Plg black gold9-13-12

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Plg black gold9-13-12

  1. 1. PLG Consulting Logistics in the Utica Shale Development Prepared for Black Gold Ohio Columbus, OH September 13, 2012PLG Consulting Logistics / Engineering / Supply Chain 1 Delivering Solutions for Competitive Advantage 1 1
  2. 2. ContentI. About PLGII. Energy BoomsIII. Products and Logistics FlowsIV. Utica Logistics Conclusions PLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 2
  3. 3. About Professional Logistics Group» A logistics, engineering and supply chain consulting firm that delivers solutions, providing competitive advantage for our clients» Headquartered in Chicago  Team members throughout the United States  11 years of “on the ground” experience in: – North America / Asia / Europe / South America / Middle East» Consulting services  Strategy and optimization  Supply chain assessments & solutions  Logistics assets and infrastructure  Rail and plant infrastructure  Private equity support» Industry groups served  Energy – oil and gas, wind, ethanol, coal  Processing – petrochemical / chemical  Manufacturing  Private equityPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 3
  4. 4. Energy BoomsPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 4
  5. 5. The Shale Development Gold Rush» 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 PLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 5
  6. 6. North American Shale PlaysPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 6
  7. 7. Ohio’s Boom Horizontal Well Production* Year Drilled Producing 2011 33 4 2012 160 193Forecasted 2013 650 843Forecasted 2014 1,075 1,918Forecasted» Estimated jobs created/supported by 2014* 65,000+ total 28,000+ field development and supply chain Baker Hughes Rig Count * Ohio Shale Coalition Oil Gas As of: September 7, 2012PLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 7
  8. 8. Products and Logistics FlowsPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 8
  9. 9. Shale Oil and Gas Supply Chain Materials Fuel Upstream Midstream Downstream • Proppants Gasoline Distillates • Chemicals Exploration • Clean water Crude Transportation Jet Fuel Residuals Oil Production (Well Site) Processing Equipment • Drilling Rigs • OCTG (Pipe) Refining Chemical Crude/ Gathering • Cement Feedstocks Gas Mixture Process Natural Product Gas Logistics FlowPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 9
  10. 10. Natural Gas & Petrochemical Supply Chain Petrochemical Refined Processing Polymers Crude Products Olefins Polybutadiene Polypropylene Polyethylene Chemical Ethylene Propylene Butylene Feedstocks Petrochemicals Natural Manufacturing Gas Power Aromatics Ammonia Many Others Intermediates become consumer and Generation industrial products Industrial Use Process Product Consumer Logistics Flow Use ConsumersPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 10
  11. 11. Hydraulic Fracturing Equipment Staging AreaSource: JPTOnline.org PLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 11
  12. 12. Upstream Transportation Requirements Volumes Per Single Well Site (Based on 30 stages/well site) Source to Transloading Transloading to Wellhead Site Material Railcars Material Trucks Proppants 40 Proppants 160 Pipe 5 Pipe 20 Fracturing Fracturing 2 8 Chemicals Chemicals Clean Water and Clean Water and Sourced Locally ~1000 Cement Cement Total 47 Total ~1200 Leaving Site Trucks Waste Water ~500 Oil and Natural Gas Pipeline, Rail, TruckPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 12
  13. 13. Key Logistics 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 availabilityPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 13
  14. 14. Potential Crude Oil Destinations Refinery Ohio Region of Utica Play» Utica could displace incoming crude at these local refineries» Other mothballed refineries may open up if Utica takes off» Logistics flows will need to be established PLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 14
  15. 15. Utica Natural Gas Markets» Utilize existing gas » Construction of new transmission system to pipeline systems for supply local markets access into new markets  Well-developed pipeline system  NEXUS gas pipeline ties in the  Pipelines may be reconfigured or Midwest and beyond added to improve gas flow Current Gas Pipeline Network NEXUS Proposed RoutePLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 15
  16. 16. Potential for Downstream Processing In the RegionMarcellus/Utica will create an opportunityfor a more cost-competitive chemicalfeedstock supply chain» Marcellus and Utica are expected to Monaca, PA increase ethane supply by 25%*» 45% of all US polyethylene is consumed around the Utica shale play» 70% of all US polyethylene is produced in Texas and Louisiana Proposed Shell * Source: Townsend Solutions and American Chemistry Council Ethylene Facility PLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 16
  17. 17. LNG Potential Opportunity» LNG is a cost leverage play  Global market price for dry gas is $10-17/mcf  Current US market price is ~$3/mcf  Cost to liquefy and transport is $4 to $7/mcg  Several companies have applied for export permits» Infrastructure Considerations  Some dry gas infrastructure already in place  Requires fractionation and liquefaction to transport efficiently  There are 4 LNG import terminals in the Northeast that could be modified for export» Potential Markets  Exports to Europe  Would need Federal legislation changesPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 17
  18. 18. Utica Logistics ConclusionsPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 18
  19. 19. Utica Must Be Most Cost-Competitive to Win! Oil, gas, and petrochemicals are commodities » Utica must beat the competition with lowest delivered cost  Production and logistics cost are main cost drivers  Environmental and regulatory factors will also impact cost » Know your competitors – Bakken, Marcellus, Eagle Ford, West Africa, North Sea, Canada » Importance of cost will escalate as more shale plays are developed in the U.S.PLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 19
  20. 20. Utica Pros and Cons » Advantages  Location  Good basic infrastructure  Learning from earlier shale plays  Wetter than Marcellus » Disadvantages  New entrant in shale gas and oil  Short term pipeline infrastructure  Lack of petrochemical plantsPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 20
  21. 21. What Can Ohio Do To Help Utica Win?» Drive cost competitiveness of production & logistics» Develop markets for products» Support with political / regulatory efficiency» Make Ohio an easy place to do business» Promote partnerships between:  State and local government  Educational institutions  Local supply companies  Oil and gas companiesPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 21
  22. 22. 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.COMPLG Consulting Logistics / Engineering / Supply Chain Delivering Solutions for Competitive Advantage 22
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