02.20-21.2014, PRESENTATION, OIL SHALE OPPORTUNITIES IN MONGOLIA, Ts.Gantsog

1

OIL SHALE OPPORTUNITIES

IN MONGOLIA

Ulaanbaatar, 2014

Ts.GantsogExecutive Director Genie Oil Shale Mongolia

2

1. What is oil shale?2. Where is it?3. How is it processed?4. Why is it important?5. What are the challenges?

QUESTIONS TO BE ANSWERED:

3

Oil Shale is a huge energy resource

Oil shale generally refers to a sedimentary rock that contains solid hydrocarbon materials called kerogen

When oil shale is heated to ~325°C the kerogen generates hydrocarbon liquids and gases

Two basic methods:Above ground ex-situ retortingUnderground in-situ retorting

What is Oil Shale

4

155

Extra-heavy oil & bitumenOil shale

100 bln boe

UNCONVENTIONAL POTENTIAL

5

Geologic Map of Mongolia

6

Cretaceous and the Potential Oil Shale Basins

7

Source Rock

r

2480

120° F120° F

350° F350° FGenerationGeneration

MigrationMigration

Seal RockSeal Rock

Reservoir RockReservoir Rock

OilOil

WaterWater

Gas CapGas Cap

EntrapmentEntrapment

Source Rock Tight Oil

Oil – Oil Shale – Shale Gas –Shale Oil

8

1 D 1 mD 1 µD 1 nDPermeability (Darcy)

Good Oil Reservoir

World’s Best Oil Reservoir Tight Gas Sand

Source Rock

Spra

berr

ySh

aly

Sand

Permeability of resource types

9

Exploring for Oil Shale

10

Lacustrine Oil Shale of Mongolia

1111

IN-SITU CONVERSION PROCESS

¢

Producer

HeaterHeaterOverburden

• Naphtha• Jet• Diesel• Nat. Gas• Hydrogen• Chem. Feed• Heat

High ValueProducts

What is it? • Enhancement of natural

maturation of kerogen by slowheating

• Results in:- thermal cracking- in-situ hydrogenation- high sweep vapor phase

production - high API oil- N, S, O content vary with

resource• Average temperature limited to

diesel boiling point

Potential resource applications:• Oil Shale • Heavy Oil / Bitumen• Coal

How is it done?• Electric resistance/gas

heaters• Underground conductive heat

transport

Adapted from Shell

12

Sweden Pioneered In-Situ Retorting During World War II

Motivated by deeper oil shale next to a surface mine

R&D started in 1940Full scale production began in 1942

1 Proprietary and

13

152V electric heater wells were placed 2.2 m apart (hexagonal)

Heated to 400 oC in 4 months.

180-m wide advancing at 140 m per year (17-m thick)

26 boreholes/day or 6500 boreholes/year

Oil was higher quality than from surface retorting

Sweden processed 2,450 tons of shale per day, with a yield of 160,000 barrels / year

1 Proprietary and

14

15

Ljungström Field – West with Heater Pattern Relics

Ljungström Field - South

Reclaimed Production Area

1 Proprietary and

16

IN SITU HEATER TECHNOLOGIES

Кюри тусгаарлагч бүхий цахилгаан халаагуурууд

Хийн халаагуур

17

In-Situ Conversion Pilots

18

Subsurface Heating Interval

18

100-200 m

50 m

HEATERPRODUCEROBSERVATIONCORE HOLECOMBO. OBV./COREDE-WATERING HOLE GROUND WATER MONITOR

WELL POSITIONS

Proprietary and Confidential

19

HEATEDZONE

Producer

Perf’s

3’ Dia. Target

TD @ 300m. Complete with Sucker Rods & Hydraulic Pump in

2-7/8” Tubing

HeaterHole

8-1/2” OH

9-5/8” Csg.

3’ Dia. Target

CanisterHeater

RefluxBaffle

De-WateringHole

3’ Dia. Target

9-5/8” Csg.

9-5/8” Csg. & 7” Slotted Liner

13-3/8 Cond.Drilled & Driven(typ.)

2-7/8”Tubing& Pump

Ground Water Monitor

5’ Dia. Target

9-5/8” Csg.

8-1/2” OH

9-5/8” Csg.

ObservationHole

3’ Dia. Target

TD @ 290m. Complete with MI Heater in 4-1/2” Canister w/ Reflux Baffle

TD @ 300m. Complete with Fully Cemented

Welded 2-7/8” Tubing

TD @ 300m. Complete with ESP on 2-7/8” Tubing

TD @ 300m. Complete with ESP on 2-7/8” Tubing

7” Slotted Liner 7” Slotted Liner

8-1/2” OH

8-1/2” OH

12-1/4”

