PLG Reshoring Summit

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  • 1. Shale Oil & Gas A Key Driver for Reshoring in the Tri-State Area Taylor Robinson President, PLG Consulting 11
  • 2. Topics About PLG Consulting Shale Oil & Gas 101 Shale impact to the US reindustrialization Wrap 2
  • 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 3
  • 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 4
  • 5. Two Technology Breakthroughs Together: Hydraulic Fracturing & Horizontal Drilling Great YouTube video by Marathon on fracing: Http:// h? 5
  • 6. US Shale Plays Marcellus & Utica - Large plays - Great location - Big potential - Dry & 6
  • 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 7
  • 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 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 12
  • 13. The 13
  • 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) 14
  • 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