GAS PROCESSING RELATED SERVICES PRIMARY CONTACTS. Peter W. Halliday. Aaron J. Imrie

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1 Baker & O'Brien's natural gas consulting practice has grown in concert with the emerging role of natural gas as the world's preferred fuel choice. As natural gas is processed, impurities and water are removed to meet pipeline gas quality specifications. Further processing may be performed to recover natural gas liquids, produce liquefied natural gas, or provide compressed natural gas. Baker & O Brien is one of the leaders in evaluating gas-to-liquids technology and project economics. Additionally, we provide expert witness testimony and advise clients on the proper interpretation and application of natural gas contract terms. We have evaluated numerous acquisitions and divestitures of natural gas and natural gas liquids gathering, processing, treating, and transportation facilities. In addition, Baker & O Brien has established appropriate market value of natural gas and condensate, provided expertise in the construction and operation of production and processing facilities, and established the causes of major pipeline and processing incidents. RELATED SERVICES Accident/Incident Investigation Asset Valuations Due Diligence and Advisor to Lenders and Investors Engineering, Procurement, and Construction (EPC) Markets and Strategy Merger and Acquisition Support Property Damage and Business Interruption Insurance Claims Technology Assessment PRIMARY CONTACTS Peter W. Halliday Vice President Dallas Aaron J. Imrie Consultant Dallas 1 of 10

2 Carl A. Robertson Consultant Dallas Melvin M. Sinquefield Consultant Houston RELATED EXPERIENCE Application of Superfund Tax to Gas Processors Reviewed legislation relating to the Superfund Tax and its applicability to natural gas processors who produce natural gasoline at their facilities. Compared natural gas processing with crude oil processing in order to show whether the Superfund Tax was intended to be levied on gas processors. Audit of Gas Contract Conducted an audit of the revenue settlement of natural gas liquids and residue gas per the terms of a gas processing agreement. Investigated causes of reduced product yields, and reviewed compressor operation, fuel consumption, and product and fuel allocation procedures. Construction Dispute - Gas Plant Provided expert reports and testimony regarding project management issues, alleged defects, and liquidated damages for international arbitration between owner and contractor. The project involved an offshore platform, an undersea pipeline, an onshore pipeline, an onshore cryogenic gas processing plant, and a sales gas pipeline. Construction Dispute Litigation - Gas Plant Assisted in a litigated dispute between Owner-Operator and Engineering & Construction Contractor over whether a cryogenic gas plant, as engineered, procured, and constructed, met the stipulated contractual performance guarantees; prepared expert witness rebuttal report with respect to relevant issues. Contractual Dispute Performed a due diligence of owner allegations and contractor claims pertaining to a Lump Sum-Turn Key contract termination. Reviewed documents, schedules, witness statements, and expert reports to advise counsel on implications of contracting strategy and contract management following award. Fertilizer Project Due Diligence Assessment In conjunction with a leading upstream consulting firm, conducted a due diligence assessment of gas resources for the purpose of 2 of 10

3 developing a fertilizer complex associated with onshore and offshore gas production under development. The assignment entailed delineating the quantity and quality of gas resources available to support the prospective fertilizer project and estimating costs to deliver natural gas suitable for producing nitrogen fertilizers to the project. Gas Processing Performed a preliminary evaluation of the gas processing design, capital costs, and economics for a natural gas liquids recovery and fractionation facility and a condensate stabilization facility in the Republic of Turkmenistan. Gas to Liquids Evaluation On behalf of a major oil and gas producer, prepared a conceptual design for a Fischer-Tropsch based gas-to-liquids unit using low value associated gas to produce LPG, gasoline, and zero sulfur diesel. Developed estimates of charge and yield, capital and operating costs, and project development and capital spending schedules. Gas Well Incident Prepared expert report on behalf of client versus OSHA. Matter involved failure of a pipe carrying natural gas that injured one contractor. OSHA cited client for failure to provided a safe means of pressure relief for vessel (in-line heater) and piping. Gasification Project Assessment Assisted in the evaluation of a petcoke-to-substitute natural gas facility to support possible equity investment. Assessment included review of