Shale Insight 2019

Remarks of Assistant Secretary for Fossil Energy Steven Winberg as prepared at Shale Insight 2019 in Pittsburgh, PA on October 24, 2019. 

Thank you, and good morning.

I appreciate the opportunity to talk this morning about what the Department of Energy – in collaboration with industry and university researchers – is doing to support and encourage the development of our unconventional oil and gas resources. 

First, I just want to say I’m honored to follow President Trump’s address to you yesterday.  The president has been steadfast in his commitment to American energy development and economic growth – and especially in this region.  

He and this Administration are focused on policies that unleash, rather than constrain, the potential of the vast energy resources here in Appalachia.  Unleashing that potential means not only energy security, but good-paying generational jobs for families in this region.

This Administration is also focused on innovation and technology development to help expand and improve our oil and gas development – and to realize the benefits that come with that development. 

Through Secretary Perry’s leadership, the Department of Energy is leading the way when it comes developing those technologies, and I’m proud that the Office of Fossil Energy is playing a critical role in that effort.

And, having helped develop the technologies that led to the shale revolution, we have a pretty successful track record when it comes to innovative, cutting edge R&D.

So, I’d like to talk to you for a few minutes about what we’re doing to expand the shale revolution that is  changing the energy landscape in America and around the world.  

You don’t have to look very far to see that change.  The Marcellus and Utica shale plays across Pennsylvania, West Virginia, and Ohio are responsible for 85 percent of the growth in U.S. natural gas production over the past decade and already account for right at a third of U.S. production today. 

So, thanks in large part to the energy development here, the United States is now the top producer of both oil and gas.  Right now, the estimated production of crude oil is at 12.4 million barrels per day, and we expect it to reach 13.3 million barrels per day in 2020, both new records. 

At the same time, daily production of dry natural gas is estimated at 91.4 billion cubic feet per day, with figures for 2020 expected to reach nearly 93 billion cubic feet per day.

For the first time since 1957, we’re a net exporter of natural gas– and we’re on track to becoming a net energy exporter next year.  The last time we were a net energy exporter was in 1953 – over 65 years ago.

In the meantime, our natural gas exports are having a global reach.  To date, the Department of Energy has authorized 38 billion cubic feet per day of natural gas that can be exported as LNG to anywhere in the world.  So far, U.S. LNG cargos have landed in nearly 40 different destinations across Europe, Asia, Africa, the Middle East, South America, North America, and the Caribbean. 

And we’re working to expand the markets and reach of our natural gas.  Right now, five large-scale projects are exporting LNG with a combined capacity of approximately 7 Bcf/d.  By the end of 2020, we expect to be at 10 Bcf/day.

When you combine what we have in operation and under construction, that number grows to 15.5 Bcf/day, a 121% increase.

And if the entirety of the 38 Bcf/day we’ve authorized is built, we’ll more than double what we currently have in operation and under construction.

Clearly, there is a lot of headroom for our friends and allies around the world to utilize our energy bounty and in the process, secure their energy future.

So, a lot of energy accomplishments that no one expected just a decade ago.  And, as I mentioned earlier, these accomplishments have been helped significantly by the Administration’s policies that seek to unleash the full potential of America’s fossil fuel resources. 

In a word, we’re putting innovation – the kind of innovation that will be highlighted during this showcase – ahead of over-regulation. 

And, by the way, we saw an example of this a couple of months ago with the EPA’s proposal to roll back the previous administration’s rule on methane emissions.

Now, I know there have been mixed views on this among industry – some are supportive, others are concerned that it will reduce the need for new technologies they’re developing to monitor methane emissions.

Here’s what I see as the bottom line – we’ve seen a reduction in methane emissions in large part because of what industry is already doing to capture the gas for use in commercial markets.  The fact is, when methane is emitted, the natural gas industry loses money.  So for us to get from good to great – we’ll continue to need technologies to monitor methane emissions, and continue to reduce methane emissions, with the goal of zero methane emissions.

