Shale Oil & Gas —A Key Driver for   Reshoring in the Tri-State Area              Taylor Robinson              President, P...
Topics» About PLG Consulting» Shale Oil & Gas 101» Shale impact to the US  reindustrialization» Wrap upwww.PLGConsulting.c...
About PLG Consulting» Boutique consulting firm with team members throughout the US     Established in 2001     Over 80 c...
Is The Shale Boom Different Than                                           Recent Energy Booms?» Other recent energy “boom...
Two Technology Breakthroughs Together:                         Hydraulic Fracturing & Horizontal Drilling          Great Y...
US Shale Plays                         Marcellus & Utica                         - Large plays                         - G...
Shale Oil & Gas High Level                                                          Supply Chain     Materials            ...
Shale Oil or Gas -- Which is more important                                 to US industry competitiveness?               ...
Downstream Supply Chain                                       Petrochemical       Refined                          Process...
Natural Gas & Petrochemical                                                   Downstream Products                         ...
Impact Of Shale Gas to US Industry --                                                Electricity Cost Competitiveness» Sha...
Gas Feedstock                                                                   Cost Competitiveness                      ...
The Graduatewww.PLGConsulting.com              13
Pre-Shale Plastics Supply Chain                                                                Lordstown                  ...
Potential Plastics Supply Chain  Potential Scenario                            HDPE Calculated Cost                       ...
Manufacturing Cost of Goods                                                                   Sold (COGS) Comparison  US v...
Key Questions for US manufacturers1.    Will we take advantage of the raw material & energy      cost advantages driven by...
Implications & Wrap Up» Shale gas is a game-changer for US manufacturing» US manufacturing must continuously reduce  their...
Thank You!                           For follow up questions and information, please contact:                             ...
Upcoming SlideShare
Loading in...5
×

PLG Reshoring Summit

417

Published on

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
417
On Slideshare
0
From Embeds
0
Number of Embeds
5
Actions
Shares
0
Downloads
13
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

