Unconven(onal

Fuels and Implica(ons for CCUS Deployment

Michael E. Moore Execu/ve Director NACCSA Vice President Energy Commodi/es and Advisory Services FearnOil Inc. June 24th 2013 Birmingham, AL

Covered Topics
US Oil and Gas Shale Resources & Infrastructure Changing US Energy Infrastructure Crude Oil Shipping by Rail Ohio Shale Investments US LNG/Natgas Exports Coal US Renewables CCUS/CCS Developments Other Inter-related Energy Ac/vi/es

US Oil & Gas Resources and Infrastructure

US Conven/onal Oil and Gas Reservoirs

US Shale Plays - Unconven/onal Oil &Gas

480,000 Miles of Natgas - Oil and HL Pipelines-constantly expanding

EIA 4-30-13 h$p://www.eia.gov/oil_gas/natural_gas/data_publica:ons/eia914/eia914.html

US Natgas Produc/on

US Natgas Produc/on Shale

EIA May 22 2013 h$p://www.eia.gov/naturalgas/weekly/

US Oil Produc/on-Regional

EIA April 2013 short term energy outlook forecasts US crude oil produc:on to increase from an average of 6.5 MMb/d in 2012 to 7.9 MMb/d in 2014
h$p://www.eia.gov/forecasts/steo/archives/Apr13.pdf

Bakken Oil Produc/on Surges to New High

h$p://www.upstreamonline.com/live/ar:cle1330011.ece

June 14th-2013 Oil produc:on from North Dakota's Bakken shale hit a new high in April and could exceed the state's forecast of 850,000 barrels per day by the end of the year, state regulators said on Friday. North Dakota's Department of Mineral Resources said April output rose 1.3%, or just over 10,000 bpd from a month earlier, to 793,000 bpd despite inclement weather condi:ons. Output was around 33% higher than a year earlier. Na:onwide, oil produc:on hit 7.37 million bpd in the week that ended 3 May - the most since February 1992, according to the Energy Informa:on Administra:on. Those numbers slipped by about 76,000 bpd last week to 7.22 million bpd, Bloomberg reported. About 75% of Bakken oil le\ North Dakota on trains in April, up from 71% in March, the state Pipeline Authority said. About 17% was shipped out via pipeline, down from 20% in March

Texas Rapid Change in Oil Produc/on

Source: Tintera ACUS Bucharest Presenta/on 3-12-13 Source: Bloomberg May 28th 2013 h[p://www.bloomberg.com/ news/2013-05-28/eagle-ford-oil-output-rises-77-to-more- than-500-000-barrels-day.html

Oil produc:on in Texass Eagle Ford shale forma:on rose more Than 77% in March from a year earlier, topping 500,000 barrels a day and pos:ng a record. The nine geographic elds that make up the majority of Eagle Ford yielded 529,874 barrels of crude a day, according to preliminary data released by the Texas Railroad Commission. The elds produced 298,266 barrels daily in March 2012. The Texas produced 2.3 million barrels a day in February, the highest monthly level since April 1986

Planned Pipeline Capacity to De-Bo[leneck Cushing

h$p://www.greencarcongress.com/2013/02/eiapipelines-20130214.html

Over the past three years, 815,000 bbl/ d of new pipeline capacity delivering crude oil to Cushing was added. Over the same period, only 400,000 bbl/d of new pipeline take-away capacity was added. During the next two years an addi:onal 1,190,000 bbl/d of pipeline capacity for delivering crude oil from Canada and the midcon:nent to Cushing is planned, but this is balanced by 1,150,000 bbl/d of planned pipeline capacity addi:ons to deliver crude oil from Cushing to the Gulf Coast. About 830,000 bbl/d of new pipeline capacity is planned to move crude oil directly from the Permian Basin to the Gulf Coast, avoiding the congested Midwest. If this capacity is constructed and fully u:lized, waterborne imports to the US Gulf Coast, par:cularly of light sweet crude oil, could drop signicantly, the EIA said.

h$p://www.cleanskies.org/wp-content/uploads/2013/02/2.11.2013_EuropeReport_FINAL- web.pdf

European Company Stakes in U.S. Shale Plays

Changing US Energy Infrastructure

New Gas Flow Dynamics-Shale Gas

h$p://www.ferc.gov/industries/gas/indus-act/pipelines/horizon-pipe.pdf

Gas Pipeline Converted to Carry Crude Oil from Illinois to Gulf Coast
h$p://www.ogj.com/ar:cles/2013/02/enbridge--energy-transfer-to-convert-trunkline-segment-to- crude-.html?cmpid=EnlPipelineFebruary252013