So, innovation, rather than overly burdensome regulations, will help you do what you do best.

And ultimately, by innovating more and regulating a little less and more prudently, by encouraging—rather than discouraging—production, we ensure our energy security, grow our economy, create jobs, and protect the environment.  As I see it, government can use a carrot or government can use a stick.  This Administration prefers the carrot.

So, the shale revolution has truly transformed the energy landscape in America and globally. 

For those of you here today, the energy transformation we’re witnessing isn’t some far off, abstract event or just a production or export number – as stunning as impressive as these numbers are.

This energy transformation is happening right in your backyards – in your states and in your communities.  And it’s opening up the opportunities for expanded economic development and growth – and better futures for families across Appalachia.

And one of the most exciting and potentially transformational of those opportunities is the movement we’re seeing toward a build-out of a new Appalachian petrochemical industry. 

As you know, a lot of Appalachian natural gas contains substantial volumes of natural gas liquids or NGLs, including ethane, a key chemical feedstock for ethylene – a key building block of the plastics found in almost every product we use in daily life.

You’re probably aware of the report we delivered to Congress last year that found that Appalachia – with its abundant resources upstream and extensive downstream industrial activity – could offer a highly competitive advantage and help the U.S. gain global petrochemical market share.

In fact, IHS Markit has estimated that the market could support five world-scale crackers in this region.  And that’s in addition to the existing mid-size cracker facility located in Kentucky, which the region’s ethane supports.

We’re encouraged by market developments we’re seeing in that direction, with Shell’s ethane cracker plant in Beaver County, here in Pennsylvania, and the progress that is being made on PTT’s planned cracker plant in Belmont County, Ohio.

But the big picture includes not only the crackers, but also the derivative processing facilities and downstream manufacturing. All of those facilities are the prize. They bring billions in capital investment, tax revenue, and family-sustaining, generational jobs.

Now, private investment will drive this Appalachian manufacturing renaissance, but industry and government need to work together to fully realize this opportunity. 

For our part, the Department of Energy is reaching across federal and state agencies to help ensure that government is creating a positive environment for private investment in Appalachia – and we stand ready to work with state, local, and industry stakeholders to realize this enormous potential.

The bottom line is, if we play our cards right, every person in this room will be a witness to an Appalachian petrochemical and manufacturing renaissance – and a revival in jobs – on a scale that we could scarcely have imagined just a few years ago. 

But, the successes that have come from the shale revolution also highlight the importance of overcoming the challenges that still remain — both upstream in the development of these unconventional resources, and midstream in terms of infrastructure efficiency.  While smart policies and regulations can go a long way to spur resource development and delivery, a lot of the challenges we face require technology solutions.

And that’s where the Office of Fossil Energy’s research portfolio – our innovation and our collaboration with industry and the research community – is playing the critical role I mentioned earlier.

We learned a lot from our years of unconventional oil and gas R&D – especially about hydraulic fracturing.  So, when it comes to upstream development, one important lesson is that oil and gas development is not just about new technology. 

As you know, drilling is complex, especially in unconventional geologic settings.  Completions have become more complex.  And compared to yesterday’s technology, the latest technology is like going from landlines to smart phones. 

With the application of new technology comes the opportunity to gather more and better – and more insightful – data to understand more deeply the interface between technology and geology. 

So, we’re focused on applying machine learning, artificial intelligence, and data analytics to help improve recovery and operational efficiency, to reduce costs of production, and to strengthen our delivery infrastructure.  And we’re excited about the potential of NETL’s Center for Advanced Decision Science to advance these improvements.

Let’s look first at upstream production and development, where one of the biggest challenges has to do with the rapid decline curve in shale oil and gas production after initial production. 

For example, let’s say that a well yields 2 million cubic feet of natural gas per day in the first year of production.  By the second year, it drops to 600 thousand cubic feet per day and continues to decline over time.  There will come a point when – if gas prices are too low to justify leaving the well in production – an operator may prematurely plug and abandon the well, leaving valuable resources in the ground. 

