Middle East Shale: Potential and Jordan Middle East shale... Kuwait Syria Egypt Oman Qatar Algeria

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  • Middle East Shale: Potential and Implications

    EAGE Workshop Jordan, September 2013

    1

  • Middle East shale overlooked, but important

    Middle East [was] not addressed by the current study. This was primarily because there [are] significant quantities of conventional natural gas reserves (EIA 2011) Shale gas is neither plentiful nor cheap Qatar Petroleum (2010)

  • Middle East Shale: Key points

    Most attention to date has focussed on impact of North American shale gas/oil on the Middle East

    But MENA shale raises important questions:

    Does MENA have shale oil/gas resources? Where and how much?

    Does the region need to develop its shale oil and gas?

    Can the region develop shale resources technically & economically?

    What are the challenges to be overcome?

  • Global Shale Impact

    4

  • 0

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    Jan-04 May-05 Sep-06 Feb-08 Jun-09 Nov-10 Mar-12

    Oil

    pro

    du

    ctio

    n (

    kbb

    l/d

    ay)

    Qatar

    Ecuador

    North Dakota

    US shale boom North Dakota (Bakken) overtakes smallest 2 OPEC members

    5

  • Global gas resources

    0

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    12000

    14000

    Asia & Australia North America Former SovietUnion

    Middle East &Africa

    Latin America Europe

    Gas

    re

    sou

    rce

    s (t

    rilli

    on

    cu

    bic

    fe

    et)

    Tight gas

    Shale gas

    Coalbed methane

    Conventional gas

    Source: Rogner (1997), EIA (2011, 2013)

    Shale means a huge jump in global resources

    Detailed assessment of Middle East unconventional gas not publicly available

    MENAs dominance in conventional gas challenged by unconventional gas

    23/07/2015 6

  • Shale gas can reshape gas trade flows

    White: satellite imagery of lights = energy demand

    Purple Red: global gas basins, in increasing size of resources (USGS)

    Yellow: main current and future export routes for Middle East gas

    Significant shale gas potential

    Less LNG demand in Europe?

    North African shale gas to Europe

    Australian shale-to-LNG

    Lower Chinese (and Indian?) LNG imports

    North American shale-to-LNG

    v

    New conventional gas

    More intra-MENA gas trade?

  • MENA shale resources

    8

  • Early Silurian: Qusaiba, Mudawarra

    9 Source: Afifi (2004)

  • Middle Jurassic: Sargelu, Naokelekan

    10 Source: Ziegler (2001)

  • Late Jurassic: Jubaila-Hanifa

    11 Source: Ziegler (2001)

  • Early-Middle Cretaceous: Garau/Sulaiy; Kazhdumi

    12 Source: Ziegler (2001)

  • Palaeogene: Pabdeh, Aaliji

    13 Source: Ziegler (2001)

  • Abu Dhabi examples: Diyab, Shilaif

    14 Source: Ahmed K. Taher (2010)

    Shilaif (Mid-Cretaceous)

    31 billion bbl generated, most not migrated out of source rock

    Diyab (Late Jurassic)

    Well B1 tested 1000 bpd from natural fractures

  • Middle East shales compare favourably with USA

    Country Shale Age TOC % Thickness (m)

    Oman Athel Silicilyte Infracambrian-Cambrian

    4-7 50-1500

    Regional Qusaiba Silurian 4-12 20-70

    Jordan, Iraq Mudawwara Silurian 4-7 50-1500

    Turkey Dadas Silurian 2-8 30-61

    Iraq Chia Gara Jurassic 2.5-7.5 30-300

    Iraq, Iraq, Kuwait Nahr Umr Cretaceous 0.4-14 150-220

    Iran, Iraq Pabdeh Palaeocene 3-7.5 150-220

    USA Barnett Carboniferous 4.5 90

    USA/Canada Bakken Devonian-Carboniferous

    10-20 46

    Middle Eastern shales often deep (4000+ m) but comparable to Haynesville

    Likely many are high liquids; carbonate rich (easier to fracture)

