plg shale energy oh/pa presentation
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TRANSCRIPT
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Prepared for
Shale Energy Supply and
Downstream Opportunities for
Businesses in NE Ohio
Youngstown, OH
November 7, 2012
PLG Consulting
I. About PLG Consulting
II. Recent Energy Booms
III. Shale Energy 101
IV. Economic Opportunities for OH & PA
V. Resulting Business Opportunities
Content
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» Boutique consulting firm specializing in logistics, engineering, and supply chain Established in 2001
Over 80 clients and 200 engagements
Significant shale development practice since 2010
» Headquarters in Chicago USA, with team members throughout the US and with “on the ground” experience in: North America / Europe / South America / Asia / Middle East
» Consulting services Strategy & optimization
Assessments & benchmarking
Transportation assets & infrastructure development
Logistics and Supply Chain operations
M&A/investments/private equity
» Specializing in these industry categories: Energy
Bulk commodities (Proppants, Chemicals, Plastics)
Manufactured goods
Private Equity
I. About PLG Consulting
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» Other recent energy “boom” events with major logistics challenges….
» Common characteristics
New technology breakthroughs and/or dramatic market shifts
Speed to market is paramount; logistics strategy an afterthought
Rush of capital and new players
Continuous change and evolution
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II. Energy Booms
Logistics cost and supply chain execution are even more critical
in shale development
Logistics Cost as a Percentage
of Product Cost
» Frac sand is highly sensitive to logistics costs relative to past energy “booms”
» As frac sand costs are decreasing, rail freight rates are increasing
Ethanol 8%
Wind
turbine 12%
Frac sand 58%
Source: PLG analysis 5
Total Landed Cost Breakdown of Frac Sand
($180/ton)
Best Frac sand comes from WI & MN
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» “All sand is not created equal”
» WI & MN sand is:» Round
» Uniform in size
» Almost pure quartz
» Extremely hard
» Serves as an optimum proppant
» What is a proppant? It props
open the fissures in the shale
Source: Federal Reserve Bank of Minneapolis, July 2012
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III. Shale Energy 101
North American “Shale Plays”
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Bakken & Eagle Ford
are largest “shale plays”
so far…What can we
learn from them?
Marcellus & Utica
are large plays with
great location and
tremendous potential
Shale Economic Impact to ND
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OH PA
WV
ND
• Per capita income rose from 38th to
17th among all states since 2000
• Oil investments driving significant
improvements in state and local
infrastructure development
North Dakota Oil Production
Two Technology Breakthroughs:
Horizontal Drilling & Hydraulic Fracturing
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Great YouTube video by
Marathon on fracing:
Http://www.youtube.com/watc
h?v=VY34PQUiwOQ
Natural
Gas
• Proppants
• Chemicals
• Clean water
Materials
• Drilling Rigs
• OCTG (Pipe)
• Cement
Equipment
Shale Energy Supply Chain
Upstream
Exploration
Production
(Well Site)
Midstream Downstream
Refining
Fuel
Gasoline Distillates
Crude
Oil
Crude/
Gas
Mixture
Chemical
Feedstocks
Process
Product
Logistics Flow
Transportation
Processing
Gathering
Jet Fuel Residuals
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Hydraulic Fracturing
Equipment Staging Area
Source: JPTOnline.org
Frac Tanks/Fluid Storage
Chemical Trucks
Blender
Sand Storage
Unit
Pump Trucks
Data Van
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Hydraulic Fracturing Materials
Inputs and Logistics – Per Well
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Materials
Chemicals
Clean Water/
Cement
Proppants
OCTG (Pipe)
Source to
Transloading
2
Local source
40
5
Transloading to
Wellhead Site
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~1,000
160
20
47 Total
Railcars
~1,200 Total
Truckloads
Oil / Gas/ NGLs
Truck, Rail,
Pipeline
Waste Water
~500 Total
Truckloads
Chemical
Feedstocks
Midstream / Downstream
Supply Chain
Consumers
Petrochemicals
Aromatics AmmoniaMany
Others
Olefins
Ethylene Propylene Butylene
Polymers
Polybutadiene Polypropylene Polyethylene
Manufacturing
Intermediates become consumer and
industrial products
Natural
Gas Power Generation
Industrial Use
Consumer Use
Petrochemical
ProcessingRefinedCrude
Products
Process
Product
Logistics Flow14
Key Logistical Questions for
Midstream and Downstream
» Where are the destinations
for further processing? Midstream processing
Crude oil refineries
Petrochemical processing plants
» Is the infrastructure in place
to allow efficient movements? Pipeline locations and capacity
Adequate roads
Rail infrastructure
Waterway terminal availability
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IV. Economic Opportunities
for OH & PA
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Traditional Plastics Supply Chain
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Component
Manufacturing
Lordstown
Assembly Plant
Imported crude
via vessel
Resins
ship
via railRefineries
Resin
Plants
Cracker
“I just want to say one word
to you…Plastics…There’s a
great future in it. Think
about it.”
