Paul McCloskey - Vice President of Energy & Business Development - - PowerPoint PPT Presentation

June 14, 2016

Paul McCloskey - Vice President of Energy & Business Development

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

 Who we are: CorePA/Clearly Ahead Development  Overview of Marcellus Shale

 PA – Gas importer to gas exporter.

• What’s that mean for prices now & in the future?

 Overview of US natural gas & pricing.  What are other companies doing with energy in

PA?

 What are we (Clearly Ahead) trying to do with

energy in Clearfield County, PA?

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

 Illustrate that the USA and particularly

Pennsylvania has a superabundance of natural gas.

 Show how this superabundance will ensure long-

term price stability & affordability of natural gas in Pennsylvania & provide at least 2 distinct advantages to companies locating here.

 Identify 7 energy-intense industries that would

be ideal for expansion/relocation into CorePA.

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

U.S.A.

Pennsylvania

CorePA Clearfield County

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

• Buffalo, NY - 3.5 Hours

(258,959)

• New York, NY - 4.5 Hours

(8,550,405)

• Washington DC - 4 Hours

(658,893)

• Baltimore, MD - 3.5 Hours

(622,104)

• Cleveland, OH - 3.5 Hours

(390,113)

• Pittsburgh, PA - 2 Hours

(305,841)

• Philadelphia, PA - 4 Hours

(1,560,297)

• City, State - Drive Time

(Population) Conclusion: Access to major population centers (+12,346,612 people) within 1 day drive.

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

 County-wide Economic

Development

 Business Attraction  Business Expansion  Increased Tax Base

 Membership-Based

Organization

 Land & Building

Development

 Energy Department  Financial Lending

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”



PA- largest producer

• f hardwoods in U.S.



Annual revenues from PA forest products industry exceeds $5.5 billion

*Source: Pennsylvania Forest Products Association

Coal



3rd largest county producer of coal in Pennsylvania



Thermal & Met. Coal

Timber Natural Gas



5,228 Conventional Wells*



150 Unconventional Wells*



3 Natural Gas Transmission Lines

* Appx. Numbers - Source: PA DEP

Sample of Companies Engaged in “Upstream” Sector of Shale Gas Industry in Clearfield County

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Exploration & Production Companies in Clearfield County

United States Shale Gas Generates Interest From Around the Globe

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Foreign Delegations in CorePA

Foreign Delegations in CorePA

Chinese Fertilizer Company

Foreign Delegations in CorePA

Foreign Delegations in CorePA

China Petroleum & Petrochemical Engineering Institute

Foreign Delegations in CorePA

Lanling County Government

Lanling County, Linyi City, People’s Republic of China

U.S. Department of Energy, U.S. Shale Basins

Marcellus Shale • Marcellus fairway is 40,000 –

50,000 square miles  Estimates of recoverable reserves up to 500 tcf; current U.S. natural gas demand is 23 tcf per year  Not all of the Marcellus will produce the same...  Barnett core is 5,000 square mile  Barnett is largest U.S. gas field, providing 6% of US natural gas

U.S. Department of Energy, U.S. Shale Basins

Bakken (o (oil il)

The Competition

Eagle Ford (emerging)

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

How Much Natural Gas Does the US Have?

The U.S. Energy Information Administration estimates that as of January 1, 2013 there were about 2,276 trillion cubic feet (Tcf) of technically recoverable resources of dry natural gas in the United States. At the rate of U.S. dry natural gas consumption in 2013 of about 27 Tcf per year, the United States has enough natural gas to last about 84 years. Source: http://www.eia.gov/tools/faqs/faq.cfm?id=58&t=8

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

How Much Natural Gas Does the US Consume?

Source: http://www.eia.gov/todayinenergy/detail.cfm?id=26552

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

How the Marcellus Region Fits In

Source July 2015: http://www.eia.gov/todayinenergy/detail.cfm?id=26552 EIA's latest data show that natural gas produced from U.S. shale basins now accounts for 56% of U.S. dry natural gas production. Collectively, shale gas production from the Marcellus and Utica regions increased by 12.6 Bcf/d from January 2012 to June 2015, making these regions the driving forces behind overall U.S. natural gas production growth.