  • Numerous different Gulf unconventional gas plays

    Gulf unconventional plays varied, potentially large

    Sour and contaminated gas (CO2, H2S, nitrogen)

    Tight gas (sands & carbonates)

    Shale gas, condensate and oil

    Deep and ultra-deep

    Mixed resources (e.g. deep, tight and sour)

    Source: PacWest; Manaar research

    CURRENT ACTIVITY

    Also: Egypt, Tunisia, Algeria

  • MENA gas: Shale resources significant locally and globally

    Sources: BP, USGS, EIA, Petrenel, Baker Hughes, Manaar research

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    Gas

    re

    sou

    rce

    s (T

    cf)

    Shale gas (Tcf)

    Exploration potential (Tcf)1

    Gas reserves (Tcf)

  • Middle East need for shale

    18

  • Does Middle East need to produce shale oil?

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    2010 2015 2020 2025 2030 2035

    Demand

    Non-OPEC + NGLs

    OPEC

    Source: OPEC Bulletin & World Oil Outlook

    OPEC itself sees only slow

    growth in call for its crude

    Forecasts a slowly-falling

    market share from 34% today

    to 32% by 2015-35

    Competition for new supplies

    from Iraq, Iran, Libya, etc

    However shale oil can be

    important for non-OPEC

    producers

    Oman, Egypt, Tunisia, etc

    Algeria?

    Associated liquids - Kuwait

    19

  • 20

    -5

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    20

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    2008 2015

    Ga

    s e

    xpo

    rts/im

    po

    rts (

    Bcf/

    da

    y)

    UAE Jordan

    Bahrain Kuwait

    Syria Iran

    Lebanon Israel

    Yemen Oman

    Libya Egypt

    Algeria Qatar

    Source: Fattouh & Stern,eds. (2010)

    -3.0

    -2.5

    -2.0

    -1.5

    -1.0

    -0.5

    0.0

    2008 2015

    Gas

    exp

    ort

    s/im

    po

    rts

    (Bcf

    /day

    ) Jordan Bahrain

    Kuwait Syria

    Iran Lebanon

    UAENet gas exports / imports Net importers only

    Does Middle East need to produce shale gas?

  • Long-term global gas export balance

    Middle East and Africa are

    the two major exporting

    regions

    Asia is the major importing

    region

    Russia supplies Europe

    Big change is the emergence

    of North American gas exports

    after 2015

    However, total Middle East

    gas exports do not grow much

    and it falls behind Africa

    -35.0

    -25.0

    -15.0

    -5.0

    5.0

    15.0

    1990 2000 2010 2020 2030

    Gas

    exp

    ort

    s (B

    cf/d

    ay)

    North America S & C America

    Europe & Eurasia Middle East

    Africa Asia Pacific

  • Abu Dhabi: gas supply squeezed to 2016

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    2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

    Ga

    s s

    up

    ply

    /d

    em

    an

    d (

    Bcf/

    da

    y)

    Bab Hail Shah

    IGD AGD-II OGD-III

    Imports Existing fields Demand

  • Oman: needs unconventional gas to maintain LNG exports

    0.00

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    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

