Shale s evolving storyline in the Appalachian Basin. November 7, 2013

Transcription

1 Shale s evolving storyline in the Appalachian Basin November 7, 2013

2 What a Difference Two Years Makes 2011 Energy Inc Energy Inc. Rig count: PA 110, OH 13, WV 28 PA production 0.4 tcf (first half of 2011) Rig count: PA 54, OH 34, WV 34 PA production 1.4 tcf (first half of 2013)

3 U.S. to be World s Largest Oil & Natural Gas Producer This Year Source: U.S. Energy Information Administration, October 4, 2013 Note: Petroleum production includes crude oil, natural gas liquids, condensates, refinery processing gain, and other liquids, including biofuels. Barrels per day oil equivalent were calculated using a conversion factor of 1 barrel oil equivalent = 5.55 million British thermal units (Btu).

4 Shale Gas Proved Reserves By State

5 Increases in Production

6 What a Difference Two Years Makes 2011 Energy Inc Energy Inc. Rig count: PA 110, OH 13, WV 28 PA production 0.4 tcf (first half of 2011) Rig count: PA 54, OH 34, WV 34 PA production 1.4 tcf (first half of 2013)

7 2011 Protests

8 2013 Protests

9 What a Difference Two Years Makes 2011 Energy Inc Energy Inc. Rig count: PA 110, OH 13, WV 28 PA production 0.4 tcf (first half of 2011) Rig count: PA 54, OH 34, WV 34 PA production 1.4 tcf (first half of 2013) Focus on drilling, fracking Capturing downstream opportunities

10 Transformation Underway Biggest energy breakthrough in this country since the dawning of the age of oil, some 150 years ago -- Stephen Pryor, President, Exxon Mobil Chemical, Shale Insight Conference (9/25/13) From 2007 to 2012, North American shale gas production climbed by more than 50 percent annually. -- McKinsey Global Institute (7/13) U.S. unconventional oil and gas revolution to increase disposable income by more than $2,700 per household and boost US trade position by more than $164 billion in IHS Global (9/4/13)

11 Milestones stunning U.S. natural gas production at highest level ever, up more than 30% in the last seven years U.S. oil production up by 1 million barrels/day in 2013 largest annual increase in US history U.S. now the world s largest exporter of refined products with shipments of gasoline and other fuels doubling over the last five years alone FLASHBACK: In 2003, TIME Magazine declared the U.S. was running out of energy TIME: The U.S. Is an Energy Superpower (Oct. 4, 2013)

12 We Have Addressed Real Challenges Technical and Regulatory Legislative and Political Social and Community And will need to continue sustained attention

13 Myriad of Federal, State & Other Regulators Federal agencies One state s agencies Multi-jurisdictional agencies

14 We Have Addressed Real Challenges The State Review of Oil & Natural Gas Environmental Regulations (STRONGER) a national non-profit organization dedicated to assessing states regulations and assisting in strengthening them determined that Pa. DEP s Oil and Gas program is well-managed, professional and meeting its program objectives. (9/20/13)

15 Recommended Practices Ongoing From the very basic: Tips for those hunting near active areas of development the universally relevant: Acknowledging the need and benefits to sourcing and hiring locally Promoting small, disadvantaged businesses Ensuring companies know the rules of the road Underscoring community safety as top priority to the highly technical: Pre-Drill Water Supply Surveys, Responding to Stray Gas Incidents, Water Pipelines, Pipeline Boring 8 published 20 more in development

16 What Does The Road Go From Here?

17 Liquids-Rich Basins Development Source: U.S. Energy Information Administration, from Baker Hughes, U.S. Rig Counts Reports dataset Source: U.S. Energy Information Administration, from Baker Hughes, U.S. Rig Counts Reports dataset Note: Dry and wet regions of West Virginia and Pennsylvania based on classifications from Bentek Energy, LLC.

18 Wet Natural Gas Proved Reserves, 2011

19 Changes in Wet Natural Gas Proved Reserves 2010 to 2011

20 Leading to NGL Supply Growth MMb/d US supply growth from gas plants expected to reach 4.9 MMb/d by 2023 US NGL Production from Gas Plants Source: Bentek Energy, September 25, 2013, Shale Insight, Philadelphia PADD 1 PADD 2 PADD 3 PADD 4 PADD 5 Growth PADD 1 PADD 2 PADD 3 PADD 4 PADD 5 Total Growth ,450 % 345% 94% 29% 8% 10% 52% Source: Bentek 20

21 States in Each PADD Region

22 U.S. Production of NGLs Source: EIA Annual Energy Outlook 2013 million barrels per day

23 Examples of Current Marcellus-Driven Petrochemical Opportunities Proposed Reuse Options Market Viability Estimated Capital Costs (Millions$) Job Creation Potential (FTEs) Propane Dehydrogenation High $300 to $ to 75 Comments Existing polypropylene plant at site (Braskem) is ready buyer of output from this reuse Natural Gas Liquids Processing Facility High $300 to $ to 100 Synergies exist with existing plant infrastructure, lowering overall investment costs Natural Gas Power Generation Medium $650 to $ to 100 Facility well positioned in mid-atlantic markets; dwindling number of coalburning plants Ethane Cracking and Derivatives High $2,500 to $3, to 200 High demand for polyethylene resins; site has competitive logistical advantages Liquified Natural Gas Export Terminal Low $2,000 to $2, to 200 Strong overseas market; several LNG plants already have applied for permission to export Gas-to-Liquids Production/Storage Low $4,000 to $6, to 400 Diesel markets especially attractive on the East Coast Source: IHS Sunoco Marcus Hook Industrial Complex Economic Opportunity Reuse Study, June 27, 2012

