Unconventional Shale: The Future of Water Management in the Most Talked about U.S. Industry

Unconventional Shale: The Future of Water Unconventional Shale: The Future of Water Management in the Most Talked about U.S. Management in the Most Talked about U.S.

Industry Industry What andWhat and where are the growth opportunities for water treatment in the where are the growth opportunities for water treatment in the

oil and gas shale basins?oil and gas shale basins?

Ankur Jajoo, Industry AnalystAnkur Jajoo, Industry Analyst

Energy & Environment

April 18th 2013

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Ankur Jajoo

Functional Expertise

Experience in market research and growth consulting with particular expertise in:

- Market based competitive strategies (Oil and Gas E&P, Sewage Sludge)

- New market explorations within market verticals

- Return on Investment (ROI) models and assessment of emerging and disruptive technology trends.

- Analysis of production and consumption behavior within wastewater treatments and specialty chemical treatments within different market verticals using statistical benefit-cost analysis, and other strategic models for use in syndicated research and custom business consulting projects.

Industry Expertise

- Environmental Market– Water and Wastewater Treatment in Oil and (Shale) Gas, Petrochemicals, Food and Beverage, Drinking Water, and Municipal markets. Air Pollution Control Technologies in Oil and Gas and also Energy and Power Industry.

- Building Technologies-Datacenters, Air Conditioning and Lighting

- Chemicals & Materials – Thermal Printing & Waxes

- Industrial Automation & Process Control - Industrial AC/DC Drives

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Ankur JajooIndustry Analyst

Frost & SullivanNorth AmericaSan Antonio, Texas

What I bring to the Team

- Best Practices from other industries on how to develop winning strategies to penetrate new clients.

- Experience in covering a broad range of sectors, leveraging long-standing working relationships with leading industry participants’ CEO’s and senior executives in:

Environmental Technologies, Oil and Gas E&P, Chemicals & Materials, Industrial Automation & Process Control, Security & Defense

- Global perspective on purchasing requirements and procurement process across multiple vertical markets

- Critical thinker that solves complex business challenges

- A proven leader that can work with various stake-holders to execute strategic initiatives and successful project management on global projects

Career Highlights

- Worked directly with major chemical , energy and environmental companies, 212 Resources, TSK Water, Pentair Filtration, Toray Industries, Phillps, GE Oil and Gas, Brady Corp, Bunge, Synagro ,ThermoEnergy, Baker Corporation.

- Published articles on Environmental Leader, Oil & Gas Online, San Antonio Business Journal, Bloomberg, Water Online, Down To Earth.

Education

- Business Management Studies from University of Bradford, England

Focus Points

• Water Treatment and Management Trends

• Future of Water Treatment Companies

• Drilling Activity Trends

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• Key Shale Play Activity

• Conclusion

Why Water Management Development Is Important in Unconventional Shale Play?

• Future energy industry which will affect the long term source of power generation affecting all industries – multiplier effect.

• Importance of fresh water consumption and management for hydraulic fracturing – the scarcity and value of water usage.

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• Key Market Challenges – Low natural gas prices, water contamination, permit approvals, competitive disposal methods

• Potential $ Billion market opportunity for the industry supply chain

• Constant changing market dynamics and learning is a must.

Water Treatment and Management Trends

Water Treatment Current and Future Drivers

Key Industry Drivers: Water Management in United States Shale Basins

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Water management challenges

Evolving development of technologies.

Disposal limitations and fresh water usage limited

Source: Frost & Sullivan analysis.

Water Treatment Current and Future Restraints

Key Industry Restraints: Water Management in United States Shale Basins

Environmental challenges and political challenges

Higher levels of

1) Dry gas market has limited drilling activity and need for water treatment.

2) Service companies building their own technology portfolios

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Higher levels of

TDS which can be reused

Each shale basin, each well produces varying levels of water

Source: Frost & Sullivan analysis.

Future Market Trends

Present Current and Future Key Trends: 2013-2018

Current:

1. Wet gas/ liquid rich plays is where current drilling activity lies.

2. Best economic use of water management services.

3. Growth opportunities in shale basins will be with liquid oils.

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Future:

1. Stronger opportunity of M&A’s or JV’s for technology manufacturers.

2. Infrastructure development to recover by-product gases.

3. Average cost of drilling a well is dropping through advanced techniques water management costs need to drop.

Source: Frost & Sullivan analysis.