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Dry Gas” = Methane (CH4) Butane (C4H10) Ethane (C2H6) Propane (C3H8)

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Historic Energy Pricing in US

Commodity Prices (per mmBtu) (June 13, 2016)

• Crude Oil------$8.46
• Natural Gas----$2.62

Commodity Prices (per mmBtu) (2012)

• Crude Oil------$17.20
• Natural Gas----$3.00

Oil & gas prices were linked until shale revolution

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

How natural gas is priced in US

Natural gas transported from source through a network of pipelines & priced at various “hubs” throughout the US. Locations of various price “hubs” across the US. The “Henry Hub” in Louisiana sets the baseline for the US.

Since nat. gas is difficult to transport, it is priced as a regional commodity using the “Henry Hub” price as the benchmark.

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Discounted Spot Pricing at Leidy Hub in PA.

• Henry Hub cost:

$2.59/thousand cubic feet or ~$73/thousand cubic meters*

• Leidy Hub cost:

$1.46/thousand cubic feet or ~$41/thousand cubic meters**

*as of June 14, 2016 – Bloomberg Energy **as of June 14, 2016 – Natural Gas Intel

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

• 1. Superabundance of natural gas
• 1. Huge reserves = High Supply
• 2. Low demand (1.09Tcf annual demand in 2013*

3.20Tcf annual production in 2013*)

• 3. “Shut-in” wells
• 2. Lack of pipeline infrastructure
• 3. Marcellus has one of the lowest breakeven costs
• f any shale play in the USA.

*Pennsylvania Public Utility Commission’s “Gas Outlook Report, June 2015”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“The Marcellus shale has fundamentally altered the outlook for the US natural gas

• industry. The US is emerging as a low-cost

chemicals producer and is poised to become an exporter of natural gas—a feat unthinkable just 5 years ago when it was widely believed that increasing LNG imports would be needed to meet domestic demand.”

http://www.ogj.com/articles/uogr/print/volume-2/issue-3/marcellus-continues-to-defy- expectations-driving-us-gas-production-ever-higher.html

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Suppose a fertilizer company or power plant uses 60,000mcf/day & is investigating locations.

Cost of gas supply in IA ($1.96/mcf) 60,000 units x 1.96 per unit $117,600/day Cost of gas supply in PA ($1.46/mcf) 60,000 units x 1.46 per unit $87,600/day

The fertilizer company would save $30,000/day in operating costs by locating in PA. Of course, other factors would determine ultimate realized savings including transportation costs, taxes, logistics, labor costs, etc.

Well, yes, the price of gas in PA is low now, but what about in the future? What if the price of natural gas at the Leidy Hub is equal to the price of natural gas at the Henry Hub?

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

As shown earlier, the USA and Pennsylvania in particular have immense natural gas resources along with the technology to recover those resources which will result in stable, low-cost energy for the foreseeable future. Even if PA gas evens out with Henry Hub gas, it will still be some of the most affordable on the planet.

 UK: ~$4.80/mmBtu (spot LNG)*  Japan: ~$4.90/mmBtu (spot LNG)*  Dutch: ~$5.10/mmBtu*  Russian export to Germany: ~$6.15/mmBtu*  US prices  Nymex: $2.59/mmBtu**  Pennsylvania (Leidy): $1.46/mmBtu***

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”



Sources:



*BP Statisticial Review of World Energy Report 2016



**Bloomberg Energy



***Natural Gas Intel

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

• E&P Companies Willing to Entertain Long-Term Contracts
• 5 - 20 years (depending on volume & price)
• Why?
• Over-supplied Natural Gas Market
• No definitive end in sight

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Source: Clearfield County GIS Department (www.gis.clearfieldco.org/)

16” Natural Gas Pipeline 8” LPG Pipeline 20” Natural Gas Pipeline 30” Natural Gas Pipeline

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Source: Clearfield County GIS Department (www.gis.clearfieldco.org/)

Gas-fired Power Plant 603MW 115 kV 345 kV 230 kV

Electric Transmission Lines

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

The closer you can locate to heavy infrastructure, the lower your development costs will be and you’ll save At least 6 intersections identified in Clearfield County with industrial land available for development.

