Natural Gas an Inside Propective 2-19-14

THANK YOU

Carnegie Mellon UniversityFebruary 19, 2014

Natural Gas An Inside Perspective

Courtesy: IPS Engineering EPC

http://www.ips-epc.com/about-us/%20http:/www.ips-epc.com/wpipsepc/wp-content/uploads/Pipeline-construction.jpg

THANK YOU

James M. Bright, P.E.Senior Engineer

• BS in Civil EngineeringWest Virginia University

• Life long connection with the natural gas industry

• Career experience includes:– Facility planning and design– Hydraulic flow modeling– Structural analysis and design– Surveying– Construction inspection– Project management

“Effective communication is the key to excellence in Engineering”


THANK YOU

IPS Engineering EPC

• A preferred provider of value-added, safety first Engineering, Procurement, and Construction services for the hydrocarbon industry.

• Privately owned and based in Tulsa, OK

• Formed in June 2009.

• Venture capitol provided by the PLH Group

• 2013 annual revenues totaled $89 million

• Proud member of the Marcellus Shale Coalition


Clean, Abundant, and Versatile

Natural Gas - Premier fuel for our century

• Electricity generation, heating, domestic use

• Combined heat and power applications (COGEN)

• Light and heavy duty transportation fuel

• Feedstock for industries (NGL)

• Exports (LNG)


Environmental Impact

Methane + 2 Oxygen = 2 (Water) + Carbon Dioxide

CH4 + 2 (O2) = 2 ( H2O ) + CO2

Natural Gas – 97% to 99% methane

• Methane (C1) - The simplest, cleanest hydrocarbon

• Has the least carbon footprint of any fossil fuel


THANK YOUShale Gas 101


Shale Gas – A Global Energy Opportunity

North America1,931 trillion cubic feet

South America1,300 trillion cubic feet

Africa1,100 trillion cubic feet

Europe700 trillion cubic feet

Shale Gas Revolution Across the U.S.

Source: Energy Information Administration

The Marcellus Shale: An Introduction

Marcellus Shale outcrop along State Route 174, south of Slate Hill Rd in Marcellus, NY

What is the Marcellus Shale?

- Geological formation formed by the accumulation of sediment on a sea floor about 400 million years ago.

- Pressure and heat, over geologic time, have produced an organic-rich, black shale.

- Begins in the Catskill Mountains, stretches west toward Marcellus, NY, and then southwest across PA, WV, and OH.

Why is it Important?

- Success of other shale plays has allowed companies to transfer horizontal drilling and technology to other areas.

- Proximity to high-demand markets along the East Coast make it an attractive target for energy development.

Marcellus Shale Geographic Footprint

The Utica Shale: Companion to Marcellus

• Lies below the Marcellus

• Bigger, deeper, and denser shale

• One of the newest U.S. unconventional energy sources

• Rich in natural gas liquids (NGL)

• Particularly accessible in OH

• Success in the Marcellus has led to success in the Utica

• Devonian Shale is yet another Northeastern play

PA Well Count

OH Well Count

WV Well Count

LegendMarcellus Shale Formation

Wet Gas Region

“Wet” and “Dry” Gas Regions

Sources: Pace Global; Equitable Resources, MarkWest, Atlas Energy, Range Resources, and Caiman Energy.

Wet Gas1200+ Btu per Mcf

Dry Gas<1200 Btu per Mcf

THANK YOUThe Economics of Shale Gas


“Decoupling” of Oil and Gas Prices

Natural Gas Industry Segments

Exploration and Production

• Gas Field Exploration

• Well Drilling and Hydraulic Fracturing

• Gas Production and Liquids Recovery

Gathering andProcessing

• Gas Collection Systems

• Gas Processing - Separation

- Dehydration - Fractionation ( NGL)

• Compression

Transportation andDistribution

• Gas Conditioning

• Transmission Pipelines

• Measurement and Regulation

• Odorization

• Distribution Pipelines

UPSTREAM MIDSTREAM DOWNSTREAM

Upstream Segment

Steps in Drilling

Horizontal Drilling on a Well Pad

• More efficient production, smaller footprint.

