Tài liệu resources to reserves docx

What is badly needed, however, capital investment in projects ke uniack new hysrocarbon resources, be they non-conventional, or In deepwater offshore locations of in countries where geop

INTERNATIONAL”

ENERGY AGENCY

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INTERNATIONAL ENERGY AGENCY The Inersotoaol Energy Agency [EA] í an ulonamovs body which was established in November 1974 within the henewofk cŸ the Organisation for Economic Co-operation and Development OECD) 1o implhmen! en inirnclonel energy programme

I cartes outa comprehensive programme of eneigy co-operation among tenia of the

‘OECD’ thiry member counties The basic ans ofthe BA are

* fe aintan and improve systems for coping with il supply dauptions

+ to promote rational energy policies ine glabal conte! Praugh cowperatve clans wh nonmember counts, indvty ond inortonel organisations:

to operate © permenent information system onthe international el mark

to improve the work's energy supply and demand che by developing ehenots energy sources epd incIeosng the eficiency of enaay use:

+ fe isin the Inegrtion of environmental and energy poles

The EA member couniies aie: Austola, Austia, Belgium, Conede, the Czech Republi, Denmark, Fisand, France, Garmeny, Greece, Hungary, itelaed, Ul, Jzpan, the Republic of Kerea, Luxembourg, the Netherlands, New Zeclond, Norway, Porligal, Span, Swede, Swizrond, Terkay, the United Kingdom, the Unied Soles, The European Commision takes port inthe work ofthe IEA

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD i e sieue Ícuem where the governments of tity democracies work together le

‘eddressthe economic, sociol and arvironmene| challange: of globalization, The OECD is leo

Le forefon of efor to understand ond to halp governments roepond fo new developments end cancers, tach os zerperate gavernaes, the information conomny end the challenges of can egeing population The Orgotiseton provides sling where governmens ean compote eley experiences sok answers commen problems, identi ged practcn avd work ocx

‘rdinal domesic ond international pois

The OECD member counties ae: Aula, Ausio, elgum, Canada, the Ceach Republi, Denmark, Finlond, France, Germany, Gresce, Hungary eelond, land, tly, Japon, Kore, luxembourg, Mexico, the Netherlands, Now Zealane, Norway, Poland, Bomaool 'áe Slovok Republic, Spoin, Sweden, Swiewiond, Tukey, tha United Kingdom and the Und Stats

‘The European Commision takes pot inthe work ofthe OECD

© OECD/IEA, 2005

No reproduction, copy, ransmission or translation of this publican may be made

‘wihoul wien permission Apphetions sheuld be vent te lnvarational Energy Agency (1EA) Head of Publications Service,

9 tue de la Fedéeation, 75739 Paris Cedex 15, France

FOREWORD

Soaring oil prices have again spotlighted the old question re we running aut of oil? Tae doomsayers are again conveying grim messages through the Font pages (of maj newspapers, "Peak ol is now part ofthe general pub's vacabulry along withthe notion that ol preductlon may have peaked already heralding 3 period of inevitable decine,

‘The eas long maintained that none ofthis isa cause for concern Hytracarbon| resources around the world are abundant and wil easly fuel the worl through ite transition to 2 sustainable energy future What is badly needed, however, capital investment in projects ke uniack new hysrocarbon resources, be they non-conventional, or In deepwater offshore locations of in countries where geopolitical factors have restricted investment While today's high ol pices have row started to mobilise capital the entre supply chain inthe upstream oll and

fs industry is nevertheless stretched after years of low investment Since new projects take several years to materials, high ell prices may be with us for

"everl years to come,

‘Technological progress hae always been the key factor to prove the doomsayers wrong, We expect that technology will once again dive costs down, powiding move attractive retuens for investors Technology will enablenew resources tobe

‘developed cost-effectively adit wil accelerate implementation of newprojects

This Book reviews current and future technology tends in the upstream oll and

Ea industry confirms that exciting innovations are on the horizon, with the potential to fll expectation of secure energy supplies in an expanding world fconomy, but alzo to mitigate fossil fuels impact on the global climate it highlights how governments can help create the conditions for technlegy to delves its promises

Its our hope that this publication will make a significant contribution to broazening knowedge ofthe ere behind the petal pumps and pipelines anc Jnform the ongoing debate onthe future of worldwide energy supply

Clouse Mancit Executive Director

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ACKNOWLEDGEMENTS

“The lead author of thi boale wae Christian Besson, working within 2 bros collective effort crawing on extensive input from mary colleagues a the EA and experts around the globe

At the IEA, Antonio Miiger, Head of the Energy Technology Collaboration Division, prewided the criving force behind this project Tae work of Daf Gielen

tn the IgA Energy Technology Perspectives model provided the bass for same

of the material in Chapter 7 He himself participated in rurnerous helpful tiscussions Fatih Biro, Neil Hie, ace Podkaneki and Frcjof Unander provided very useful comments

Josten Dahl Karzen, Char ofthe IA Advisory Group on Oiland Gas Technology supported the project fom the cutset providing access ta key data and contacts

“The IA Working Party on Fossil Fuels and the IE& Committee on Energy Research and Technology ako proved invaluable suppor

‘Any attempt to cite all the experts who contributed input and advice is bound

to fal, We gratefully acknowledge the guidance of the following experts and apologise to those we have missed: Thomas Ahibrant (USGS), Takashi Aman (Mitsubishi Heavy Industry Tor Austad (Unversity of Stavanger, Moncher BenHassine {NRCar), Stephen Cessiani (ExxonMobil Paul Ching (Shell, Thor Christensen (Oanish Maritime), Jim Clarke (GP), Scott Dallimore (NRCan),