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Methane (CH4) Butane (C4H10) Ethane (C2H6) Propane (C3H8)

“Wet Gas” “Dry Gas”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Major Publicly Announced Projects Utilizing Natural Gas

Gas-to-Liquids 2,000 bpd Gas-to-Liquids 1,000 bpd

GTL C2H6

Ethane Cracker World-Scale

GTL

Liberty Plant 830MW Gas-Fired Power Plant

Moxie Energy

Patriot Plant 830MW Gas-Fired Power Plant

Moxie Energy

Good Spring Plant 700MW Gas-Fired Power Plant Energy Self-sufficient Manufacturing Facility

Proctor & Gamble

LNG Exports via Cove Point, MD

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

 Power Generation  Gas-to-Liquids (GTL)  Pulp & Paper  Fertilizer Production  Chemical Production  Cement & Brick Production

Pulp & Paper pic

G T L

 Food & Beverage Processing

Source: Clearfield County GIS Department (www.gis.clearfieldco.org/)

603 MW Power Plant Currently undergoing conversion to gas

Power Generation

1,837 Acre Site For Sale Site prepped for Coal Power Plant but stalled in 2008.

Gas-to-Liquids (GTL)

 Syn-crude  Diesel  Gasoline  Di-methyl Ether  Ethylene

Potential outputs from various GTL processes:

Pennsylvania Grain Processing, LLC

• 110 Million gallons of Ethanol
• 330,000 tons Dry Distiller’s Grain

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Pulp & Paper

 Historic Timber

Industry/Hardwood Resources

 Natural Gas for Drying Kilns  Wood Processing Cluster:

 BWP  Appalachian Wood Products  Domtar

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Fertilizer Production

 Proximity to Markets  32,458 Harvested Acres in Clearfield

County*

 3,942,079 Harvested Acres in

Pennsylvania*

* Source: United States Department of Agriculture based off of most recent census data

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Chemical Production

 Methane utilized as fuel source

& feedstock for various chemical products:

 Syngas  Methanol  Ammonia  DME

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Transportation

 Location Along Interstate  CNG Conversion Companies  Several Major Area Fleets

• WalMart Distribution Center
• C&S Wholesale Grocers DC

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Cement & Brick Production

 Abundant Raw Materials  World-Class Sandstone Quarries  County Formerly Home to Two

Brick Refractories:

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Commerce Park in Clearfield County is the first industrial park in the Commonwealth of Pennsylvania to be certified for food & beverage manufacturing.

KopRnik

French firm of energy analysts assisting energy-intense European companies with relocation to US to take advantage of energy environment.

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Website launching July 1st, 2016: http://www.alex-andlauer.com/ Alexandre Andlauer Christophe Hecker

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Ethane (C2H6) is “cracked” into ethylene.

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

• an ethane cracker with an approximate annual average capacity of 1.5 million metric tons of ethylene;
• three polyethylene units with a combined annual production of approximately 1.6 million metric tons; and
• power and steam generation, storage, logistics, cooling water and water treatment, emergency flare, buildings and warehouses.

Source: http://www.shell.us/about-us/projects-and-locations/appalachian- petrochemical-project/about-the-appalachian-petrochemical-project.html June 7, 2016 - Shell Chemical announced decision to move forward with construction of world-scale multi-billion dollar ethane cracking facility.

Mariner East Pipeline

Sunoco Logistics Mariner East Pipeline will transport wet gas from SW- PA to Marcus Hook refinery.

511 Spruce Street (Suite #5) Clearfield, Pennsylvania 16830 814-768-7838

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

1. The USA (and PA in particular) has an abundance of energy which will help to ensure long-term price stability making it a great location for investment.

• 2. Pennsylvania is home to the Leidy Hub which is currently the lowest-cost spot-

price hub in the country.

• 3. We have relationships with O&G company executives and natural gas marketers

to assist you with securing long-term, fixed-price contracts.

• 4. We have access to existing heavy infrastructure in our county so your company

can tap into our natural gas and electricity resources with the least amount of capital expense.

• 5. We’ve identified the top 7 energy-intense industries that would enjoy a distinct

energy advantage by locating here.

• 6. Pennsylvania has an Office of International Business Development (OIBD)

dedicated to assisting foreign companies with investing in PA.

“Proudly Serving the Community to Create Growth & Opportunity in Clearfield County, Pennsylvania”

Paul McCloskey VP of Energy & Business Development 511 Spruce Street – Suite 5 Clearfield, PA 16830 1-814-768-7838

pmccloskey@clearlyahead.com

Contact Information