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PLG Consulting         Prepared for Shale Energy Supply andDownstream Opportunities for  Businesses in NE Ohio         You...
ContentI.    About PLG ConsultingII.   Recent Energy BoomsIII. Shale Energy 101IV. Economic Opportunities for OH & PAV.   ...
I. About PLG Consulting» Boutique consulting firm specializing in logistics, engineering, and supply chain    Established...
II. Energy Booms» Other recent energy “boom” events with major logistics challenges….» Common characteristics     New tec...
Logistics Cost as a Percentage                                                of Product Cost» Frac sand is highly sensiti...
Best Frac sand comes from WI & MN                                                                 » “All sand is not creat...
III. Shale Energy 101                    7
North American “Shale Plays”                                             Marcellus & Utica                                ...
Shale Economic Impact to NDNorth Dakota Oil Production                                                                    ...
Two Technology Breakthroughs:                              Horizontal Drilling & Hydraulic FracturingGreat YouTube video b...
Shale Energy Supply ChainMaterials                                                             Fuel                   Upst...
Hydraulic Fracturing                                                             Equipment Staging Area                   ...
Hydraulic Fracturing Materials                         Inputs and Logistics – Per Well                 Source to      Tran...
Midstream / Downstream                                                      Supply Chain                                 P...
Key Logistical Questions for                                Midstream and Downstream» Where are the destinations  for furt...
IV. Economic Opportunities              for OH & PA                         16
Traditional Plastics Supply Chain                    “I just want to say one word Lordstown                    to you…Plas...
Potential Plastics Supply Chain                Lordstown                      HDPE Calculated Cost                Assembly...
Gas Demand Growth Potential                                            Opportunities – LNG & Others» LNG export is a cost ...
Impact of Crude Oil in UticaUtica crude would firstdisplace foreign crude inthis region and havelogistical cost advantagev...
V. Resulting Business        Opportunities                    21
Shale Development Activities» Exploration and Preparation                   » Production     Land acquisition            ...
Shale Regional Development                                Business Opportunities»   Engineering                    »   Med...
Will this boom actually occur?» Not a matter of “if” but “when”….     Natural Gas & Crude is here     Proven technology ...
Thank You!   For follow up questions and information, please contact:       Taylor Robinson, President+1-508-982-1319 / tr...
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PLG Shale Energy OH/PA Presentation

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Transcript of "PLG Shale Energy OH/PA Presentation"

  1. 1. PLG Consulting Prepared for Shale Energy Supply andDownstream Opportunities for Businesses in NE Ohio Youngstown, OH November 7, 2012 1
  2. 2. ContentI. About PLG ConsultingII. Recent Energy BoomsIII. Shale Energy 101IV. Economic Opportunities for OH & PAV. Resulting Business Opportunities 2
  3. 3. I. About PLG Consulting» Boutique consulting firm specializing in logistics, engineering, and supply chain  Established in 2001  Over 80 clients and 200 engagements  Significant shale development practice since 2010» Headquarters in Chicago USA, with team members throughout the US and with “on the ground” experience in:  North America / Europe / South America / Asia / Middle East» Consulting services  Strategy & optimization  Assessments & benchmarking  Transportation assets & infrastructure development  Logistics and Supply Chain operations  M&A/investments/private equity» Specializing in these industry categories:  Energy  Bulk commodities (Proppants, Chemicals, Plastics)  Manufactured goods  Private Equity 3
  4. 4. II. Energy Booms» Other recent energy “boom” events with major logistics challenges….» Common characteristics  New technology breakthroughs and/or dramatic market shifts  Speed to market is paramount; logistics strategy an afterthought  Rush of capital and new players  Continuous change and evolution Logistics cost and supply chain execution are even more critical in shale development 4
  5. 5. Logistics Cost as a Percentage of Product Cost» Frac sand is highly sensitive to logistics costs relative to past energy “booms”» As frac sand costs are decreasing, rail freight rates are increasing Total Landed Cost Breakdown of Frac Sand Ethanol 8% Wind turbine 12% Frac sand 58% ($180/ton) Source: PLG analysis 5
  6. 6. Best Frac sand comes from WI & MN » “All sand is not created equal” » WI & MN sand is: » Round » Uniform in size » Almost pure quartz » Extremely hard » Serves as an optimum proppant » What is a proppant? It props open the fissures in the shaleSource: Federal Reserve Bank of Minneapolis, July 2012 6
  7. 7. III. Shale Energy 101 7
  8. 8. North American “Shale Plays” Marcellus & Utica are large plays withBakken & Eagle Ford great location andare largest “shale plays” tremendous potentialso far…What can welearn from them? 8
