Golden Rules For A Golden Age of Gas

Golden Rules for a
Golden Age of Gas

World Energy Outlook
Special Report on Unconventional Gas
Golden Rules for a

Golden Age of Gas
World Energy
gy Outlook
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Gas
Natural gas is poised to enter a golden age, but this future
hinges critically on the successful development of the
worlds vast unconventional gas resources. North American
experience shows unconventional gas notably shale gas
can be exploited economically. Many countries are lining up to
emulate this success.
But some governments are hesitant, or even actively opposed.
They are responding to public concerns that production might
involve unacceptable environmental and social damage.
This report, in the World Energy Outlook series, treats these
aspirations and anxieties with equal seriousness. It features two
new cases: a Golden Rules Case, in which the highest practicable
standards are adopted, gaining industry a social licence to operate;
and its counterpart, in which the tide turns against unconventional
gas as constraints prove too difcult to overcome.
The report:
Describes the unconventional gas resource and what is involved
in exploiting it.
Identies the key environmental and social risks and how they
can be addressed.
Suggests the Golden Rules necessary to realise the economic and
energy security benets while meeting public concerns.

Spells out the implications of compliance with these rules for
governments and industry, including on development costs.
Assesses the impact of the two cases on global gas trade

patterns and pricing, energy security and climate change.
For more information, and the free download of this report,

please visit: www.worldenergyoutlook.org
WEO-2012 to be released 12 November 2012
Golden Rules for a

Golden Age of Gas
World Energy Outlook
Special Report on Unconventional Gas
INTERNATIONAL ENERGY AGENCY

The International Energy Agency (IEA), an autonomous agency, was established in November 1974.
Its primary mandate was and is two-fold: to promote energy security amongst its member
countries through collective response to physical disruptions in oil supply, and provide authoritative
research and analysis on ways to ensure reliable, affordable and clean energy for its 28 member
countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among
its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports.
The Agencys aims include the following objectives:
Secure member countries access to reliable and ample supplies of all forms of energy; in particular,
through maintaining effective emergency response capabilities in case of oil supply disruptions.
Promote sustainable energy policies that spur economic growth and environmental protection
in a global context particularly in terms of reducing greenhouse-gas emissions that contribute
to climate change.
Improve transparency of international markets through collection and analysis of
energy data.
Support global collaboration on energy technology to secure future energy supplies
and mitigate their environmental impact, including through improved energy
efciency and development and deployment of low-carbon technologies.
Find solutions to global energy challenges through engagement and
dialogue with non-member countries, industry, international
organisations and other stakeholders.
IEA member countries:

Australia
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Netherlands
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OECD/IEA, 2012
Spain
International Energy Agency
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United States
Please note that this publication
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The terms and conditions are available
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The European Commission

also participates in
the work of the IEA.
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Table of Contents
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Executive Summary
The Golden Rules
Introduction
3
9
13
15
Addressing environmental risks
17
The environmental impact of unconventional gas production

Shale and tight gas developments
Coalbed methane developments
Water use
Treatment and disposal of waste water
Methane and other air emissions
Golden Rules to address the environmental impacts
Measure, disclose and engage
Watch where you drill
Isolate wells and prevent leaks
Treat water responsibly
Eliminate venting, minimise flaring and other emissions
Be ready to think big
Ensure a consistently high level of environmental performance
Complying with the Golden Rules
Implications for governments
Implications for industry
18
21
28
30
32
38
42
43
44
45
45
46
47
48
49
49
52
The Golden Rules Case and its counterpart
63
Paths for unconventional gas development

Golden Rules and other policy conditions
Unconventional gas resources
Development and production costs
Natural gas prices
Other assumptions
64
65
68
71
73
75
Table of Contents
The Golden Rules Case

Demand
Supply
International gas trade, markets and security
Investment and other economic impacts
Climate change and the environment
The Low Unconventional Case
Demand
Supply
International gas trade, markets and security
Climate change and the environment
OECD/IEA, 2012
76
76
81
86
88
91
92
92
93
96
98
99
Country and regional outlooks
101
United States
Canada
Mexico
China
Europe
Australia
102
108
111
115
120
130
ANNEXES
137
Annex A. Units and conversion factors
137
Annex B. References
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Table 2.3 Natural gas price assumptions by case