    Ga

    s s

    up

    ply

    /d

    em

    an

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    LNG exports

    Oil sector

    Industry

    Power

    Supply

  • Gas policy motivations vary by country

    -10%

    10%

    30%

    50%

    70%

    90%

    -100% -50% 0% 50% 100%

    % p

    ow

    er

    gen

    era

    tio

    n f

    rom

    oil

    Net gas imports

    Iran

    Saudi Arabia

    Yemen Iraq

    Libya

    Kuwait

    Syria

    Egypt

    Oman

    Algeria Qatar

    Abu Dhabi Bahrain

    Tunisia

    UAE - Northern Emirates

    Morocco

    Jordan

    Dubai

    Lebanon

    Bring gas to domestic consumers

    Limit dependence on gas imports

    Save domestic oil for export

    Grow domestic gas to sustain exports

    23/07/2015 24

    Bubble size indicates market size

  • Implications of soaring MENA gas demand

    Need for improved efficiency and end to gas flaring

    Challenges to gas-based industrialisation & job creation

    Need for new gas exploration & development

    Power cuts and unrest

  • Challenges to overcome

    26

  • MENA unconventional gas SWOT analysis

    Strengths Weaknesses

    Strong existing transportation networks and infrastructure

    Numerous organic-rich shale/carbonate horizons

    Carbonate-rich shales (easy to fracture)

    Preferential pricing for shale gas (Oman)

    Incentives for exploration and development (Algeria new Petroleum Laws)

    Fast-growing, gas-short domestic markets

    More expensive to produce than conventional gas

    Gas prices not high enough to support high costs

    Water scarcity

    Lack of drilling and exploration resources in North Africa at present as well as skilled labour

    Only 3 dominant pumpers in the MENA: Schlumberger, Baker Hughes and Halliburton

    Deep reservoirs

    Uneven distribution of gas reserves between countries

    Traditional mindset of NOCs

    Opportunities Threats

    Adequate resources of shale gas and tight gas

    Gain to export in thriving gas industry

    Local market conditions - gas shortage countries have potential for long term gas supply contracts

    Many unexplored reserves in North Africa and Iraq

    Saline-water & non-water fracs such as CO2 and LPG to alleviate water shortages

    Insufficient increases in gas prices

    Lack of adaptation of fiscal regimes

    Environmental opposition in Egypt and Tunisia

    Political instability, particularly in North Africa

    Competition from exports from US, East Africa, East Mediterranean

  • Gas prices have to rise to support shale gas development

    US shale break-even prices (source: Antero)

    Saudi Arabia current: $0.75

    Bahrain current: $2.25

    Iran target: ~$6

  • Gas pricing reform slowly materialising

    0

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    Gas

    pri

    ce e

    qu

    ival

    en

    t ($

    /MM

    Btu

    )

    29

    LOW LEGACY PRICES

    HIGH NEXT-GENERATION PRICES

    INTERNATIONAL BENCHMARKS

    HIGH-COST FUELS

    HIGH NEXT-GENERATION PRICES

    Source: Manaar research 29

  • Unconventional gas still competitive

    Alternative generation (solar, nuclear, coal CCS) is cheaper than LNG or oil

    However, high-cost domestic gas (e.g. unconventional) at ~$8/MMBtu is still

    competitive against alternatives

    30

    Source: Manaar research

    23/07/2015

    Gas/oil fuel prices $/MMBtu

    0

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    Ele

    ctri

    city

    ge

    ne

    rati

    on

    co

    st (

    $

    /kW

    h)

    Dubai retail rate

    Kuwait retail rate

  • MENA frac capacity not insignificant today, but well behind China, Russia

    Source: PacWest Consulting Partners; Manaar research

  • MENA to see fast growth in frac capacity, but still small in global terms

    Source: PacWest Consulting Partners; Manaar research

  • Conclusions

    Shale oil and gas present both challenge and opportunity to MENA

    MENA likely to have large shale oil & gas resources, spread across many

    countries

    Less immediate need for shale oil given market constraints

    But could be important in non-OPEC, second-tier producers

    Shale gas potentially important in meeting regional gas demand

    Relevant to almost every country

    Barriers to development

    Mainly: commercial terms, low gas prices

    Also: water, service companies, deep reservoirs

    Region gearing up to activity: Jordan, Saudi Arabia, Oman, Algeria, Abu

    Dhabi, etc

  • Robin Mills,

    Head of Consulting,

    Manaar Energy Consulting,

    Dubai, UAE

    robin.mills@manaarco.com

    +971 4 326 6300

    +971 50 293 4668

    www.manaarco.com

    Contact Details

    mailto:robin.mills@manaarco.comhttp://www.manaarco.com/