VRGE TM Overview. Non-Hydraulic Fracturing Technology for Unconventional Oil & Gas Production. Expansion Energy LLC. Patent Pending.

Transcription

1 VRGE TM Overview Non-Hydraulic Fracturing Technology for Unconventional Oil & Gas Production Patent Pending

2 Shale Gas & Shale Oil Revolution» Technology-enabled, economic production of Shale Gas & Shale Oil has dramatically increased global output & recoverable reserves Especially in North America including Marcellus, Barnett, Haynesville, Fayetteville and other shale gas plays Energy independence is now plausible for the U.S year supply of Gas + increased Oil production Other global shale gas regions will follow soon China, Australia, Argentina, Brazil, South Africa, Poland, UK, etc. Rapid expansion of Bakken Shale oil play has made North Dakota the #2 oil-producing state in 2012 Eagle Ford (TX), Niobrara (CO, WY, NE) and other U.S. shale oil regions are also rapidly developing» Made possible by technological advances in hydraulic fracturing + horizontal/directional drilling Source: US Dept. of Energy Energy Information Administration VRGE -- Non-Hydraulic Fracturing Technology 2

3 North American Shale Oil & Shale Gas Plays Reliant on Fracking VRGE -- Non-Hydraulic Fracturing Technology 3

4 Major Shale Gas Basins A Global Opportunity Technically recoverable shale gas reserves (32 countries) = 6,622 TCF > 100 years of Supply Source: US Dept. of Energy Energy Information Administration VRGE -- Non-Hydraulic Fracturing Technology 4

5 But Hydraulic Fracturing is Under Threat» from regulators, policy-makers, litigation, environmental groups and the public in the U.S.» Certain countries are banning hydraulic fracturing before it has even begun (e.g., Spain, France)» Virtually continuous media scrutiny» Many believe chemicals & fluid additives used for hydraulic fracturing threaten groundwater & health» Concerns over water consumption up to 5 million gallons per well Scarcity of water in some regions is constraining the number of wells that can be drilled» Truck traffic & road wear (> 200 water truck deliveries + > 200 wastewater truck trips per well)» Air emission concerns such as VOCs, benzene, formaldehyde, NOx» Specific examples: EPA s Pavilion, WY investigation + other studies to determine effects of hydraulic fracturing on groundwater EPA may increase its oversight of hydraulic fracturing that uses diesel fuel as an additive (SDWA regulations) EPA is developing stricter standards that fracking wastewater must meet before going to a treatment plant Environmentalists are pressuring EPA to regulate fracking water disposal wells as hazardous (Class I wells) Disposal wells are now being blamed for small earthquakes in some regions (e.g., Ohio) Congressional investigations into the effects of hydraulic fracturing fluids (e.g., diesel) on groundwater The FRAC Act introduced in Congress would require regulation of hydraulic fracturing under the fed SDWA Many state legislatures & regulators are moving toward stricter regulations on hydraulic fracturing New York, New Jersey & Maryland have de facto moratoriums on hydraulic fracturing due to potential risks US Centers for Disease Control (CDC) is beginning to investigate toxicity of fracking chemicals Hydraulic fracturing-related litigation is increasing VRGE -- Non-Hydraulic Fracturing Technology 5

6 The Solution: VRGE TM A Non-Hydraulic Fracturing Technology» A unique, patent-pending Expansion Energy technology available for license» VRGE TM (pronounced VeRGE ) = Vandor s Refrigerated Gas Extraction technology For extraction of Natural Gas (NG), NG Condensates & Crude Oil from shale, sandstone & other tight formations» A fracturing technology that replaces hydraulic fracturing» Requires no water and no disposal of fracking wastewater» Because no water is used, the chemical/fluid additives used for hydraulic fracturing are avoided Some of those chemicals have been deemed harmful/hazardous VRGE eliminates this key concern of regulators, policy-makers, environmental groups and the public» VRGE relies on the utilization of deep refrigeration (cryogenics) + energy-efficient compression Both are accomplished with a single (mobile) cryogenic plant located at the well site» The fracturing and proppant-delivery medium for VRGE is the natural gas in the targeted underground formation itself Only a small amount of NG is required from off-site (to start the process)» The cryogenic plant can also produce LNG, which can be stored in on-site tanks & transported by truck» Refrigeration from the cryogenic plant can also be used to separate NGLs from the NG stream On-site separation/fractionation of: propane / ethane / butane / isobutane / pentane» Pre-fracking steps drilling, perforation, etc. are the same as for hydraulically fractured wells VRGE -- Non-Hydraulic Fracturing Technology 6