‘Maurice Ousseault (University of Waterloo), Anna-lnger Eide (Norwegian Petraleum Directorate) and het colleagues at NPD Carol Fairbrother (NRCan), Lenn Flint Lanef Consulting) Mare Fovette (Gaz de France), Peter Gerling (BGR, Cerman Institut for Geosciences), Per Gerhard Grin (Statoil, FrengoisKalaydan (FP, Fitz Krusen (ConceoPhilips), Fikri Kuchuk (Schlumberger, Oh Yoon Kwon (orean Ship Builders Assocation), Rick Marsh (Alberta Energy Utilities Board), Alain Morash (Total, Rod Nelson (Schlumberger) Rolf Ødegaard tai] Kent Pesry(GTH, Danny Searpece (OECD), David Sweet ILNGA} and Brad Wark (NRCan)

‘The lead author takes sole responsiblity for any possible eroxs oF omissions, in spite of all these important contributions

“The manuscript was skifully edited by May Harries White and the layout prepared by Corinne Hayworth, Special thanks are due to Corinne and to Bertrand Sadin, who briliantly handled the cfficult task of preparing allthe many itustrations,

Comments and questions should be addressee to AntonioPsueger@ico og,

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TABLE OF CONTENTS

Executive Summary 13

Heavy Oil, Bitumen, Oil Sands, Oil Shales 75

Chapter 4 — Non-Conventional Gas Resources and

‘Methane Hydrates

‘Non-conventional ge Tight ga

Methane hydrates: resources for the long-term future?

epee B

Oil and gas shipping bottlenecks Environment and Safety

Environmental footprint

CO, and climate change Security and safety Getting on Track

‘Modelling future technology trends Impact of technology on future supply The role of governments

121

Box 11+ United Sates Geologic Survey resources estimates s Boy ta + The(EAIrglemernAdresmertonEhanced Olfecovey 45 fox 13+ ThelEA implementing Agreement on Multiphase lw Sciences &

Box 16+ Fling a spec case of stranded gas 2 Box 17+ An example of modern development - Wytch Fim 106 Bọc 18 Anexarpe of mode development — the Euopipe gas pee lndng ia

List of figures

Figure £51 + ico curt: incting tecnologia progres # Femesi- Gamiibtie pbilldltwetumetieebe morxig a figueas+ Calis nal gas invevimert ah, 003 2095 a Figure + Word primar energy demand ovr ime inEA Reference Scenario a Figue 12+ Percentage share of transport in glbal ol demand

Figue 14+ Typical ol oc gaebearng sedimentary yer 2"

Figue 16 Clssiation of hydrocarbon resoures a Figue 17» Crude oil and NCL reserves at end003 # Figue 18+ Evolution of proven ol esenes asa function f time 2 Figue 19+ Word proven reser of matural gas 2

Figure «OPEC and OPEC Mie East percentage shares of wo il supply SẼ

Coll tows and major chokepoints, 2003

Public oll and gas upstream RED spending

£80 spending of major comparies

From a wooden shack

10 North Sea offshore platform from paper to immersive 3D

From wooden pipeline

ta liquefied natural gas eariers Impact of technelogy on preduction from the North Sea

‘Theoretical shape of amaunt of cil discovered a a function of ine

Annual il dscoveres nd production for USA Lower a8

‘World ol production by source

ExxonMobil production peejections

‘Word ultimately recoverable conventional ail

‘World ultimately recoverable conventional gas

Teehnalogy impact on costs for offshore USA

Example of conventional wellconstuction

Sketch of casing being expanded by an expanding tock

‘New equipment for integrated completion services

Un-recoveredil leftover in Unites States fields

Evolution of expected recouery factor in Norway

By-passed ail

{3D seismic picture of fuvial sediments 3 000 metses below ground

Schematics af multilateral well

Coiled tubing unit

Residual ol et in smal pores after water has displaced the il from large pores Trend in injecting hycrocarbon gas for enhanced ol recovery in Nonway

Estimated cost of various enhanced oil recovery methods

United States Geological Survey reserve growth function

‘Word ultimately recoverable conventional al ith breakdown

oF undiscovered olan adeition of enhanced il recovery

Future oll and gas deepwater potential inthe world

Evolution of deepwater technology

Key technology challenges for deepwater and ultra-deepmater

Evolving deeswater operations from large surface facilties

10 subse têchnlogies

Cost impact of evolving offshore technology in the Norwegian sector

ofthe Nenh Ses

Impact of technology in making smaller hydrocarbon accumulations economical Share of Arctic in undiscovered oil and gas resources

3

”

”

n

"New transport solutions for Arete seas

Estimates of hydrocarbon resources a a function of burial depth

‘Map of sediment thickness

Heauy ol resources in the world

Oilsands outcrop in Canads

Oil production costs fram Canadian oilsands

Schematic representation of steam assisted gravity ctainage

Schematic representation of steam assisted grovtycainage~ cross-section

Distribation of ol shales around the world

Cost structure for Stuart Shale project proposal, Australia

Coa bed methane gas production n the United States

United States cal bed methane sources

Methane hydrate ietke structure

Hydeates existence domain as function of pressure and temperature

‘Map of confirmes methane hydrate presence

‘New offshore re asiiation technology

Reduction in pipeline transportation costs overtime

Composite reinforced line pipe

Evolution of capital costs of gas to-iquids plants

Prototype small-scale gae-to-iquide plant

Estimates of amount of flared gat

Applcablity of various ga tranepart technologies

+ Oil production 19208-stye in the ol fields of Bako, Azerbajan

Cl production facility in the 19505 the Wytch atm field, Unites Kingdom

“Trends in ey envitonmental impact indieators

‘Tapping lrgetvolomes of reserve with a slr surface Footprint in Alaska

Decreasing dilsite footprints in Alaska

il coet curve, including technological progress

Oil coe curve, alternative presentation

Incremental costs of finding developing nd producing new ol ane gaz

resources in the United States

Cl gas and coal cost curves from Rognec

‘Non-conveationa oll cost cures from Greene

Canadian ol sands learning curves

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EXECUTIVE SUMMARY

‘Over the coming decades, the world wil continue to ely heavily on large-scale supplies of el and gas According to demand projections fram the IEA World Energy Outlook (WEC} Reference Scenavo, the share of these hwo fuels in the world energy fue! mix wil actualy inteaze from around 57% in 2002 to some

