Shale Gas Treatment Challenges and Requirements

Honeywell s Businesses $37.6 billion in revenues in 2012, 50% outside of U.S. Nearly 122,000 employees operating in 100 countries 19,000 engineers and scientists A Fortune 100 company with Morristown, NJ global corporate headquarters Aerospace Automation & Control Solutions Performance Materials & Technologies Transportation Systems UOP 6084A-2 2

UOP Offers to the Oil and Gas Industry Upstream Midstream Downstream Exploring for, drilling for and producing crude oil and natural gas Processing, storage and transportation Refining and converting oil / gas into end products such as fuels and chemicals UOP technology, materials and services enable natural gas resource development UOP processing technology, equipment, materials and services 3

Shale Resource Processing Challenges 4

Gas Value Chain Challenges Supply diversification LNG, biogas, shale gas, tight gas, SNG, CBM, and conventional gas vary in quality and composition Unconventional gas quality in China will most certainly vary between and within fields Demand diversification Pipeline network delivers to customers with varying needs Stranded gas brings additional challenges Agile and flexible solutions required 5

Lessons from U.S. Shale Gas Variability Barnett Shale Gas Composition Well C 1 C 2 C 3 CO 2 N 2 1 80.3 8.1 2.3 1.4 7.9 2 81.2 11.8 5.2 0.3 1.5 3 91.8 4.4 0.4 2.3 1.1 4 93.7 2.6 0.0 2.7 1.0 Oil and gas geochemistry and petroleum systems of the Fort Worth basin, AAPG Bulletin, Vol. 91, No. 4 (April 2007) Marcellus Shale Gas Composition Well C 1 C 2 C 3 CO2 N 2 1 79.4 16.1 4.0 0.1 0.4 2 82.1 14.0 3.5 0.1 0.3 3 83.8 12.0 3.0 0.9 0.3 4 95.5 3.0 1.0 0.3 0.2 Compositional variety complicates processing plans for US shale gas, Oil & Gas Journal, March 9, 2009 New Albany Shale Gas Composition Well C 1 C 2 C 3 CO 2 1 87.7 1.7 2.5 8.1 2 88.0 0.8 0.8 10.4 3 91.0 1.0 0.6 7.4 4 92.8 1.0 0.6 5.6 Identification of microbial and thermogenic gas components from Upper Devonian black shale cores, Illinois and Michigan basins, AAPG Bulletin, Vol 92, No. 3 (March 2003) Antrim Shale Gas Composition Well C 1 C 2 C 3 CO 2 N 2 1 27.5 3.5 1.0 3.0 65.0 2 57.3 4.9 1.9 0.0 35.9 3 77.5 4.0 0.9 3.3 14.3 4 85.6 4.3 0.4 9.0 0.7 Microbial production and modification of gases in sedimentary basins: A geochemical case study from a Devonian shale gas play, AAPG Bulletin, Vol 87, No. 8 (August 2003) Variations in C 2, C 3, CO 2, Nitrogen, and Other Components 6 in Shale Gas Impact Interchangeability with Other Gas Supplies 6

US High Rates of Return in Liquids-Rich Plays Driving Activity GPM 4-9 4-9 4-7 8-13 4-9 3-9 4-9 3-9 1-2 1-2 1-2 <1 <1 180% 160% 140% WET DRY DRY Rate of Return 120% 100% 80% 60% 40% 20% 0% -20% $80 WTI $70 WTI $60 WTI Liquid rich field plays are forecasted to generate over 75% of incremental gas in USA (+4 TCF) over next 6 years HH Dry Gas Price = $3.00/MMBTU NGL Price = 40% WTI All Wet US Gas Plays Drive >20% Return at Current Prices 7

Gas Plant Development: Decision Criteria Upstream Factors Methane Ethane Propane Butanes C 5 + condensate Oil Acid Gases: CO 2, H 2 S, Mercaptan, COS Other: Mercury, Arsenic, Nitrogen, Water HC Distribution Production Profile Contaminants Pressure, Flow Ambient Conditions Offshore/ Onshore Fiscal Regime Environmental Constraints Midstream Factors Compression Plant Configuration & Design Decisions: Gas Processing Functional Blocks Acid Gas Removal Sour Gas Removal Hydrocarbon Management Dehydration Other Contaminant Removal Utilities & Disposal Downstream Factors By-Products Products Opp. Efficiency Consumption Disposal Sales gas / LNG NGL s Spec products C 5 + condensate Availability Flexibility Energy Chemicals Labor Air Water Subsurface UOP 6084B-8 Many Factors Impact Selection of Gas Processing Technologies 8

