Mexico’s new chapter in natural gas - Latest Oil, Energy & · PDF file ·...
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Mexico’s new chapter in natural gas
16th Mexican Energy Conference November 13-14, 2012
Houston, Texas
Dr. Edgar Rangel Germán
2
Agenda
• Current supply and demand situation of natural gas in Mexico
• Developing Mexico’s gas resources and the implications of new gas discoveries
• The role of shale gas
• Infrastructure challenges
• “Gasification of México”
• Can Mexico become an energy hub?
• Final remarks
3
Background
• From some 7 to 8 trillion barrels of conventional oil, 3.3 trillion barrels are considered technically recoverable, and 1 trillion have already been produced.
• Seven trillion of non-conventional (heavy oil, bitumen, oil sands, and oil shales). Estimated technically recoverable quantities vary from 1 trillion to 3 trillion barrels; roughly 0.01 trillion barrels have been produced to date.
Source: IEA
• From some 6 trillion barrels of conventional oil, 3.3 trillion barrels are considered technically recoverable, from these, 1 trillion have already been produced.
• In addition, there are 6 trillion boe of conventional and non-conventional gas.
Additional supply required:
≈5,000 mmpcd
Estimated gas demand for
2025
11,063 mmpcd
2010 Production
5,916 mmpcd
Source: Prospective natural gas market 2010-2025 (SENER)
In the 2010 – 2025 period, SENER forecasts an average annual growth of at least
2.4%, this figure is even greater than the worldwide average estimated by the
Energy Information Administration, 2.0%.
Demand forecast 2025
(mmcfd)
Historical Forecast
MM
CFD
Natural Gas Demand forecast
6
Other Sectors
Natural Gas production
7
Natural Gas production (mmcfpd)
Natural Gas by Asset (mmcfpd)
Natural Gas production by type (mmcfpd)
Source. CNH
Gas Natural Supply
In the short term, imports will help to meet the demand of our growing economy.
Producción gas natural por activos integrales, includes Nitrogen
(mmcfd) Fuente: Sistema de Información Energética
con información de Petróleos Mexicanos.
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
8,000.0
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80
19
81
19
82
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83
19
84
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85
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86
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87
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88
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95
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96
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97
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99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Macuspana Muspac
Burgos
Cantarell
Samaria-Luna Abkatún-Pol Chuc
Bellota Jujo
Imports
(mm
cfd
)
2008 2009 2010 2011 2012
447 422 536 791 794
Imports mmcfd
8
CAPEX OPEX
mmp mmp
Burgos 6,070 221,417 44,971 2011-2025
Macuspana 297 5,914 6,207 2011-2042
Veracruz 1,008 24,952 10,254 2011-2025
Lankahuasa 182 5,101 1,409 2011-2025
Gas del terciario 276 6,867 1,346 2011-2034
Lakach 845 24,808 4,359 2011-2023
PeriodGas production
mmmpc
Natural Gas Oil and gas projects
(Associated gas) Gas projects
(non- associated gas)
9
2012 Gas Production (Jan-Sept)
Trends in Gas Production
Source: BP Statistical Review of World Energy, 2012
mm
cfd
mm
cfd
10
0
10
20
30
40
50
60
70
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
US Canada Russian Federation
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Trinidad & Tobago Argentina Bolivia Peru
Big players
Latin America
Trends in Gas Production
11
0
2
4
6
8
10
12
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
China Indonesia Malaysia Nigeria
mm
cfd
0
2
4
6
8
10
12
14
16
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Iran Oatar Saudi Arabia United Arab Emirates
0
2
4
6
8
10
12