6036 in 2030 if energy policies worldwide co not change

As a result, demand for ol and ges wil expand by early 70% over these three decades Even if governments took more vigoraus steps to addrese environmental and energy security concerns as modelled inthe IEA WorldEneray Outlot’ Alternative Scenario, weldwide đemand for cil would be caly 1196 lower than under the IEA Reference Scenario’ projections, and demand for gas nly 1096 lower In adeiticn, as output from the woud’ existing production sourcesinevitably declines, probably at arate around 5% per yar, ths decine wil reed to be compensated with new supplies,

“The hydrocarbon resources in place around the world are sufficiently abundant to-sustan likely growth inthe global energy system for the foreseeable Future But keeping pace with todays demand growth projections wil oblige the hydrocarbon industry to take on anew, diverse set of business and technological challenges Tis is largely because it will be more technically demanding to Aevelop remaining wold ell and gas resources and bring them to markets than

‘was the cate foe previous autput Enswing the right conditions for sustained and accelerated technological progress in the oll and gue upeteam sector wil bea key factor for succeze in securing glebal security of supply fr al countries

urpose ofthis book isto:

1» Review future neds for technological advances to meet the challenges facing the hydrocarbon industey in the 212 century,

1» Discuss embedded policy implications

15 Measure the impact that technological progress can be expected to have on tomorrow's hydrocarbon resources vallbiliy

The big challenges for the future

Mescure in units of oil equivalent roughly 1 trillion barrels of conventional ail and gas ae in place, and atleast as much non-conventional ol and gas, Out of these 20 rion bares of ell equivalent (bce, § to 10 trlion can be considered

‘echnicaly,but not necessarily economically, recoverable, depending.on recovery rates, echnlogical progress and longterm price assurnpticns

Proven reserves amount to about a2 trilen boe, khích isnot so far from the 15 trlion boe produced so fer, aver more than 100 years af exploitation, Indeed, us trilionboe i also rough estimate of what needs o be produced over the next 25 yeas,

ut the intensifying need to abtsn supplies from more challenging conventions and non-conventional resources wil impose vey considerable demands on the sector's human, Financial and itellectal capabilites, Conventional oll ané gas resources will contine to dominate glabal ol and gas supply Uwroughoot the period 10 2030 The existing base of ether exploited or known reservoirs wil provide the lion's share of future supply fram conventional hydrocarbon, Steepening output decline curves, however, and the need to sustain economic feldlf trough cos reductions and enhances ecovery methods, present major challenges in this context, Current worldwide average recovery cates Fr all re roughly 36% and technological progress could substantially raise that percentage In particular, increased ute af CO; for enhanced oll recovery could Simultaneously increase recovery factors and curb greenhouse gps emissions ino the atmosphere Gas recovery rates, on the other nana, average around 76 worlduide, 8 9 consequence, enhancing recovery rates does not have the same significance for gas it does foro

Ir future supplies of conventional il and gas ae to expand, t wil also became necessary to obtain access te resources in more technotogiclly demanding reas, such 2s

Deep and ultra-deep water,

Deeply buried and more complex reservoirs,

‘etic regions, where goveroments consider this desirable

ew remaining, remote, unexplored basin

Remaining prospects with smaller accurwlatons In known areas

ln terms of investment, projected requternents for natual gas supply willbe

‘ose to those for ol over the next 3o yes Indeed growth in ema or gas wil

‘outpace that for ol also moving gosto frequently mare distant markets is move costly than shipping oil While the maior cals for capital to mobilise oll stem essential fom exploratian, production and refining investment in gee supply

ul focus chiefly on tanspectation infrastructure to feed fast growing market New technology is needes to provide more cost-effective solutions; lquefied natural gis is one option that will play alge rol if global markets are to be created and served

‘Meanwhile, enhanced explltation of substantial known resources of non conventional el and gas promises to produce much larger supplies ofboth fuels, Significant declinesin the cot of extracting and producing these resources over the past two cecades have akrea¢y won them a sizeable share of the market Boosting the relative Fuel-mix shares of non-carwentianal cl and gas resources

in future world energy supply wil eal for major investments in production and Aisteibution capacity and for development and deployment of more cos: cifectve technologies Gavernment paces to encourage such investment can ply an important al

Focus of the study

ven the broad span of challenges, expanding the global supply from both conventional and ron-carventinal resources wil thus demand important fdvances in key technologies and the related scence baze to forter:

Industry technical capability to expand and meet projected needs Further reduction in ecovery costs

Successful handling of more challenging economics and greater investment rst

“Tis study takes adetsiled look at what kind of techaological progressis required {o underpin future ol and gas supply The question is examined in terms of core technology, but alsa in terme of the role to be played by industry, scientific research, academia and governments in furthering technological progress inthe industry

“The fallowing technology aress ate highlighted as central to ensuring future supplies

Improved ability to characterise reservoir heterogeneities and to image fluid

‘movements, particularly in large carbonate resertoif Low-cost well

range of information technology-based intelligent "efild” systems allowing real-time management of reservoir

[Amore streamlined, standardised, “essembly-line" appreach te all operations in oil and gas fields

Renewed emphasis on better-perfoiming enhanced cil recovery techniques, including the use of CO to combine cil ecovery with climate-change mitigation, Irnproving deepwater technologies to secure viability a a water cepth of up to some 4 060 metres

