VRGE TM Overview. Patented Waterless Fracturing & EOR Technology for Unconventional Oil & Gas Production. Expansion Energy LLC.

Transcription

1 VRGE TM Overview Patented Waterless Fracturing & EOR Technology for Unconventional Oil & Gas Production February 2015

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 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 -- Waterless Fracturing & EOR Technology 2

3 Expansion Energy LLC North American Shale Oil & Shale Gas Plays Reliant on Fracturing VRGE -- Waterless Fracturing & EOR Technology 3

4 Global Shale Oil & Shale Gas Basins Many Are Water-Constrained Source: US Dept. of Energy Energy Information Administration Technically recoverable shale Gas reserves = 7,795 TCF (> 100 years of supply) Technically recoverable shale Oil reserves = 335 Billion barrels VRGE -- Waterless Fracturing & EOR Technology 4

5 Water-Based Hydraulic Fracturing is Under Threat» from regulators, policy-makers, litigation, environmental groups and the public in the U.S.» 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 (up to 500 water truck deliveries + > 200 wastewater truck trips per well)» France banned hydraulic fracturing before it even began; Spain and others also considering bans» Specific examples: EPA s + other studies to determine effects of hydraulic fracturing on groundwater EPA is developing stricter standards that fracturing wastewater must meet before going to a treatment plant Environmentalists are pressuring EPA to regulate fracturing water disposal wells as hazardous (Class I wells) Disposal wells are now being blamed for small earthquakes in some regions (e.g., Ohio, Texas) Congressional investigations into the effects of hydraulic fracturing fluids on groundwater The FRAC Act introduced in Congress would require regulation of hydraulic fracturing under the federal SDWA Some 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 fracturing chemicals Hydraulic fracturing-related litigation is increasing VRGE -- Waterless Fracturing & EOR Technology 5

6 The Solution: VRGE TM A Waterless Fracturing & EOR Technology» Pronounced VeRGE a unique, patented technology (US Patent # 8,342,246) available for license» Replaces water-based hydraulic fracturing For extraction of Oil, Natural Gas (NG), NG Condensates from shale, sandstone & other tight formations Applicable for: fracturing new wells + recompletions / lifting / enhanced oil recovery (EOR)» VRGE s fracturing fluid is Natural Gas (methane) from nearby wells or from the targeted formation A mobile cryogenic plant (e.g., VX TM Cycle (Slide 14)) + cryogenic pumps produce high-pressure CNG for fracturing NG-based foam enhances proppant transfer & placement in the formation Analogous to other gas-energized fracs (N 2 & CO 2 ), but does not require importing fracing fluids to well site» Reduces total completion costs by up to $2 million per horizontal well (Marcellus, Bakken, etc.)» NG used by VRGE eventually resurfaces and can be sold to market or used for further VRGE fracturing» The cryogenic plant can remain onsite to: Produce LNG fuel for drilling rigs, frac pumps, trucks, etc. or to sell LNG to the market Separate NGLs from the NG stream (propane / ethane / butane / isobutane / pentane)» Requires little or no water and avoids the need to dispose of large volumes of fracturing wastewater» Chemical additives & biocides used for water-based fracturing are reduced or eliminated» Pre-fracturing steps drilling, perforation, etc. are the same as for other types of fracturing VRGE -- Waterless Fracturing & EOR Technology 6

7 Fracturing Issues Avoided by Not Using Water» Use of water is a root cause of hydraulic fracturing s main drawbacks & public concerns» Hydrocarbon formations do not like water. A main reason chemicals and fluid additives are used for water-based 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 flowback water in underground wells or above-ground pits Limited number of disposal wells Fracturing chemicals/fluid additives cause concerns about groundwater quality & human health Insufficient number of wastewater treatment plants equipped to treat fracturing wastewater Disposing of large volumes of wastewater underground can cause geologic disturbances» Consumption of large volumes of water a 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 fracturing-related truck traffic is for water & wastewater transport Highway safety concerns Road wear / road re-construction costs Reducing the use of water avoids many of fracturing s political & regulatory threats. VRGE -- Waterless Fracturing & EOR Technology 7

8 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 a balance of refrigeration & compression Optimally, the Meta-NG plant is a VX TM Cycle LNG/CCNG plant (see Slide 14)» Natural gas is both the fracturing medium + part of a safe, proprietary proppant-carrying foam Little or no water is sent down-hole to the well bore NG used to make the Meta-NG comes from the targeted formation itself or from a nearby well(s)» Meta-NG is nearly as dense as a liquid and thus can be pumped like a liquid with relatively little energy» Extracted oil, NG and/or NG condensates evacuate the well bore the same way they exit a hydraulically fractured well» After initial fracturing, the on-site VX TM Cycle plant can either be moved to a new well or can remain at the original well site to: Produce truckable LNG (e.g., from stranded wells) or cold, dense NG (to increase pipeline take-away capacity) Extract NGLs from the NG stream Knock out CO2, N2 and water from the NG stream NG clean-up VRGE -- Waterless Fracturing & EOR Technology 8