7 VRGE TM Transforms Fracking from This Hydraulic Fracturing Source: FracFocus.org Source: HydraulicFracturing.com VRGE -- Non-Hydraulic Fracturing Technology 7

8 to This! VRGE TM Non-Hydraulic Fracturing A reduction from: ~ trucks/containerized equipment for hydraulic fracturing to: ~ trucks/containerized equipment for VRGE Not needed Not needed Not needed Not needed VRGE CCNG Plant (Trailer-Mounted) Not needed Not needed HydraulicFracturing.com rendering modified by Expansion Energy VRGE -- Non-Hydraulic Fracturing Technology 8

9 Fracturing Issues Avoided by Eliminating the Use of Water» The majority of them!» Use of water is the root cause of hydraulic fracturing s main drawbacks & public concerns» The main reason chemicals and fluid additives are used for hydraulic fracturing is to counteract the negative effects of water, such as: Swelling of the underground formation (e.g., shale) Surface tension of water which constrains the flow of oil & gas Fluid viscosity issues» Disposal of contaminated wastewater in underground wells or above-ground pits Fracking chemicals/fluid additives cause concerns about groundwater quality & human health There is an insufficient number of wastewater treatment plants equipped to treat fracking wastewater Disposing large volumes of wastewater underground can cause geologic disturbances» Consumption of large volumes of water causing concern for policy-makers & the public» Scarcity of water in some regions may limit the number of wells that can be drilled» The majority of fracking-related truck traffic is for water & wastewater transport Highway safety concerns Road wear / road re-construction costs» Eliminating water from fracking avoids most of fracking s political & regulatory threats.» Expansion Energy s non-hydraulic fracturing technology VRGE is the solution! VRGE -- Non-Hydraulic Fracturing Technology 9

10 How VRGE Works A Metacritical TM Technology» VRGE uses a dense, cryogenic non-liquid fluid phase of NG that Expansion Energy calls Metacritical TM Metacritical TM NG ( Meta-NG ) is natural gas above its critical pressure & below its critical temperature Metacritical TM natural gas is synonymous with cold compressed natural gas ( CCNG TM ) Ideally, Meta-NG is produced at the well site (see Slide 13, VX Cycle ) a balance of refrigeration & compression» Natural gas is both the fracturing medium + the proppant delivery medium (e.g., for frac sand) No water or other external fluids are sent down-hole to the well bore NG used to make the Meta-NG comes from the targeted formation itself (after an initial charge of external NG)» Meta-NG is nearly as dense as a liquid and thus can be pumped like a liquid w/ relatively little energy Requires far less equipment/trucks vs. hydraulic fracking compression» Proppant can be lubricated to improve flow & prevent scouring» Extracted oil, NG and/or NG condensates evacuate the well bore the same way(s) they exit a hydraulically fractured well» After initial fracturing, the on-site Meta-NG plant can either be moved to a new well or can remain at original well site to: Produce truckable LNG (e.g., from stranded wells) or cold, dense NG (to increase pipeline take-away capacity) Separate/fractionate NGLs from the NG stream Knock out CO2, N2 and water from the NG stream NG clean-up Continuously fracture the formation VRGE -- Non-Hydraulic Fracturing Technology 10

11 The VRGE Cycle» VRGE delivers a one-two punch : ❶ Thermal Shock + ❷ High-Pressure Fracturing Thermal shock extreme change in temperature is not part of hydraulic fracturing Thermal shock flexes the formation, expanding/creating more fissures, thus releasing more oil & gas Step ❶ -- Thermal Shock 1. The on-site meta-ng plant produces CCNG from an initial NG charge + from the liberated NG stream 2. The CCNG is sent down a previously drilled & perforated well bore 3. Cryogenic temp. of the CCNG freezes the formation, making it brittle & creating/extending fissures 4. CCNG-to-LNG phase shift (& vice versa) can be repeated w/ different pressures to flex the formation 5. CCNG eventually warms and evacuates the well bore, along with liberated oil and/or NG Step ❷ -- High-Pressure Fracturing 1. Meta-NG (CCNG) produced on-site is pumped to high pressure with a cryogenic pump 2. The CCNG is then warmed by waste heat from the CCNG plant to make high-pressure, warm CNG 3. The warm, high-pressure CNG is sent down-hole to the well bore 4. The high-pressure CNG creates, extends & holds open fissures in the underground formation, and also carries lubricated proppant into those fissures 5. Pressure is then reduced, leaving proppant to hold open the fissures, thus liberating oil and/or NG Steps ❶ and ❷ are repeated for each stage of fracking to be completed per well (similar to stages of hydraulic fracturing) VRGE -- Non-Hydraulic Fracturing Technology 11