1» Technologies for safe and environmentally sound operations in Arctic egions 1» Technologies for economical production of non-conventional resources, in particular heauy ols, bitumen ol shales and non-convertionl gas,

Technologies to minimise the environmental footprint of all oll and gas

‘operations

‘Technologies and actions ta ease shipping bottlenecks,

‘Technologies that reinforce the safety of instlations Major ongoing industrial developments in each of these areas ae explored and summarised

Key conclusions and recommendations

The key problem i not the limit of gelogial resources The overriding questions tay revlve around the technologies, prices and policies that willmake the worl’ vast esources economical recoverable and tur them into prover reserves First it willbe necessary to mobilise some very large-scale investments, estimated

at some USD § tlion over the coming three decades” Then a widespread and fetermined RED effort wil be needed to bring in the technologies required Industry clearly has the means, capablities ana incentives to perfem the required R&D Measures encouraging hat effort would be beneficial Public policy can play

‘key role innumerous ways, notably by focusing onthe Folwing:

1 Prosiding a framework favouable to investment in new resources, including approprite licensing taxation, royalties and support for demonstration projects Experience has shown that these can be instrumental in catalyzing the technology learning required ta make non-conventional resources competitive 1+ Providing 3 policy climate that ensures continued active co-operation between techaclogy developers in IEA countries and hydrocarbon resaurces holders in (PEC counties

14 “Taking the lead in promoting technology development and facilitating Investments that can educe shipping bottlenecks

‘Actively participating In developing and faciitating the implementation of techaciogies that improve the safety of installations

‘= Ensuring that CO, emissions reduction s hen sufcient value to faster more widespread CO, enhanced ol ecovery EOR) and thus higher recovery rates 1» Supporting basic science in the biology and ecology of subsurface bacterial systems, since thie can trigger breakthroughs in use of biotechnologies to enhance recavery art transform heavy hydrocarbons

1 Vigianty supporting industry's effores to reduce its environmental foatprint and thus to access eeources inne areas

1= Continuing to speerhead science and technology advances linked to future exploitation of methane hydrate deposits, while ensuring sưrong incustry paticipation These resources ae potentially very important to long-term supply but curenty 200 far af for sole reliance on industry contibutions

From discussions with incustry experts on the impact of future techaclogies, a shared perspective has emerged on the Future avalabilty of various types of resource, asa funtion of ol pris, but algo takinginto account likely technological progress This perspective i expressed graphically in Figure ES2- It shows the various el pries (Brent at which the expleitation af various volumes of efferent resources becomes an economical option The cast of capture and storage of CƠ; rosucedcuing the extraction of ccn-conventional of taken into account, {Paced and os eet queen ort ad tay eth Rs a Thee of SD 5 or ae rapoaton ons am onus he ta Wo ney bd 208

Figure £S.1 + Oil cost curve, including technological progress:

availability of ol resources asa function of economic price

Tneuse CO gation cans

‘Available iin billion bores

‘The x xis represents comolatve acessbl oi The y axis represents the pice at

Ubi each type of resource becomes economical,

Currently, most companies base ther investment decisions ona long-term price (oF USD 20 fo USD 2 per barrel The graph suggest tnat accepting » long-term price of for example USD 3olbrtel would make an appreciable ference to the economic ecoverabiliy of lage amounts of ol

The analysis here focuses only on ail, for which extraction represents the dominant cost Where gas is concemed, reserves ae plentiful and the economies are dominated by the cas of trnspertation, Development of bquefied natura {gas and other transportation technologies will determine the future supply equation

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INTRODUCTION

(ane gas wl contique to play a key role in energy supply for IEA counties and the world at lange throughout the first half ofthis century This isthe consensus view held by numerous stucies on prospective energy markets, inclucing the EA Wid Energy Outlook WEO) Their predictions assume the cil and gas industry's ontiouing ailty to delve hycrocarbons inthe quantities requires under the vatious price scenarios used in each study Although diferent models use sifferent methodologies, their common assumption is essentially based ia tur,

‘on extrapolation of the industry's track-ecord in expanding reserves, recovery and production

Sustaining such production trend, however, depends on thre key factors

1 Sufficient capital Investment io exploration, wells, prosuction facies, transportation, processing plants, refineries The importance of such capital Investment has been stressed in various I publestons over recent yeas, 35 ilustrated in Figures a and o2 (next pagel

|= Sufficient sled human resources This =» major challenge for the industry in general Various downsizing exercises carried out by major oll comparies over the past 20 years have distorted the industry age pyramid and many professionals willeach retirement agen the next 10 yeas The Incusty's image ten to make it less atractive for young, educated people than other “greener Industries, particularly in A counties At the same time, cue to shifts of production from industrialised to developing countries and the legitimate wish

fo favour the local wark force in such countries, fis now becaming urgent t2 train lage numbers of young professionals from many different nations Providing adequate skilled staff sa well known challenge in incustry management circles and one that is being addressed, n part, by various players

While this topic isnot discussed inthis study, it is nevertheless worth stressing that attracting and training enough sled professionals are going tobe cuca toecurity of supply ina scenario where ol and gas remains large component in energy use in EA countries

1 Continuing technological progress Most projections assume various levels of suztsined improvement in technologies to expandrecoverabe eserves in known Fieles orto develop new more challenging ft: Projections are bases heavily 09 extrapolating past industry trends, There ae three reasons, however, why such assumptions may need tobe re-examined,

fs the industiy moves on to mare and more “ffl” ol and gas deposits, the pace of technological progress wil need to accelerate significantly if past production trends are to be maintained

1¢ Although technological advances appear ta be continuous when averaged lover time, such atvances actualy come in discrete steps as successive

