AGI Leadership Forum

Scott W. Tinker, BEG, 2002

AGI Leadership Forum

Scott W. TinkerBureau of Economic Geology


Humanity’s Top Ten Problemsfor next 50 years

1. ENERGY2. WATER3. FOOD4. ENVIRONMENT 5. POVERTY6. TERRORISM & WAR7. DISEASE8. EDUCATION9. DEMOCRACY10. POPULATION

2003 6.3 Billion People2050 8-10 Billion PeopleRichard Smalley, 2003


U.S. Data: Annual Energy Review 1999 (EIA, 2000)

U. S. Energy Consumption

U.S. Energy Consumption

0

20

40

60

80

100

120

1845

1870

1895

1920

1945

1953

1958

1963

1968

1973

1978

1983

1988

1993

1998

Qua

d B

TU

Renewable Energy

Hydroelectric

Nuclear Energy

Natural Gas

Oil Imported

Oil Produced

Coal

Wood and Waste


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after Hefner, 1993

100

80

60

40

20

0

Per

cen

tag

e o

f to

tal

mar

ket

Year

1850 1900 1950 2000

World Energy Consumption

Solids

GasesLiquids

U.S. ConsumptionGases (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)

20

30

40

50

1980 1985 1990 1995

En

erg

y co

nsu

mp

tio

n (

per

cen

t)

Year

Energy Demand

World oil

World coal

World gas, nuclear,hydro, renewables


EIA (1949-1990) and NPC (1991-2015)

L48 Conventional Onshore

Associated and High-Perm Gas

Shallow Offshore

L48 Unconventional Onshore Tight Gas, Shale Gas, CBMDeepwater+Subsalt Offshore

0

5,000

10,000

15,000

20,000

25,000

30,000

1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013

Year

An

nu

al N

atu

ral G

as P

rod

uct

ion

(B

cf)

$2

$3

$1 Wel

lhea

d P

rice

($/

mcf

)

U.S. Natural Gas Production

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Data: Natural Gas (NPC, 1999)

Recoverable Portion of In-Place Gas Resource (Tcf)

Reserve GrowthINCREASING

Development costsTechnology needs

Uncertainty

DECREASING Concentration

Cumulative Production

ReservesKnown Reserves

Supply & Technology

Undiscovered, Unconventional Reserves

Unassessed Unconventional Reserves

Geopressured Brine

Gas HydratesNot Assessed by NPC

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

1977 1980 1983 1986 1989 1992 1995 1998 2001

U.S

. D

ry N

atu

ral G

as

To

tal D

isco

ve

rie

s (

Bc

f)

Data: EIA (2002)


Proposed 2004 DOE Budget

Total DOE Budget:$23,375 million

Source: DOE, FY 2002 Budget Request

%3 Directed at U.S. Major Energy

Coal40%

Natural Gas3%Oil

2%

Renewable Energy33%

Nuclear16%

U.S. Energy Research Budget $801 Million (3%)


Short Term: Support Independents

Long Term: Support Gas EconomyAdvanced RecoveryUnconventional Natural GasCO2 SequestrationData Preservation

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DOE Sponsored Research

What Should be the Focus?


Support efforts to advance DOE O&G

What you will hear- “Corporate Welfare” Three myths:

Wealthy industry does not need federal support

It is a poor federal investmentBeing done by the private sector

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What can be done?


Myth 1: Wealthy Oil Industry

~10 percent ROI*

*Source:Energy Information

Administration, FRS

25

20

15

10

5

0

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

Sources:FRS companies: Energy Information Administration, Form EIA-28 (Financial Reporting System).S&P Industrials: Compustat PC Plus, a service of Standard and Poor’s.

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Per

cen

t

Layoffs

Layoffs

Layoffs

FRS companies

S&P Industrials

Amerada HessAmocoAnadarkoAshlandARCOBP AmericaBurlington ResourcesChevronCoastalDuPont (Conoco)EnronExxon

FinaKerr-McGeeMobilOccidentalOryxPhillips PetroleumShell OilSunTexacoUnion Pacific Res.UnocalUSX (Marathon)


Myth 2: Being Done by the Private Sector

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NJ

Ma

Washington

Oregon

Nevada

California

Idaho

Montana

Wyoming

Utah

Arizona

Colorado

New Mexico

Texas

Oklahoma

Kansas

Nebraska

South Dakota

North Dakota

Illinois

Louisiana

Arkansas

Missouri

Flor

Maine

Mich

Minnesota

Iowa

Miss AlaGeorgia

Tennessee

Kentucky

S Carol

N Carolina

VirginiaWV

Wisc

IndOhio

Pennsyl

New York

VtNH

CtRI

DelawareMd

Hawaii

Alaska Exxon Prod. Res.

