) Q a t a r A r c h ( 4 6 5 . 6 T c f ) Z a g r o s F o l d B e l t ( 3 9 9 . 4 T c f ) E a s t V e n e z u e l a B a s i n M e s o p o t a m i a n F r d p . B s n . ( 2 9 8 . 3 T c f ) G r e a t e r G h a w a r U p l i f t ( 2 4 8 . 6 T c f ) ( 1 2 9 . 7 T c f ) R u b A l K h a l i B a s i n ( 1 8 2 . 3 T c f ) USGS World Petroleum Assessment 2000 (Tcf) Natural Gas Resource Availability ~3870 Tcf in Major Basins ~13,000 Tcf Total Resources Current annual global consumption is ~90 Tcf Does not include unconventional gas (shale, coal, tight), brines, gas hydrates, or gasification of coal, heavy oil, tar.

  20. Known Reserves Cumulative Production (811) Increasing development costs, technology needs, uncertainty, and decreasing concentration Reserves (157) Reserve Growth (305) Undiscovered, Unconventional Reserves (1,004) Unassessed Unconventional Reserves (400) Geopressured Brine (Up to 24,000) Gas Hydrate (Up to 300,000) Not Assessed by NPC Natural Gas Resource Availability 1999 NPC Study (NPC, 1999b) Recoverable Portion of In-Place US Gas Resource (Tcf) QAd1023

  21. Conventional Gas Unconventional Gas U.S. Natural Gas Total Natural Gas 25,000 20,000 15,000 Annual Natural Gas Production (Bcf) 10,000 5,000 0 1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 2015 EIA (1949-1990) and NPC (1991-2015)

  22. Natural Gas Mitigation Options After 8/05 DOE Roundtable White Paper

  23. Global Reserves Global proved oil and gas reserves Recoverable coal reserves (oil shale and oil sands not included) EIA International Energy Annual 2002, International Energy Outlook 2004

  24. Anderson, John, and others, 2003, Oilfield Review, v. 15, no. 3, p. 10. US Coal Resources

  25. U.S. Coal Consumption

  26. Outline • Trends • Technology • Talent • Tomorrow

  27. W ashington Maine Minnesota Montana North Dakota Vt Oregon NH Wisc Idaho Ma South Dakota New York Ct Mich RI Wyoming NJ Pennsyl Iowa Nebraska Unocal Ohio Nevada Md Delaware Illinois Ind Utah Marathon Marathon WV California Virginia Colorado Kansas Missouri Conoco Conoco Phillips Phillips Kentucky N Carolina Arizona Amoco Amoco Tennessee Chevron Chevron Arkansas S Carol Oklahoma New Mexico ARCO ARCO Georgia Ala Miss Mobil Mobil Texas Texaco Texaco Flor Louisiana Shell Alaska Hawaii QAc8962c Technology Unocal ExxonMobil

  28. E&P Firms* Service Companies** Basic/Breakthrough Applied/Incremental TechnologyR&D Investments in theUpstream Sector ($2004) 1,400 1,200 1,000 800 ($, millions) R&D Investment 600 400 200 0 1977 1982 1987 1992 1997 2002 * US E&P firms and the US R&D investments of international E&P firms; source Department of Energy, EIA, CERA analysis. ** Traditional Oil Field Service companies (Baker Hughes, Halliburton, Schlumberger, Smith, Weatherford); source, company annual reports, CERA analysis. Source: Cambridge Energy Research Associates, 2005

  29. Technology The trend towards unconventional oil and natural gas production will drive The Rock Revival • Rheology and rock mechanics • Fracture modeling and simulation • Diagenetic and rock quality modeling • Petroleum system modeling

  30. Technology • Logging Through Casing • Seismic Imaging: 4C and 9C • Surface/Subsurface Area: 1/2500 • Subsurface Combustion • Seafloor Operations • Real Time Sensors: Nanotech

  31. Outline • Trends • Technology • Talent • Tomorrow

  32. 1.7 mil $80 1.1 mil $10 0.7 mil 5 Employees Large O&G Co US Upstream R&D 2004 Dollars CERA Oil Price: 2003 Dollars BP Website Talent US Undergraduate Geosciences AGI, 2003 AAPG Website

  33. Supply Push Demand Pull Rock R&D Information Tech US: Majors US: Independents Median Age ~ 30 Median Age ~ 50 S&E Strong S&E Weakening 5 Learning from the Past

  34. Industry Response • Determine the real demand for talent • Act for the long term in terms of talent investment (and try to ignore the Wall Street reaction!) • Invest in universities in good and bad times. Universities are the seed crop. • Do not expect quarterly bottom line impact • Require performance measures • Develop university partnerships outside of the standard faculty/student models

  35. University Response • Do not overreact to industry talent demands (learn from the 1970s) • Create tougher (not easier) enrollment and retention standards; focus on quality not quantity. One talented person is worth 10 warm bodies. • Break out of the discipline silos: well-designed, integrated research programs. • Establish global university partnerships that are long term, research based, and two-way.

  36. Government Response • Invest in longer-term, higher-risk research. • Support programs that drive commercialization. • Adapt US policies to fit a global industry. Energy independence is a sound bite. Structure for global interdependence. • Work to bring respect and allure back to science and engineering.

  37. Professional Society Response • Get professional help to develop a coordinated, accurate, and interesting global message about energy. • The story is international, and includes universities, government and industry. • Find a credible storyteller, because there is a great story to tell!

  38. Outline • Trends • Technology • Talent • Tomorrow

  39. 16% 12% World’s Proved Oil and Natural-Gas Reserves? 100 80 65% Controlled by governments; not open to Western companies 60 40 Russian reserves, held by Russian companies 20 Controlled by governments; limited access for Western companies 7% Open to any oil company 0 Source: PFC Energy research, based on BP’s 2005 Statistical Review of World Energy From Ball (2006) QAd4882x

  40. IOCs Global Oil Reserves (2004 %) 0.3 0.25 0.2 % 0.15 0.1 0.05 0 BP Total Qatar Chevron NIOC (Iran) INOC (Iraq) Libya NOC PetroChina ExxonMobil Adnoc (UAE) KPC (Kuwait) Yukos (Russia) Lukoil (Russia) Aramco (Saudi) NNPC (Nigeria) Pemex (Mexico) Petrobras (Brazil) PDV (Venezuela) Gazprom (Russia) Sonatrach (Algeria)

  41. Follow the Molecules • IOCs will focus on unconventional resources • Liquids: shale oil, heavy oil, tar sands, coal liquefaction, and beyond • Gases: coalbed methane, shale gas, tight gas, hydrates, coal gasification, and beyond • Technology and Talent needed!

  42. Tomorrow • Global energy demand, combined with limited conventional energy choices and political instability in key regions, will keep the price of fossil fuels moderate to high, and volatile • Liquid fuels production will flatten over the next 30 years and incremental growth will come from unconventional forms • Natural gas reserve adds will be largely unconventional, LNG lanes will open, coal gasification will accelerate. • Natural gas prices will detach from oil and compete with coal in electricity markets

  43. Tomorrow • Rocks will make a revival • Great advances in subsurface measurement and drilling will continue • Fossil fuel emissions limits, based on global warming concerns, will be put into place (p.s. let them hear from you!) • Universities, industry, governments and professional societies must coordinate a energy message

  44. This is the greatest industry in the world, and the most vital for the coming century. Do well and have a blast! Thank You! QAd3931x

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