Innovation in Unconventional Oil / Gas

Shale Gas Innovation Contest

May 2014

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North American shale gas was a small business revolution

and not led by big oil

Pioneers

Fast
Followers

Acquirers /
Late Entrants

Experience and Capability in Unconventionals

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Technology and innovation have been critical to the

increasingly quicker development of new plays and basins
Months to One Billion Cubic Feet Per Day in Gas Production

125

80

54
48

45

40

16

Jonah

Pinedale

Barnett

Montney Fayetteville Eagle Ford Marcellus Haynesville

Source: Baker Hughes; ADI Analytics Research

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12

More significantly, it is addressing the recovery and depletion

issues making the shale gas revolution more sustainable
Gas Production Per Horizontal Well
(Thousand Cubic Feet Per Day)
4,000

2011

3,000

2010
2,000
2009
2008
1,000
2007

0
0
Source: Baker Hughes; ADI Analytics Research
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10

20
Time in Months
6

30

This is coming through smarter e.g., intelligent exploration

and harder e.g., higher stage / lateral intensity running
Average Lateral Lengths
(Estimates, Feet)

Stages Per Well

(Estimates, Number)

14

4,400
4,200
3,750

10
8
7

2,900

3,000

2007

2008

4
6

2009

2010

2011

5
4

2007

2008

Source: Baker Hughes; ADI Analytics Research

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2009

2010

2011

Collectively, new technologies, practices, and innovation is

behind the learning curve that we see across the U.S. and
Average F&D Cost Reductions in U.S. Shale Gas
(Weighted across top 10 operators in 5 basins, U.S. $/MM Btu)

2006

2007

2008

2009

Source: ADI Analytics Research

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Pad drilling
Multi-laterals
Multiple fracs
More stages
Proppant optim.

2010

2011

 Across all the major basins

Barnett
(F&D cost in U.S. $/MM Btu)

Haynesville / Bossier
(F&D cost in U.S. $/MM Btu)

-22%

-9%

2005

2006

2007

2008

2009

2010

2011

2005

Marcellus
(F&D cost in U.S. $/MM Btu)

2006

2007

2008

2009

2010

2011

Fayetteville
(F&D cost in U.S. $/MM Btu)

-27%
-15%

2005

2006

2007

2008

2009

2010

2011

2005

Source: ADI Analytics Benchmarking Service, 2013

www.adi-analytics.com

2006

2007

2008

2009

2010

2011

Fracture effectiveness continues to be a challenge

Share of Low-Performing Fractures

(Fractures contributing 1-5% of production)

Key Issues
Growing realization that production per
cluster of fractures is not uniform in
shale gas reservoirs

50%

43%

Nearly 30% - 50% of fractures contribute

less than 1% to 5% of gas production

30%

Technology Needs
Better fracture imaging and siting, e.g.,
with cheaper micro-seismic, alternative
diagnostic tools such as ultrasound, and
better data interpretation
Schlumberger Schlumberger

Advanced proppants and optimized

proppant delivery mechanisms

Expert

Sources: A. Gatti, Schlumberger, December 2010; ADI Analytics Research

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10

Flaring is a significant challenge but addressing it is

becoming very important
Bakken Flaring Rates by Well and
(Thousand Cubic Feet Per Day)

Avg. Gas Flared / Sold by Well

(Thousand Cubic Feet Per Day)

2,500

117
2,000

95
Average for 2011
using this data set is
54 Mcf/well

1,500

41

Flared

76

Sold

84
74
25

60

38

22

1,000
26

500

52

59

57

2010

2011

34

0
0

200

400

600

800

1000

2008

2009

Note: Approximate estimates based on averages. Volume of gas not marketed is considered as flared.
Sources: North Dakota Industrial Commission
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11

2012

Midstream has emerged as a major bottleneck creating

opportunities for technical and business model innovation
Evacuation of U.S. Domestic Oil Production
(Change in Barrels Per Day Over 2009 - 2012)

752,836
1,113,121
130,134

245,479

Loss in market share

173,885
71,055
Increase in oil
production

Pipeline

Tanker

Barge

Truck

Rail

19%

16%

-20%

145%

94%

625%

Change from base over 2009 - 2012

Source: EIA; ADI Analytics Research

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12

New fuel and vehicular technology adoption is notoriously

slow and natural gas in transportation will be no different
Years to Achieve 25% Market Share

Years to Achieve 25% of New Sales

Fuel changes have been

quicker but still take at least 10
years for meaningful shares

Gas

Oil

Diesel-fired
Diesel
ocean ships locomotives

Diesel-fired class 8
trucks (estimate)

Natural gas-fired
refuse trucks

Source: Vaclav Smil; ACT Research; Argonne National Laboratory; Encana; National Petroleum Council; ADI Analytics Research
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13

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