1. 3rd Asia Energy Security Summit
Co-operation for Security, Stability and Sustainability
North America, South America and China’s
standpoint on future Shale gas market
February 2013

2. The Changing Global Energy Mix and Demand Supply Scenario
World Primary Energy Demand (MTOE)
• Global energy demand expected to increase by
5000
more that ~33% in next 25 years [IEA]
4000
• Highest growth in demand expected in China
3000
and India
2000
2008
• Pronounced shift away from oil, coal and in 2035
1000
some countries, nuclear, towards natural gas
0
and renewables
• Natural Gas is projected to surpass coal in the
primary energy supply mix by 2035. WEO, 2011 (Gas Scenario)
• Unconventional gas accounts for more than
40% of increase in gas production by 2035;
major share coming from North America and
China – WEO 2011
• Unconventional together to account for almost a
fifth of the increase in global energy supply to
2030.
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3. Global Shale Gas Reserves and Potential
Source: World Shale Gas
Resources, Technically recoverable
Continent
2011, EIA (Tcm)
North America 54.7
South America 34.7
China 36
Total 219
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4. Shale Gas revolution in North America
• US, which currently imports 20% of its energy is expected to be net exporter in the long term
because of Shale gas revolution
• Gas prices hit a 10 year low
• Infrastructure related to export of gas being set-up in North America
• Canada also has good reserve but relatively slower in developing shale gas
• Shale gas expected to spur economic activity due to low energy prices
• Competitiveness of nuclear energy is being challenged by relatively cheap Natural Gas.
• Regulations requiring more disclosure of environmental impact expected in US
Natural gas Production (tcf)
19.80
10.90
2.00
4.60
9.40 6.60
4.00 4.40
Canada (2008) Canada (2035) … US (2008) US (2035)
Conventional Unconventional
Source: WEO: 2011 *Unconventional include shale, CBM and Tight Gas
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5. Changing Global Dynamics and Energy Trade Flows
• Switch in direction of international energy trade
towards Asia
• Strategic Trade Routes Security
• Decreasing dependence of US on Persian Gulf Oil Exports to US from Saudi Arabia
and Middle East (Thousand Barrels per day)
2000
• The US - historically a major power shaping
developments in ME/ Persian Gulf 1800
• Changes expected in the Geopolitical
environment in the region 1600
• Dispute over Iran sanctions and the new 1400
balance of political influence
• Coal consumption in Europe 1200
• Domestic Coal Surplus in US because of gas
1000
prices
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
• Coal flowing to Europe
• How long will this sustain? Source: IEA
• Changing scenario for Russian Gas Exports
• Delayed production for projects destined for US
• Russian Supplies in Europe
• Gazprom supplies to Ukraine
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6. Economic Impact of Shale Gas on US Economy
• Significant price difference
• Low energy/ feedstock
between US & Europe/ Asia
prices expected to improve
• Producers may face financing
competitiveness of industry
risk due to pricing; may affect
• Petrochemicals, fertilizer,
US Restrictions future investment
steel Energy, infrastructure, on
• Recent report submitted to US
manufacturing and Export of Gas
Department of Energy suggests
transportation sector to Impact of Low
Cost Shale Gas US expected to benefit exports
benefit the most
on Economy in • Strong domestic production to
• Direct and indirect Job North America
help reduced volatility in prices
creation
and improve investment
• Reduced pressure on US
• U.S. becomes able to produce
with respect to emission
large quantities of gas from
norms
shale at low cost
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7. China’s natural gas consumption is expected to grow in the future,
reducing the share of coal from the Energy basket
• China’s gas consumption stands at 4% of its Energy mix, Energy Mix (2011) – China
considerably lower than the world average.
• The demand supply gas of gas in china is expected to 4%
widen further owing to demand growth rate
70%
18%
• Although conventional gas reserves/production is limited,
China is estimated to have ~36 tcm of shale gas deposits. 2%
6%
1%
• In the 12th 5-year plan, Chinese government has shown
interest towards increasing the development of natural gas Oil Natural gas Coal
Nuclear energy Hydro electricity Renewables
as a preferred fuel and reduction in emissions
Widening gap
7.47
5.72 5.05
4.62 4.19
2.99 3.16 3.61
2009 2011 … 2015 2020
Production (tcf) Consumption (tcf)
7 ©2013 Deloitte Touche Tohmatsu India Private Limited

