1. COGA August, 2003 Decarbonization: The Coming Natural Gas Economy Scott W. Tinker Bureau of Economic Geology John A. and Katherine G. Jackson School of Geosciences The University of Texas at Austin Scott Tinker, Director Bureau of Economic Geology August 4, 2003

2. The four EEEEs — Energy, Environment, Economy, and Education — are inextricably linked. We have a unique opportunity to positively impact the global 4-E balance in the 21 st century. Scott Tinker, Director Bureau of Economic Geology August 4, 2003

3. 1.ENERGY 2.WATER 3.FOOD 4.ENVIRONMENT 5.POVERTY 6.TERRORISM & WAR 7.DISEASE 8.EDUCATION 9.DEMOCRACY 10. POPULATION 1.ENERGY 2.WATER 3.FOOD 4.ENVIRONMENT 5.POVERTY 6.TERRORISM & WAR 7.DISEASE 8.EDUCATION 9.DEMOCRACY 10. POPULATION Humanity’s Top Ten Problems for next 50 years Nobel Laureate Dr. Richard Smalley, 2003 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

4. QAd1023 Outline Global Decarbonization Global Decarbonization Why the Trend Towards Gas Why the Trend Towards Gas Creating a Global Gas Economy Creating a Global Gas Economy Challenge of Meeting Demand Challenge of Meeting Demand Opportunities Opportunities Scott Tinker, Director Bureau of Economic Geology August 4, 2003

5. Scott Tinker, Director Bureau of Economic Geology August 4, 2003

6. QAc9841c after Hefner, 1993 100 80 60 40 20 0 Percentage of total market Year 1850190019502000 World Energy Consumption WW I WW II Oil Embargo Solids Gases Liquids U.S. Consumption Gases (Natural Gas, Hydrogen, Nuclear, Renewables) Solids (Wood, Coal) Liquids (Oil) U.S. Data: Annual Energy Review 1999 (EIA, 2000) World Data: International Energy Annual 1999 (EIA, 2000) Scott Tinker, Director Bureau of Economic Geology August 4, 2003

7. U.S. Data: Annual Energy Review 1999 (EIA, 2000) World Data: International Energy Annual 1999 (EIA, 2000) 20 30 40 50 1980198519901995 Energy consumption (percent) Year Energy Demand World oil World coal World gas, nuclear, hydro, renewables Scott Tinker, Director Bureau of Economic Geology August 4, 2003

8. 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 U.S. Energy Consumption 1973 Supply Instability Price Volatility Governmental Policy Technology 1973 U.S. Energy Consumption Forecast 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 18451860187518901905192019351950196519801995201020252040 % of Total Market Gases and Renewables Liquids Solids U.S. Energy Consumption Forecast 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 19501960197019801990200020102020203020402050 Quad BTU Gases and Renewables Liquids Solids QAd1023 1 Quad Btu ~ 1 Tcf Gas Tinker Forecast Scott Tinker, Director Bureau of Economic Geology August 4, 2003

9. QAd1023 Why the Long-Term Trend Towards Natural Gas? Efficiency Efficiency Economy Economy Environment Environment Availability Availability Scott Tinker, Director Bureau of Economic Geology August 4, 2003

10. Why Natural Gas? Efficiency QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

11. Why Natural Gas? Economy/Efficiency Per capita income 0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 051015202530 Per-capita oil consumption (bbl/yr) Saudi Arabia India China Indonesia Russia Brazil Mexico United Kingdom France Italy Japan Canada United States Germany Note: 15 largest economies shown in red. Source: JPT, May 2001 QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

12. Why Natural Gas? Economy -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 1970 19731976 19791982 1985 1988 1991 19941997 2000 GDP Growth (% change from previous year) $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 Crude Oil Domestic Wellhead Price ($/bbl) 8.00% 10.00% GDP Growth Crude Oil Domestic Wellhead Price QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

