U.S. Energy Information Administration Independent Statistics & Analysis APEC Energy Working Group Workshop on Unconventional Gas Vancouver, British Colombia, Canada, 10 May 2011 Jeff Skeer, U.S. Department of Energy, APEC Energy Working Group Aloulou Fawzi, Energy Economist, U.S. Energy Information Administration Shale Gas Resource Estimates in the 2011 Annual Energy Outlook of the U.S. Energy Information Administration

Overview 2 U.S. shale gas resource estimates AEO2011 shale gas sensitivity cases Shale gas resource estimates in 14 regions outside the United States: An initial assessment APEC EWG-41 Unconvnetional Gas Workshop, Vancouver, May 10, 2011

U.S. Shale Gas Resource Estimates 3

4 Shale Gas Plays, Lower 48 States Source: Energy Information Administration based on data from various published studies.

Recent AEO Natural Gas Resource Projections 5 U.S. dry natural gas resources Trillion cubic feet Source: EIA, Annual Energy Outlook 2011 and earlier editions Unproved shale gas Unproved other gas (including Alaska and offshore) Proved reserves (all types & locations)

AEO2011 Reference Case U.S. Natural Gas Supply 6 U.S. dry natural gas Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011 Net imports Shale gas Non-associated onshore Non-associated offshore Tight gas Coalbed methane Alaska Associated with oil 1% 45% 8% 22% 7% 2009 History Projections 11% 14% 20% 9% 28% 8% 2% 9%

AEO2011 Reference Case U.S. Gas Consumption 7 U.S. dry natural gas Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011 * Includes lease and gas plant fuel ** Includes pipeline fuel Transportation** Commercial Residential Electric Power Industrial* Projections

Total Unproved Technically Recoverable Shale Gas Resource Is Estimated at 827 Tcf 8 This includes approximately 750 Tcf of discovered shale gas resource 20.1 Tcf of inferred reserves 56 Tcf of undiscovered resource (with the majority in the Washington/Oregon area) The largest concentrations of shale gas are contained in the Northeast region which contains the Marcellus Shale and the Gulf Coast region containing the Haynesville Shale

AEO2011 Shale Gas Sensitivity Cases 9

AEO2011 Shale Gas Resource Determinants 10 The key determinants of the AEO2011 technically recoverable shale gas resource base are: (1) the estimated ultimately recovery (EUR) per well, and (2) the formation acreage from which natural gas can be produced. Shale gas cases were created by varying the reference case resource EUR and recovery factors by +/- 50%, which is consistent with USGS 95 and 5 percent probability range. Shale cases are meant to be illustrative of the shale gas resource uncertainty and do not represent confidence intervals or expected probability distributions.

U.S. High Shale Gas Cases 11 High EUR case. The estimated ultimately recovery (EUR) per shale gas well is assumed to be 50 percent higher than in the AEO2011 Reference case. Well spacing remains unchanged. Each well is recovering 50% more gas from the same acreage. The formation’s productive acreage remains unchanged. High Recovery case. Fifty percent (50%) more natural gas can be recovered from the shale formation than in the Reference case, with 50 percent more productive acreage. The EUR per well is unchanged. Fifty percent (50%) more wells would be drilled to fully recover the shale gas in each play. In both cases, the technically recoverable unproved shale gas resource potential increases from 827 Tcf to 1,230 Tcf.

U.S. Low Shale Gas Cases 12 Low EUR case. The estimated ultimately recovery (EUR) per shale gas well is assumed to be 50 percent lower than in the AEO2011 Reference case. Well spacing remains unchanged. Each well is recovering 50% less gas from the same acreage. The formation’s productive acreage remains unchanged. Low Recovery case. Fifty percent (50%) less natural gas can be recovered from the shale formation than in the Reference case, with 50 percent less productive acreage. The EUR per well is unchanged. Fifty percent (50%) less wells would be drilled to fully recover the shale gas in each play. In both cases, the technically recoverable unproved shale gas resource potential decreases from 827 Tcf to 423 Tcf.

Implications of U.S. Shale Gas Cases 13 High/Low EUR cases vary the cost of producing shale gas on a per unit basis by varying the volume of gas that can be recovered from a well at a fixed capital cost per well. These cases exhibit the greatest variability in gas prices, consumption, and supply. High/Low recovery cases vary the area of the shale gas resource endowment, but do not affect the cost of producing gas within the productive area. Gas prices increase as the less expensive shale gas formations are depleted first. These cases exhibit less variability in gas prices, consumption, and supply.

Shale gas production 14 Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

Total U.S. Natural Gas Production 15 Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

Net U.S. Natural Gas Imports 16 Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

Total U.S. Natural Gas Consumption 17 Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

U.S. Natural Gas Consumption for Electricity 18 Trillion cubic feet per year Source: EIA Annual Energy Outlook 2011

Henry Hub Spot Natural Gas Prices 19 Dollars per million Btu in 2009 constant dollars Source: EIA Annual Energy Outlook 2011

Conclusions on U.S. Shale Gas Potential 20 The ultimate size of the shale gas resource base will have a significant impact on natural gas supply, consumption, and prices. Reducing shale gas production costs is more important than expanding shale gas productive acreage.

