Section One

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40 years. While the early high performance production mechanism is dominated by the free gas flow from fractures and macroporosity, the lowered pressure production phase is dominated by gas desorption from the organic matter into the fracture system. The latter is not yet well understood and more research and development (R&D) is required to improve knowledge in this area. 22 Shale gas development relies upon large scale drilling efforts, which require the availability of extensive drilling, fracturing, and well completion services, as well as adequate human skills and expertise. Given these factors, it may be difficult for the US shale gas model to be repeated in other regions of the world. Moreover, the land footprint of operations may act as a further barrier in regions where population density is high, such as in Western Europe. Another significant issue, and probably the major one today, is the concern about the environmental impacts of shale gas development. The hydraulic fracturing process uses large amount of water to which is added potentially toxic chemical components. This raises concerns about excessive water withdrawals, and the risk of contamination of potable water aquifers. The disposal of large amounts of potentially toxic water flowing back from the wells may also cause surface pollution, if not properly controlled and managed. Some have also pointed to the risk of methane migration into domestic drinking water wells. 23 Moreover, given the dense drilling pattern necessitated by shale gas dvelopment, even if drilling pads are used, concerns have been raised about excessive land use encroachment, noise pollution and the risk of accidental blow-ups. The regulatory response to these public concerns has been varied among countries. In the US, the Environmental Protection Agency (EPA) has launched a study on the potential impacts of hydraulic fracturing on drinking water resources. Its initial findings are expected to be made public by the end of 2012. 24 Some US states have also decided to place a moratorium on hydraulic fracturing (New York; Maryland). And in France, legislation has been enacted to ban the use of hydraulic fracturing. How policymakers and regulators respond to public concerns regarding the potential environmental risks associated with shale gas development will have a major impact on the contribution of shale gas to future world energy supplies. There is no doubting the huge resource potential of shale gas, but given the state of play and the uncertainties just highlighted it is still too early to assess shale gas’ role in the future global energy supply. However, it will clearly have some impact, and not only in the natural gas market. It has the potential to impact oil markets too. 53 Chapter 1
54 In last year’s WOO, the potential effect of shale gas on oil markets was assessed as being rather limited. There is no doubt that a lower natural gas price per unit of energy could be seen as an incentive to use more gas. However, in electricity generation, oil’s share is low and has been falling in all regions, and this trend is expected to continue. In the transportation sector, natural gas could be used either directly in internal combustion engines as Compressed Natural Gas (CNG) – or even as LNG for heavy trucks – and indirectly in electricity-powered cars. According to the International Association for Natural Gas Vehicles, the global number of natural gas vehicles reached 12.7 million units in 2010, mostly in Asia and Latin America. However, this represents less than 1% of total commercial road vehicles. In the US, there are only 112,000 natural gas vehicles. Higher vehicle costs, lower energy density and a lack of refuelling stations prevent a more widespread use of natural gas in transportation. Large upfront subsidies are needed to overcome such hurdles, even if the CNG gas price premium remains high over a long period of time. Similarly, the development of electric vehicles faces many obstacles, which are explained in Box 2.1. In terms of the main impact on oil markets, it is likely that this will be through the use of horizontal drilling and hydraulic fracturing in shales that are in the gascondensate or oil maturity window. This would bring additional liquids supply that has the potential to be substantial. It is already happening today in the US. This is covered in Chapter 3. by 2035 it will have been overtaken, in the Reference Case, by coal use, which will represent 29% of total energy, similar to today, while oil’s share falls from 34% to 28%. Gas use will rise at faster rates than either coal or oil, both in percentage terms and volumes, with its share rising from 23% to 25%. The prospects for nuclear energy have clearly been affected by events at Japan’s Fukushima nuclear power plant in March this year (Box 1.6). The Reference Case reflects the immediate aftermath of the accident when nuclear power had to be replaced by other fuels. Moreover, moving forward, it is assumed that future prospects for nuclear power in Japan have been negatively affected. It has also led a number of other countries to effectively rule out future nuclear build, such as Germany, Switzerland and Italy (Box 1.6). It may also have implications elsewhere. In the Reference Case, nuclear energy still expands at an average rate of 1.7% p.a., although its contribution has been revised down from earlier estimates. Biomass use expands rapidly, and its contribution to total supply is approaching that of nuclear by 2035, at around 6%. Renewable energy, other than hydro, rises the
Page 1 and 2: Section One
Page 4 and 5: Chapter 1 World oil trends: overvie
Page 6 and 7: Box 1.1 Regulatory reform in the en
Page 8 and 9: commodities, the OTC market also in
Page 10 and 11: IHS CERA upstream capital cost MOVE
Page 12 and 13: in the strength of the dollar: in N
Page 14 and 15: to this, there is the dominance of
Page 16 and 17: Although these reduced growth targe
Page 18 and 19: Global and regional population leve
Page 20 and 21: average of 67% of the population in
Page 22 and 23: Table 1.3 Population by urban/rural
Page 24 and 25: Figure 1.8 Real GDP by region in 20
Page 26 and 27: Policies The Reference Case retains
Page 28 and 29: electric vehicles, which focuses on
Page 30 and 31: Box 1.5 Shale gas: recent developme
Page 34 and 35: Box 1.6 After Fukushima: unclear fo
Page 36 and 37: is Japan itself, which has been ask
Page 38 and 39: Figure 1.13 Fossil fuel use per cap
Page 40 and 41: Table 1.6 Medium-term Reference Cas
Page 42 and 43: Table 1.7 World oil demand outlook
Page 44 and 45: low, and well below levels seen in
Page 46 and 47: has also taken into account the pot
Page 48 and 49: stronger than previously expected s
Page 50 and 51: d 0 Conventional Figure 1.22 US & C
Page 52 and 53: Upstream investment Figure 1.25 mb/
Page 54: different picture. By 2035, Annex I
Page 57 and 58: 78 0 Figure 2.2 The distribution of
Page 59 and 60: 80 Table 2.1 Vehicle and passenger
Page 61 and 62: 82 0 1970 1974 1978 1982 1986 1990
Page 63 and 64: n (millions) 7,000 84 0 China Brazi
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Page 67 and 68: 88 Conventional powertrain technolo
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104 Figure 2.15 Share of industry i
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106 Figure 2.16 Figure 2.16 Oil use
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108 Table 2.19 Oil demand growth in
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110 from 63% to 10% in Southeast As
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112
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114 In Canada, although the Outlook
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116 Non-OPEC Latin America’s prod
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118 additional supply of 180,000 b/
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120 limiting factor for feasible su
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122 Table 3.4 Medium-term non-OPEC
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124 some deposits will not be suffi
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126 1.8 mb/d in 2010, to 2.7 mb/d i
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128 Of utmost importance, in respec
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130 influences and, therefore, brin
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132 early support given to Brazil
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134 the call on OPEC crude by 2035
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136 us to cooperate to lay the foun
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138 Figure 4.1 Table 4.6 Oil supply
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140 COP-16, held in Cancun at the e
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142 in Article 4, paragraph 8, of t
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144 identifies sustainable long-ter
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146 Beyond the oil sector, there ar
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148 other international research an
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Section One

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