• Conductor, surface casing protect well water source.

• Well is drilled vertically and horizontally as much as 6,000 feet.

• Wellbore is approximately 20 inches in diameter at its widest.

• 5 ac vs. 24 ac = 1 acre when done

Hydraulic Fracturing

• Industrial process - properly cased well along with proper containment at the surface is critical

• Permits from state regulatory agencies required for water withdrawal.

• New technologies allow producers to recycle most water

• 30 State and federal agencies monitor hydraulic fracturing

Steps in Completion

Environmental Protection

Well Casing

• Multiple layers of steel and cement ensure redundant protection

• Conductor and Surface casing extend through water table

• Cementing to surface for each layer provides stability, protection, and prevents cross flow of hydrocarbons

• 25 PA Code, Chapter 78 Oil and Gas Rules, contains strengthened standards


Hydraulic Fracturing • Used for more than 65 years; Over

1 million wells in 27 states since 1947

• Well stimulation began in the 1860’s when nitroglycerin torpedoes were used

• 90 percent of oil and gas wells use HF technology today

• 99.5 percent water/sand mix

• 3 to 5 million gallons of water fractures the shale.

• Well casing protects water supply

• Revisions to 25 PA Code, Chapter 78 reflect the best practices in well casing

Gallons per million BTU Range Mid-point

Deep shale natural gas 0.60 – 5.80 3

Nuclear 8 – 14 11

Conventional oil 8 – 20 14

Coal 13 – 32 23

Fuel ethanol from corn 2,510 – 29,100 15,800

Biodiesel from soy 14,000 – 75,000 44,500

Source: Ground Water Protection Council, U.S. Department of Energy


Less Reliance on Water Resources

Site Restoration

The Well Site

• The property is contoured and landscaped as closely as possible to return to pre-drilling conditions.

• Property owners generally see:

‒ Short wellheads on a level pad

‒ Minimal equipment

‒ Two to three water storage tanks

‒ Measurement system to monitor gas production

Courtesy: Range Resources

Midstream Segment


Focus on Midstream

• A Gathering Line - defined by PA state law as a pipeline used to transport natural gas from a production facility to a transmission line

• Gathering lines generally buried to a depth of 36” or more

• Location of pipeline negotiated by property owner and pipeline company

• Right of Way agreements – Legally binding documents– Pipeline operator has access to the right

of way for construction, operation, maintenance, and repairs

• A Right of Way may contain multiple pipelines and is typically 50-75 feet wide

• Subject to Pennsylvania PUC regulation

Source: MarkWest Energy Partners Courtesy: IPS Engineering EPC

Gas Processing

Gas Separation, Dehydration, and Fractionation

• NE Marcellus gas is “dry” SW Marcellus and Utica gas is ‘wet”

• Gas processing turns production gas into “pipeline quality gas” for end users

• Filter / Separator removes dirt and free liquids

• Dehydration removes water entrained in the production stream ( <7 lbs/MMcf )

• Cryogenic processing separates NGL from production gas and lowers heating value (980 – 1100 BTU/cf)

• Fractionation separates NGL into heavier products (ethane, propane, butane)


Compression SystemsCompressor Stations

• State of the art sound attenuation

• Highest standards for welding, fabrication, and material

• 24/7 monitoring and control

• Automatic safety systems

• Annual inspections by regulating entities

Compressor Units• High tech integrated control systems

• Monitoring and control 24/7

• Made in the USA

• Operated and maintained by local workers

Downstream Segment

Focus on Downstream

Transmission Pipelines• Critical link between production and

consumers• Statistically, pipelines are the safest

transportation mode for natural gas and liquid hydrocarbons

Oil transport by truck results in 87 X more deaths and 35 X more fires / explosions than oil pipeline accidents

• Designed and built to industry standards

• HDD technology minimizes enviro. impact

• GIS technology allows for efficient layout and accurate tracking

• Interstate pipelines are subject to federal regulation and inspection: DOT PHMSA Source: Pipeline Association for Public Awareness