(in year-2010 dollars per MBtu)
'Z
Case
>h
Case
2010
2020
2035
2020
2035
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Figure 2.2 World primary energy demand by fuel in the Golden Rules Case
5 000
Addional
to 2035
4 000
2010
3 000
2 000
1 000
0
Oil
Gas
Coal
Renewables
Nuclear

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d
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Table 2.4 Natural gas demand by region in the Golden Rules Case (bcm)
2010
2020
2035
2010-2035*
1 601
1 756
1 982
0.9%
680
717
787
0.6%
K
104
130
137
1.1%
1 670
2 225
3 130
2.5%
448
486
560
0.9%
1 199
OECD

United States
Japan
Non-OECD

Russia

China
110
323
593
7.0%
India
63
100
201
4.7%
D
>
3 271
3 982
5 112
1.8%
547
592
644
0.7%
t
European Union

OECD/IEA, 2012
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78
/
d'Z

d
Table 2.5 World primary energy demand by fuel in the Golden Rules Case
D
Share
2010
2020
2035
2010
2020
2035
Gas
Coal
Biomass
K
K
DD

OECD/IEA, 2012
W'Z
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79
Figure 2.3 ( OHFWULFLW\JHQHUDWLQJFRVWVIRUQHZFRDODQGQDWXUDOJDVUHG
Dollars per MWh (2010)
power plants in selected regions in the Golden Rules Case, 2020

100
Coal ultrasupercrical
80
Natural gas
combined-cycle
gas turbine
60
40
20
0
United States
China
European Union
d
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t
80
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K

d
Table 2.6 Natural gas production by region in the Golden Rules Case (bcm)
2010
2020
2035
Share of
unconv*
Share of
unconv*
1 183
36%
1 347
Canada
160
39%
Mexico
50
3%
609
OECD
United States

Poland
K
Australia
Non-OECD

Russia
20102035**
Share of
unconv*
49%
1 546
60%
1.1%
174
57%
177
67%
0.4%
52
12%
87
43%
2.2%
59%
726
67%
821
71%
1.2%
11%
37%
34
90%
7.1%
49
11%
115
51%
170
65%
5.1%
2 094
2%
2 635
7%
3 567
20%
2.2%
0.8%
637
3%
718
4%
784
6%
China
97
12%
246
45%
473
83%
6.6%
India
51
2%
75
21%
111
80%
3.2%
Indonesia
88
106
2%
153
37%
2.2%
D
79
101
1%
135
8%
2.2%
Algeria
>

t
European Union
42
9%
53
9%
72
48%
2.1%
3 276
14%
3 982
21%
5 112
32%
1.8%
201
1%
160
7%
165
47%
-0.8%
^
OECD/IEA, 2012

81
d'Z
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W

Figure 2.4 Unconventional natural gas production by type in the Golden
bcm
Rules Case
1 750
70%
1 500
60%
Tight
Coalbed methane
Shale
1 250
50%
1 000
40%
750
30%
500
20%
250
10%
Share of unconvenonal
in total producon
(right axis)
0%
2010
2015
2020
2025
2030
2035
dE
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9
OECD/IEA, 2012
' Z
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d

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82

Figure 2.5 Ten largest unconventional gas producers in the Golden Rules
Case, 2035
0%
20%
40%
60%
80%
100%
Shale
United States
China
Coalbed methane
Canada
Tight
Australia
Share of unconvenonal
in total producon
(top axis)
India
Indonesia
Russia
Mexico
Argenna
Poland
0
100
200
300
400
500
600
bcm
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d h
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86
/
Figure 2.6 Natural gas net trade by major region in the Golden Rules Case
Net importer
Net exporter
2010
E. Europe/Eurasia
Addional
to 2035
Africa
Middle East
OECD Oceania
Lan America
OECD Americas
India
China
OECD Asia
OECD Europe
-500
-400
-300
-200
-100
100
200
300
bcm
Box 2.3 Implications for prices and pricing mechanisms
OECD/IEA, 2012
/

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d

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Figure 2.7 Cumulative investment in natural gas-supply infrastructure by
type in the Golden Rules Case, 2012-2035 (in year-2010 dollars)
Upstream: $6.9 trillion (2010)
Total: $9.7 trillion (2010)