Decision Tree Logic Summary 1) Select the proper technology within each separate gas processing block 2) Account for interactions across the different processing blocks 3) Adjust sequence of processing blocks for overall system optimization Integrated Solutions Offer Operating & Investment Flexibility 9

Acid Gas Removal Technologies Partial Pressure Acid Gas in Feed, psia Amine Process Molecular Sieves Physical Solvent Process Membrane Systems Partial Pressure Acid Gas in Product, psia No One Size Fits All Solution for Acid Gas Removal 10

Imperatives 1 2 Maximize value of gas projects with speed of implementation Monetize methane and natural gas liquids 11

Rapid NGL Recovery is Paramount Procurement Begins at Order Date Skid Mounted Mobility Flexibility in Feed Composition In-Parallel Field Skid Construction Reduced Engineering Reduced Field Construction Subvendor Delivery Optimization QUICKLY Monetize the Widest Possible Range of Natural Gas Compositions at The Lowest Installed Cost 12

China LPG Industry Overview 60 50 40 30 20 10 0 China LPG Supply & Demand (K MT) Production Consumption Net Imports 2012 2015 2020 2030 Drivers Large unmet industry Opportunity Overall supply and share of supply increasing from gas processing plants Restraints Cost of imported LPG Natural gas pipeline, gas processing, and LPG storage & distribution infrastructure Comments LPG Production (+3.7% CAGR) & consumption (+4.3% CAGR) growing within the region Growing net import deficit Price sensitive residential customers left out of the market due to high import prices Lack of penetration to inland segments China short 2.1K MT (2012) increasing to 9.5K MT (2030) Displacement of imports supports economics for increased LPG recovery via gas processing plants Increased natural gas liquids wet shale gas development Adequate natural gas Life cycle economics to encourage exploration and production and infrastructure investment Source: IHS 2012 World LPG Market Outlook Both LPG Supply and Share of Supply from Gas Plants Will Require Increased Gas Processing Capacity 13

Rapid NGL Recovery Improves Return on Investment Typical example of revenue associated with NGL recovery 200 MMSCFD of 3 GPM gas (~1,100 BTU/SCF) Monthly revenue: 5.8 MM$ Example Shale Gas 200 million cubic feet per day (MMcf/d) @ 3GPM NGL s Methane Ethane Propane n-butane i-butane Natural Gasoline Barrel Comp 67% 15% 4% 5% 9% Price Basis 1 Fuel Value Fuel Value $950 MT $950 MT $950 MT $700 MT Value over fuel $M/month $0.0 $0.0 $4.3 $1.2 $1.5 $2.5 Amount Generated Monthly $ 9.5MM 1. Average fuel gas value $9/mmbtu UOP Modular Plants Delivered Faster, Adding Value, No Schedule impact 14

Modular Pre-Engineered Plants Speed to Gas Your Plant Installed in 19 Weeks Modular Design Rapid Gas Value Possible 15

UOP Cryogenic Plant Skids Factory Built and Ready for Installation 16

Plant Case Study: Marcellus Basin Scenario: A natural gas processing company was concerned that it was unable to service existing customers and capture future opportunities in the Marcellus, a rapidly expanding geographical area. The company did not have enough processing capacity, and the lead time for a custom facility was too long. UOP solution: With a modular, pre-engineered design, a Honeywell UOP Russell cryogenic plant could be delivered in half the time of a custom plant. Results: As a result, the natural gas processing company completed the project on time and within budget. This allowed for the rapid capture of future business opportunities by expanding to multiple trains for processing and fractionation. The customer improved their returns by an estimated $2-5 million for every additional day that each train of their plant was up and running 17

UOP Equipment Lines SEGMENT Nat Gas Conditioning NGL Recovery NGL Upgrading Dehydration Mol Sieve Adsorption 9 Rich Gas Conditioner Fractionation Deethanizer / Depropanizer / Debutanizer OFFERING Glycol (TEG, DEG) Absorption Acid Gas Treatment Amine Units (100-1000 gpm 1 ) Membrane Units (1+ BCFD) Sulfur Recovery Modular Claus (10-100+ LTPD) Sulfur Scavengers Hg Removal Units 1 gpm = gallons of amine per minute GAS NGL CONTENT (GPM 2 ) 6 4 3 2 Mechanical Refrigeration Cryogenic Turboexpander 2 GPM = gallons of NGL per thousand scf of natural gas DeEnthanizer DePropanizer DeButanizer Butane Splitter Y-GRADE OR RAW MIX Purity Ethane Propane Mix-Butanes N-Butanes I-Butanes Natural Gasoline Complete Modular Equipment Solution UOP 6084C-18 18

2 Methane and NGL Monetization Options Methane Ethane Propane Gas Field Shale Gas Demethanizer Deethanizer Depropanizer Debutanizer Butane Natural Gasoline Upgrade to Higher Value Products 19

Upgrade Methane to Transportation Fuel Pipeline Feed (gas inlet) Typical Gas Specification Component Mol% (typical) Methane (C1) 85-95% Ethane (C2) 5-10% Propane (C3) 2-5% LNG Feedstock Gas Pretreatment & Liquefaction Component LNG Product Specifications Mol % (max) Methane (C1) >95% Ethane (C2) <6-8% Propane (C3) <3% Butane+ (C4+) 2-3% Carbon Dioxide (CO2) Trace Components 1-4% H2S, Hg, R-SH, COS Butane Carbon Dioxide (CO2) Pentane & Heavier Heating Value 1ppmv 50ppm <0.1mol% 1050 btu/scf (Europe & US) 1140 btu/scf (Asia, max) Small Scale LNG as Virtual Pipeline and as Substitute for Diesel After Pretreatment 20

Upgrade Methane to Olefins Natural Gas $3-6/MMBtu ($140-240/MT) Synthesis Gas Production Methanol Synthesis MTO Ethylene & Propylene ($1300/MT) Coal ($25-100/MT) Methanol-to-Olefins (MTO) is now a reality in China >20 MTO projects in various stages of D&C UOP s work in MTO dates back to 1980 s UOP has 4 UOP licensed plants in China First UOP Advanced MTO Process Unit to s/u in 2013 Picture of UOP Advanced MTO Process at Wilson Clean Energy 21

Monetize Propane to Propylene Global Propylene Gap PDH - Propane Dehydro 140 Propylene Supply / Demand (MMTPA) Supply from Refinery FCCs Propylene Gap Hydrogen 120 100 Supply from Steam Crackers Demand (Polymer/Chemical Gr.) $500/MT $800/MT $1300/MT 80 C 3 C 3 = 60 40 20 0 2001 2006 2011 2016 2021 Data Source: IHS Chemical Propylene Gap is growing Propylene demand growing at ~4% CAGR Crackers shifting to lighter feedstocks, with less propylene On-Purpose Propylene to fill the gap; MTO and PDH UOP Oleflex TM Process Single Feed Single Product enables simple project execution Excellent forward or back integration 14 operating PDH plants world-wide (9 utilize UOP s Oleflex Process) New unit activity focused in China and North America UOP has 16 PDH awards since 2011 Oleflex - A Key Technology for Filling Propylene Gap 22

Monetize Butanes to Fuels & Petrochemicals Net Gas Fresh Methanol $375/MT Alternate Products ic 4 ic 4= Oleflex Unit Ethermax TM Unit $1150/MT MTBE C 3 - ETBE HPIB MMA Isoprene $800-900/MT C 4 LPG DIB Column DeC 3 Column CSP ORU Butamer TM Unit C 5 + nc 4 ic 4 6 Commissioned MTBE Complexes with UOP Oleflex Process 7 New C 4 Oleflex Awards since 2011 4 mixed C 3 /C 4 Oleflex Units Best of Both Worlds 23

UOP Contacts in China Hanbing Ding,Sr. Sales Leader O: +86 10 8432 3928 M: +86 186 1833 6085 F: +86 10 6437 6616 E: hanbing.ding@uop.com Victor Wen, Sr. Sales Manager O: +86 10 8432 3982 M: +86 139 1172 6957 F: +86 10 6437 6616 E: victor.wen@uop.com Thank You! 24