2006-2009 Triennium Work Report October 2009 WORKING COMMITTEE 1: EXPLORATION AND PRODUCTION Chair: Vladimir Yakushev Russia 1 TABLE OF CONTENTS Introduction SG 1.1 “Remaining conventional world gas resources and technological challenges for their development” report SG 1.2 “Difficult reservoirs and unconventional natural gas resources” report 2 INTRODUCTION Reliable natural gas supply becomes more and more important for world energy sector development. Especially this is visible in regions, where old and sophisticated gas infrastructure is a considerable part of regional industry and its stable work is necessary for successful economy development. In the same time such regions often are already poor by conventional gas reserves or have no more such reserves. And there is need for searching new sources of natural gas. This is challenge for exploration and production of natural gas requiring reviewing strategies of their development in near future. The most important questions are: how much gas still we can get from mature areas (and by what means), and how much gas we can get from difficult reservoirs and unconventional gas sources? From this point of view IGU Working Committee 1 (Exploration and Production of Natural Gas) has established for the triennium 2006-2009 two Study Groups: “Remaining conventional world gas resources and technological challenges for their development” and “Difficult reservoirs and unconventional natural gas resources”. The purposes for the first Group study were to make definition of such important term now using in gas industry like “mature area”, to show current situation with reserves and production in mature areas and forecast of future development, situation with modern technologies of produced gas monetization, Arctic gas prospects, special attention was paid to large Shtokman project. Second Group had also analyzed such important term like “unconventional gas re- sources”, studied current unconventional gas sources and their resources, technologies of their exploration and production and their importance for regional gas industry develop- ment (especially in the North America). This is very important issue for global gas industry now, because gas resources of unconventional sources and difficult reservoirs exceed conventional resources many times and they are spread much more wider than conven- tional resources. 3 Study Group 1.1 Report Dominique COPIN (France) – leader REMAINING CONVENTIONAL WORLD GAS RESOURCES AND TECHNOLOGICAL CHALLENGES FOR THEIR DEVELOPMENT 4 SG 1.1. REPORT TABLE OF CONTENTS Introduction 6 1 MATURE AREAS 7 2.1 Introduction 7 2.2 Definition of maturity 10 2.3 Selection of the areas 11 2.4 Comparison of discoveries and production starts with production 12 2.5.1 United Kingdom 14 2.5.2 Norway 16 2.5.3 Netherlands 18 2.5.4 Argentina 19 2.5.5 Brazil 20 2.5.6 Malaysia 21 2.5.7 Indonesia 23 2.5.8 West Siberia 25 2.6 Production perspectives 26 2.6.1 United Kingdom 27 2.6.2 Norway 29 2.6.3 Netherlands 30 2.6.4 Argentina 31 2.6.5 Brazil 32 2.6.6 Malaysia 33 2.6.7 Indonesia 34 2.6.8 West Siberia 35 Maps 36 3 ARCTIC DEVELOPMENTS 47 3.1 Characteristics and development aspects of Shtokman gas condensate field 48 3.2 Development prospects and ecological challenges of Yamal Peninsula 50 4 NATURAL GAS MONETIZATION 56 4.1 Project costs 56 4.2 Gas-to-liquids 59 4.3 DME 60 4.4 Industrial uses for natural gas 64 4.4.1 Methanol 64 4.4.2 Ammonia 65 4.5 Gas-to-wire 66 4.6 Options close to commercialization 66 4.6.1 Floating LNG 66 4.6.2 CNG Transportation 67 4.6.3 Hydrates Transportation 67 ANNEX 1 SHTOKMAN PROJECT 68 5 INTRODUCTION Following parts are included into WOC 1 Study Group 1.1 report: mature areas, Arctic de- velopments and gas monetization. Mature areas: specificities and challenges. The history of discoveries and production starts has been analysed. The target was to il- lustrate the “maturity” of different producing areas in the North Sea, South America, South East Asia and Russia. This work shows that each area has its own specificities. The potential for growth varies considerably from one area to another. The challenges which the industry faces in these areas are broadly described. Development of Arctic gas resources. Our report includes descriptions of the most important Arctic developments in the Barents Sea and in the Yamal peninsula, like: Shtokman in the Barents Sea, Kruzenshternskoe, Bovanenkovskoe, Kharasavejskoe and Novoportovskoe fields in the Yamal peninsula. Not only are the geological models of these fields displayed, but the main challenges to overcome are also discussed, like the impact of the Arctic conditions on development schemes and environmental constraints. Gas monetization. Our report shows how the perspectives on the different ways of monetizing gas changed during the last years. Different factors can contribute to these changes such as technological improvements, market conditions, or cost evolutions. The following technologies or processes are considered: Gas to Liquids, Dimethylether, Methanol, Ammonia, Gas to Wire, Floating LNG, Compressed Natural Gas Transportation, Hydrates Transportation. 