Shale Gas Implications – New Opportunities, New

Challenges

Marcellus Center for Outreach and

ResearchResearch/Analysis

Down Hole Technical Issues

• Water quality

• induced seismicity

• NORM

– Methane migration• Well design

• Abandoned wells

– Emerging geology

– Well yield trends

– Decline curve analysis

– Regulatory

Above Ground Risk

– Fugitive methane

– Community impact(s)

• Socio-economic

– Agriculture --Tourism

• Environmental

• Water –lifecycle impacts

• Workforce

• Business Development

• Regulatory

• Governance

• Social license

Water Quality Research

• 15,000+ shale wells

• Pre-existing issues

• Few cases of well

bore integrity

• No fluid migration

• Limited methane

migration

• Primary concern

– Surface spillage

– Offsite spills w/trucks

Marcellus Center for Outreach and

ResearchOutreach

• Science-based information

• Rapid response

• Localized w/global reach

• Current materials

• Rapid evolution of info

• Broad range of views

• Access to regulators

• Positive link between

stakeholders, researchers,

industry, and elected officials

“Translational Outreach”

--Creating advocates of science

Global Interest –Local Impacts

• New geopolitical

opportunities

• New global energy

paradigm emphasis since

Paris

– More gas More

renewables

• Global gas resources

– Different economics to

extract and market

– Commercial predictability

NG --World Leader in Fuel Growth World energy consumption by energy sourcequadrillion Btu

Outlook

Source: EIA, International Energy Outlook 2017 Reference case

Shale Energy Trends

• Geopolitical -- 80% of shale gas is in locations with 30% of conventional gas resources– EU diversification, Russia “leaning east” w/China & Asia sales– Global interest in shale resources – Global interest in LNG due to FSRU units

• In U.S., increasing quantities of NGLs and “dry” nat gas– Substantial increase in reserves– New exports of NGLs --Propane/Ethane

• Large need for infrastructure–midstream/roads/people• U.S. now net “gas” exporter moving to net “energy” exporter• U.S. as world’s largest producer of nat gas and now crude oil

– 80+ Bcf/d --29+ Tcf/yr– Appalachian shale gas is 31+Bcf/d or 36% of U.S. total in ‘18– 12+ MMbbl/d

Drilling Trends in North America

• Shorter time to drill a well

– Months to weeks to days(currently) -30 to 50% increase in

efficiencies

• Costs decreasing

• Move to “walking” rigs built for purpose

• Longer wellbores – 20K foot laterals in OH, now more common

• More frac stages and move to target best rock(40% yields 80%)

– More proppant –almost doubled from recent past

– Every frac is a unique effort –matching pressures to rock

– Upgrades to subsurface technical expertise/technology

• Increased gas volumes per lateral

• Increased IPs/EURs/ROR –flatter declines

Key Gas Sourcing Trends

Natural gas productionbillion cubic feet per day

Source: EIA, International Energy Outlook 2017, Reference case

Shale gas

Coalbed methane

Tight gas

Other

Estimated U.S. Shale Gas Production -50.6 Bcf/d in

February 2018 -- 63% of Total U.S. Dry Gas (80 Bcf/d)

Source: EIA Natural Gas Monthly, STEO through February 2018 and Drillinginfo

Natural gas production (dry)billion cubic feet per day

Shale gas production as a percent of total gas production

Shale Gas Trends

Surging PA NG Production

Nat Gas Liquid Production

Petrochemical Trends

• $310B new U.S. investment??

– Shale gas driven

– Significant workforce additions

– New manufacturing capacities

– $105B/yr contribution to economy

– Competitive globally

– Shell for ethylene production in Marcellus/Utica region.

Large quantities of ethane/NGLs

• Ethane storage is newest infrastructure investment

• Three state Governor-led consortium to drive new

projects

US Electricity Generation by Energy Source

Power Generation Trends• Coal and NG trading spots for top U.S. power gen fuel

– permanent??

– 32% of U.S. total for power

– 25+ large new gas-fired projects w/over 20,000 MW in queue in eastern U.S.

– significant coal gen heading offline

– ½ of U.S. coal plants uneconomical

– Direct supply of gas to power plants

• 15+ yr low in CO2 emissions

– Nat Gas paired with renewables

• Concerns

– Pipeline constraints

– Bias towards single fuel

– Impacts to nuclear power

– Impacts to new renewables

• Greater onshore production

– Reduced price volatility?