World Shale Gas Resources: An Initial Assessment 21

Initial assessment of shale gas resources in 48 major shale basins in 32 countries indicates a large potential 22 Source: U.S. Energy Information Administration

Approach 23 EIA sponsored and reviewed the work. Advanced Resources International, Inc. (ARI) performed the work. Representatives from the Departments of Energy, Commerce, Interior and State also reviewed the work.

Methodology 24 1.Conducted preliminary geologic and reservoir characterization of shale basins and formation(s). 2.Established the areal extent, thickness and key reservoir properties of the major shale gas formations. 3.Defined the prospective area of each shale gas formation. 4.Estimated the risked shale gas in-place. 5.Calculated technically recoverable shale gas resource.

Findings The initial shale gas technically recoverable resource (TRR) estimates for 32 economies outside the U.S. is 5,760 Tcf. –More than six times EIA’s 862 Tcf TRR estimate for U.S. shale gas. Including the U.S. shale gas raises estimated world natural gas TRR by over 40 percent to 6,622 Tcf. These are moderately conservative ‘risked’ estimates. –Not probabilistic estimates –The methodology employed recognizes the sparseness and uncertainty of the data and includes conservative discounting of the potential resource. –The U.S. State Department launched the Global Shale Gas Initiative (GSGI) in April 2010 to assist ecoomies assessing their shale gas resources with the help of the U.S. Geological Survey. The expected results could be more definitive. 26

Findings (continued) Economies dependent on imports but have been estimated to have significant shale gas resources relative to their production or consumption. –France, Poland, Turkey, Ukraine, South Africa, Morocco, Chile. Economies that already produce a substantial amount of natural gas and are currently estimated to have a large amount of shale gas. –U.S., Canada, Mexico, China, Australia, Libya, Algeria, Argentina, Brazil. 26

27 Continent Technically Recoverable (Tcf) North America*1,069 South America1,225 Europe624 Africa1,042 Asia1,404 Australia396 Total5,760 Technically recoverable shale gas resource estimates (trillion cubic feet) Source: EIA ARI World Shale Gas Resources * Not including the U.S.

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29 Canada’s Shale Gas Resources and Basins Even with recent declines, Canada is still the world’s third largest producer of natural gas, with production at nearly 5.63 Tcf. After years of decline, Canada’s proved reserves of 62 Tcf have stabilized. Development of the abundant shale gas resources of Western and Eastern Canada (plus CBM and tight gas sands) could reverse the decline, as shown below: Western Basins Eastern Basins Total Canada (Tcf) Technically Recoverable Source: EIA ARI World Shale Gas Resources

Shale Gas Reservoir Properties and Resources of Western Canada 30

Shale Gas Reservoir Properties and Resources of Western Canada (continued) 31

32 Gas Shale Reservoir Properties and Resources of Eastern Canada

33 Mexico’s Shale Gas Resources and Basins While still an important producer, Mexico is today a net importer of natural gas: Production: 1.77 Tcf Consumption:2.15 Tcf Mexico’s remaining proved natural gas reserves of 12 Tcf are modest. However, Mexico has major potential for new reserves from its multiple gas shale basins. Technically recoverable resources estimated at 681 Tcf. Source: EIA ARI World Shale Gas Resources

Shale Gas Reservoir Properties and Resources of Mexico 34

Shale Gas Reservoir Properties and Resources of Mexico (continued) 35

China’s Shale Gas Resources and Basins 36 Onshore shale gas basins of China While China is the 10 th largest natural gas producer in the world, with 2.93 Tcf (in 2009), its consumption of natural gas at 3.08 Tcf exceeds its production. China’s natural gas reserves have been static, at 107 Tcf, for the past several years. China’s top two priority basins - - Tarim and Sichuan - - together contain an estimated 1,275 Tcf of technically recoverable resource. Source: EIA ARI World Shale Gas Resources

Southern South America’s Shale Gas Resources and Basins 37 Close to APEC economies Chile and Peru: Argentina produced 1.46 Tcf of natural gas in 2009 but became a net importer in Argentina’s assessed basins hold a cumulative risked recoverable resource of 774 Tcf allocated in the following basins: 164 Tcf in the Chaco basin 408 Tcf in the Nequen basin 95 Tcf in the San Jorge basin 108 Tcf in the Austral-Magallanes basin. Brazil holds 226 Tcf ; Chile 64 Tcf; Uruguay 21 Tcf; Paraguay 62 Tcf and Bolivia 48 Tcf Source: EIA ARI World Shale Gas Resources

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