13. U.S. Carbon Dioxide Emissions from Energy Consumption by End-Use Sector 0 400 800 1,200 1,600 19491954195919641969197419791984198919941999 Non-Electricity Generation in Residential, Commercial and Industrial Transportation Electricity Generation Data: EIA, 2002 MM Metric Tons of Coal Why Natural Gas? Environmental Quality QAd1023 Carbon Dioxide Emissions from Electricity Generation 0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 3,000,000,000 19891990199119921993199419951996199719981999 Other Units Gas-Fired Units Petroleum-Fired Units Coal-Fired Units Data, EIA, 2000 Short Tons Scott Tinker, Director Bureau of Economic Geology August 4, 2003

14. 1999 NPC Study (NPC, 1999b) Recoverable Portion of In-Place Gas Resource (Tcf) Reserves (1,004) Reserve Growth (305) Undiscovered, Unconventional Unassessed Unconventional Reserves (400) Geopressured Brine (Up to 24,000) Gas Hydrate (Up to 300,000) Not Assessed by NPC Increasing development costs, technology needs, uncertainty, and decreasing concentration Why Natural Gas? Resource Availability QAd1023 Cumulative Production (811) Reserves (157) Known Resources Reserve Growth New Fields Historical U.S. Composition of Total Natural Gas Discoveries (1977-2001) 0 5,000 10,000 15,000 20,000 25,000 197719801983198619891992199519982001 U.S. Dry Gas Total Discoveries (Bcf) Data: EIA (2002) Scott Tinker, Director Bureau of Economic Geology August 4, 2003

15. QAd1023 Enhance Reserves Enhance Reserves Create Resources Create Resources Transport Transport Sequester Sequester Creating a Global Gas Economy Scott Tinker, Director Bureau of Economic Geology August 4, 2003

16. 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 1950 1960 1970 1980 1990 2000 20102020 2030 20402050 Quad BTU Gases and Renewables Liquids Solids Enhance U.S. Consumption Forecast QAd1023 Natural Gas Decline for the Past Decade Source: EOG, Baker Hughes Enhance Scott Tinker, Director Bureau of Economic Geology August 4, 2003

17. Enhance Key Technologies of the 90’s 3D Seismic, Computer Assisted Exploration Deep- water, Sub-sea, FPSO Horizontal Drilling, Geosteering, & Rotary Steering Systems Source: Bates, 2002, GCAGS Baker Hughes Scott Tinker, Director Bureau of Economic Geology August 4, 2003

18. Enhance Enhanced Gas Recovery Excellent Insignificant Portfolio of EGR Field Studies Overall EGR technologies in these seven fields yielded incremental production response of 231 Bcf. QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

19. QAd1023 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 1950 196019701980 19902000 20102020 203020402050 Quad BTU Gases and Renewables Liquids Solids Create New Resources Create Enhance U.S. Consumption Scott Tinker, Director Bureau of Economic Geology August 4, 2003

20. EIA (1949-1990) and NPC (1991-2015) L48 Conventional Onshore Associated and High-Perm Gas Shallow Offshore L48 Unconventional Onshore Tight Gas, Shale Gas, CBM Deepwater+Subsalt Offshore 0 5,000 10,000 15,000 20,000 25,000 30,000 19491953195719611965196919731977198119851989199319972001200520092013 Year Annual Natural Gas Production (Bcf) $2 $3 $1$1 Wellhead Price ($/mcf) >50% L48 Unconventional Onshore Create U.S. Natural Gas Production Demand “Conventional” Unconventionals Tight (Low Permeability) Shale Coalbed Methane “Unconventional” Unconventionals Deep (>15,000 ft) Subsalt Ultra-Deep Water Methane Hydrates QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