– Weather-based moves Source: Panda Power

– Political shocks

Power Generation

• Strong trend towards

gas during transition

from coal

• Quick permitting and

construction

• “Small” footprint

• Rapid “On/Off”

• Supplement to

renewables during

buildout and prior to

storage technologies

Source: IMG Power

New Natural Gas Power Projects (as of 12.5.17)

*TBC - expected to be completed date

Applicant Twp. & CountyApprox

Cap MW

Project Phase App Rec'd Date Applicant Twp. & County

Approx Cap MW

Project Phase App Rec'd Date

Panda Liberty, LLC (Formerly Moxie

Liberty)

Asylum Twp. Bradford 900 In Commercial

Operation 9/26/2011 CPV Fairview Jackson Twp. Cambria 1050 Under Construction

TBC 2020 9/9/2015

Panda Patriot, LLC (Formerly Moxie

Patriot)

Clinton Twp. Lycoming 900 In Commercial

Operation 1/20/2012 Hilltop Energy Center, LLC

Cumberland Twp. Greene 620

Issued, Construction Not

Started3/13/2017

2/29/2012 Renovo Energy Center, LLC

Renovo Boro Clinton 950 Comment Period 8/20/2015

5/20/2014Gateway

Cogeneration 1, LLCTowanda Boro

Bradford 168Issued,

Construction Not Started

10/13/2015

1/20/2015Birdsboro Power, LLC (EmberClear)

Birdsboro Boro Berks 450 Under Construction

TBC 6.19 7/13/2015

9/27/2012 Robinson Power Co, LLC / Beech Hollow

Robinson Twp. Washington 950 Issued,

Construction Not 3/14/2016

12/23/2015Archbald Energy

Partners, LLC (EmberClear)

Archbald Boro Lackawanna 485

Issued, Construction Not

Started1/25/2016

Future Power PA, Inc. (EmberClear Good

Spring Project)

Porter Twp. Schuylkill 346

Issued, Construction Not

Started4/19/2013

Shamokin Dam Station, LLC

Shamokin Dam Boro Snyder 1200 Technical Review 7/19/2016

11/6/2013 APV Renaissance Partners OPCO, LLC

Monongahela Twp. Greene 1000 Completeness

Review 3/17/2017

12/10/2015 ESC Tioga County Power, LLC

Richmond Twp. Tioga 635 Completeness

Review 10/31/2017

760 6/6/2014UGI Development /

Hunlock Creek Energy Center

Hunlock Twp. Luzerne 119

Issued, Construction Not

Started10/15/2014

60 8/17/2015 Armstrong Power, LLC

S. Bend Twp. Armstrong 16 In Shakedown

Operation 2/23/2015

Moxie Freedom, LLC Salem Twp. Luzerne 900 Under Construction

TBC 5.18 10/31/2014 Ontelaunee Power Ontelaunee Twp. Berks 16 In Commercial

Operation 6/2/2015

6/11/2014

2/24/2016 Total MW Capacity 15,889

Lackawanna Energy Center, LLC (Invenergy)

Jessup Boro Lackawanna 1500 Under Construction

TBC Mid 2018

Tenaska Pennsylvania Partners, LLC

S. Huntingdon Westmoreland 900 Under Construction

TBC Late 2018

Calpine Mid Merit LLC/York Energy Center Expansion

Peach Botom Twp. York

Under Construction TBC 2018)

Panda Hummel Station, LLC

(Formerly Sunbury Generation)

Shamokin Dam Boro, Snyder 1064 Under Construction

TBC 3.18

Hickory Run Energy, LLC

N. Beaver Twp. Lawrence 900 Under Construction

TBC 4.20

Source: PA DEP Air Quality Monitoring

Economic Growth Projections /Potential Energy Demand—

Non-OECD Countries

OECD Non-OECD

Average annual percent change in real GDP by region, 2015-40

Source: EIA and Oxford Economic Model (March 2017)

Source: EIA https://www.eia.gov/naturalgas/monthly

Expanding Options for U.S. Shale

Gas• Increasing demand and increasing price• World LNG trade tripling, from 32 Bcf/d to 84 Bcf/d in 2040

U.S. LNG Trends

• Brownfield sites vs. greenfields– Lower environmental cost?– Existing social license?? – Key components already in place

• pipeline, storage, piers

• Numerous projects approved– All East and Gulf coasts– Some expanding– Additional 20+ in queue

• Panama Canal expansion– more LNG cargos transiting– 80% of LNG carriers – Expand markets in both Atlantic & Pacific basins– To 30 Mta in 2020 from 6 Mta in 2017

• Crude linked price versus newer “tolling” model based on U.S. Henry Hub price

• Canadian LNG facilities??