Upstream:
convenonal
7%
22%
42%
OECD/IEA, 2012
88
2021-2035
36%
44%
Upstream:
unconvenonal
Transmission
and distribuon
29%
2012-2020
64%
56%
LNG chain
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d

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h

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d
^
h^

&d

Figure 2.8 Cumulative investment in natural gas-supply infrastructure by
Net importer
major region and type in the Golden Rules Case, 2012-2035

Upstream:
convenonal
OECD Americas*
OECD Europe
Upstream:
unconvenonal
China
India
Transmission
and distribuon
OECD Asia
Net exporter
E. Europe/Eurasia
LNG chain
Africa
Other Asia
Lan America
Middle East
OECD Oceania
0
400
800
1 200 1 600 2 000 2 400 2 800

Billion dollars (2010)
K'Z
OECD/IEA, 2012
d
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Table 2.7 World energy-related CO2 emissions in the Golden Rules Case
(million tonnes)
2010
2020
2035
2010-2035*
K

EK

30 336
34 648
36 795
0.8%
OECD/IEA, 2012

d ' Z K

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d
91

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^

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92
d>h'Z
&d
D

d
>h

/
/

Figure 2.9 Cumulative change in energy demand by fuel and sector in the
Low Unconventional Case relative to Golden Rules Case,
2010-2035
Coal
Oil
Total primary
energy demand
Gas
Nuclear
Renewables
Power and heat

generaon
Electricity
and heat
Total nal
consumpon*
-6 000
-4 000
-2 000
2 000
4 000
6 000
Mtoe
d
OECD/IEA, 2012
Supply
/>h
'Zh

h

d
' Z
d
93
/ > h
&

'ZdK

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Figure 2.10 Unconventional gas production by type and case
Low Unconvenonal
Case
Tight
2010
2020
Golden Rules Case
Coalbed
methane
2035
2010
2020
2035
Shale
2010
2020
2035
0
100
200
300
400
500
600
700
800
900 1 000
bcm
OECD/IEA, 2012
d > h
h ^
d h^
' Z
&dh
W / D /
> h
'Z
Z/Y
' Z /
>hZ
Z'
Z

94
Figure 2.11 Change in natural gas production by selected region in the
Low Unconventional Case relative to the Golden Rules Case

2020
China
United States
European Union
India
Canada
Poland*
Argenna
Mexico
Indonesia
Ukraine
Australia
Qatar
Iran
Turkmenistan
Russia
-300
Addional
to 2035
-250
-200
-150
-100
-50
50
100
150
bcm
dWh
Box 2.4 What could lead to a Low Unconventional Case in China?

d

d
K'Z

W

' Z

' Z d

x dd
x Z / h
OECD/IEA, 2012
^
E
95
h^K'Z

x dD

h^d
D

x t

d
x t
t
K
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/
OECD/IEA, 2012
d > h
' Z d
>h
E
&dh^
'Z
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>E'>h
'Z
96
Figure 2.12 Major natural gas net importers by case
1
European Union
2020
2010
China
OECD Asia
Low Unconvenonal
Case
India
Golden Rules
Case
OECD Americas
2035
Other
Low Unconvenonal
Case
Golden Rules
Case
0
250
500
750
1 000
1 250
1 500
bcm
ZD
>h
'Z

>h
/
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>E'h^
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Box 2.5 A hybrid case
OECD/IEA, 2012
d

' Z
>
hW

E

d
WEO-2011
OutlookE
97

s>h

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d
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DE
d
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dh
&
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h ^
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Figure 2.13 Natural gas-import bills by selected region and case

250
2010
200
2035:
Golden Rules
Case
150
2035:
Low Unconvenonal
Case
100
50
0
OECD/IEA, 2012
-50
98
United
States
India
Japan
China
European
Union
/'W
>h'Z&&
'W
'Z
Figure 2.14 Spending on net-imports of natural gas as a share of real GDP
at market exchange rates by case
1.0%
European Union*
Japan*
0.8%
China*
United States*
0.6%
0.4%
0.2%
0%
-0.2%
1990
2000
2010
2020
2030
2035
^'Z>h