‘new sechniques ae deployed There is no guarantee that the required key technologies will actually emerge in time to make new supplies avalable in

‘the way thatthe models project

Figure 0.1 + Cumulative global oil investment needs, 2003-2030

15 Explrton ond

Figure 0.2 » Cumulative natural gas investment needs, 2003-2030

Chine Shinning

0 190 200 360 400 500 600 700 600 USO ion yoor 2000

1 Technological progress aso needs investment; and long lead times ae often Invalied Wide pice fuctoations over the past 25 years have ed to reatvely modest investments in research and development (RRO) inthe ol and gas industry These investments tend tobe portponed inthe absence of 3 stabie

‘planning hrizon, thus undermining the industys ability to assure sustained production inthe require timescales, Indeed, t <an be argued that some of the impressive technical progress seen inthe oll and gas industry during the 1990s was the esut of high RED spending atthe end of the 1970s and early 198or, and that ceduced RED expenditures in the 1990 may have already

“locked-n" a period of slower progress

Ensuringthe conditions for continuing rapid technological progress in the olland

as industry is therefore hey cequirement for security of supply in EAcountries

‘The oil and gas “upstream” industry (exploration, production and transport) Involves 2 vast numberof technologies, each of them constantly evolving itis oF course far beyond the come ofthis book to attempt any discussion ofthe future evolution of each ofthe very numerous technologies involved Large numbers of existing specialises publications take up this subject in relation to the various branches ofthe industry Our focus hee isather onthe impact of key areas of technology on future security of supey

Picking those areas, of course, means making choices in the face of much uncertainty Past history has shown thatthe ol and gas industry is very active

in pushing the technology envelope but also relatively cick averse As 3 result changes take time, The RRD teams of the 4ey incustey layers are already working on the technologies that are likely to bring major change tothe incustry before 2030 There are few surprises in store Nevertheless, picking the technologies mot likely to succeed offers plenty of scope for error if they were sacked to identify the key technologies that have braught change tothe oll and

js industry over the past 25 years, most observers woud paint to 2D seismic

Sn horizontal well But 2 lance through technical journals from 25 yeare ago (298) reveals that, while 30 seismic and horizontal wells were indeed on the hovi2on, much R&D investment was going to chemical enhanced ol recovery techniques, toexplatation of ol shales, rom which essentially no commercial Impact has resulted to thie day, Readers may wish ta Keep uncertainties such a= this in ming

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Chapter 1° SETTING THE SCENE

Demand for oil and gas

“The past century has seen ø steadily growing role for cil and gas in fueling evelopment around the globe ll the studies on energy’ future tell us that a

‘and gas wll emain dominant in word energy supply wel into this century The TEA World Energy Outlook YEA WEO-2004) projects that, without new energy and environmental policies, demand for eil wil continue to grow at 1.696 per year (Figure 1.1, Indees, oll is expected to continue providing more than gcB6 of transport vehicles energy tequirements up til at last 2030 figure 12} Natural igs demand will grow even faster, at 2336 per year Since it provides “clearer” energy than other fossil fuels, gas is claiming a rapidly growing share of the tlectriity generation market Even in scenarios ike the IA Alternative Scenario (IEA WEO:2004) which fctor in strong policies to curb CO, emissions, projected {growth in oll and gas consumotion remains significant,

Figure 1.2 Percentage share of transport in global oil demand,

percentage share of oilin transport eneray demand

Resources and reserves

Where do oan gas actually come from? They ate produced from underground

‘deposits The oil and gas are found inthe smal pores of sedimentary rocks layers (Figure 13) buried inthe earth's rust igure v4

While theories vary regarding the origin of these hydrocarbons, the general consensus is that most ofthe deposit result from burial and transformation of biomass over geologiesl periods during the ast 200 milion years or o.In terme

‘of quantities thetefore, the total amount of ol and gas residing inthe earth’

‘subsurface is certainly finite, Sine some ofthese Figure 13 + Example of cores resources have yet to be found, however, there

‘of oil-bearing rock is considerable uncertainty about the magnitude

ofthe “uncicovere resources’ The most widely sed estimates of total amounts of hydrocarbons {0 be found inthe earth's subsurface ae thore of the United States Geological Survey (USCS 20)

‘These deal primarily with conventional olan gas

‘Data on other types of resource can be located from other sources’ The following statistics summarize collected fincings, shown in graphic form in Figure 15 (Box 1 explains the terms

“conventional” and “non-conventional More

<etals canbe found in Chapters 3 and 4

rn ery a al ‘Daal tyne Cli 2 Her,

‘Abe East) hans —— Mau Ds Ua at

Figure 1.4 Typical ol-or gas-bearing sedimentary layers

Disereteype sectoral ‘eeumuloon ——_aceumuoion Stratigraphic

Continvourtype

2 fag T987 ager 200 SINE 200 ren 2053 Wir 20% A WEOIO) EA 40202

CConsatana! Neeeemaleml Conentonal Nencomesions Got

The thin lighter yl bain the conventional bar and the ight bve band io the

conventianal gas bo represent the contribution o uur enhanced o coy teigues

‘jondchateeumed the USCS coy oc Bo for one dtl)

= of

‘© Some 7 t0 8 tilion barrels of conventional al OF these, 33 trilion bores

te considered technically fr ultimately recoverable; 10 trlion have already been produced

‘© Seventrilion bares of non-conventional oil heay i bturen oilsands, and cil shale) Etieated technically recoverable quantities vary from 1 tillon to

3 trlHen bartels; roughly oo elon bares have been produced ta date

= Gas

‘© 450 tilion cubie metres of technically recoverable conventional gas, or

28 trllon barels of oil equivalent (boe), of which about 8o trillon cubic metres have already been produced (0§ trilon boe) There are few estimates

of ‘non-technical recoverable” conventional gas, but recovery factors for conventional gs tend tobe high, typically round 70%