Pilot Well Designs

Proprietary and Confidential

20

Well Development

Vertical Wells Horizontal Wells

Proprietary and Confidential

21

Scaled up to Commercial Production

production well

heater well

Pilot Pattern

Commercial Pattern

Proprietary and Confidential

22

Environmental Protection

In Compliance with all Environmental Laws and

Regulations

Minimizes Surface Disturbance Utilizing Standard Drilling Practices

All Air Emissions within Conventional Oil Production Levels

Utilizes Produced Natural Gas for Self-Sufficient Power

Utilizes no Water nor Fracking Fluids

23

Reactors at Ben Gurion University

Oil Shale Pyrolysis Reactors

24

Mongolian Oil Shale

Pre-pyrolysis Shale Post-pyrolysis Shale

25

0

2

4

6

8

10

12

14

260 344 373 383 392 400 409 422 435

Temp (C)

Oil

volu

me

(ml)

In Situ Mongolian Shale OilO

il Vo

lum

e

Proprietary and Confidential

26

In Situ Mongolian Shale Oil

Low Pressure

Medium Pressure

C20

Gasoline & Diesel

C20

Gasoline & Diesel

Proprietary and Confidential

27

In Situ Shale Oil

IC4NC4

IC5NC5

22DMB

CP 23DMB 2MP 3MP

NC622D

MP MCP

24DMP 223

TMBBZ

33DMP CH 2MH 23D

MP11D

MCP 3MH 1C3DMC

P1T3

DMCP

3EP 1T2DM

CPNC7

ISTD

MCH113

TMCP ECP 124

TMCP

123TMC

PTOL NC8

IP9EB

MXYL

PXYL

OXYL

NC9IP1

0 PBNC1

0IP1

1

NC11

NC12

IP13

IP14

NC13

IP15

NC14

IP16

NC15

NC16

IP18

NC17

IP19 PHEN

NC18

IP20

NC19

NC20

NC21

C25HBI

NC22

NC23 NC24

NC25

NC26

NC27 NC28

NC29 NC3

0NC3

1NC3

2NC3

3NC3

4NC3

5NC3

6NC3

7NC3

8NC3

9

NC40

NC41

C20

C20

Mongolian In Situ Oil

IsraeliEx Situ Oil

Gasoline & Diesel

28

Low Sulfur Fuel

Khoot Ex SituKhoot In Situ

OB In Situ

27

62

520.5%

0.14%

0.5%

API

Sulfur

Sample A Ex Situ

Sample A In SituSample B In Situ

Proprietary and Confidential

29

Моngolian Oil Value

0

1

2

3

4

5

6

7

8

9

0 10 20 30 40 50 60 70

S [w

t%]

API Gravity

MayaArab Heavy

ZuetaHeavy

IranHeavy Arab Light

Urals

Bakkan TapisBrent

WTI

Jordan Ex Situ

Genie Israel In Situ

Colorado & Australia – Retort & In situ

Genie Sample B

In Situ Genie Sample A

In Situ

30

In-Situ Mongolian Shale Gas

0

5

10

15

20

25

1 atm

10 atm

kg o

f Gas

/bbl

of O

il

Natural Gas

LPG

Hydrogen

Low Pressure

Medium Pressure

31

0.7

0.5

4.1

0.5

0.1

1

Energy balance

ШатдагЗанар

CH4

Газрын тос

LPG

C2H6

CH4

H2

32

Economy balance

ШатдагЗанар

CH4

Газрын тос

LPG

C2H6

CH4

H2

33

Pre-Feasibility Study of the Project

The world’s fifth largest accounting company BDO prepared the pre-feasibility study for Genie's project for construction of a full scale commercial production facility of daily capacity of 6,70 0 tons of oil.

Summary of findings:

The production cost of 1TOE (ton of oil equivalent) is approximately $350.

The cumulative investment, from the construction phase until full production capacity, will be approximately $4 billion.

The annual increase in the government revenues will reach $850 million.

5,600 new jobs (1,200 direct employees and 4,400 indirect employees) will be created.

34

Project development risks and costsPolitical factorsRegulatory hurdlesPublic perceptions

• Facts vs. Fiction about oil shale

Environmental considerations

Challenges for Developers

35

Public sector revenue• Taxes, bonus payments, and royalties• Economic development• Infrastructure enhancement

Stable industry• Long term employment• Educational growth• Skill development

Secure domestic oil supply• Lower gasoline prices• Improved national security

Potential Benefits from Oil Shale

36

Build processing plant with 6,700 tonnes/day of LPG, gasoline, jet, diesel, and fuel oil

Energy self-sufficiency for Mongolia plus exports to China and other Asian markets

Genie becomes one of Mongolia’s largest employers

Vision: Ensure Mongolia’s Energy Independence and Expand Mongolian Exports by Selling Surplus Oil

Products

2020 Vision for Mongolia Oil Shale

3

37

1. Oil shale is an important national energy resource• Can provide economic and security benefits• Needs to be part of a long term national energy strategy

2. The economic, environmental and political challenges are equally challenging.

3. Industry is spending millions of dollars on research to find better ways to recover transportation fuels from oil shale. Development is deliberate, thoughtful, and eminent.

4. There will not be an instantaneous oil shale industry causing massive impacts. Development will be incremental and must meet all regulatory requirements.

5. Mongolia needs all domestic sources of energy , conservation and specifically oil shale as a bridge to a society with much less dependence on foreign petroleum.

Summary