21. 0.0 500.0 1,000.0 1,500.0 2,000.0 2,500.0 3,000.0 3,500.0 4,000.0 197019751980198519901995 Bcf 11 Tcf Incremental Gas GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. $2 $3 $1$1 Wellhead Price ($/Mcf) *Advanced Stimulation Technology *Greater Green River Basin Shale Gas *Piceance Basin DOE GRI Federal Alternative Fuels Production Credit for Unconventional Gas State of Texas Tight Gas Incentives Create Tight Gas QAd1023 Private Sector Scott Tinker, Director Bureau of Economic Geology August 4, 2003

22. 600 km0 400 mi0 N QAc9715c Bureau of Economic Geology MAJOR PRODUCTIVE TIGHT GAS BASINS (Technically Recoverable Resources) Data: NPC (2000), * Based on estimates of NPC (1993), San Juan Basin tight gas resource included with oil field reserve appreciation and new fields in NPC (2000) Rocky Mountain Foreland (13.7 Tcf) Midcontinent (16.9 Tcf) Arkla-Tex (29.8 Tcf) Appalachian (18.3 Tcf) Permian Basin (19.5 Tcf) Texas Gulf Onshore (9.1 Tcf) San Juan (5.6 Tcf) * 78 Tcf QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

23. 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 1980198519901995 Bcf 2.2 Tcf Incremental Gas GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. $2 $1$1 Wellhead Price ($/Mcf) Antrim Shale Research Appalachian Basin Shales DOE (1976-1992) GRI Create Shale Gas QAd1023 Private Sector Scott Tinker, Director Bureau of Economic Geology August 4, 2003

24. 600 km0 400 mi0 N QAc9712c Ft. Worth Barnett Shale (7.2 Tcf) Illinois New Albany (2.9 Tcf) Cincinnati Arch (2.2 Tcf) Appalachian (23.4 Tcf) Data: NPC (2000) Bureau of Economic Geology Michigan Antrim (16.9 Tcf) MAJOR PRODUCTIVE DEVONIAN SHALE BASINS Technically Recoverable Resources 40 Tcf QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

25. 0.0 200.0 400.0 600.0 800.0 1,000.0 1,200.0 1980198519901995 Bcf DOE GRI GRI, 1999, GRI’s Gas Resource Database. DOE personal communication. $2 $1$1 Wellhead Price ($/Mcf) 4.5 Tcf Incremental Gas Federal Alternative Fuels Production Credit for Unconventional Gas Create Coalbed Methane QAd1023 Private Sector Scott Tinker, Director Bureau of Economic Geology August 4, 2003

26. 600 km0 400 mi0 N QAc9714c Bureau of Economic Geology Powder River (24.0 Tcf) Hanna-Carbon (4.4 Tcf) Uinta & Piceance (5.5 Tcf) San Juan (10.2 Tcf) Northern Appalachian and PA Anthracite (10.6 Tcf) Black Warrior (4.4 Tcf) Raton-Mesa (3.7 Tcf) Alaska (Bering River, North Slope, Chignik and Herendeen Bay) (57.0 Tcf) SW Coal Region (5.8 Tcf) Data: PGC (2001) MAJOR PRODUCTIVE COALBED METHANE BASINS (Total Most Likely Resources) 81 Tcf QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

27. 600 km0 400 mi0 N QAc9713c Data: PGC (2001) Bureau of Economic Geology Montana Folded Belt (5.2 Tcf) Wind River (5.0 Tcf) Greater Green River (8.4 Tcf) San Joaquin (9.0 Tcf) Anadarko, Palo Duro (17.7 Tcf) Permian (12.9 Tcf) Appalachian (5.0 Tcf) LA, MS, AL Salt (15.8 Tcf) Louisiana Gulf Coast (14.5 Tcf) Texas Gulf Coast (14.3 Tcf) MAJOR PRODUCTIVE DEEP (>15,000 FT) GAS BASINS (Total Most Likely Resources) 62 Tcf QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

28. 600 km0 400 mi0 N QAc9716c Bureau of Economic Geology MAJOR PRODUCTIVE DEEP-WATER GAS BASINS (Total Most Likely Resources) Data: PGC (2001) Pacific Slope (8.9 Tcf) Louisiana Slope (12.4 Tcf) Texas Slope (4.3 Tcf) Eastern Gulf Slope (7.6 Tcf) Gulf of Mexico OCS (47.7 Tcf) 71 Tcf QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