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Norway Turkmenistan United Kingdom
mm
cfd
mm
cfd
Europe Middle East
Asia
Source: BP Statistical Review of World Energy, 2012
2004 2005 2006 2007 2008 2009 2010 2011 2012
20,740 20,433 19,957 18,957 18,077 17,650 16,815 17,316 17,224
20,474 20,703 20,087 20,486 20,562 20,111 20,694 20,905 17,612
22,679 22,743 22,311 23,602 22,720 22,614 23,727 23,044 26,804
Proved Probable Possible
Historical Gas Reserves
3P 63,893 63,879 62,355 63,045 61,359 60,374 61,236 61,266 61,641
Source: CNH 12
Reserves-Production Ratio
3P 2P 1P
32
19
10
33
20
11
26
14
7
Reserves-Production Ratio Mexico (years)
PCE
Aceite
Gas
Marina Noreste Marina Suroeste Norte Sur
9
33
41
14
7
18 18
13
6
9
5
10
Reserves-Production Ratio (years)
3P
2P
1P
These metrics must drive the Energy Policy design
New Projects
2011 Discoveries
Source: CNH 17
Basin Field Well Type 3P mmmpc
Burgos 56.1
Nejo Lindero-1 Wet gas 17.05
Bragado Bragado-1 Wet gas 13.75
Bocaxa Bocaxa-1 Wet gas 25.3
Sabinas 118.25
Emergente Emergente-1 Dry gas 118.25
Veracruz 197.45
Chancarro Chancarro-1 Dry gas 27.5
Gasífero Gasífero-1 Black oil and gas
169.4
Sureste 7664.8
Pareto Pareto-1 Light oil 614.35
Tokal Tokal-1 Light oil 68.75
Xanab Xanab-101 Light oil 189.75
Tsimin Tsimin-1DL Light oil 149.05
Kab Kinbe-1 Light oil 1284.8
Piklis Piklis-1 Dry gas 994.95
Nen Nen-1 Dry gas 448.25
Hokchi Hokchi-101 Black oil 512.6
Sihil Sihil-8 Black oil 704.55
Kayab Kayab-1 Black oil 2697.75
Total 8036.05
U.S. Natural Gas Supply, 1990-2035 (US dry gas trillion cubic feet per year)
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Investment in Shale Gas
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Select basins, 2009 (trillion cubic feet)
Proved Natural Gas Reserves
Technically Recoverable Shale Gas Resources
Source: US Energy Information Administration
Shale Gas Resources
-
200
400
600
800
1,000
1,200
1,400
Ch
ina
Un
ite
dSt
ate
s
Arg
en
tin
a
Me
xico
Can
ada
Ch
ile
Bo
livia
Co
lom
bia
Ve
ne
zue
la
107
273
13 12 62 4 27 4
179
1,275
862 774
681
388
64 48 19 11
2.93 20.60 1.46 1.77 5.63
0.05
0.45
0.37 0.65
3.1 22.8 1.5 2.2 3.0
0.1
0.1
0.3 0.7
Production Consumption
Shale Gas
Well Target Total depth
(m)
End of
completion
Producing
interval (m)
Drilling
days
Completion
days
Result
EMERGENTE 1 Cretácico 4,071 17-feb-11 3,618-3,670 78 50 Commercial producer of dry gas
PERCUTOR 1 Terciario 3,436 30-mar-12 3,330-3,390 45 75 Commercial producer of dry gas
MONTAÑES 1 Cretácico 3,200 30-abr-12 3,155-3,080 65 191 Non commercial producer of gas and condensate
HABANO 1 Cretácico 3,770 15-abr-12 3,703-3,643 74 44 Commercial producer of gas and condensate
NOMADA 1 Cretácico 2,850 30-jun-12 2,806-2,737 37 215 Non producer
ARBOLERO 1 Jurásico 4,007 07-jul-12 3,878-3,825 100 59 Commercial producer of dry gas
21 Source: Pemex
It makes sense that the Tampico-Misantla basin will
be the best
Shale Gas Strategy
• Non-Conventional Play Study:
K Eagle Ford-Agua Nueva • Drilling of Emergente-1
Confirming Play Eagle Ford continuity from Texas to Mexico
• Completion of Emergente-1 • The first producer well in Mexico. • 81 bcf of 3P certified reserves. • Study of Nonconventional Upper Jurassic
Play La Casita- Pimienta • Montañes Drilling • Use of superficial microseismic in Montañes • Magnetotelluric Test in Montañés-1 • Percutor-1 drilling.
• Drilling of Percutor-1 • Drilling of Habano-1, • Drillling of Arbolero-1, • Completion of Montañés-1 and
Nómada-1 wells. • Initial development studies of
some fields. • Anhelido-1 and Habano-21 drilling • Shale Laboratories (Five Projects)
to evaluate, select and execute new technologies
2010 2011 2012
Source: Pemex 22
SENER estimated Mexico would need to invest more than $10 billion annually for the next 10 years to tap into its shale resources that could double the country's 6 Bcf/d production. 175 wells will be drilled during the next 4 years.