24 Marcellus and Utica Expansion Projects Crawford MarkWest alone has 22 Major projects under construction Cadiz II 200 MMcf/d 3Q14 Holmes Coshocton Medina HOPEDALE FRACTIONATOR Ohio C3+ Fractionation 60,000 Bbl/d 1Q14 Wayne CADIZ COMPLEX Cadiz I & Refrig 185 MMcf/d Complete De-ethanization 40,000 Bbl/d 1Q14 SENECA COMPLEX Seneca I 200 MMcf/d 4Q13 Seneca II 200 MMcf/d Muskingum 4Q13 Seneca III 200 MMcf/d 2Q14 De-ethanization 38,000 Bbl/d 4Q14 MWE Gathering Area MWE Utica Counties MWE Marcellus Counties MWE Plants ATEX Express Pipeline TEPPCO Product Pipeline Mariner Projects MWE NGL Pipelines Morgan Summit Tuscarawas Guernsey Noble Rich Utica Stark Washington Wood KEYSTONE COMPLEX Bluestone I & Sarsen I 90 MMcf/d Complete Pleasants Trumbull Bluestone II 120 MMcf/d Mercer 2Q14 Bluestone III 200 MMcf/d TBD Portage De-ethanization 10,000 Bbl/d 1Q14 C3+ Fractionation 10,000 Bbl/d 1Q14 Carroll Harrison Monroe Belmont Ritchie Columbiana Tyler Mahoning Jefferson Doddridge Hancock Ohio Marshall Wetzel Rich Marcellus Brooke Lawrence Beaver Washington Harrison Greene Marion Monongalia Allegheny Taylor Butler Barbour Venango Fayette Preston West Virginia Armstrong Westmoreland HOUSTON COMPLEX Clarion Houston I, II & III 355 MMcf/d Complete Houston IV 200 MMcf/d 2015 C3+ Fractionation 60,000 Bbl/d Complete De-ethanization 38,000 Bbl/d Complete MAJORSVILLE COMPLEX Majorsville I - III 470 MMcf/d Complete Majorsville IV 200 MMcf/d 1Q14 Majorsville V 200 MMcf/d 4Q13 Majorsville VI 200 MMcf/d 2016 De-ethanization I 38,000 Bbl/d 4Q13 De-ethanization II 38,000 Bbl/d TBD MOBLEY COMPLEX Mobley I & II 320 MMcf/d Complete Mobley III 200 MMcf/d 4Q13 Mobley IV 200 MMcf/d 1Q15 SHERWOOD COMPLEX Sherwood I & II 400 MMcf/d Complete Sherwood III 200 MMcf/d 4Q13 Sherwood IV 200 MMcf/d 2Q14 De-ethanization 38,000 Bbl/d 1Q15

25 Many Proposed Ethylene Production Projects in U.S. Proposed additions of U.S. ethylene production capacity, (million metric tons per year) Company Location Chevron Phillips Baytown, TX 1.5 Exxon Mobil Baytown, TX 1.5 Sasol Lake Charles, LA 1.4 Dow Freeport, TX 1.4 Shell Beaver Co, PA 1.3 Formosa Point Comfort, TX 0.8 Occidental/Mexichem Ingleside, TX 0.5 Dow St. Charles, LA 0.4 LyondellBasell Laporte, TX 0.4 Aither Chemicals Kanawha, WV 0.3 Williams/Sabic JV Geismar, LA 0.2 Ineos Alvin, TX 0.2 Westlake Lake Charles, LA 0.2 Williams/Sabic JV Geismar, LA 0.1 Total 10.1 Proposed capacity Beaver County project represents ~13% of proposed capacity >85% of proposed capacity in Gulf Coast

26 Ethane => Ethylene Production (C 2 H 4 ) Product categories Adhesives Alkyd resins Solvents Corrosion inhibitors Textiles Inks Shampoos, detergents, soaps Paints and paint remover Coatings Pipes, hoses, wire coating Coolant, antifreeze Films, packaging, bottles Plastics Tire and rubber Lubricant additives Solvent, industrial cleaners Manufacturing Sectors Apparel and accessories Beverage and tobacco products Chemicals Computers and electronics Fabricated metal products Food and kindred products Leather and allied products Nonmetalic mineral products Paper Petroleum and coal products Pharmaceutical Plastics and rubber products Primary metal manufacturing Printed matter Textiles, fabrics and mill products Transportation equipment Source: PWC, Shale Gas: Reshaping the US Chemicals Industry, October 2012

27 U.S. Recently Became Net Exporter of Propane/Propylene US imports and exports of propane/propylene, (million barrels per day) Source: EIA, Annual Energy Outlook 2013

28 Growth in Projected Demand Not Sufficient to Match Supply

29 Northeast U.S. Production Increases Source: Bentek Energy Northeast Market Update, October 3, 2013, New York

30 Thank you! Presented by: Transportation & Marketing Committee