29. L48 Unconventional Onshore Deepwater+Subsalt Offshore Technology Investment = Resource Creation EIA (1949-1990) and NPC (1991-2015) 0 5,000 10,000 15,000 20,000 25,000 30,000 19491953195719611965196919731977198119851989199319972001200520092013 Year Annual Natural Gas Production (Bcf) 170 Tcf Unc. Gas Major Basins (Technically Recoverable) Tight Gas 78 Tcf Shale Gas 40 Tcf CBM 81 Tcf Deep Gas 62 Tcf Deep Water71 Tcf 332 Tcf QAd1023 Scott Tinker, Director Bureau of Economic Geology August 4, 2003

30. North America Natural Gas Transports (Bcf) Trinidad 0 5 10 15 20 25 1949 1952195519581961 19641967 19701973 1976 1979 1982198519881991 1994 1997 2000 Quadrillion Btu Natural Gas Consumption Natural Gas Production 1 Tcf Gas = 1 Quadrillion Btu Data: EIA 17% U.S. Natural Gas Transport Scott Tinker, Director Bureau of Economic Geology August 4, 2003

31. Sequester The sustainability of a hydrocarbon-fueled economy requires that we support an environment and energy win-win. Capture carbon dioxide and return it to the subsurface for the economic benefit of enhanced hydrocarbon recovery and the environmental benefit of reduced atmospheric carbon dioxide. Scott Tinker, Director Bureau of Economic Geology August 4, 2003

32. Injector Monitor “C” “B” “A” 440 ft 100 ft BEG Texas Frio Pilot Project Scott Tinker, Director Bureau of Economic Geology August 4, 2003

33. QAd1023 Challenge of Meeting Natural Gas Demand Scott Tinker, Director Bureau of Economic Geology August 4, 2003

34. 2 199219941996 1998 3 4 5 Private Sector Billion $ Year 20002002 2004 Meeting Demand Oil and Gas R&D Funding Private Sector Data: Chris Ross, World Energy (2001, v. 4, no. 2) 1998 $ Note Scale Difference DOE O&G Million $ 20 40 60 80 100 120 Fuel Cells and Gas Turbines removed from 1996-1999 for comparison Scott Tinker, Director Bureau of Economic Geology August 4, 2003

35. 1,800 1,000 600 Number of employees (thousands) 197819981994199019861974 Year 1982 1,400 Meeting Demand Oil Company Employment Largest 25 Oil Companies Scott Tinker, Director Bureau of Economic Geology August 4, 2003

36. Meeting Demand UNIVERSITY ENROLLMENTS Geoscience Graduate Students Petroleum Engineering Scott Tinker, Director Bureau of Economic Geology August 4, 2003

37. Time O&G R&D Funding University Enrollments O&G Employment Demand, esp. Natural Gas Technology Requirements The Challenge Scott Tinker, Director Bureau of Economic Geology August 4, 2003

38. Summary QAd1023 Global oil and coal consumption will remain at current levels for 30-50 years. Natural gas and other energy sources will need to fill the global demand gap. 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 1950 196019701980 19902000 20102020 203020402050 Quad BTU Gases and Renewables Liquids Solids The global economy and environment will benefit from a transition to natural gas. Scott Tinker, Director Bureau of Economic Geology August 4, 2003

39. Global Opportunities & Benefits QAd1023 Research and technology for a gas industry are different than for an oil industry. Unconventional sources will require significant geoscience and engineering advancements to be economically viable. Sequestration of greenhouse gases will be required to handle atmospheric emissions, and will need geoscience and engineering understanding. Scott Tinker, Director Bureau of Economic Geology August 4, 2003

40. Thank You! Scott Tinker, Director Bureau of Economic Geology August 4, 2003