Evolving Ethane Markets

• Ethane exports to

Norway and Scotland

from

Pennsylvania/Ohio/We

st Virginia

• New eastern U.S.

markets for ethane and

propane including

truck terminal in Phila

• 25% of global NGL

supply and growing

New “Virtual” NG Technology

LNG/Diesel Rail

Source: GE

Steps to Build a Rail LNG Supply Chain

SHALE TRAINING & EDUCATION

CENTER (SHALETEC)

• Partnership between Penn College & Penn State - Extension

• Collaborative partnership on workforce assessments:▪ Northcentral PA 2009▪ Southwest PA 2010▪ PA Statewide 2011▪ PA Economic Impact Study 2011▪ WV Direct Job Creation Study 2011▪ OH Workforce 2015

• 14,000+ employees trained since 2009 in specific areas related to the oil & natural gas industry

Well Pad Construction

Land Surveyor

Engineer Crew to grade wellsite

Drivers to deliver stone for wellsite

Laborers to lay geotex mat to protect from spillages

Laborers to place concrete

Laborers to build storage tanks for fluids

Construction manager

Biologist

Materials

supplier

DIRECT WORKFORCE

Truck drivers for transport of materials

Equipmentsupplier

INDIRECT WORKFORCE

Jobs in businesses suppling services

to indirect workforce, i.e.

restaurant labor

INDUCED WORKFORCE

Construction equipment operators

Workers needed directly to construct the Well Pad

Public crews to maintain roads in

region -- accessibility to the wellsite

Workers created from goods and

services provided to the direct workforce

Workforce created due to the Well

Pad construction but not actually

associated with it

Source: Bethany Smith, Penn State

ShaleNET Initiative

• Collaboration of educational institutes, government, NGOs, and industry partners

– Assessment of emerging industries and workforce needs

– Assessment of workforce training capacities in multi-state region

– Development of workforce skill set requirements

– Common training curriculum vetted with industry

• $20M USD in two federal government grants

• Ongoing State of Pennsylvania funding

• Industry grants

▪ Scholarships to train workers

▪ 94% placement, 67% formerly unemployed

▪ 79% retention, 19% veterans, 35% underrepresented populations

• Overall goal is to train the right number of workers, with the right skills, in the appropriate timeframe-

Workforce and Business Trends

• “Localizing” the worker

• 75% blue collar/technical

• Front loaded on well’s

lifecycle

• Matching demand to

availability of labor

• Institutional capacity to

train and not

“overproduce”

• Housing requirements

and required infrastructure

• Key part of social license

Technical-related Degrees

• Automated Manufacturing

Technology - A.A.S.

• Civil Engineering Technology –

A.A.S. and B.S.

• Computer Aided Drafting

Technology – A.A.S.

• Computer Aided Product Design –

B.S.

• Construction Management – B.S.

• Diesel Technology- A.A.S.

• Electric Power Generation – A.A.S.

• Electrical Technology – A.A.S.

• Electronics & Computer

Engineering Technology – A.A.S.

• Heavy Construction Equipment

Technology – A.A.S.

• Machine Tool Technology - A.A.S.

• Mechatronics – A.A.S

• Welding - A.A.S.

• Welding & Fabrication Engineering

Technology – B.S.

SHALENET – TALENT MATCH SYSTEM

• Online resource to explore careers in oil & NG industry

• Short term training and credit career paths explained

• Self-evaluation of career fit

• Resource for accurate information about industry employment expectations

• Connects candidates to a ShaleNET career counselor to evaluate next steps

• Build career awareness

▪ http://careerguide.shalenet.org/#/

ENERGY TECHNOLOGY EDUCATION

CENTERProps Include:

Wellheads

Production Site w/Frac & Meter Runs

Drilling Rig Trainer

Courses Include:

Confined Space & Rescue

Incipient Fire Extinguisher

Fall Protection

Instrumentation

Haz Mat

High Angle Rescue

JLG AWP & RTFL

Hot Work Air Monitoring

What are key issues/concerns?

Water Ag/tourism

Labor Governance

Revenue generation Local credibility

Environmental Social license

Truck traffic Air emissions

Waste disposal Socio-economic impacts

Economic development Crime

Education Risk mitigation

CSR Climate

Induced seismicity Land development

www.marcellus.psu.eduwww.shaletec.org www.naturalgas.psu.edu