Marcellus Shale: Business & Job Growth Drilling Overview & Marketing
Global Shale Resources 22.9 QCF NG 3,352 bbl oil United States • 2,431 TCF
• 665 TCF (27% shale)
• 223B bbl oil • 58B bbl oil
Worldwide Consumption (Annual) 113 TCF Natural Gas 31.2B bbl oil
200 & 100 year supply respectively
Local Impacts – Global Implications
US Shale Plays
How Long?
• “Multi-generational play”
• “Careers not jobs”
Marcellus / Utica / Upper Devonian
• 95,000 sq. mile aerial extent • 10,000 – 20,000 to be developed • 10 wells per square mile? • 100,000 – 200,000 total wells
• 2,500 wells per year (currently)
Evolving Shale Issues • Economics of development
• Constraints in transmission/storage
– Wells on pipeline
• Growing International Interest
Evolving Shale Issues • Evolving Technology
– Closed loop vs. tanks – Move to “green completions” – Greening of products (food grade products)
• Predictability by public & industry is critical
• Public understanding of regulatory process
• Greater Transparency Push
– Industry and Government – Fracfocus.org – Social media impacts
Oil Gas PA TX OH WV Sept 2012 1409 452 63 877 20 27 Sept 2013 1365 394 52 830 35 35
* Bakers-Hughes
Key Drivers of Development: Rigs & Price
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Natural Gas Spot Price ($/MMBTU)
Leading PA Counties Susquehanna 11 Washington 9 Lycoming 8 Wyoming 8 Greene 7
Policy Can Drive Where Development Occurs • New York • Federal
– Coal Fired Power Plants – Hydraulic Fracturing – Pipeline Development – Exporting
• Economically Driven (4-6x premium) • Contract vs spot pricing • Political/Patriotic • DOE
• State – Impact Fee / Taxes – Pipeline Regulation
• Public Input
Impact on Exporting?
• LNG Exporting (6 BCF/Day) – Deloitte $0.15 increase – EIA $0.50 - $0.70 increase – US Department of Energy (NERA) ~ $0.30 increase – Purdue Researchers ~ $0.60 increase – Charles River Assoc (DOW) $2.50 increase (8 BCF/D)
• LNG Permits Approved
– Lake Charles (LA) 2 Bcf/d – Sabine Pass (LA) 2.2 Bcf/d – Freeport (TX) 1.4 Bcf/d – Cove Point 0.77 Bcf/d
• Pipeline exporting
– Mexico • Currently 2.1 bcf/day • Project potential 7 bcf/day
– Canada • Net imports 5.8 bcf/day • Imports increasing – LNG??
Emerging Technologies - Utilization
• Vehicle Conversion – New engine technologies – New Fuel Formulations – Bi-fuel & dual fuel
• Power Gen
– Small scale – Industrial & commercial
Emerging Technologies - Utilization
• Gas to Liquids (GTL) – Old technology – Increased R & D on
small scale • Mobile LNG
– Off road – Drill rigs
US Manufacturing Renaissance
Ethylene Production • Northeast US new hub?
Methanex • $1.1 B to move methanol plant from Chile LA • World’s largest methanol supplier • 2,500 construction jobs • 1MM metric ton plant
Fertilizer Projects • 6 Major Projects (~$10B) • US Imports 50% currently • Gas accounts for 70% of cost
Supply Chain Opportunities: What & Where
• Hot spots versus overall development
• Development type/geography – Energy & Production versus sub-contractors – Basin headquarters – Regional offices/centers – Field offices – Field location
• well site, compressor station, pipeline, etc...
Master Service Agreement
• Legal contract that includes most terms that govern future transactions
• Permits quick execution of work/purchase orders that incorporate MSA terms
• Process to evaluate risks and benefits • Defines EHS and performance standards
• Safety audits & required vendor meetings
• Required for first tier suppliers
• Outline obligations and responsibilities of both parties
Master Service Agreement
What it’s not….
• Guarantee of work
• Template for all contractors or companies
• Speedy process – Market changes during negotiation may extend time
• Required for all work in the oil gas industry
Typical Elements of MSA
• Description of service or product being offered • Term of agreement • Payment amount and terms and process of payments • Performance and Warranty
– Enforceable for prime and subs. Terms such as “reasonable time” and “quality workmanship”
• Indemnification • Damages – direct, consequential • Remedies • Safety & regulatory compliance
– ISNetworld • Insurance • Venue
– Consider where work is being completed or if this covers multiple locations
Payment - Terms and Process
• May not align with your set terms
• Unique process – Proper documentation – Electronic – Added cost?
• Plan accordingly
Industry Knowledge & Updates Newsletters & Terminology
• NGI Daily – Daily News Accounts ($$) • Ohio Energy Resource Alliance – Updates on Ohio Activity (Free) • Schlumberger – Oil Field Glossary (Free) • Shale Directories (Free) • Shale Digest (SS)
Websites
• Education • Government (State & Federal) • Non-profit
Linked In Groups Google Alerts
Business Considerations The Message
• Safety • Experience • Knowledge • Commitment • Owner Involvement • High tech • Be Direct
Forms of Operation • Internal/Interwoven • Separate Division • Independent Entity
Adapt • 24/7 • Mobile • “Local” redefined • Think global
Competition or not? • New Partnerships • Backfill
Marketing & Networking • Local, State & National Trade Shows
– DUG East – OOGA Winter Meeting – Networking, B2B Events
• Chamber of Commerce/Partnerships
– Member only events – Direct marketing opportunities
• Task Forces
• Print media
• Public Meetings
• Website
• Must have • “Shale Energy Services”
Networking is Key
• Create & improve relationships
• Understand your market / decision makers – Maximize ROI
• Be seen and involved
– Events, restaurants, trade shows, public meetings – Parking lots, bars, convenience stores
• Follow up gets results
Business Considerations Financial Costs
• Soft costs • Slower pay than typical operations • Expansion (Hiring/Marketing, etc.) • Equipment • Employee
• Safety Training • PPE • Screening
• Insurance
Fitting the Oil/Gas Patch • Be ready
– Strong work ethic – Problem solver – Basic knowledge of natural gas production – Pass a drug test
• Network Properly (high contact) • Patience and perseverance (polite persistence) • Get ready
– Follow/understand the industry – Take your safety training – Have a plan
Summary
• Engage with industry
• Educate yourselves and organization
• Slow down – multi generational play
• Develop a plan
Thank You www.marcellus.psu.edu www.naturalgas.psu.edu
Matt Henderson [email protected] (570) 244-1128
Photo Courtesy Penn State Marcellus Center