ARCO

Marathon

Amoco

Mobil

Chevron

Conoco

TexacoShell

Phillips

ARCO

Marathon

Amoco

Mobil

Chevron

Conoco

Texaco

Phillips


21992 1994 1996 1998

3

4

5

Pri

vat

e S

ecto

rB

illi

on

$

Year

2000 2002 2004

Myth 2: Being Done PrivatelyOil and Gas R&D Funding

Private Sector Data: Chris Ross, World Energy (2001, v. 4, no. 2)

1998 $

Note Scale Difference

DO

E O

&G

Mil

lio

n $

20

40

60

80

100

120

Fuel Cells and Gas Turbines removed

from 1996-1999 for comparison

Scott W. Tinker, BEG, 2002 Arthur L. Smith, CFA - Abilene, Texas, 1996Arthur L. Smith, CFA - Abilene, Texas, 1996

19741974 19791979 19841984 19891989 19941994 20002000 20052005

200,000200,000

400,000400,000

600,000600,000

800,000800,000

1,000,0001,000,000

1,200,0001,200,000

1,400,0001,400,000

1,600,0001,600,000

Total Total Number of Number of Petroleum Petroleum

Industry Industry EmployeesEmployees

(FRS Companies)(FRS Companies)

Global Global Energy Energy Demand will Demand will Counter Counter TrendTrend

Myth 2: Being Done Privately

Oil Company Employment

AAPG WebsiteAAPG Website


7676

140140

255255

191191

9090

4848

151533

2323

00

5050

100100

150150

200200

250250

300300

>25>25 26-2926-29 30-3430-34 35-3935-39 40-4440-44 45-4945-49 50-5450-54 55-5955-59 60+60+

Age (yrs)Age (yrs)


1998 Demographics For a Typical Major

Age Brackets for Geoscientists Worldwide

Insuffic

ient Replace

ment

Insuffic

ient Replace

ment Increasing Retirement

Increasing Retirement

1975-83 Boom Hiring1975-83 Boom Hiring

Source: AAPG Website


*with normal attrition and no replenishment

Gone Gone FishingFishing

323

76

140

255

191

153

0

50

100

150

200

250

300

>25 26-29 30-34 35-39 40-44 45-49 50-54 55-59 60+Age (YRS)

Age Brackets for Geoscientists Worldwide (2008*)


2008 Demographics For a Typical Major


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Source: AGI

10,000

20,000


U.S. UNIVERSITY ENROLLMENTS

Geoscience Graduate Students

Petroleum Engineering


22,621

2410

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Private

Federal

Myth 3: Poor Federal Investment

* Private sector = 17.7 Tcf * $1.42 average price/Mcf from 1970-1996*90% (1-average FRS ROI from 1970-1996)** Economic Value = 17.7 Tcf * $1.42 average price/Mcf from 1970-1996*Economic Value Multiplier of 2.48 (BEA, 1992)

$241 Federal$23 Billion Private*

$62 Billion (257x) Economic Value**$2.5 Billion (10%) Private ROI

2,513

62,332

17.7 Tcf Incremental Unconventional Gas through 1996Federal Investment ~ 1% of PrivateFederal Return on Investment ~ 257x Private


Time

O&G R&D FundingUniversity

Enrollments O&G Employment

Demand, esp. Natural Gas

Technology Requirements

The Challenge

Today


Write/Visit Your Congressman

Write the Vice President and OMBMust hear from the major oil companies

Emphasize: Technical Business: Need Energy ResearchIndependents: U.S. EOR and EGRThe U.S. Transition to Natural GasGas Economy: Research and TechnologyDemographics: Students and IndustryA Changed World: New Private/Federal

Model QAd1023

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