1s Atleast 250 tilioncubie metres of non-conventional gas, or 15 lon boe (coal bed methane, tight gas, gas shales), although there Is no reliable fstimate worl! wide and there could be twa or three times more, About

‘001 trlion be of non-conventional gas have already been produced

‘= Between + 000 and 10 000 000 trillion cubic metres of gat locked in the form of hydrates at seabed level or in permaftost between 6 tillon and 6o eo trlion boe), Estimates vary widely, but i is generally agreed that resources here are significantly larger than those of conventional gas The recoverability status s unknown,

Sin ps mms eee “esootel a! hh gas dashed ra

Box 1+ “Conventional” and “non-conventional”

There is no universally agreed deiniion of what is meant by conventional olor gas, as

<nposed to noncamentionaliydocarbors Roughly speaking, any soureofIydocarbors

‘that requires peductontecelogies significant diferent fom the mainsveam in curenty pled reser sdesrbed as nnconventonal Howmees ts clearly an inreise and

‘medependentdefiton Inthe longterm fue, in fact nonconventona, hey oi may wel become the nam rather than the exception

oi!

Some experts use a definition bosed on oll density, or AP! gravity (American Petroleum Institute geviy) For example, alos with API gravity below 20 (le density greater thon (0934q/<}) are considered to be nor conventional This indudes “heavy ols bitumen and

‘nr deposits While this dassfeation has the merit of precision, it doesnot aways reflect which technologies are used for production for example, some ols with 20 API gravity located in deep offshore reservoirs in Bra! are extracted using entiely conventional techniques Other experts focus on the viscosity ofthe ol They regard as conventional ary ol which can low at reservoir temperature and pressure without recourse to vscsityeduction technology But such ols may sill need special processing at the surface if they ore too wscous to flow a surface conditions

(shales are general regarded as nonconventona, though they donot in thẻ gbore definitions Moe details on this canbe found in Chapte 3 Alo cassfed as norconventional

‘a7 both derived fam processing coal with coattsiquids (CTY technologies and oi derived

‘fom gas trough gasteliquds (CTL) technologies The raw matenalsare nevertheless perfect

‘conventional fossil fuels These wil be discussed briefly in Chapters 5 and 7

Another aporoach, used notably by the United States Geological Survey, sto denominate

‘nonconventonal (il or gas) according to the geological setting of the reser The Fycrocarbon is conventional ifthe reservoir sits obove water or water bening sediments and

if itis relatively localised, if either 's the case, the hydrocarbon isnonconventona This ype

of definition basa sound geological bass, but doesnot always connect with the technologies

‘equited for production which ar the main concer in this study

Gas

‘The definitions are just as hay for gas General the industy dossifes as non conventional the gos that i fund in unusul iypes of esewoic The main types are coal bed methane (CBM), which is gas associated with deeply buried coal seoms, ond "aight gas’ gas from

‘eserois with very low permeability that can only be praduced ot economic rates though

‘special production technologies (Sstematic use of stimulation techniques) Wile CBM fas {an unambiguous defniton, thee isa continuum between conventional and tight reservoirs without any sharp tanstion Stimulation techniques are also fequently used for Conventional reservoirs Ths question i iscussed futher in Chapter 4

(ne can as ist lean gas" and “sour gas’, gas contained in convention gas reservoirs but wth a high concentration of impunes (nitrogen and carbon cade for lean gas, hydrogen sulphide for sour gas) that negatively impacts the economics

‘These numbers indicate that only a small action ofthe hydrocarbon resources

In place have been produced, However, not all of these resources can be extracted, Some resources ate “unrecoverable” using currently known technologies Others, although technically recoverable, are not “economically recoverable” at current or expected prices, Extracting them would be simply too costly using present technologies “Proven” and “probable” reserves are thus hydrocarbons that can reasonably be considered economically recoverable at curren prices Obviously quantities here can ony be estimated, since the exact amount of oil that wil be procucee cannot be determined befoce it has been fextiacted and the reservoie abandoned To introduce some uniformity and coherence in the Figures used by diferent cornpanies, various organisations have standardised estimating methadologies Figure 16) & degree of uncertainty remains, however, and judgement is caled for,

Figure 1.6 Classification of hydrocorbon resources

‘The current “best estimates” for fproven) reserves of oll and natucal gas Hqulds are show in Figure 17-Proven oil reserves asa function of time can be seen in Figure 18 Proven reserves of gos are mapped in Figure 1.9

Sách có ban quyễn

‘These numbers should be seen inthe light of figures both for ol and gas akeady produced to date and for annual pracuction rates (39 bllon bavel of cil and

3 trlion cubie metres af gos in 2004) The ratio af proven reserves to current

‘early production gives» very rough fel of how many more years of output Femainon te basis of reserves as they stand today, Tati, roughly 40 years for cil and year for gas

“The fairy constant level of remaining reserves has led some stakeholders to consider that such level ill continue indefinitely and that evolving technology will mobilise whatever volumes of hydrocarbons are needed Others, however, stress that hydrocarbons ate unquestionably finite, and that close to one-half of the earths proven resevies of conventional oil has akeacy been consumed, Because of the uncertainties over the respective amounts of resources and) reserves it dificult to pred the mament of "peak ol, wien production

‘might be expected to start to decline, Estimates range from today to 2050 0°

beyond n fact, many experts agree that conventional il outside OPEC Middle East has either peaked aleady, of will do so over the next ten years Optimists retort that, even If this were so, non-conventional hycrocarbons are abundant and technology will make i possible to tap them at ressanable coz,

“The key questions, however, a8 not about when conventional production wil peak, but about the cost involved not forgetting the cost of CO; emissions) in