>h

d>h
K'
Z d &
> h

OECD/IEA, 2012
d

' Z >
h
99
Figure 2.15 World power generation mix by case
2010
4 572 TWh
Low Unconvenonal
Case
21 201 TWh
36 700 TWh
2035
7 100 TWh
Golden Rules
Case
36 700 TWh
8 780 TWh
0%
20%
Coal
40%
Oil
Gas
60%
Nuclear
80%
100%
Renewables
Edt
OECD/IEA, 2012
E

100
Chapter 3
Country and regional outlooks
Are we moving towards a world of Golden Rules?
Highlights
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OECD/IEA, 2012
x E

d

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Chapter 3 | Country and regional outlooks
101
United States
Z
h
h^ d

^

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h ^ t

h^
dh^

dh^
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h^
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Table 3.1 Remaining recoverable natural gas resources and production by
type in the United States
W
Recoverable resources (tcm)

End-2011
h
2005
2010
Share of total
(2010)
^
d

OECD/IEA, 2012
Share of total

Total
74
100%
511
609
100%
^/
102
Figure 3.1 Major unconventional natural gas resources in North America

Horn
River
Montney
Mannville
Group (CBM)
CANADA
Colorado Group
Belly River (CBM)
Horseshoe
Canyon (CBM)
Frederick Brook
Bakken
Utica
Horton
Bluff
Powder River (CBM)

Antrim
Niobrara
UNITED STATES OF AMERICA
Uinta (CBM)
Piceance (CBM)
New Albany
Raton (CBM)
Monterey
Fayetteville
San Juan (CBM)
Barnett/
Woodford
Woodford
Marcellus
Devonian
Utica
Barnett Haynesville
Tuscaloosa
Eagle
Ford
Eagle Ford,
La Casita
MEXICO
Pimienta
Current shale plays

Prospective shale plays
Maltrata
Current coalbed
methane (CBM)
Prospective coalbed
methane (CBM)
This document and any map included herein are without prejudice to the status of or sovereignty over any territory,
to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
OECD/IEA, 2012
Regulatory framework

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103

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OECD/IEA, 2012
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h^

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h ^

t

h
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105

W

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h^
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Figure 3.2 Natural gas balance in the United States in the Golden Rules
bcm
Case*
100%
1 000
800
80%
600
60%
400
40%
200
20%
Net trade
Producon
Share of unconvenonal in
total producon (right axis)
0%
-20%
-200
2000
2010 2015 2020
2025 2030
2035
OECD/IEA, 2012
W d
/ > h
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dWh^

/
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^
106

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Table 3.2 Natural gas indicators in the United States by case
Golden Rules
Case
W
h
^
Delta*
2010
2020
2035
2020
2035
2035

h
E
>h
Case
Imports as a share of demand
^
dK
OECD/IEA, 2012
'Z>h/
d h ^
'Z^
107
dd
h^

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OECD/IEA, 2012
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h^
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108
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t
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d

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109
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d
h ^ > Z
d
W
h

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d

dh^

t >E' W
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/
bcm
Figure 3.3 Natural gas balance in Canada in the Golden Rules Case*
200
80%
Net exports
175
70%
Demand
150
60%
125
50%
100
40%
75
30%
50
20%
25
10%
0%
0
2000 2010
2015
2020
2025
2030
2035
OECD/IEA, 2012
d
110
/>h
/
E
,
dd

'Z>h

'Z
>h

^

Table 3.3 Natural gas indicators in Canada by case
>h
Case
Golden Rules
Case
2010
2020
2035
2020
2035
Delta*
2035
W
^

h
E
^
dK
'Z>h/
Mexico
Z
OECD/IEA, 2012
D
/
h ^
D t

d
/E^
111
D D

&
^ d
>

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&
W

W

/

W

OECD/IEA, 2012
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d

,
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112
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d
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W
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h^d
D
E&d
OECD/IEA, 2012
/'ZD

113
Shale and

D&/>h
bcm
Figure 3.4 Natural gas balance in Mexico in the Golden Rules Case*
125
75%
100
60%
75
45%
50
30%
25
15%
Net imports
Producon
0%
2000
2010
2015
2020
2025
2030
2035
d
OECD/IEA, 2012
ZD