PEMEX will invest 240 million dollars for the exploration of two possible shale gas production fields or unconventional gas, located in the north of the country. The funds come from the Oil Sector Fund Sener-CONACYT and the project would begin this year.
Challenges to developing Shale gas in Mexico
• Technology: Well engineering and reservoir engineering
• Identify sweet spots in the plays.
• How much gas/oil is producible? Where is it?
• Thousands of wells to be drilled, geosteering.
• Water, Sand/proppant and other materials used while fracking.
• Cementing and Completion, microseismic.
• Environmental issues, carbon footprint.
• Infrastructure to transport gas.
• Strategies and time to develop massively.
• Pricing.
• Human Resources: The great crew change!!
23
Appropriate regulation should take some of
these issues into account.
Key issues
• The “Golden rules” to address environmental and social impacts:
1. Measure, disclose & engage
2. Watch where you drill
3. Isolate well & prevent leaks
4. Treat water responsibly
5. Eliminate venting, minimize flaring & other emissions
6. Be ready to think big
7. Ensure a consistently high level of environmental performance
24
We have excellent timing to implement these rules, as we are just starting…
Source: OECD/IEA (2012)
The role of shale gas
• Self sufficiency.
• Access to the fuel of the future for a long time.
• Lower prices.
• Jobs creation.
• Added value, revenues.
• Triggering of other sectors: industrial, electric, petrochemicals, etc.
25
An appropriate balance in policy-making between
prescriptive regulation and performance-based regulation
in order to guarantee high operational standards while also promoting innovation
and technological improvement… (IEA, 2012)
However, Shale Gas won´t solve all the challenges that Mexico is facing.
Shale gas should be just one more component of Mexico’s hydrocarbon policy.
Current Infrastructure 2011
Fuente: Pemex y Prospectiva del Mercado de Gas Natural 2012-2026. SENER. 27
Pipelines: 11,296 km.
11 gas processing centers (compression).
328,310 HP compression capacity
Source: Prospectiva del Mercado de Gas Natural 2012-2026. SENER
Planned gas pipelines
28
Gas Pipeline CAPEX (mmUSD)
Lenght (Kms.)
Capacity (mmcfd)
Main user
1 Manzanillo Guadalajara 358 313 500 CFE
2 Tlaxcala-Morelos 210 170 320 CFE
3 Tamazunchale – El Sauz
600 200 630 CFE
4 Chihuahua 500 385 850 CFE
5 Frontera- Los Ramones-Centro
3,291 1,221 2,100* 1,400**
PGPB
6 Noroeste 2,448 2,041 1,606 CFE
7 Zacatecas (2 phases) 110 + 14.8
165 20 + 20 Private
8 Yucatán 125 75 300 PGPB
9 Jáltipan – Salina Cruz* 1,760 222 90 PR
*Rehabilitación del ducto
CFE Comisión Federal de Electricidad PGPB Pemex Gas y Petroquímica Básica PR Pemex Refinación
*2,100 from the border to Los Ramones **1,400 from Los Ramones to Central Mexico
Total CAPEX: 9,416 mmUSD
Total Lenght: 4,792 Km
Planned additions to current Infrastructure
LNG Terminals
Source: World LNG Gas Report 2011 IGU
Terminal CAPEX MMUSD
Storing capacity (cubic meters)
Max capacity MMCFD
Start of Operations
Altamira 379 300,000 0.76 2006
Costa Azul 875 320,000 1.3 2008
Manzanillo 783 300,000 0.5 2012
Indonesia, 4%
Nigeria, 20%
Peru, 11%
Qatar, 31%
Yemen, 3%
Mexico´s 2011 imports
29
International Role of LNG
A very large share of the LNG is used in the Asia-Pacific region
Source: World LNG Gas Report 2011 IGU 30
International Gas Prices
Source: SENER with information from BP and CRE
-8%
17%
-16% -57%
-54%
-55%
31
*Average annual price 1 Average price of the first hand sales
Supply and demand for natural gas
Source: Outlook for Energy a View to 2030, ExxonMobil.
A mix for the natural gas supply for Mexico should be determined
32
Main sources of Natural Gas
33 Source: CNH (2012)
Associated gas (Cantarell, Ku-Maloob-Zaap, Litoral
de Tabasco, Samaria-Luna)
Price Availability
Small ?
Small ?
Medium
High
Medium
Huge!!