Key Future Technology Trends and Solutions

• Frac fluids using less fresh water

• Lowest capital and operating costs

• No perfect solution or technology

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Find most cost effective and practical solution, that meets state level compliance, recovery and use as by-product or.......

Fracking without water ??? WATER

Expensive, but possible for the market in the long termSource: Frost & Sullivan analysis.

Drilling Activity Trends &

Future of Water Treatment Companies

Oil or Gas?

• Research suggests the short term future lies in liquid oils and wet gas.

Liquid Oil Wet Gas Dry Gas

• Bakken Shale• Eagle Ford• Cana-Woodford

• Marcellus Shale (South-west Pennsylvania)

• Marcellus Shale (North-east and West Virginia)

Key Shale Basins Targeted for Drilling Opportunity Key Shale Basins Targeted for Drilling Opportunity

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• Drilling economics affect profit margins

Source: Frost & Sullivan analysis.

• Cana-Woodford• Permian Basin• Utica Shale• Niobrara Shale

Pennsylvania)• Utica Shale• Bakken Shale• Eagle Ford• Permian Basin

West Virginia)• Woodford• Haynesville• Fayetteville• Barnett Shale

Impact Water Management

Oil or Gas Drilling Rigs?

• Shale Gas “boom” is easing up due to low profitability.

March 2012 March 2013 % Change from 2012

Oil Rigs 1,293 1,333 + 3.1%

Active Rigs in the United States as of March 2013Active Rigs in the United States as of March 2013

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• Oil producing fields or wet gas plays is where activity is.

Source: Frost & Sullivan analysis.

Natural Gas Rigs

691 420 - 39.2%

Data Source Statistics : EIA 2013.

Shale Basins Challenges and Opportunity

• Marcellus and Utica Shale:

• Ohio EPA and Ohio DNR are identifying treatment technologies.

• Liquid oil in Utica and wet gas in Marcellus

• Bakken Shale:

• Liquid play – oil and gas. Produces by-product gas which is flared

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• Texas State (Eagle Ford, Barnett Shale, Permian Basin):

• Liquid play – oil and gas.

• Salt water disposal wells

• Rail road Commission removed need for drilling permits.

• Cana-Woodford (Western Oklahoma):

• Liquid play – high grade crude and economic drilling Source: Frost & Sullivan analysis.

E&P Drilling Activity Growth Opportunity

• Antero Resources

• 84,000 acres in Marcellus, 73,000 acres in Utica

• $1.65 billion budget for wet gas exploration

• EOG Resources

• Liquid play – capital investments into oil weighted plays

• Eagle Ford and Bakken Shale Marcellus and Barnett

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• Eagle Ford and Bakken Shale Marcellus and Barnett

• Range Resources

• Liquid play – Permian Basin, Wet gas – Marcellus Shale

• 75% capital budget in Marcellus play

• Marathon Oil

• Liquid play – Eagle Ford (long-term), 410,000 acres in Bakken Shale Source: Frost & Sullivan analysis.

Future of Shale Water Technology Market?

• Service companies developing own portfolio or frac techniques using less water.

• Bottom line revenue – How far will manufacturers go to make $$$ ?

• Licensing, Joint Ventures, Merger & Acquisitions, Partnerships a likely probability or possibility.

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likely probability or possibility.

• Technology offering not enough.

• Additional services are required to excel and stand out

• Focus on shale basins that warrant water treatment

• Variance of water levels produced from each basin is challenging and also the range of practical, economic solutions. OR – adapt to all plays

Source: Frost & Sullivan analysis.

Conclusion

Conclusion Slide: Key Take-aways

• No one-stop perfect solution for all basins due to water variance from each well.

• Dry gas is a long term opportunity. Focus is on oil and LNG

• Water free fracking – game changer?

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• Water free fracking – game changer?

• Service companies are constantly striving to find methods of requiring less water treatment or frack with less water.

• Industry is still evolving to understand the appropriate solutions.

Source: Frost & Sullivan analysis.

Next Steps

Develop Your Visionary and Innovative SkillsGrowth Partnership Service Share your growth thought leadership and ideas or

join our GIL Global Community

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For Additional Information

Britni Myers

Corporate CommunicationsEnergy & Environment

(210) 477-8481

[email protected]

Ankur Jajoo

Industry Analyst

Energy & Environment

(210) 247-2423

[email protected]

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Roberta Gamble

Partner

Energy & Environment

(650) 475-4522

[email protected]

Nils Frenkel

Sales Director

Energy & Environment

(210) 247-2451

[email protected]