9 Proppant Storage Proppant Blender + Slurry Pumps (trailer-mounted) Environmentally Benign Foaming Fluid VRGE Process Schematic Vaporization & Heat Exchangers (trailer-mounted) Cryogenic CCNG Pumps (trailermounted) CCNG Plant e.g., VX Cycle (skid- mounted) Truck delivery of Oil and/or LNG to market High-Pressure CNG + Foam + 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 -- Waterless Fracturing & EOR Technology 9

10 Flow Chart of VRGE Process Steps Part 1 ❶ Natural Gas (from nearby wells or targeted formation) Produce cryogenic CCNG TM at well site using a VX TM Cycle LNG plant (or other LNG plant) Pump CCNG to high pressure with cryogenic NG pump(s) ❷ Blend Proppant + Surfactant into a slurry Pump slurry to high pressure Vaporize CCNG into high-pressure CNG using heat exchangers ❸ Safe/Benign Non-Aqueous (or Water-Based) Liquid Foaming Agent Integrate with high-pressure slurry Proppant Slurry + Foaming Agent is energized by high-pressure CNG To Part 2 VRGE -- Waterless Fracturing & EOR Technology 10

11 Flow Chart of VRGE Process Steps Part 2 From Part 1: High-Pressure, Proppant- Carrying Foam Foam is sent down-hole to fracture the formation + deliver proppant Produced hydrocarbons (Oil, Gas, Condensates) Return of energized foam ingredients ❶, ❸ + Produced water ❹ To market The process (Parts 1 & 2) is repeated for each stage of fracturing to be completed per well (similar to stages of water-based fracturing) Separation ❸ ❹ Return / Re-use Dispose Key ❶ = Natural Gas ❸ = Non-Aqueous (or Water-Based) Liquid Foaming Agent ❹ = Produced Water On-site LNG/CCNG plant (VX TM Cycle) Methane + NGLs LNG/CCNG NGLs VRGE -- Waterless Fracturing & EOR Technology 11

12 VRGE Process Steps 1. Natural gas is supplied from a nearby well(s) or from the targeted formation itself 2. NG is converted to CCNG TM (Meta-NG) by an onsite cryogenic plant such as a VX TM Cycle LNG plant 3. The CCNG is pumped to high pressure with a cryogenic NG pump(s) 4. The high-pressure CCNG is then vaporized via heat exchangers into high-pressure CNG 5. Warming of the high-pressure CCNG (to CNG) can be accelerated by waste heat from the CCNG plant 6. The high-pressure CNG is then blended with high-pressure proppant-carrying slurry + foaming agent 7. The energized warm, high-pressure CNG+foam+proppant is sent down-hole to the well bore 8. The high-pressure CNG+foam creates, extends and holds open fissures in the underground formation, and also carries proppant into those fissures 9. Pressure is then reduced, leaving proppant to hold open the fissures, thus liberating oil and/or NG The process is repeated for each stage of fracturing to be completed per well Safety Note: VRGE LNG/CCNG pumps utilize extend-drive shafts or electric-drive to keep combustible fluids away from ignition sources Optional Bonus Feature Thermal Shock The CNG+foam+proppant can be sent down-hole cold (e.g., -20 F) to shock the warm formation, making it brittle and creating/extending fissures VRGE -- Waterless Fracturing & EOR Technology 12

13 VRGE vs. Other Fracturing Technologies Hydraulic Fracturing CO2 Nitrogen Gelled VRGE (Water + Chemicals) Foam Foam Propane (CNG Foam) Requires "Importing" Fracturing Fluids to Well Site Yes Yes Yes Yes No Significant Truck Traffic/Costs Yes Yes Yes Yes No Cost for Consumption of Fracturing Fluid $$ $$$ $$$ $$$ $ Water Consumption High Low Low None None (or Low) Requires Waste Fluid Disposal High Medium Medium Medium None (or Low) Viable Where Water is Scarce No Somewhat Somewhat Yes Yes Safe, Non-Aqueous Liquid Used for Foaming N/A Water Water Gel Liquid (or Water) Recycling of Foaming Liquid N/A No No N/A Yes "Contamination" of Produced Hydrocarbons Yes Yes Yes Yes No Requires Chemicals to Mitigate Effects of Water Yes Yes Yes No No Temperature & Viscosity Control Chemicals Chemicals Chemicals Chemicals Physical State On-Site LNG Production + Separation of NGLs No No No No Yes Requires Pipeline to Get Natural Gas to Market Yes Yes Yes Yes No VRGE -- Waterless Fracturing & EOR Technology 13

14 Optimal Technology Combination: VRGE TM + VX TM Cycle» Two Expansion Energy technologies VRGE + VX Cycle are highly complementary» The VX Cycle is an ultra-small-scale LNG/CCNG production plant as low as 6,000 gal/day» VX is the best choice for cost-effectively producing LNG/CCNG on-site at small-scale» All VX Cycle plants up to 100,000 GPD are manufactured by Dresser-Rand Co. (Houston, TX)» The VX Cycle is: Energy-efficient 70% to 85% NG conversion efficiency Compact and mobile can be skid-mounted, truck/trailer-mounted or containerized Affordably priced 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 ( > 20 years useful lifetime) Provides refrigeration for extraction of NGLs propane/ethane/butane/isobutane/pentane» VX produces dense LNG/CCNG that can be stored in on-site tanks LNG can be trucked to nearby pipelines, then re-gasified Can provide LNG fuel for nearby drilling rigs, frac spreads, trucks and construction equipment» VX boosts pipeline capacity by providing a more dense (colder) NG product VRGE -- Waterless Fracturing & EOR Technology 14

15 VRGE Economic Advantages» Gas-energized fracturing typically yields greater oil & gas production often X» Lowers total completion costs by up to $2 million per horizontal well vs. water-based fracs» Reduces costs for water consumption/transport/flowback disposal saves ~ $1 million/well» Reduces proppant consumption by 50% or more» Substantially reduces costs for chemical/fluid additives & biocides» Eliminates costs for transport, treatment & disposal of flowback water» Reduces the need for new disposal wells and wastewater treatment plants» Less total energy is consumed for VRGE vs. water-based fracturing = lower energy costs» Reduced truck traffic = less need for road repairs/expansions key issue in oil & gas basins» VRGE s on-site CCNG plant can produce LNG + NGLs for additional revenues» VRGE s on-site CCNG plant can be used for re-fracs (re-completions) & continuous EOR» The NG used by VRGE for fracturing or EOR eventually resurfaces and is sold to the market VRGE s total costs are far lower than water-based fracturing s costs. VRGE -- Waterless Fracturing & EOR Technology 15

16 VRGE Well Performance & Efficacy Advantages» Oil & gas formations do not like water Water causes swelling of shales + creates surface tension that restricts the flow of oil & gas Water-based fracturing uses chemicals & additives to reduce swelling + weaken surface tension VRGE avoids this drawback by eliminating (or greatly reducing) the use of water» Greater oil & gas production from the use of gas-energized fracturing fluid Wells fraced with CO2- or N2-energized foams typically perform better than water-fraced wells Higher production (often X or more) + shallower decline curves Better proppant placement => reduced proppant consumption VRGE s CNG-energized system provides similar benefits while avoiding the costs, logistical complexity and supply constraints of importing fluids (CO2, N2, propane, etc.) to the well site» VRGE-produced oil & gas is not contaminated with nitrogen, CO2, propane or chemicals» Optional thermal shock (subjecting the formation to cold temp.) can create more fissures» VRGE allows stranded NG wells to be viable by providing a truckable LNG product» VRGE s cold (dense) gaseous NG increases pipeline take-away capacity (in BTU terms) Applicable for: fracturing new wells + recompletions / lifting / enhanced oil recovery (EOR) VRGE -- Waterless Fracturing & EOR Technology 16

17 VRGE Environmental & Safety Advantages» Eliminates or greatly reduces use of water which is scarce in many regions Lack of water has constrained oil & gas development in certain regions» Needs no chemical additives or biocides to counteract the effects of water» No contaminated fracturing waste streams Only normal produced water from the underground formation needs disposal» Eliminates the need for transport/treatment/disposal of flowback water & chemicals» Greatly reduces trucked water deliveries Reduced fuel consumption Reduced diesel exhaust Reduced dust an air quality/emissions issue» Reduced truck traffic = improved highway safety a major concern in producing regions» VRGE s on-site LNG/CCNG plant allows capture & sale of associated gas (instead of flaring) More energy-efficient & resource-efficient than water-based fracturing. Reduces political & regulatory threats. VRGE -- Waterless Fracturing & EOR Technology 17

18 VRGE s Addressable Market» Total global fracturing market is currently ~ $20 billion/year Includes fracturing only (not drilling, site construction, etc.)» U.S. is ~ 80% of current fracturing 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 fracturing in order to maintain/grow oil & gas production» Revenue potential from VRGE is in the billions of $ Source: EnergyTribune.com, Michael Economides VRGE -- Waterless Fracturing & EOR 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 Weatherford / Frac Tech / Trican» Several dozen smaller companies make up the remaining ~ 20% global market share Source: EnergyTribune.com, Michael Economides VRGE -- Waterless Fracturing & EOR Technology 19

20 Seeking Industry Partners & Licensees 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.: Jeremy Dockter, Co-Founder & Managing Director Tel.: VRGE -- Waterless Fracturing & EOR Technology 20