8. Despite large shale gas reserves, China is expected to import major
share of its gas requirement, owing to the rapid growth in demand
Supply drivers
1. Sino-US Shale Gas Resources
Cooperation Initiative
Demand drivers 2. LNG Terminal capacity expansion
1. Rapid urbanization – 2.26 tcf planned by 2015
2. Promotion of gas based 3. Acquisition of international
transportation companies to learn technical know-
how and secure resources
3. Chinese governments push to
reduce carbon emissions 4. Focus on increasing production of
domestic unconventional fuels
4. Uncertainty over nuclear power
5. Reduction of coal based power
supply
China expected to play a key role in the Global Energy market:
• Persian Gulf and Middle East as China is expected to be major buyer in future
• Developing influence in Africa
• Diplomatic role with respect to Iranian Crude and US oils sanctions
• Imports from Australia and central Asia
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9. Most of the South American nations depend on oil and hydro to meet
their primary energy requirements
• South and Central American energy consumption is
mainly concentrated in three countries, viz. Argentina,
Energy Mix (2011) – South & Brazil, and Venezuela. (accounting for almost 70% of
Central America
the region’s energy consumption in 2011)
2%
• Argentina produces 1.37 tcf of gas against a demand
of 1.64 tcf.
26%
• Argentina and Brazil are the only two nations that
45%
import large quantities of gas while the other nations
1% either import small quantities or are net exporters
4%
• Major share of imports are coming from Bolivia or
Qatar
22%
• The region is looking to reduce its dependence on
Oil Natural gas Coal hydel power because of its unreliable nature
Nuclear energy Hydro electricity Renewables
• Gas based power generation is expected to increase
in the region
9

10. Discoveries of shale gas deposits in Argentina/ Brazil offer the South
American nations an alternative to meet their energy requirements
• Argentina has ~22 tcm of proven shale gas reserves,
South American Shale Deposits and Brazil, indicates a potential of ~6.4 tcm of shale gas
reserves.
• The shale gas reserves are expected to have significant
impact the economy, especially in Argentina
• Argentina is taking steps towards harnessing the shale
gas potential
• Well-head gas prices by 44% (to $7.5 per mmBtu) in
order to attract private investment into the sector by
Argentina
• India and China are also looking at shale gas assets in
South America in an effort to secure supplies to their
respective nations
Source: Schlumberger Oilfield Services
10

11. Key Challenges faced by Shale Gas
• Gas Prices: Uncertainties with respect to gas pricing and current low prices in North America may
affect the investment environment
• Managing costs and financing risks are key concerns of investors because of low domestic
prices and restrictions on exports
• Accessibility to Technology and Capital
• Availability of skill base
• Environmental issues, especially related to water management and surface impact
• Geo-political environment
• Reputation Risk and Public Opinion
Select Countries where Shale Gas
Remarks
Development was stalled
France Temporary moratorium on shale gas drilling through
June 2011. Subsequently, ban on hydraulic fracturing in
2011
Quebec (Canada) Shale gas production and hydraulic fracturing put on
hold.
South Africa Temporary moratorium in 2012 in certain regions
United States Moratorium in hydraulic fracturing in 2010 and 2011 in
states of New York and Maryland, respectively
11

12. The future of Shale Gas and its dominance in Global Energy mix may depend on host
of factors
Policies/ Regulations
Carbon Emission
Norms
Technology Capital
Adoption Requirement
Future of
Shale Gas
Demand and Gas
Supply Pricing
Environmental
Issues
Energy Security
Geo Politics
Energy Strategy/ Diversification
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13. Shale Gas Impact
• How will reputational risk/ public opinion impact investments in shale gas? What environmental
regulation will it attract?
• How long will low prices in North America sustain? Will global gas market/ pricing emerge?
• Will the U.S. become a long-term exporter of LNG or it will remain restrictive to Exports?
• How will China’s unending energy appetite affect gas prices and Demand Supply scenario?
• How will the global energy trade flows and Geo-politics change in light of Shale gas
developments?
13 ©2013 Deloitte Touche Tohmatsu India Private Limited

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©2013 Deloitte Touche Tohmatsu India Private Limited
©2013 Deloitte Touche Tohmatsu India Private Limited