/'Z
dd
/
h^>E'

,
D/
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K
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^

114
Table 3.4 Natural gas indicators in Mexico by case

Golden Rules
Case
>h
Case
Delta*
2010
2020
2035
2020
2035
2035
W
h
^

h
E
^
dK
'Z>h/
China
Z
d

d

^d
dK
^:&
OECD/IEA, 2012

D
WhD^

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E
t Z/ d
D>Z
D>ZD>Z
115

d
h^
Figure 3.5 Major unconventional natural gas resources in China
Songliao
Basin
Junggar
Basin
Tarim
Basin
Beijing
Ordos
Basin
Sichuan
Basin
Bohai
Basin
Tianjin
North
China
Basin
Shanghai
Wuhan
Chongqing
Shale gas
Coalbed methane
OECD/IEA, 2012
d
d

d

/
^

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^
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116

&

s


h ^ E

OECD/IEA, 2012
^

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h > D Z

d
EW ^/EKW

&
117

W

t

t

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t>
d
d
th &z W
d
ZD
ZD ^
th &z
W

OECD/IEA, 2012
W
'

/
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d
&h
h

118
bcm
Figure 3.6 Natural gas balance in China in the Golden Rules Case*
600
90%
500
75%
400
60%
300
45%
200
30%
100
15%
Net imports
Producon
0%
2000
2010
2015
2020
2025
2030
2035
d
Table 3.5 Natural gas indicators in China by case

Golden Rules
Case
2010
W
h
^
2020
2035
2020
2035
Delta*
2035

h
E
>h
Case
77
^
dK
OECD/IEA, 2012
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d d

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119
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Z

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OECD/IEA, 2012

^
W ^ ^
W E '
W W &
E ' ^ & W &
E h ^
h < W
h
h<'Wd
120
Figure 3.7
Major unconventional natural gas resources in Europe
Shale gas
Coalbed methane
Alum Shale
Northern
Petroleum
System
Baltic Basin
North SeaGerman Basin

Southern
Petroleum
System
Podlasie Basin
Lublin Basin
Dnieper-Donets Basin
Paris Basin
Pannonian-Transylvanian
Basin
Cantabrian
Basin
France SouthEast Basin
Carpathian-Balkanian
Basin
Thrace Basin
Southeast
Anatolian
Basin
121
OECD/IEA, 2012
Lusitanian
Basin
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
,

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122
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123
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Units and conversion factors
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References
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World Energy Outlook 2011K/W

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| eferences
13
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1 1
Chapter 3: Country and regional outlooks

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Annex
| eferences
1 3
WORLD
ENERGY
OUTLOOK
2012
OECD/IEA, 2012
RELEASE: 12 NOVEMBER 2012
WORLD ENERGY OUTLOOK 2012

Industry and government decision-makers and others with a stake in the
energy sector all need WEO-2012. It presents authoritative projections of
energy trends through to 2035 and insights into what they mean for energy
security, environmental sustainability and economic development.
Oil, coal, natural gas, renewables and nuclear power are all covered, including
the outlook for unconventional gas, building on the recent WEO special
report on the Golden Rules for a Golden Age of Gas. Global energy demand,
production, trade, investment and carbon dioxide emissions are broken down
by region or country, by fuel and by sector.
Special strategic analyses cover:
the Iraqi energy sector,
r examining its role both in satisfying the countrys
internal needs and in meeting global oil demand;
what unlocking the potential for energy efciencyy could do, country by
country and sector by sector, for oil security, the climate and the economy;
the cost of delaying action on climate change, as more and more carbonemitting facilities are built;
the water-energy nexus, as water resources become increasingly stressed
and access more contentious;
measures of progress towards providing universal access to modern
energy services; and
recent developments in subsidies for fossil fuels and renewable energy.
y
No-one can be sure today how the future energy system might evolve; but
many decisions cannot wait. The insights of WEO-2012 are invaluable to those
who must make them.
The Paris-based International Energy Agency is an intergovernmental body committed to advancing