New applications of machine learning and data analytics may be able to process and interpret complex data streams in real time to enhance decision making — and increase production of our unconventional resources. 

Another lesson we’ve learned is that the technical challenges to resource recovery vary from basin to basin.  So, we’re pursuing a more targeted “basin-specific” approach to technology development, where we want to be able to look at all kinds of subsurface data – a massive amount of data – to better understand specific basins and develop the technology and improved completion designs to increase unconventional oil and gas production.

A perfect example is some of the early work that our National Energy Technology Laboratory has been doing to characterize and predict recovery efficiencies and improve production in the Western Marcellus, with techniques that may be applied in shales across the United States.

To advance our basin-specific work, we’ve established a network of oil and gas field laboratories to generate new data for machine learning and to demonstrate and test new technologies in actual operating oilfield settings.  And NETL is partnering with oil and natural gas producers and academic researchers to carry out experiments at those labs.

These projects are focused on providing additional levels of data gathering and analysis that are incorporated into normal drilling, well completion, and production operations to help identify ways to:

Improve the effectiveness of hydraulic fracturing;

Design better well completions;

More effectively characterize the fundamental processes behind the flow of oil and gas from tight rocks; and

Reduce the impacts of development by increasing per-well recoveries.

And let me just note that this year we’ve selected $95 million in oil and gas recovery projects – including several CO2-EOR projects.

Now, as you know, water and oil and gas systems are closely interlinked.  And one of the things we’re focused on is transforming the oil and gas sector’s produced water from a waste to a resource – even from a cost stream to a revenue stream, through the development of advanced treatment technologies.

We have a number of projects to address produced water challenges and earlier this year, we selected nearly $5 million in projects to develop produced water treatment technologies, and to develop techno-economic analyses that link the supply of produced water with industries that could possibly use it on a regional or basin-specific basis.

So, all of this work has the potential to usher in a paradigm shift in our oil and gas research portfolio.

When it comes to midstream resource delivery, we’re pursuing data science and management tools to improve operational reliability and reduce loss from natural gas gathering, transmission, distribution, and storage facilities.  A good example is our work with the Pacific Northwest National Lab (PNNL) where we’re using large sets of pipeline integrity data as well as continuous operational data from pipeline operators to advance the state of the art in pipeline infrastructure integrity.

We’re also beginning to look at cybersecurity, as well as continuing our focus on reducing methane losses.  And we have several R&D pathways to help us meet these goals and to pave the way for the “pipeline of the future.” These include efforts focused on developments in new sensor technologies combined with artificial intelligence for real time operational monitoring and early fault prediction, as well as advanced materials, like liners and coatings, for pipelines.    

Internal corrosion is a major contributor to reported pipeline failures, and there’s no existing real-time monitoring technology is commercially available.  So, we’re putting a specific emphasis on integrating advanced materials with novel sensors and artificial intelligence to identify early signs of corrosion. 

This will ultimately enable operators to take real-time preventative measures to ensure the integrity and security of the pipeline infrastructure.  So, we’re targeting the development of low-cost sensing platforms that are inherently compatible with natural gas pipeline infrastructure monitoring, including passive wireless and optical fiber based sensing.

And we’re integrating advanced artificial intelligence techniques with distributed fiber optical sensing methods to localize and classify in real-time risks to the pipeline infrastructure, including seismic activity and excavation.

So, we’re looking at a lot of important work to improve and expand resource production and strengthen our delivery infrastructure.  The common thread running through this research and development is the broad application of latest advances in big data, machine learning, and artificial intelligence tools that can completely revolutionize our understanding of the subsurface and the way we approach and tackle challenges in the field.

And at the end of the day, we could unlock the transformative potential of our oil and gas resources, even beyond what we’ve seen in the shale revolution.

So, again, thanks for the opportunity to speak to you today, and I wish all of you success during this conference and particularly, during this Technology Showcase event.