‘making non-conventional hydrocarbons avalable or inereasing the recovery ates

of conventional hydrocarbons, 35 well as about the impact of energy efficiency gains lei the answers to these questions that willdetermine how fs, and when,

‘other primary sources of energy like casl, nuclear or renewable energies wil supersede hydocaroons in the role they play today

Figure 1.7» Crude oll and NGL reserves at end-2003,

Figure 1.8 + Evolution of proven ol eserves as a function of time

= Oec OFC m©rcp

Simin, conventional gas is located primarly in Russia and the Former Sovet Union (FSU) countries, and in lean, Qatar and Saudi abia,as shown in Figure 19, Since these reserve ‘often atin the same regions a the markets they serve, considerations of security and diversity of supply ate among the important factors to be placed in the balance in decisions over squeezing more hydrocarbons fram deposits in other regions closer to home or over ceveloping non-conventional hydracarbons Underlning this point, the IEA World Eneray (Outlook 2004 Reference Scenario predicts that 43% oF the woes ol supply wil

be coming fom the OPEC Middle East countries by 2030, compared with 2596 in

2004 (igure 111) Figure 1.10 Distribution of proven reserves of conventional ol,

‘according to various sources, in percentages

Figure 1.11 + OPEC and OPEC Middle East percentage shores of world oll supply

one s0

‘OPEC Mie Eot

Oil and gas transport

Because of is uneven geographical dstfoution oil has long been traded and transported al around the word But gis Is much move difficult to transport economically anc ga rading has adionally been much more regionalthan uly

‘worldwide Curenty, however, weridwide trade for gas is developing and could

‘assume 2 scale simi to that foro The catalysts ae st, declining production fom convetienal gas fields in the United States an Europe and, second, the vent of technological capablity for longer pipelines and lang-istance sea transport inthe fon of liquefied naturel gas (INC) A concern here ithe Future capacity of curent, aeady busy maritime channels (Figure x1) Chapter 5 {evo to transportation ofa and gos

Figure 1.12 + Oil flows and major chokepoints, 2003

na nen oe

shor fwd demand)

Structure of the oil and gas industry

‘Many players are involved inthe ei and gas production chai, from the owners of the subsurface resources to financing ceganistions, and onto operators driers, eauipment manufacturers, facility constructors, service providers and engineering compa

‘The producing companies are generally classified within three main groups

15 Theintermatinal “majors ike Exxcntobil Shel 6P and Total, tonamejusta fev:

“Typically, they hold portfolios of very big projects all ver the word, wielding extensive eke sete ancl ety access to capital They sesumesigicant investment rks of = technical market or politcal nature, and they seek careesponding turn premiums These majors promote technology development very atively

1» The independents which are smaller private companies specialising in smaller scale projects focusing on specie geographical areas oF types oF tesesoÌ Woling with a smaller cost base they are usualy adept at managing oder reservoirs or reacting quickly to swings in cil ad gas prices and taking on projects offering rapid returns These companies are often innovative in developing new types of resource and in leveraging their local knawedge

15 The*majrresources holders”, cational companies which own andoten operate the field in theirhame countries Same af the many exarsples ae Saud Aramco, PDVSA Wenezuels) and PEMEX (Mexico) The major resource halders tend to practice longer-term resource management (in contrast with the net-pesent- value approach and significant dicount rates seen among private compasies, With some notable exceptions, they tend tobe followers of new technologies rather than developers Together, these companies produce about 70% of worldwide oll ane gas consumption, They control more than got of proven

OF course, all the companies co-exist within a continuum Some national companies ae active intemationaly, for example, and sonse independent companies compete with majors forthe same types ef project particulary strong trend among national companies is towards participation in projects

‘outside their own countries, be it to avert investment risks, as wth Norway's Statol or Malaysia's Petronas, orto target supply security, as with companies in hetimporter counties fke China's CNPC and Sinopec, or ONGC, the Indian national cil company The latter ae prime examples of companies with a rapidly rowing international presence and 2 readiness to take an more risky or les economically attractive projets because corporate policy is driven by security of supply more than by economies ona preject-by project basis

Subsequent chapters ofthis study will examine the dynamics of developing new resources key to understanding these dynamics is a grasp of the huge initia capital imestment requited to develo afi exploration surveys, val ling and construction, production and treatment facilities, transport (pipatiees, tankers, LNG plants) Capital depreciation represents a large portion of hydrocarbon production cost While this vares widely around the word, 6o% i probably a typical value, Marginal production costs, on the other hend, re relatively fo, ranging from lss than USO 1 per barrel in Saul Arabia to up to USD 10 per barrel in ciffeul offshore, Acti regions The pay-back period for large capita investments i often ten years or more This is why many of the

‘jor cernpanes plan projects on the basis ofan ol price of around USD 20, even Ifthe current price is much higher

The producing companies act as planners architects and project managers for ost af the explaration and production project They ely heavily on service and supply companies for the actual implementation Dring contractors own and operate diing rigs Engineering companies design and bull production

‘aclties Service companies perfor seine surveys and most of the operations Fequiced in wells The service and supply sector thus plays ake role in techaology evelopment, alongside the producing companies themseves

Research and development

In ther cole a pre developers of new technology, the sevice providers and equipment manufacturers work closely with the major oll ané gas companies, The leading international ol and gas groups are the most active in taking up Innovative concepts, but some national ol companies are igo key players =

‘ustrated in the deepwater oll technology activities of Srazs Petrobras The major service companies ané equipment manufactwers ensure that new

‘technology is availabe rapiely wardwice fr all custome in adition, smal, local companies aso frequently contribute greatly to advancing technology by leveraging their localknowledgetotry more risky ideas often in partnership with local independents,