PLG Reshoring Summit

  1. 1. Shale Oil & Gas —A Key Driver for Reshoring in the Tri-State Area Taylor Robinson President, PLG Consulting www.PLGConsulting.com 11
  2. 2. Topics» About PLG Consulting» Shale Oil & Gas 101» Shale impact to the US reindustrialization» Wrap upwww.PLGConsulting.com 2
  3. 3. About PLG Consulting» Boutique consulting firm with team members throughout the US  Established in 2001  Over 80 clients and 200 engagements  Significant shale development practice since 2010» Consulting services  Strategy & optimization  Assessments & best practice benchmarking  Transportation assets & infrastructure development  Supply Chain design & operationalization  M&A/investments/private equity» Specializing in these industry categories:  Energy  Bulk commodities  Manufactured goods  Private Equitywww.PLGConsulting.com 3
  4. 4. Is The Shale Boom Different Than Recent Energy Booms?» Other recent energy “boom” events with major supply chain challenges….» Common characteristics  New technology breakthroughs and/or dramatic market shifts  Speed to market is paramount -- supply chain strategies an afterthought  Rush of capital and new players  Continuous change and evolution required to improve efficiency Previous two energy booms did not improve the cost of energy without government incentiveswww.PLGConsulting.com 4
  5. 5. Two Technology Breakthroughs Together: Hydraulic Fracturing & Horizontal Drilling Great YouTube video by Marathon on fracing: Http://www.youtube.com/watc h?v=VY34PQUiwOQwww.PLGConsulting.com 5
  6. 6. US Shale Plays Marcellus & Utica - Large plays - Great location - Big potential - Dry & wetwww.PLGConsulting.com 6
  7. 7. Shale Oil & Gas High Level Supply Chain Materials Fuel Upstream Midstream Downstream • Proppants Gasoline Distillates • Clean water Exploration • Chemicals 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 Flowwww.PLGConsulting.com 7
  8. 8. Shale Oil or Gas -- Which is more important to US industry competitiveness? Energy Cost per Million BTU» Natural Gas is 4X cheaper than oil on a BTU-basis  Not expected to change for the foreseeable future  Gas is more plentiful on most shale plays» Gas drives an increasing share of the US electricity generation capacity» Gas by products are the “building blocks of manufacturing”» Gas’ cost advantages will drive new Source: EIA innovation to convert gas to more fuels Net Generation by Energy Source (2012)  New long-haul trucks now available with natural gas Net Generation by Energy engines (CNG) 1600 37% (48% in 2007)  BNSF testing conversion to natural gas-fired trains (LNG) 1400  Natural gas to liquid diesel conversion plants in planning 30% (21% in 2007) (Shell, Sasol) Megawatt Hours (Thousand) 1200  Siluria Technologies converting natural gas into jet fuel 1000  Increases gas demand 800 19% 12%» Cleaner burning fuel 600  30% less carbon emissions than oil 400  53% less than coal 200 <1% 0 Coal Natural Gas Nuclear Renewables Petroleum 8www.PLGConsulting.com Source: EIA
  9. 9. Downstream 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 Consumer Product Use Consumers Logistics Flowwww.PLGConsulting.com 9
  10. 10. Natural Gas & Petrochemical Downstream Products Feedstock/ Intermediary Low-Density Food packaging, film, Finished Polyethylene trash bags, diapers, toys Products House wares, crates, High Density drums, food containers, Polyethylene bottles. Siding, windows, Ethylene Vinyl Chloride PVC frames, pipe, medical Dichloride tubing Antifreeze Pantyhose, Natural Gas, Ethylene Ethylene carpets, clothing Fibers OIl Oxide Glycol PET Miscellaneous Bottles, film Ethane, Ethyl Polystyrene Styrene Naphtha, etc. Benzene SAN Insulation, cups SBR Linear Latex Instrument lenses, Detergents house wares Ethylene Alcohols Miscellaneous Vinyl Acetate Tire, hose Adhesives, coatings, textile/ paper. finishing, flooring Medical gloves, Miscellaneous carpeting, coatingswww.PLGConsulting.com 10
  11. 11. Impact Of Shale Gas to US Industry -- Electricity Cost Competitiveness» Shale gas boom makes electricity costs lower A Average Cost of Electricity (2012) for US industries 35 31¢  Reduced energy costs felt throughout supply chain 30¢ 30  Large users are achieving greater even lower costs by buying 25 ¢/kWh natural gas directly from wells with long term contracts 18¢ 20  Some processes only become economically viable with lower costs 13¢ 15 9¢ 10 7¢ 4¢ 3¢» Steel example -- Direct Reduction Iron (DRI) 5  Shale gas strips oxygen from iron core to make high purity pellets 0  Produces higher quality steel vs. scrap steel  DRI pellets cost ~$270/ton vs. scrap steel cost ~$390/ton  At least five new DRI steel plants being considered in the U.S. by: – Nucor/Encana, Bluescope Steel/Cargill, Essar Global Ltd.  Nucor signed a 20 year supply agreement with Encana Gas & Oil» Reciprocal Growth and Other Industry Impacts  Shale gas creates demand for OCTG steel pipe for wells  Increased demand for U.S. steel creates greater demand for U.S. gas  Other energy-intensive industries will have great advantages and are anticipating further expansions in the US – Chemicals – Glass Three iron-ore storage domes stand near Nucors direct-reduced iron plant in Convent, La. www.wsj.com - Feb 1, 2013 – Castingswww.PLGConsulting.com 11
  12. 12. Gas Feedstock Cost Competitiveness Relative Profit Margins for Producing Ethylene from» Gas feedstock (ethane) makes ethylene Ethane and Naphtha very competitive  Ethylene is feedstock for a broad range of chemical products – a “building block” of manufacturing  >70 cents per pound more profit per pound from ethane production compared to naphtha  Ethane-to-Naphtha cracker ratio – Was 70%/30% – Likely to reach 95%/5%» Production capacity for ethylene set to expand in U.S. -- abundant supply  Investment in ethylene production has already increased by 33% domestically  Production capacity expected to rise by up to 35% in coming years  Investments in the repair and expansion of existing crackers also increasing  Ethane exports will grow fueling more demand for gaswww.PLGConsulting.com 12
  13. 13. The Graduatewww.PLGConsulting.com 13
  14. 14. Pre-Shale Plastics Supply Chain Lordstown Assembly Plant Component Manufacturing Resin Plants Resins ship via rail Cracker Refineries Imported crude via vessel (Naptha-based)www.PLGConsulting.com 14
  15. 15. Potential Plastics Supply Chain Potential Scenario HDPE Calculated Cost HDPE Calculated Cost Lordstown 2500 Assembly Plant 2018 2000 1500 $/Ton 1266 Component Resin Cracker 1000 Manufacturing Plants 692 526 500 0 Asia US Saudi US Recent Gas Wells Historical Sources: CMAI, TopLine Analytics, and Alembic analysis, 2012 » Local gas feedstock … local cracking …. local resin processing …. Local manufacturing  tremendous material, logistics and manufacturing cost advantage » 5-10% total cost advantage potential vs. US Gulf Coast supply chain » Plastics may replace other materials due to low cost – like aluminum, castingswww.PLGConsulting.com 15
  16. 16. Manufacturing Cost of Goods Sold (COGS) Comparison US vs. China COGS for Widget X - 2008 US vs. China COGS for Widget X - 2008 US vs. vs. China COGS for Widget XX 2015 US China COGS for Widget - - 2015 100 100 100 80 -20% 80 80 80 or more 70 +10%? 60 60 40 40 20 20 0 0 US 2008 China 2008 US 2015 China 2015 Direct Material Indirect Material Labor Overhead Shipping Direct Material Indirect Material Labor Overhead Shipping » Direct & Indirect Materials make up 60-70% of typical manufactured component  US has & will have substantive raw material cost advantages over much of the world  Winners will take advantage of constantly changing raw material markets with Value Engineering  Global sourcing capability still will remain a requirement » Overseas shipping can account for 10% of the component cost – built in advantage for USwww.PLGConsulting.com 16
  17. 17. Key Questions for US manufacturers1. Will we take advantage of the raw material & energy cost advantages driven by shale gas?2. Will we leverage the logistical cost and cash flow advantages of local manufacturing?3. Will we relentlessly lower our labor and overhead costs?  PLG model assumes that US manufacturers can cut their labor and overhead by 50% between 2008 & 2015  Must minimize all Supply Chain costs & cycle times from supplier to customer  Lean and Six Sigma can’t be just buzzwords – must live it!4. Will we lead our teams to do things differently than in the past?www.PLGConsulting.com 17
  18. 18. Implications & Wrap Up» Shale gas is a game-changer for US manufacturing» US manufacturing must continuously reduce their labor and overhead costs» Competition will intensify, change, grow….  The Chinese will not easily give up on manufacturing US products  New entrants in US will use new materials and technology in many industries  “Innovate or perish”» Shale Oil & Gas has additive benefits to the US economy  Energy independence – 2020 or 2025?  Driving large increase in exports – LNG, propane, petrochemicals, chemicals, plastics  Major improvement on trade deficit  Shale Oil & Gas supply chain will drive job growthwww.PLGConsulting.com 18
  19. 19. 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.PLGConsulting.com “News” sectionwww.PLGConsulting.com 19
  1. Gostou de algum slide específico?

    Recortar slides é uma maneira fácil de colecionar informações para acessar mais tarde.

×