security of energy supply, economic growth and environmental sustainability through energy policy and
technology co-operation. It was founded after the oil supply disruptions in 1973-1974 and consists of
28 industrialised countries, all members of the Organisation for Economic Co-operation and Development.
IEA/OECD, 2012
OECD/IEA, 2012
For more information, please visit our website: www.worldenergyoutlook.org
T
A
B
L
E
OECD/IEA, 2012
www.worldenergyoutlook.org
O
F
C
O
N
T
E
N
T
S
PART A
GLOBAL
ENERGY
TRENDS
PART B
FOCUS ON
ENERGY
EFFICIENCY
PART C
ENERGY
OUTLOOK
FOR IRAQ
PART D
SPECIAL
TOPICS
ANNEXES
OECD/IEA, 2012
UNDERSTANDING THE SCENARIOS
ENERGY PROJECTIONS TO 2035
OIL MARKET OUTLOOK
NATURAL GAS MARKET OUTLOOK
COAL MARKET OUTLOOK
POWER SECTOR OUTLOOK
RENEWABLE ENERGY OUTLOOK
CLIMATE CHANGE AND THE ENERGY OUTLOOK
THE OUTLOOK FOR ENERGY EFFICIENCY
PUSHING ENERGY EFFICIENCY TO THE LIMIT
10
UNLOCKING ENERGY EFFICIENCY AT THE SECTORAL LEVEL
11
IRAQS ENERGY SECTOR
12
ENERGY RESOURCES AND SUPPLY POTENTIAL
13
FUELLING RECONSTRUCTION AND GROWTH
14
IMPLICATIONS OF IRAQS ENERGY DEVELOPMENT
15
WATER FOR ENERGY
16
MEASURING PROGRESS TOWARDS ENERGY FOR ALL
17
ANNEXES
OECD/IEA, 2012
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IEA PUBLICATIONS, 9 rue de la Fdraon, 75739 Paris Cedex 15

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Golden Rules For A Golden Age of Gas

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Golden Rules for a

Golden Age of Gas

Golden Rules for a

energy security benets while meeting public concerns.

Assesses the impact of the two cases on global gas trade

For more information, and the free download of this report,

Golden Rules for a

INTERNATIONAL ENERGY AGENCY

IEA member countries:

The European Commission

World Energy Outlook | Special Report

DWorld Energy Outlook

Addressing environmental risks

The environmental impact of unconventional gas production

The Golden Rules Case and its counterpart

Paths for unconventional gas development

The Golden Rules Case

Country and regional outlooks

Annex A. Units and conversion factors

World Energy Outlook | Special Report

World Energy Outlook | Special Report

World Energy Outlook | Special Report

The Golden Rules

Measure, disclose and engage

Watch where you drill

Isolate wells and prevent leaks

The Golden Rules

Treat water responsibly

Be ready to think big

Ensure a consistently high level of environmental performance

World Energy Outlook | Special Report

inking the Golden Rules to a Golden Age of Gas

World Energy Outlook | Special Report

Chapter 1 | Addressing environmental risks

World Energy Outlook | Special Report

Chapter 1 | Addressing environmental risks

Figure 1.1 Drilling intensity in Johnson County, Texas

^ ' ' ' d K W h^ & & ^

World Energy Outlook | Special Report

Chapter 1 | Addressing environmental risks

World Energy Outlook | Special Report

Chapter 1 | Addressing environmental risks

Figure 1.2 Typical well design and cementing

World Energy Outlook | Special Report

High pressure fracturing

Shale gas flows into the

World Energy Outlook | Special Report

World Energy Outlook | Special Report

Perforation through casing and

First water, then coalbed

Chapter 1 | Addressing environmental risks

World Energy Outlook | Special Report

Chapter 1 | Addressing environmental risks

World Energy Outlook | Special Report

Box 1.4 :KDWLVLQDIUDFWXULQJXLG"

Chapter 1 | Addressing environmental risks

World Energy Outlook | Special Report

World Energy Outlook | Special Report

Chapter 1 | Addressing environmental risks

World Energy Outlook | Special Report

Chapter 1 | Addressing environmental risks

Rao of GHG emissions of gas over coal

^ ' ' ' d K W h^ & & ^

Figure 2.3 ( OHFWULFLW\JHQHUDWLQJFRVWVIRUQHZFRDODQGQDWXUDOJDVUHG