12 Proppant Storage Containers VRGE Process Schematic: Step ❶ Thermal Shock Proppant Blender /Hopper (skid- or trailer-mounted) Heat Exchanger (waste heat from CCNG plant) Cryogenic CCNG Pump CCNG Plant (skid- or trailer-mounted) Truck delivery of LNG and/or Oil to market LNG/CCNG Storage Tank (can be mobile) NG pipeline to market CCNG Oil- and/or Gas-Bearing Formation e.g., shale (~5,000-10,000 ft. sub-surface) CCNG + Phase Shift to LNG and back (flexing) VRGE -- Non-Hydraulic Fracturing Technology 12

13 VRGE Process Schematic: Step ❷ High-Pressure Fracturing Proppant Storage Proppant Blender /Hopper (skid- or trailer-mounted) Heat Exchanger (waste heat from CCNG plant) Cryogenic CCNG Pump CCNG Plant (skid- or trailer-mounted) Truck delivery of LNG and/or Oil to market Warm, High-Pressure CNG + Proppant LNG/CCNG Storage Tank (can be mobile) NG pipeline to market Oil- and/or Gas-Bearing Formation e.g., shale (~5,000-10,000 ft. sub-surface) Extracted Oil and/or Gas VRGE -- Non-Hydraulic Fracturing Technology 13

14 An Optimal Technology Combination: VRGE TM + VX TM Cycle» Two Expansion Energy technologies VRGE & the VX Cycle are highly complementary» The VX Cycle is an ultra-small-scale LNG/CCNG production plant as low as 2,000 gal/day» Other LNG/CCNG production technologies can also be used as VRGE s LNG/CCNG source» But VX is the best choice for cost-effectively producing LNG/CCNG on-site at small-scale» The VX Cycle is: Energy-efficient 80% to 90% NG conversion efficiency Compact and mobile can be skid-mounted, truck/trailer-mounted or containerized Affordably priced less than $3 million/plant for the smallest capacities (~ 2,000 gal/day) Low-cost to operate Able to be fully automated for off-site control Manufactured using only off-the-shelf components Durable and long-lasting, with few moving parts Useful lifetime of up to 20 years with proper maintenance Able to provide refrigeration for extraction/fractionation of NGLs Propane / ethane / butane / isobutane / pentane» VX produces dense LNG/CCNG that can be stored in on-site tanks & transported by truck» VX boosts pipeline capacity by delivering a more dense (colder) NG product VRGE -- Non-Hydraulic Fracturing Technology 14

15 VRGE s Environmental & Safety Advantages» Eliminates the use of water a precious resource that is scarce in many oil & gas basins Lack of water has constrained oil & gas production/drilling in certain regions» Uses no chemicals or fluid additives Eliminates threats to groundwater / public health / worker health» Does not produce contaminated fracking waste streams» Eliminates the need for transport/treatment/disposal of fracking wastewater & chemicals» Eliminates the need for water trucks, compression trucks/trailers & nitrogen trucks/trailers Reduced fuel consumption Reduced diesel exhaust (from truck engines & diesel compressors) Reduced road dust an air quality/emissions issue» Reduced truck traffic = improved highway safety (a major concern in producing regions)» Eliminates nitrogen-containing gaseous methane streams» Smaller well sites & well pads» Reduced noise levels» VRGE s on-site LNG/CCNG plant allows capture & sale of associated gas (instead of flaring)» More energy-efficient & resource-efficient than hydraulic fracturing» VRGE greatly reduces political & regulatory threats! VRGE -- Non-Hydraulic Fracturing Technology 15