Intra-state Pipelines

State Regulation of Pipeline Safety

• Just as with midstream pipelines, downstream transmission lines are subject to state regulation

– Pennsylvania PUC

– Pennsylvania Act 13 – Strengthens environmental and safety laws for oil and gas industry

– Pennsylvania Underground Utility Line Protection Law – The One Call System

• Third party damage is the greatest threat to pipeline safety

– “One Call” participation in PA is mandatory

Gas Conditioning

Pipeline Quality Gas

• Gas Conditioning usually occurs at the compressor station discharge

• Removal of residual liquids by coalesors

- Glycol Alcohol used in the dehydration process

- Compressor lubricating oil

• Final polishing before transportation by downstream facilities

Measurement and Regulation (M&R)

Accuracy is critical

• Measurement is the company cash register

• Gas quality and composition is recorded at “custody transfer” points by a chromatograph

• Regulation can be based on pressure or flow control

• Distribution piping is typically low pressure: 25 – 150 psig

Courtesy: Valtronics, Inc.

Odorization

Leak detection

• Odorization gives Natural Gas its distinctive smell

• Mercaptans are a family of sulfur containing hydrocarbons

• Methanethiol - CH4S

• 49 CFR Part 192.625 mandates odorization

• Prepares gas for distribution systems


Courtesy: Valtronics, Inc.

THANK YOUEconomic Impact

Courtesy: Ecobag

Economic Impact for Our Region

Income to Local Landowners and Businesses

• More than 4,500 wells drilled from 2010 through 2012

• Investment of approximately $32.0 billion

• 2013 projection: $13.5 billion

- Leasing and bonuses- Exploration- Drilling and completion- Pipelines and processing- Royalties

Source: Survey of Marcellus Shale Coalition Board Member Companies

Natural Gas Job Phase

Pre-drilling (Exploration)

• Geologic studies, permitting, water management, engineering/design, site preparation, environmental and safety compliance

Drilling (Extraction)

• Pipeline, compressor, well facilities construction, Hydraulic Fracturing & completions, water management, environmental and safety compliance

Production/Reclamatio

n

• Engineering, site reclamation, environmental and safety compliance

Delivery to Market (transport, storage,

marketing)

• NG Marketers, commodity traders, logistics, storage, accounting, risk management

Diverse Job Opportunities

Professional Functions Identified in MSC SurveySource: MSC Membership Survey, May 2013

Fast Fact 400+ individuals within nearly 150 different occupations

needed to complete and produce gas from a Marcellus Shale well (MSETC, 2010)

30%

20%

13%11%

8%

4%4% 3%

2% 2% 1% 1%

Equipment Operations

Operations and Maintenance

Commercial

Engineering and Construction

Administration

Environmental Health & Safety

Land

Well Services

Other

Water Management

Geology

Purchasing

Marcellus Shale Coalition


Benefits for All

• We are committed to being responsible members of the communities in which we work.

• We strive to attract and retain a talented and engaged local workforce.

• We conduct our business in a manner that will provide sustainable and broad-based economic, environmentally sensitive, and energy-security benefits for all.

Marcellus Shale Coalition Pennsylvania based trade association


Dialogue & Education

• Coalition meetings with legislative and executive officials:‒ PA Department of Environmental Protection‒ PA Department of Community and Economic Development‒ Members of U.S. Congress, PA General Assembly

• Public speaking engagements and presentations:‒ Chambers of Commerce‒ West Virginia University‒ Federal Reserve Bank‒ Sierra Club‒ Pennsylvania Environmental Council

• Outreach to:‒ Agriculture community‒ Organized labor‒ Small and mid-sized businesses‒ Sportsmen’s groups‒ Local government

Research Collaborative

Industry

• Nationally recognized technical experts from trade associations

Academia • Leaders from university research centers

Public Sector

• Research institutions at state and federal agencies

National

• Research leaders such as RAND, Brookings, and funders of charitable foundations

ResearchCollaborativeResearch Collaborative

THANK YOU !

J.M.Bright, P.E.

Documents

Natural Gas an Inside Propective 2-19-14