All Party Parliamentary Group on Peak Oil

1
All Party Parliamentary Group on Peak Oil Peak
Gas How close are we? 28th April
2009 Howard V Rogers CEng, MIChemE Senior
Research Fellow OIES Natural Gas Research
Programme howard.rogers_at_oxfordenergy.com
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Gas Development Chain Chokes
Access Choke
Exploration Evaluation
Resource Assessment
Basin Evaluation Coarse Seismic Distribution of
Resource Potential
Rate at which prospective areas are made
available by Host Governments for exploration
activity by Oil Gas companies
Potential Fields identified from Seismic
data Risked exploration economics (success rate 1
in 8) Cost of exploration well 5 - 50 million
Field Production
Field life typically 5 to 25 years. Field will
be in decline phase for last 30 to 50 of its
life.
Determined by Prospectivity, Fiscal Terms, oil
gas price outlook, rig day rates and
availability.
Viability Choke
Reserves Assessment
Determined by size of field reserves, processing
and pipeline capacity and sometime contractual
constraints.
Production Choke
Viability Choke
Determined by Fiscal terms price outlook,
contractor rates, financing and transportation
infrastructure.
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Distribution of Gas Endowment
120
100
80
Resource (Yet-to-Find)
60
Trillion Cubic Metres
Reserves (Proven)
40
20
0
Middle East
Russia
North
Asia Pacific
Africa
South
Europe
FSU
America
Central
America
Source USGS BP Statistical Review of World
Energy
4
Regional and Global Reserve Yet to Find to
Production Ratios
350
300
Resource (Yet-to-Find)/Production
250
200
Reserves (Proven)/Production
No of Years at current production rate
150
100
50
0
Middle East
Russia
North
Asia Pacific
Africa
South
Europe
World
FSU
America
Central
America
Source USGS BP Statistical Review of World
Energy
5
Regional Gas Endowment vs. Consumption
100
Europe
90
80
South Central America
Africa
70
Asia Pacific
60
50
of World Total
North America
40
30
Russia FSU
20
10
Middle East
0
Reserves Resources
Consumption
Source USGS BP Statistical Review of World
Energy
6
Global Gas Supply Channels 2020s likely to be
critical.
4,000
Gas demand reduced through Nuclear, Coal with CCS
and Renewables.
?
3,500
LNG
Pressure on supply due to scale of long distance
infrastructure required.
3,000
Long Distance Pipelines
2,500
2,000
bcma
1,500
Production consumed within region
1,000
500
0
1990
1995
2000
2005
2010
2015
2020
Source IEA, EIA, BP Statistical Review of World
Energy, Own Analysis.
7
Europe Region Gas Supply Demand- Increasing
LNG requirement as pipeline imports plateau and
domestic production declines
800
LNG Required
700
Other Pipeline
Iran Pipeline
600
Azerbaijan Pipeline
Libya Pipeline
500
Algeria Pipeline
Russia Pipeline
bcma
400
Norway
UK
Other
300
Romania
Netherlands
200
Italy
Germany
100
Demand
0
1990
1995
2000
2005
2010
2015
2020
2025
2030
Source IEA, EIA Own Analysis
8
UK Ireland Gas Supply Demand Increasing
Reliance on LNG exposure to Global supply/demand
pressures.
Source IEA, National Grid, BERR, Own Analysis
9
UK Market Seasonal Flexibility
UK Ireland Gas Supply Demand
500
450
400
350
300
Production
mcm/day
250
Imports
Demand
200
150
100
50
0
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
UK Ireland Seasonal Flexibility Requirement
14
12
Storage Equivalent Needed
10
8
bcm Storage Working Volume
Historically provided by IUK, LNG
6
Storage In Place
4
2
0
2005
2010
2015
2020
Source IEA, National Grid, BERR, Own Analysis
10
Europes Hybrid Market
Gas Prices
16
14
Average German Border Price
UK Market
12
10
8
6
4
2
0
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Source ICIS Heren, Argus
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Conclusions

• No obvious shortage of natural gas as a resource.
• Growing mismatch of regional distribution of
  resources vs. consumption is a reality.
• Access to resource often limited by resource
  nationalism.
• Low energy density of gas (compared with oil)
  makes transport infrastructure a more expensive
  part of the supply chain.
• LNG is a key part of the solution and will
  increasingly feature in the European supply
  portfolio and especially in the case of the UK.
• As UK domestic production declines and loses
  its seasonal bounce the issue of seasonal
  storage becomes paramount.
• Failure to build sufficient storage in the UK
  will expose the market to
• Competition with Asia for winter spot cargoes (at
  crude parity price).
• Uncertainty over Interconnector import flows
  during winter.