-The Graduate, 1967
Potential Plastics Supply Chain
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Gas Wells
CrackerResin
Plants
Lordstown
Assembly
Plant
Component
Manufacturing
0
500
1000
1500
2000
2500
Asia USHistorical
Saudi USRecent
$/T
on
HDPE Calculated Cost
Sources: CMAI, TopLine Analytics, and Alembic analysis, 2012
» Low cost natural gas with local processing would give this
region a tremendous material and manufacturing cost
advantage
Gas Demand Growth Potential
Opportunities – LNG & Others
» LNG export is a cost leverage play
» Infrastructure & Regulatory Issues
Requires fractionation and liquefaction to transport efficiently.
There are 4 LNG import terminals in the Northeast that could be modified for export
Marcus Hook, PA has great export potential
Federal government must approve exporting LNG. Several companies have applied for
export permits.
» Emerging technology & applications
Compressed Natural Gas (CNG) as transportation fuel
Converting natural gas to diesel or gasoline (Cairns City, PA)
Exporting byproducts – propane, ethelyne, resins19
0
3
6
9
12
15
US
$
$10
$3.50
$4-7
$7.50-
$10.50
$13
Impact of Crude Oil in Utica
20Source: EIA
Utica crude would first
displace foreign crude in
this region and have
logistical cost advantage
vs. Bakken.
Utica has the potential to
produce 100 to 180 million
barrels of oil annually.
Source: EAI, Inc.
V. Resulting Business
Opportunities
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Shale Development Activities
» Exploration and Preparation
Land acquisition
Engineering – Civil, Mechanical
Legal
Construction
Infrastructure build-out – roads, rail,
roads, pipelines, bridges, buildings
» Drilling
Transportation – transloading,
trucking
Fresh water management
Brine water processing &
transportation
Equipment maintenance
» Production
Transportation
Equipment Maintenance
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Shale Regional Development
Business Opportunities
» Engineering
» Construction
» Material supply & handling
» Real Estate
» Temporary Housing
» Hotels
» Restaurants & Supermarkets
» Catering/On-site food supply
» Medical support
» Vehicle rental & repair
» Equipment rental & repair
» Machine parts
» Temporary labor
» Work clothing, shoes, PPE
» Construction material salvage
» Fuel – gas, diesel, propane
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Direct Employment: ~20% of all jobs created
Indirect & Induced Employment: ~80% of jobs created
Will this boom actually occur?
» Not a matter of “if” but “when”…. Natural Gas & Crude is here
Proven technology to find it
Geographically advantageous
Great transportation infrastructure in place
» “When” depends on these factors…. US Natural Gas Prices
Gas processing & pipeline capacity
Cracker & resin factories in region
LNG export timing & amount
Finding fracing “recipe” for Utica crude oil
Global crude oil price
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Thank You!For follow up questions and information, please contact:
Taylor Robinson, President+1-508-982-1319 / [email protected]
This presentation will be available at:
WWW.ProLogisticsGroup.COM
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