  9. 9. Shale Economic Impact to NDNorth Dakota Oil Production ND WV OH PA • Per capita income rose from 38th to 17th among all states since 2000 • Oil investments driving significant improvements in state and local infrastructure development 9
  10. 10. Two Technology Breakthroughs: Horizontal Drilling & Hydraulic FracturingGreat YouTube video byMarathon on fracing:Http://www.youtube.com/watch?v=VY34PQUiwOQ 10
  11. 11. Shale Energy Supply ChainMaterials Fuel Upstream Midstream Downstream• Proppants Gasoline Distillates• Chemicals Exploration• Clean water Crude Transportation Jet Fuel Residuals Oil Production (Well Site) ProcessingEquipment• Drilling Rigs• OCTG (Pipe) Refining Chemical Crude/ Gathering• Cement Feedstocks Gas Mixture Process Natural Product Gas Logistics Flow 11
  12. 12. Hydraulic Fracturing Equipment Staging Area Frac Tanks/Fluid Storage Data Van Chemical Trucks Blender Pump Trucks Sand Storage UnitSource: JPTOnline.org 12
  13. 13. Hydraulic Fracturing Materials Inputs and Logistics – Per Well Source to Transloading toMaterials Waste Water Transloading Wellhead Site ~500 Total Proppants 40 160 TruckloadsOCTG (Pipe) 5 20 Chemicals 2 8Clean Water/ Oil / Gas/ NGLs Local source ~1,000 Cement Truck, Rail, 47 Total ~1,200 Total Pipeline Railcars Truckloads 13
  14. 14. Midstream / Downstream Supply Chain Petrochemical Refined Processing Polymers Crude Products Olefins Polybutadiene Polypropylene Polyethylene Chemical Ethylene Propylene Butylene Feedstocks PetrochemicalsNatural Manufacturing Gas Power Aromatics Ammonia Many Others Intermediates become consumer and Generation industrial products Industrial Use Process Consumer Product Use Consumers Logistics Flow 14
  15. 15. Key Logistical Questions for Midstream and Downstream» Where are the destinations for further processing?  Midstream processing  Crude oil refineries  Petrochemical processing plants» Is the infrastructure in place to allow efficient movements?  Pipeline locations and capacity  Adequate roads  Rail infrastructure  Waterway terminal availability 15
  16. 16. IV. Economic Opportunities for OH & PA 16
  17. 17. Traditional Plastics Supply Chain “I just want to say one word Lordstown to you…Plastics…There’s a Assembly Plant great future in it. Think about it.” -The Graduate, 1967Resin ComponentPlants Manufacturing Cracker Resins ship Refineries via rail Imported crude via vessel 17
  18. 18. Potential Plastics Supply Chain Lordstown HDPE Calculated Cost Assembly 2500 Plant 2000 Component 1500Manufacturing $/Ton Resin Cracker Plants 1000 500 Gas Wells 0 Asia US Saudi US Historical Recent Sources: CMAI, TopLine Analytics, and Alembic analysis, 2012» Low cost natural gas with local processing would give this region a tremendous material and manufacturing cost advantage 18
  19. 19. Gas Demand Growth Potential Opportunities – LNG & Others» LNG export is a cost leverage play 15 $7.50- $13 12 $4-7 $10.50 $10 US $ 9 6 $3.50 3 0» Infrastructure & Regulatory Issues  Requires fractionation and liquefaction to transport efficiently.  There are 4 LNG import terminals in the Northeast that could be modified for export  Marcus Hook, PA has great export potential  Federal government must approve exporting LNG. Several companies have applied for export permits.» Emerging technology & applications  Compressed Natural Gas (CNG) as transportation fuel  Converting natural gas to diesel or gasoline (Cairns City, PA)  Exporting byproducts – propane, ethelyne, resins 19
  20. 20. Impact of Crude Oil in UticaUtica crude would firstdisplace foreign crude inthis region and havelogistical cost advantagevs. Bakken.Utica has the potential toproduce 100 to 180 millionbarrels of oil annually. Source: EAI, Inc. Source: EIA 20
  21. 21. V. Resulting Business Opportunities 21
  22. 22. Shale Development Activities» Exploration and Preparation » Production  Land acquisition  Transportation  Engineering – Civil, Mechanical  Equipment Maintenance  Legal  Construction  Infrastructure build-out – roads, rail, roads, pipelines, bridges, buildings» Drilling  Transportation – transloading, trucking  Fresh water management  Brine water processing & transportation  Equipment maintenance 22
  23. 23. Shale Regional Development Business Opportunities» Engineering » Medical support» Construction » Vehicle rental & repair» Material supply & handling » Equipment rental & repair» Real Estate » Machine parts» Temporary Housing » Temporary labor» Hotels » Work clothing, shoes, PPE» Restaurants & Supermarkets » Construction material salvage» Catering/On-site food supply » Fuel – gas, diesel, propane Direct Employment: ~20% of all jobs created Indirect & Induced Employment: ~80% of jobs created 23
  24. 24. Will this boom actually occur?» Not a matter of “if” but “when”….  Natural Gas & Crude is here  Proven technology to find it  Geographically advantageous  Great transportation infrastructure in place» “When” depends on these factors….  US Natural Gas Prices  Gas processing & pipeline capacity  Cracker & resin factories in region  LNG export timing & amount  Finding fracing “recipe” for Utica crude oil  Global crude oil price 24
  25. 25. Thank You! For follow up questions and information, please contact: Taylor Robinson, President+1-508-982-1319 / trobinson@prologisticsgroup.com This presentation will be available at: WWW.ProLogisticsGroup.COM 25
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