Wile some figures can be cited for industryfunded and national BRD respectively, statistics on total R&D spending on upstream oll and gas technology ae dificult to come by (FP 2005) plausible ball park figure forthe Industry a 2 whole might be between USO 5billon and USD 10 bilion per yea,

“Tierepresents less than 16 ofthe industry tuinover

Figure 1.13 Public oll and gos upstream R&D spending

am std wg ms pray meme cadets ye,

Public RAD spending 2s reported by EA member counries,s shown in Figure 1.13, From a high level afte the el shocks ef the 1970s, this upstream oil and gas RED spending celined steadily during the period of velatvey low oil prices oF the

19908, & handful of countries account for the bulk of this Funding lust, Canada, France Japan, Norway, United States), Some see such outay 2 rucal in| ltder to support ther national il and gas production France and Japan ae the

hy non-reducing counties investing significantly in ol and gas R&D

“The RAD investments of lage, publly listed companies can be traced through their annual reports Figure 1.24 shows the trends and volumes af spending for 3 group the foremest producing and sevice companies Large oilcompanies, to,

ut back on R&O investment duting the 1996s they adapted to lower ol prices

by outsourcing more activites, Focusing on cre businesses and consolidating

Figure 1.14 # R&D spending of major companies

S tage! Service Companies

PT

“Their RRO efforts have often been efocused on a iniled number of areas seen toeffer the possiblity of competitive advantage, fr instance in exploration in some specific types of reservoir For their part, service companies have

‘maintained substantial and growing levels of RED investment A comparison between Figures 1.13 and 1.4 shows clearly that RBD spending among private comparies far exceeds public expencitures as to be expected within a mature Industry

The RED contributions of small and medium sized companies [SMEs] are more difficult to gouge in Europe, the European Oil and Gas innovation Forum {EUROGE| groups more than 2 sco European supply ad service companies inthe oll and gas incustey They account for more than 250 cao jobs ane an annual turnover exceeding USD so billion, Their reported RRO spending amounts to roughly USO 2 blon pe year Marquette 2004) 4 reasonable guess is thal about

12596 of that comes From SMES

While puble information is scarce on RED investment among rational ei companies, anecdotal evidence suggests this has been growing For example, RAD centres have Been launched by Saudi Aramco, Petrobras and Petronas vera, however it ikely that 90% of the RED inthe ol and ges upetream sectors undertaken in IEA counties

Even if parly offset by inresses in R&D investment in the service and supply sector, the cecline in RAD investment among large ol companies and Zovernments could be a worrying sign that technological progress might be slower over coming years than inthe past

The role of technology

Before exploring technology future impact onthe olan gas industry its worth lacing back over advances to date Some 150years ago, methods inthe upstream bland gos industry were akin ta those in traditional mining or construction But steadily improving techrology has propelled the industry towards techniques that

‘would seem at home tocay in missions to explore exter space,

DrĂng, eigtalýietuinó đo: trổ

Figure 16+ From Ø wooden shock buckets at the end ofa ropes now done

with sophisticated tay orl ei oad vith amend pote eink tle

zo cenhnetes in davcty Woh ack, sare of fees be the ling contol ig Ee posuble ta contol the

det tom twist or dil upwards Al tis tdxgofdseiVh le conduted out of the pera phy age Brough remotecontl equipment notte tat teed ina mission Ma

Offshore driling which started with platforms resting on the seabec in a few metres of water, now inuolves dyosmically positioned vessels able to thelr postions in deep sea to within factions of metres Today's floating structures carry vast arrays of Tacties and stand above

In the old days, reservoir management was rgelya question of adjusting a valve

to control the natura flow of the hydrocarbons Ie now involves a closed loop of sophisticated computer simulations ("reservoir simulators, which drive the potions of new wells and the injection of water, gos or more complex hide to

‘maxise the asaunt of hydrocarbons produced Feld development isoptimised

using massive amounts of data fiom measurements Figure 1.18» From wooden pipeline takenwthinthewelsor at surface

in thre dimensions in viral

Regular technological advances ate pushing back the frontiers of operating capablity a extreme depths, under extreme reservoir pressure, or in difficul temperature ar geographical situations,

Ever more sophisticated pipelines, tankers and UNG carriers now enable hydracerzons to travel all around the worl

regular, spectacular forwardleaps in technology have enabled hydrocarbons

to fuel the worlds economies former than 109 years ver ths period, specialists have repeatetly precited the end ofthe oilers, only ta be proved wrong by new advances in technology, We conclude this chapter with an illustration of the impact of technology on the volumes of ol extracted from the North Sea, as of year 2000 igure 120: technology played a key role in extending the ie ofthis fil province We shalllook 2 further examples in subsequent chapters

Figure 1.20+ Impact of technology on production from the North Sea,

in thousand barrels per day

Box 2+ Peak oil The issue of Ypeok ai’ the time when worldwide ol production will begin to decease, has generated a lage amount of literoture ond controversy The purpose ofthis box ito give on

‘elementary invaduction to this issue

The dea of peok ol originates inthe work of MLK Hubbers, a geologist ot Shell and the USCS who successfuly predicted the peok in ol praducton in the USA There are various ways 10,

“deve” the Hubbert curve; here we use one that focuses onthe exploration process

{nthe initial stage of exploration for @ resource such as ol the success rate for discoveries is simall because geologists do not know where itis best to explore But as more ols found, we learn more about places where its likely tobe found, and the success ate increnses However

‘because the amount of oll nthe ground is finite, there eventually comes a time when mest oft has been found, and it becomes more and mor difficult to ind addtional reservar the exploration success rate decreases again Based on this argument, one expects the amount fol liscovered as a function of tne to look lke the cure in Figure 1.2

Figure 1.21 + Theoretical shape of amount of oll discovered as a function of time

‘Amount fil covered vero te

Itis common after Hubert, to describe this curve by a “Togs” function: