Marcellus Shale: Business & Job Growth Drilling Overview & Marketing
Global Shale Resources 22.9 QCF NG 3,352 bbl oil United States 2,431 TCF 665 TCF (27% shale) 223B bbl oil 58B bbl oil Worldwide Consumption (Annual) 113 TCF Natural Gas 31.2B bbl oil 200 & 100 year supply respectively
Local Impacts Global Implications
US Shale Plays
How Long? Multi-generational play Careers not jobs Marcellus / Utica / Upper Devonian 95,000 sq. mile aerial extent 10,000 20,000 to be developed 10 wells per square mile? 100,000 200,000 total wells 2,500 wells per year (currently)
Evolving Shale Issues Economics of development Constraints in transmission/storage Wells on pipeline Growing International Interest
Evolving Shale Issues Evolving Technology Closed loop vs. tanks Move to green completions Greening of products (food grade products) Predictability by public & industry is critical Public understanding of regulatory process Greater Transparency Push Industry and Government Fracfocus.org Social media impacts
* Bakers-Hughes Key Drivers of Development: Rigs & Price Oil Gas PA TX OH WV Sept 2012 1409 452 63 877 20 27 Sept 2013 1365 394 52 830 35 35 Leading PA Counties Susquehanna 11 Washington 9 Lycoming 8 Wyoming 8 Greene 7 $5.00 $4.50 $4.00 $3.50 $3.00 Natural Gas Spot Price ($/MMBTU) $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 3/1/13 3/8/13 3/15/13 3/22/13 3/29/13 4/5/13 4/12/13 4/19/13 4/26/13 5/3/13 5/10/13 5/17/13 5/24/13 5/31/13 6/7/13 6/14/13 6/21/13 6/28/13 7/5/13 7/12/13 7/19/13 7/26/13 8/2/13 8/9/13 8/16/13 8/23/13 8/30/13
Policy Can Drive Where Development Occurs New York Federal Coal Fired Power Plants Hydraulic Fracturing Pipeline Development Exporting Economically Driven (4-6x premium) Contract vs spot pricing Political/Patriotic DOE State Impact Fee / Taxes Pipeline Regulation Public Input
Impact on Exporting? LNG Exporting (6 BCF/Day) Deloitte $0.15 increase EIA $0.50 - $0.70 increase US Department of Energy (NERA) ~ $0.30 increase Purdue Researchers ~ $0.60 increase Charles River Assoc (DOW) $2.50 increase (8 BCF/D) LNG Permits Approved Lake Charles (LA) 2 Bcf/d Sabine Pass (LA) 2.2 Bcf/d Freeport (TX) 1.4 Bcf/d Cove Point 0.77 Bcf/d Pipeline exporting Mexico Currently 2.1 bcf/day Project potential 7 bcf/day Canada Net imports 5.8 bcf/day Imports increasing LNG??
Emerging Technologies - Utilization Vehicle Conversion New engine technologies New Fuel Formulations Bi-fuel & dual fuel Power Gen Small scale Industrial & commercial
Emerging Technologies - Utilization Gas to Liquids (GTL) Old technology Increased R & D on small scale Mobile LNG Off road Drill rigs
US Manufacturing Renaissance Ethylene Production Northeast US new hub? Methanex $1.1 B to move methanol plant from Chile LA World s largest methanol supplier 2,500 construction jobs 1MM metric ton plant Fertilizer Projects 6 Major Projects (~$10B) US Imports 50% currently Gas accounts for 70% of cost
Supply Chain Opportunities: What & Where Hot spots versus overall development Development type/geography Energy & Production versus sub-contractors Basin headquarters Regional offices/centers Field offices Field location well site, compressor station, pipeline, etc...
Master Service Agreement Legal contract that includes most terms that govern future transactions Permits quick execution of work/purchase orders that incorporate MSA terms Process to evaluate risks and benefits Defines EHS and performance standards Safety audits & required vendor meetings Required for first tier suppliers Outline obligations and responsibilities of both parties
Master Service Agreement What it s not. Guarantee of work Template for all contractors or companies Speedy process Market changes during negotiation may extend time Required for all work in the oil gas industry
Typical Elements of MSA Description of service or product being offered Term of agreement Payment amount and terms and process of payments Performance and Warranty Enforceable for prime and subs. Terms such as reasonable time and quality workmanship Indemnification Damages direct, consequential Remedies Safety & regulatory compliance ISNetworld Insurance Venue Consider where work is being completed or if this covers multiple locations
Payment - Terms and Process May not align with your set terms Unique process Proper documentation Electronic Added cost? Plan accordingly
Industry Knowledge & Updates Newsletters & Terminology NGI Daily Daily News Accounts ($$) Ohio Energy Resource Alliance Updates on Ohio Activity (Free) Schlumberger Oil Field Glossary (Free) Shale Directories (Free) Shale Digest (SS) Websites Education Government (State & Federal) Non-profit Linked In Groups Google Alerts
Business Considerations The Message Safety Experience Knowledge Commitment Owner Involvement High tech Be Direct Forms of Operation Internal/Interwoven Separate Division Independent Entity Adapt 24/7 Mobile Local redefined Think global Competition or not? New Partnerships Backfill
Marketing & Networking Local, State & National Trade Shows DUG East OOGA Winter Meeting Networking, B2B Events Chamber of Commerce/Partnerships Member only events Direct marketing opportunities Task Forces Print media Public Meetings Website Must have Shale Energy Services
Networking is Key Create & improve relationships Understand your market / decision makers Maximize ROI Be seen and involved Events, restaurants, trade shows, public meetings Parking lots, bars, convenience stores Follow up gets results
Business Considerations Financial Costs Soft costs Slower pay than typical operations Expansion (Hiring/Marketing, etc.) Equipment Employee Safety Training PPE Screening Insurance
Fitting the Oil/Gas Patch Be ready Strong work ethic Problem solver Basic knowledge of natural gas production Pass a drug test Network Properly (high contact) Patience and perseverance (polite persistence) Get ready Follow/understand the industry Take your safety training Have a plan
Summary Engage with industry Educate yourselves and organization Slow down multi generational play Develop a plan
Thank You Matt Henderson mwhenderson@psu.edu (570) 244-1128 www.marcellus.psu.edu www.naturalgas.psu.edu Photo Courtesy Penn State Marcellus Center