technology, commercial issues, and economics. Global Gasification Feedstock Analysis Conducted an analysis of the potential low-cost carbon feedstocks for a grassroots gasification project to produce a combination of synthetic fuels and electricity. The study investigated sources and delivered costs for various feedstocks, including coal, petroleum coke, and low-valued refinery streams such as residuum and cracked fuel oils. Historical data was used to assess pricing mechanisms for world petroleum coke prices, including delivered coal prices to Japan and Western Europe. Independent Engineer Retained as the Independent Engineer for the "grassroots" Tangguh LNG Liquefaction Project in Indonesia. Prepared the technical due diligence for the US$3 billion facility on behalf of a financial consortium. Investigation of Gas Processing Plant Incident Assisted in the investigation of an explosion and fire with resulting failure of natural gas supply from onshore crude oil, condensate, and natural gas processing facilities located offshore. Reviewed facility design, operating, and maintenance standards and prepared expert testimony. LPG Pipeline Contamination Evaluated pipeline contamination and potential sources of contaminants from various sources. Manufactured Gas Plant Provided technical assistance and review of historical documents in support of litigation regarding the environmental cleanup of a manufactured gas plant site. The site, which had various gasification units in operation between approximately 1870 to 1950, had been used for a number of other purposes. Analysis investigated the contamination present at the site to all previous and current gas plant operations. Midstream Acquisition Due Diligence Assisted energy distribution company with due diligence for potential transaction involving gas gathering and processing assets located in the Permian Basin. Assets evaluated included over 4,000 miles of gas and liquid pipelines, four gas processing plants, and multiple gas treating plants. Participated in data room reviews and management presentations with a focus on commercial, operational, and technical evaluations of midstream systems. Developed comprehensive economic model of the integrated 3 of 10

4 gathering and processing assets that was used to determine valuations and evaluate key sensitivities. Natural Gas Asset Strategic Initiative Prepared job descriptions and qualifications as part of a new organizational strategy of a fully integrated natural gas division. Natural Gas Production Facilities Served as one of two project managers responsible for the engineering, procurement, and construction of a 200 million cubic feet per day natural gas recovery facility in central Algeria to provide the feedstock for a new liquefied natural gas (LNG) plant on the Algerian coast. At the time of installation, the $250-million project was the largest of its kind in the world. Conducted negotiations with local labor, equipment, and utility suppliers. Arranged meetings with local environmental agencies to ensure compliance with all national environmental rules and regulations. Offshore Pipeline Project Served as Independent Engineer on behalf of a major financial institution for a $200 million project to build a deepwater gas and oil-gathering system. Prepared a valuation of offshore pipelines and an onshore gas processing plant for gathering and processing of deepwater Gulf of Mexico oil and gas production in support of structured finance. Certified completion of the project for financial purposes. Propane Product Quality Dispute Investigated the design and operation of a natural gas liquid fractionation, storage, and loading facility located on the Red Sea to determine potential causes of alleged hydrogen sulfide contamination of propane cargoes. Valuation of Pipelines and Gas Plant Served as independent engineer on behalf of a major bank to value and certify completion of a project to build offshore pipelines and an onshore gas processing plant for gathering and processing of deepwater Gulf of Mexico oil and gas production. The valuation was prepared for the lender in support of $200 million of structured finance. Salt Water Disposal Tank Explosion Investigated the cause and origin of a storage tank explosion at an oil and gas salt water disposal facility in Colorado. Conducted site investigation and facility/equipment inspections, evaluated system design and operation, and conducted witness interviews. Determined cause of explosion and worked with company management to evaluate existing policies and procedures for potential areas of improvement. Technology Commercialization Performed due diligence on a new gas-to-liquids (GTL) process to evaluate possible routes to commercialization. The work program included the following steps: verification of mass balance, comparison of laboratory and pilot plant yields, evaluation of alternative technologies, assessment of scale-up issues, review of preliminary commercial design, estimate of capital costs, and the development of an economic model that included sensitivity analyses for capital costs, yields, and prices. Substitute Natural Gas Market Study Developed comprehensive market profile of SNG industry and market in North America, including operating and planned facilities, feedstock outlook, project incentives, and environmental issues. Pipeline Contamination Dispute Assisted in a claim involving an alleged y-grade/ngl pipeline contamination from a gas processing facility. Examined the following key areas to evaluate the claim: pipeline hydraulics, laboratory records, chronology of pipeline sample data, reasonableness of claimed expenses, gas processing facility operation, and records. Gas Plant Explosion & Subsequent Insurance Claims Assisted resolution of claims between insurance company and Owners/Operators related to a gas plant explosion. Reviewed 4 of 10

5 property damage and business interruption claims for accuracy and veracity. Project Cost Overrun Dispute For a large sour condensate stripper facility, evaluated a significant project cost increase over the original estimate, taking into account work scope changes, market escalation, the accuracy of the original estimate, and the impact of project delays. An assessment was made of the reasonableness in each category and the likelihood of success with respect to cost recovery via litigation proceedings from a technical standpoint. The project was designed and constructed during a period of rapidly escalating labor and material costs. Review Project Development Costs Evaluated multi-million dollar cost overruns of yearly operating budgets of a Central Asian consortium involved with the oil and gas development and production. Costs reviewed included Engineering Support, Operating Costs, Drilling Costs, and Capital Expenditures. Gas Plant Emergency Shutdown Design Analysis To determine whether a system complied with key requirements, reviewed design of cryogenic gas plant emergency shutdown system in connection with a fire event to assess conformance with API RP 521 (Guide for Pressure Relieving and Depressuring Systems). Provided affidavit of merit pursuant to Texas Civil Practice Section Natural Gas Gathering Disputes Provided expert report regarding claims involving natural gas measurement, prudent operations, natural gas pricing, surface estate issues, reasonable accommodations, and environmental considerations. Feasibility Assessment Developed a feasibility study for a large, potentially stranded, natural gas discovery. Constructed an economic model to evaluate potential options for gas monetization, including pipeline natural gas sales, gas-to-liquids (GTL), and liquefaction (LNG). Performed market assessments for the LNG and GTL products. Refinery Off-Gas Recovery Project Provided independent assessment and due diligence for a proposed refinery offgas treating facility in the USGC. Advised the client on requirements related to schedule, documentation, and technology selection for project financing. Pipeline Pigging Accident Reviewed injury accident that occurred while pigging a gathering pipeline to remove formation water produced with natural gas. Provided an expert report regarding applicable industry standards regarding operation of vacuum truck for disposal of formation, as well as observations regarding the contractual responsibilities of the tank truck operator and the production operator. Gas Producer Contractual Dispute Provided expert report and testified in federal bankruptcy court concerning disposal costs of produced salt water, reasonableness of a farm-out joint venture agreement, costs of capital, and salvage value of production equipment. Gas Gathering and Treating Due Diligence Performed due diligence of West Texas natural gas gathering and treating system. Reviewed contracts and facilities, assessed competition, developed economic model, and estimated market value of assets. Review Project Development Costs Evaluated multi-million dollar cost overruns of yearly operating budgets of a Central Asian consortium involved with the oil and gas development and production. Costs reviewed included Engineering Support, Operating Costs, Drilling Costs, and Capital Expenditures. Gas Compressor Incident Dispute 5 of 10

6 Provided expert opinions concerning a gas compressor failure insurance claim related to: (1) evaluating the gas processing facilities' maintenance and standard of care practices compared to industry standards; and (2) reviewing the operating practices and programs utilized at the facility to determine if these practices caused or contributed to the incident and subsequent damage. Gas Treating Facility Explosion Investigation Investigated cause of system overpressure and shutdown of downstream pipelines which led to flange gasket failure and fire. Reviewed system design, construction, and overpressure protection at wellheads located upstream to determine cause of failure. Review Infrastructure Assets Assisted client in evaluating infrastructure spending to support ongoing operations and maintenance activities. Our review evaluated whether the infrastructure assets were integral to the overall technological complex. Condensate Gathering System Due Diligence Assisted client with engineering due diligence on a Texas condensate gathering system focusing on pipeline mechanical integrity issues. Settlement Hearing Testified on a dispute between an independent producer and a processor regarding the fairness of a proposed natural gas processing agreement in the Fort Worth Basin. Supply Contract Dispute Assisted in breach of contract claims regarding a helium supply agreement from a large natural gas processing/treating complex. Analyzed historical operation and performance of processing and extraction facilities, including sources and composition of gas supplies, plant shutdowns, and plant turndown capabilities. Reviewed plant performance, including operating costs, efficiencies, and operating modes to support defendant's plant operations. LNG Project Development Commercial responsibility for the upstream development of a number of non-operated gas fields associated with a world-scale LNG project. Involved in numerous gas purchase and sale agreements associated with managing the project s upstream gas portfolio ahead of first LNG in Joint-Operating Agreements Responsible for joint venture management with a mandate to ensure operator compliance within operating agreements (JOAs). Responsible for overseeing non-operator audits with a goal to bring about greater operator accountability and transparency. Project Management Executed several mid-to-large pipeline and facility projects in multiple international locations, overcoming challenging cultural and language differences. Performed feasibility studies, detailed design, procurement, construction, inspection, hydrotesting, risk assessments, and pipeline integrity. CTL/GTL Question-Answer Session Presented background information to groups of stock research analysts in New York and Boston on the technologies utilized in gas-to-liquids and coal-to-liquids processes. In addition, the economics of gasification projects in the U.S. and the role of publicly traded companies in GTL and CTL was discussed. Gas Plant Fire Damage Repair Costs Assessed fire-related damages and estimated rebuild cost for a cooling tower at a gas plant. Gas Plant Construction Dispute Provided expert advice with respect to standard and customary practices of gas plant design and construction. 6 of 10

7 Pipeline Pigging Incident Investigation Following a plant incident caused by the ingress of water, we investigated upstream pipeline activities and operating records to determine the root cause of the incident. Engineering & Construction - Liquidated Damages Dispute Reviewed claim relating to assessment of liquidated damages and inadequate delivery of Operating Manuals. Petroleum Revenue Override Dispute Reviewed contract, evaluated contract terms and key definitions and analyzed royalties related to a large West African oil, gas, LNG and petrochemical complex. LNG Liquefaction Capital and Operating Costs On behalf of a confidential client with a proposed world-scale LNG liquefaction plant, prepared high-level cost estimates for two phases of the project: 1) the engineering, procurement, and construction (EPC) phase and, 2) the operating phase. Provided cost data for client s financial model to help assess the risks and viability of the project. Gas Plant Construction Dispute Prepared expert report for AAA arbitration regarding alleged deficiencies by the EPC contractor relating to compliance with recognized and generally accepted good engineering practice (RAGAGEP) for adherence with OSHA requirements. Multiple issues, including control room safe location, electrical area classification, positive material identification, process hazard analysis, metallurgy selection, and building ventilation design were addressed. Flare Tower Design Review Independently reviewed the design of two flare towers for an LNG onshore facility. Commented on the EPCM contractor's responsibilities to review the work product of subcontractors and vendors. Natural Gas Midstream Due Diligence Conducted due diligence on gas gathering assets in East Texas for a prospective purchaser. Inspected facilities, reviewed pipeline and facility construction records, confirmed regulatory status, evaluated pipeline integrity management program, and assessed process safety. GTL Technology and Cost Evaluation Evaluated the technology, cost estimate and financial model for a small scale GTL project to convert natural gas to liquid specialty products. The project evaluation included a review of the synthesis gas process, Fischer-Tropsch (FT) reactor technology, product recovery and product separation. The project definition and stage of development were evaluated for technology risk, cost estimate range of accuracy and suitability of the financial model assumptions. GTL Jet Fuel Scoping Study On behalf of a major airline, assessed the risks and benefits involved in entering into either a jet fuel off-take agreement, or participating in project ownership. The assessment, for a number of small-scale GTL technology providers, covered the following topics: state of technology development; technical risks for project completion; likely capital costs, yields, and operating costs; market price analysis for crude oil and natural gas; and economic sensitivity analyses. Midstream Infrastructure Review Completed a high-level review of natural gas and natural gas liquid (NGL) infrastructure in Western Oklahoma for a project developer to present to a potential investor. LNG Due Diligence On behalf of potential offtakers and equity investors of train one, performed a technical due diligence and risk assessment of a two-train liquefaction project, including common use of certain existing regasification facilities. Work completed during the 7 of 10

8 development phase of the project involved the evaluation of pre-completion risks and post-completion risks, including a review of planned and existing facilities. CAPEX, contractor capabilities, construction schedule duration, and OPEX were reviewed for appropriateness and risk of overrun. Subsequent follow-up work included a review of an Open Book Estimate (OBE), a project risk evaluation (reviewed and quantified pre-fid and post-fid cost and schedule risk), and an assessment of the project s draft environmental impact statement (EIS). Propane Pricing Analysis Evaluated the historical development of propane prices in a key North American market, and developed a report that assessed propane supply-demand dynamics and price response, given the increasing availability of supply. Evaluated the evolution of company price postings and compared independently-assessed, third party prices to these postings. Provided opinions on the best propane price reference points to be used in commercial supply contracts. Gas Plant Due Diligence On behalf of a developer's due diligence process, provided an independent review of a gas plant project in the U.S. Reviewed documents and consulted with the developer regarding the process design, engineering, major systems and equipment, procurement, construction, schedule and CAPEX. LNG Capital Cost Review On behalf of potential offtakers and equity investors of one train, Baker & O Brien performed a follow-up review of the updated Open Book Estimate (OBE) of a two-train liquefaction project, including common use of certain existing regasification facilities. Gas Plant Acquisition Dispute After concluding a transaction, the acquiring party claimed that the facilities were not sufficient to conduct business due to deficiencies related to design, construction, safety, and failure to meet environmental regulations. Visited the plant to interview key personnel, viewed the physical facilities, and reviewed relevant operational, safety, and engineering design information. Our findings and opinions were presented in an expert report which was submitted into evidence. Oil Disposition Study Developed economics of crude disposition alternatives for producer's growing production of light tight oil. Alternatives included local and distant refining values with appropriate logistics costs. GTL Technology Assessment Assisted company in evaluating a larger equity investment in a GTL technology company by visiting the prototype unit, reviewing process data, and assessing the potential market. GTL Commercialization Study Performed due diligence on a new GTL process to evaluate possible routes to commercialization. The work program included the following steps: (1) verification of mass balance; (2) comparison of laboratory and pilot plant yields; (3) evaluation of alternative technologies; (4) assessment of scale-up issues; (5) review of preliminary commercial design; (6) estimate of capital costs; and (7) the development of an economic model that included sensitivity analyses for capital costs, yields and prices. Gas Plant Mediation Support Provided mediation support in relation to a helium supply agreement dispute. GTL Facility Due Diligence Performed due diligence for a company evaluating an equity investment in a GTL facility under construction. Reviewed project budget and schedule for completion. Evaluated the amount of contingency included in the budget, confirmed the status of payments to contractors and other service providers, and interviewed project representatives regarding mechanical completion and commissioning plans. 8 of 10

9 LNG Technical Advisor Provided technical support regarding the FERC filing process, reviewed FEED study deliverables from contractors, and advised with regard to other contracts in support of the project, including geotechnical issues, noise survey, vapor dispersion, etc. Also reviewed progression and risks involved in estimates of project CAPEX and OPEX. Gas Plant Construction Dispute Reviewed and testified on behalf of an owner constructing a gas plant in Northern Canada. Owner's claim was against the general mechanical contractor and primarily concerned cost and schedule. The contract was a reimbursable contract. EPC Construction Dispute Provided expert support in a construction dispute relating to a natural gas processing plant in North America. The dispute primarily concerned engineering design issues and whether the installed facilities met contract, specification, and industrial standard requirements. Gas Pipeline Dispute As a member of the three person dispute resolution board for a gas pipeline construction project, reviewed, evaluated, and determined liability for project claims brought before the board. Pipeline Pig Station Incident Investigation Reviewed information concerning a fire associated with the commissioning of a pipeline station and equipment skid. Purpose was to assess cause and origin for the incident and roles and responsibilities of the operating company and equipment supplier associated with the project. GTL Technology Assessment Provided a fatal flaw analysis, evaluated the technology application and integration, reviewed the cost estimate accuracy range, and assessed the financial model for a natural gas to wax proposed project. Particular emphasis was placed on the ability to scale-up the process, the assumptions for plant capacity and availability, and the project schedule. Insulation Works Dispute Provided expert witness assistance with technical issues regarding the installation of insulation on an LNG facility. Baker & O'Brien reviewed the technical issues, prepared an expert report, and testified regarding our opinions in an ICC Arbitration hearing. Lender's Engineer - GTL Plant Served as Independent Engineer on behalf of a major Australian bank for the construction of a GTL plant. Prepared a technology assessment, analyzed feedstock supply, and reviewed contracts. Inspected equipment and confirmed permits were in place prior to authorizing draw-down certificates. Monitored construction progress, confirmed expenditures, and compared these expenditures against budget. GTL Facility Due Diligence Performed due diligence for a company evaluating an equity investment in a GTL facility under construction. Reviewed project budget and schedule for completion. Evaluated the amount of contingency included in the budget, confirmed the status of payments to contractors and other service providers; interviewed project representatives regarding mechanical completion and commissioning plans. Natural Gas Measurement Dispute Assisted client with a "Discovery Request" regarding measurement of shale-play natural gas from a field meter. Reviewed accounting records, photos, and meter specifications to determine if consistent with industry standards for measuring natural gas. Propane Quality Review Reviewed claims regarding a propane quality dispute between a supplier at a new terminal and a retail distributor. Reviewed 9 of 10

10 propane quality test results and bills of lading to compare actual versus reported quality. We provided technical findings to client and assisted in getting the matter settled. Construction Dispute - Gas Processing Plant Dispute involving delay and disruption, welding, and testing during gas plant debottlenecking project. Contractor claimed that multiple owner changes had resulted in significant additional costs, including delay. Owner claimed that the costs resulting from the changes were previously paid and that the delay in completion was due to the contractor s poor management of the project. Project Feasibility - LNG On behalf of the major oil company project sponsor, prepared a capital cost estimate for a proposed world-scale, grassroots liquefaction plant. The cost estimate was used to evaluate competing Front-End Engineering and Design (FEED) technology packages from engineering, procurement, and construction (EPC) contractor/licensors. LNG Due Diligence Provided technical support to the sponsor of a multi-train liquefaction project. The scope of work included: preparation of a technical due diligence report; in-depth review of the Open Book Estimate (OBE), schedule, and project execution plan; assessment of the EPC contractor s capabilities and experience; high-level review of geotechnical issues; assistance in the development of an Operating and Maintenance (O&M) plan; input into the formation of sponsor s project management team; and input into the development of owner s costs, including appropriate levels of cost and schedule contingency. Provided support to the sponsor with EPC contract negotiations. 10 of 10