6 MATURE AREAS Introduction Gas consumption will keep on increasing for some decades. This will be true in almost every country around the world, whether the country has been a significant gas consumer for a long time or not. The oldest (”mature”) gas consumers have benefited from the fact that they were close to fields bearing significant gas reserves. Reserves of these fields are generally not yet ex- hausted. But one can expect that, in the areas where these fields are located, the most prolific fields have produced a large share of their reserves, and also that the fields which are still to be discovered may be smaller than the ones which have been producing for a long time. Under these circumstances, the producing area which encompasses these fields can be qualified as “mature”. These “mature” gas consumers will still be supplied by fields which have produced for many years and which are either close or connected to them through developed pipeline or gas liquefaction infrastructures. There is a fundamental imbalance between “maturity” in terms of consumption and “matur- ity” in terms of production. The consumption “maturity” will not result soon in reduction of consumption, while the question of the productions’ ability to match the consumption growth of their markets is worth examining closely. The following question arises: to which extent will production from these “mature” produc- ing areas meet the increasing demand for gas in the “mature” consuming areas which they are supplying? This issue is important in terms of the supply and demand equation. It also raises the issue of the increase of the need for gas infrastructures to link high growth potential producing areas to old and new consuming areas. This will depend on many factors, one of them be- ing the capacity of mature producing areas to improve their production profiles. The purpose of this study is to show the specificities of different important mature areas and to identify the different challenges they will have to meet. The purpose is certainly not to oppose one country against the others, or one operator against the others, or even to compare them. Comparisons here are used only as a tool to investigate the characteristics of a mature area. More importantly, the fact that a zone is mature has nothing to do with the attractivity of the area in terms of investments. Many operators can find that mature areas are interesting places to invest in any segment of the exploration and production process. Some elements such as the industrial base, infrastructures, experience of people, proximity of the markets, political stability and many others, can make investment opportunities in these areas at- tractive for companies. The purpose of this study is not to tell operators what to do. We have based our study on Wood Mackenzie data. This data helped us gather very use- ful information on histories of discoveries and production starts in the different areas. 7 Conclusions The areas which are analysed in this work present different characteristics. The challenges that have to be met are very different from one area to another. A general observation which has important short term consequences for some areas can be made: In most areas, the deficit of commercial discoveries versus production increases with time. As with any general rule, there are exceptions. Norway is one of them, because a very important field was discovered in 1995, which frontally encounters the trend. The other exception is an area which should not be regarded as mature: Brazil. United Kingdom By many criteria, UK is the most mature area of the group of areas which were studied. The short duration life of its reserves, whether they are commercial or not, and the deficit of discoveries versus production are the main characteristics which qualify this area as mature. This leads to the conclusion that unless an important discovery is made, or a group of discoveries, the decline previously noticed will continue. Norway Owing to recent starts of production on very important fields, production will continue in- creasing in the near future after a period of stability around year 2000. Norway will not see its production decline before long, but it will need new discoveries to increase its produc- tion. The coming growth is due to exceptional exploration successes. For production to keep on increasing after 2012, more exploration successes are necessary. The Netherlands This area will soon enter a decline period. If we exclude Groningen, the decline will be very strong after 2012. As long as the production plateau in Groningen does not stop, this de- cline will be somehow mitigated.