Associated gas from Chicontepec
Non-associated gas: Burgos, Veracruz
Imported gas: Pipelines from the north
Imported gas from LNG plants: Altamira & Manzanillo
Shale gas Huge!!
Small ? Non-associated gas:
Deep waters
Natural Gas Production forecast
Estrategia Nacional de Energía 2012, Producción de gas natural por grandes proyectos
The two scenarios of the ENE consider large volumes of shale gas
Inertial Scenario
Scenario ENE
mm
cfd
mm
cfd
34
“Gasification of Mexico” as a Transition policy
GASIFICATION OF MEXICO
TECHNOLOGY
• Consumption reduction • Increase efficiency • Low-carbon sources • CCUS • Natural repositories and
storage sites • EOR:
Conversion Bridge to CCUS Storage
• Synergies.
ECON TOOLS • Life-cycle analysis • Merit order
REGULATION
STRATEGIES • Infrastructure • Energy security • Long-term planning (30-50 years) • Avoid bad economic policies • Define scale and pace
37
Main natural gas derivatives*
Ammonia
Methanol
Agriculture, clothing, plastics,
automotive, metals,
photographic, paper, etc.
Plastics, automotive, construction,
pharmaceutical, photography, clothing, etc.
Basic petrochemical
Secondary petrochemical
Processing or manufacturing
Main end-use industries
* With information from the Mexican Petroleum Institute.
Nitrogenous fertilizers, synthetic resins and fibers,
etc.
Automotive parts, phones, furniture appliances, tires,
etc.
Carpets, explosives, plasticizers, adhesives,
dyes, etc.
Synthetic resins, fuel (gasoline), etc.
Disinfectants, fumigants, synthetic drugs, explosives,
etc.
Solvents, inks, wetting, bactericides, adhesives,
etc.
Acrylonitrile
Formaldehyde, methylamines, MTBE1/TAME2
Natural gas (methane)
1 Methyl Tertiary Butyl Ether 2 Tertiary-Amyl Methyl Ether
38
Energy planning and legal reforms
• Energy planning should not result from operators’ production forecasts. It must be the result of planning and energy policy.
• First we need technical solutions before legal reforms: Do we know how to develop our shales? Is concession or risk contract the right model?
• Both regional and integral (consider all sectors) planning process is needed.
• While dealing with reforms we need to keep in mind that we can’t defeat the basic laws like Physics, Chemistry or market: can you really treat gas separately from liquids??
• With the proper legal framework Mexico could become an energy hub. 40
The 2008 Energy Reform had some
caveats in its design and unfortunately
has not been properly
implemented
A new reform must consider the
international arena, most importantly our
North-American region
41
Mexico as an energy hub
• Mexico has a unique geographical location
• Mexico has access to the main natgas markets.
• We must design our technical solutions, public policies and legal framework, thinking on a larger scale.
Final Remarks
Demand grows, but it shouldn’t be the only
driver for planning
• Industry can´t grow
• Natgas-powered electricity plants can´t
grow
• Petrochemical industry is severely affected
• Cement/Copper/Etc. power plants are stuck
• New Investment is discouraged
• Etc.
Low gas prices in the
international markets, not necessarily forever
Gas shortfall: • Critical alerts • Imports • Losses
43
No natgas molecule
Final Remarks
• Fossil fuels will still be the major source of energy for the next 100 years, and there are plenty of resources in the world and in Mexico.
• We must foster the natural gas transition (The gasification of México) and low-carbon energy econom.
• We require new strategies in the way we finance and manage shale gas/oil projects. Shale gas eventually will become the main source of natural gas for Mexico.
• Appropriate regulation is fundamental to the massive development of shale gas and to increase natural gas reserves (not only resources!).
• Generational replacement is an issue. We will need lots of extremely talented and certified professionals.
• The era of boring oil is over! And so the most interesting chapter in the Mexican Oil and Gas Industry is just beginning.
• The gasification of Mexico is the best strategy towards transition, self-sufficiency and why not? Turn Mexico into an energy hub.
44
The future role of USA
46
• According to the IEA, the US will become the world´s largest oil producer by 2017.
• The increase domestic production and energy efficiency measures will reduce the imports into the US. The US will become an oil exporter in 2035.
Source: US set to become biggest oil producer, Financial Times, Guy Chazan and Ed Crooks, Novemeber 12, 2012.