16 VRGE s Economic Advantages» VRGE can increase a well s ROI dramatically lower costs + greater oil & gas production» Far lower capital cost vs. hydraulic fracturing ~ trucks/containerized equipment (for VRGE) vs. ~ 40 trucks/containerized equipment (for hydraulic fracturing)» Far smaller crews + fully automated/remote-controlled after initial fracturing A shortage of fracking crews has caused costly bottlenecks in the fast-growing regions (Bakken, Eagle Ford, etc.)» Eliminates costs for water consumption & transport» Eliminates costs for transport, treatment & disposal of fracturing wastewater» Diminishes the need for new (or upgraded) wastewater treatment plants and disposal wells» No costs for chemicals or fluid additives none are needed» Reduced truck traffic = less need for road repairs/expansions a key issue in oil & gas basins» Smaller well sites & well pads reduces well construction costs» VRGE s on-site CCNG plant can separate NGLs from the NG stream for additional revenues» VRGE s on-site CCNG plant can be used for re-fracs (re-completions)» Far less energy is consumed for VRGE vs. hydraulic fracturing = lower energy costs» VRGE s capital costs & operating costs are far lower than hydraulic fracturing s costs! VRGE -- Non-Hydraulic Fracturing Technology 16

17 VRGE s Performance & Efficacy Advantages» Oil-bearing & gas-bearing formations do not like water (from hydraulic fracturing) Water causes swelling of shales + creates surface tension that restricts the flow of oil & gas Chemicals/fluids are used in hydraulic fracturing to reduce swelling + weaken surface tension By eliminating the need for water, VRGE eliminates the need for those chemicals & fluid additives» VRGE delivers a one-two punch : ❶ Thermal Shock + ❷ High-Pressure Fracturing VRGE uses thermal shock (extreme changes in temperature) to create initial fissures VRGE then uses extremely high pressure to create/expand fissures in shale, etc., similar to hydraulic fracturing More + wider fissures in the formation means greater volumes of oil & gas can be extracted» VRGE s NG product can be gaseous NG or liquefied NG (LNG) a value-added product LNG can be trucked to market if no pipeline exists e.g., in stranded gas regions LNG is typically sold at a high premium vs. NG (on a BTU-equivalent basis) e.g., to fuel vehicles & drilling rigs» VRGE allows stranded NG wells to be viable by providing a truckable LNG product» VRGE-produced oil & gas are not contaminated with nitrogen, CO2 or chemicals/additives» VRGE s cold (dense) gaseous NG increases pipeline take-away capacity (in BTU terms)» VRGE s LNG/CCNG plant can separate NGLs from the NG stream a value-added function» VRGE can be fully automated after initial fracturing is completed» VRGE increases the effectiveness of fracturing! VRGE -- Non-Hydraulic Fracturing Technology 17

18 VRGE s Addressable Market» Total global fracking market is currently ~ $20 billion/year Includes fracturing only (not drilling, site construction, etc.)» U.S. is ~ 80% of current fracking market both in terms of $ and # of frac jobs Nearly 120,000 frac jobs per year in the U.S.» U.S. and global markets continue to grow» U.S. will rely heavily on fracking in order to maintain/grow oil & gas production» Revenue potential from VRGE is in the billions of $! Source: EnergyTribune.com, Michael Economides VRGE -- Non-Hydraulic Fracturing Technology 18

19 Targeted VRGE Users/Licensees: Fracturing Services Companies» A somewhat consolidated industry» The 3 largest fracturing services companies have ~ 65% combined global market share Halliburton / Schlumberger / Baker Hughes» Next 3 largest have ~ 15% combined global market share Frac Tech / Trican / Weatherford» Several dozen smaller companies make up the remaining ~ 20% global market share Source: EnergyTribune.com, Michael Economides VRGE -- Non-Hydraulic Fracturing Technology 19

20 Seeking Industry Partners for VRGE Expansion Energy is seeking industry partners to license, co-market & demonstrate the VRGE technology, including:» Oil & Gas Producers» Fracturing/Completion Services Companies» Manufacturers of Oil & Gas Production Equipment Interested parties are invited to contact us for further discussion. Contact Information David Vandor, CTO, Co-Founder & Managing Director Tel.: dvandor@expansion-energy.com Jeremy Dockter, Co-Founder & Managing Director Tel.: jdockter@expansion-energy.com VRGE -- Non-Hydraulic Fracturing Technology 20