Enbridge Inc. and Energy Transfer will jointly develop a project to move 420,000-660,000 b/d of crude oil by pipeline from Patoka, Ill., to St. James, La., and the eastern Gulf Coast rening market by conver:ng certain segments of Trunkline Gas Co. LLCs system to liquids service. Trunkline is a subsidiary of Energy Transfer Partners LP and Energy Transfer Equity LP. The converted 30-in. OD crude oil pipeline would enter service by 2015, pending US Federal Energy Regulatory Commission approval of Trunklines July 2012 request to abandon certain designated segments of pipeline from natural gas transmission service. Crude slate and the level of subscrip:ons received in a pending open season will determine the pipelines capacity. Once completed, the project will span more than 700 miles, including a new lateral from near Boyce, La., to St. James. The St. James hub will provide access to reneries in the eastern Gulf Coast, as well as dock access for water-borne shipments. Enbridge and Energy Transfer would each own 50% of the joint venture. Enbridges par:cipa:on in the venture is subject to a minimum level of commitments being obtained in the open season, and on comple:on of due diligence. Crude oil reaches the Patoka hub from both western Canada produc/on and from the Bakken play in North Dakota through a variety of exis:ng pipelines. Enbridges Southern Access Extension pipeline will also deliver 300,000 b/d to Patoka star:ng in early 2015 (OGJ Online, Dec. 14, 2012). Energy Transfer describes the eastern Gulf Coast as a highly a$rac:ve market for Canadian and Bakken crude, but not currently accessible by pipeline. The Trunkline conversion would create the rst pipeline transporta:on op:on for moving crude oil to the eastern Gulf Coast from the US Midwest.

Crude Oil Shipping by Rail

h$p://www.progressiverailroading.com/rail_industry_trends/ar:cle/Shales-in-the-West-well-beyond-the-Bakken-drive-crude-oil- trac-for-many-railroads--36140

Crude Oil Shipments by Rail Jump

May 2013--BNSF now moves about seven or eight unit trains per day out of the Bakken, carrying about 600,000 barrels of oil. And daily volume is projected to con:nue climbing, to 700,000 barrels by year's end and to 1 million barrels by some point in 2014. The dierence compared with several years ago is that Bakken crude now is being transported to more des:na:ons, says BNSF Vice President of Industrial Products Sales John Miller. BNSF expects to move crude to more than 50 des:na:ons by 2014's end. "First it went to Cushing and then St. James, [Louisiana], and now it heads in all direc:ons, including the East Coast," says Miller. "It tells the story of rail's exibility."

Crude Oil by Rail-Bakken Example

Bakken to WA Bakken to NF, CA Bakken to USGC Bakken to NJ Bakken to PA Bakken to USGC

US Exported More Rened Products than it Imported-Not Seen Since 1949

For the rst :me since 1949, the United States exported more gasoline, hea:ng oil and diesel fuel last year than it imported, the Energy Department reported today. Bloomberg writes that to oset weak U.S. demand, reners exported 439,000 barrels a day more than were imported the year before. In 2010, daily imports averaged 269,000 barrels, according to the Petroleum Supply Monthly report. Imports of crude oil and related products fell 11% last year, reaching a level not seen since 1995. h$p://content.usatoday.com/communi:es/ ondeadline/post/2012/02/us-exported-more-gasoline- than-imported-last-year/1

Ohio Shale Investments

HTTP://UNCONVENTIONALENERGY.BLOGS.IHS.COM/2013/02/12/UTICA-SHALE-PROMISES-TO- MAKE-OHIO-AN-ENERGY-POWERHOUSE

IHS Ohio U/ca Shale Report

2012 unconven:onal oil/gas ac:vity contributed value- added economic ac:vity of $4.1 billion IHS forecasts that this contribu:on will grow to $35.2 billion by 2035. 2012 U:ca shale new jobs - 39,000. 2020 will increase to 144,000 2035 to 275,000 2012 Ohios opera:ng shale/horizontal rig count was 9 rigs As of Feb 2013 549 permits issued 249 wells drilled 2013 shale /horizontal opera:ng rig count 25

Ohio Economic Impact from Shale

Source: ODNR presenta:on 3/12 h$p://www.dnr.state.oh.us/portals/10/energy/U:ca/U:ca- PointPleasantPlay.pdf

h$ps://www.mecseminars.com/sites/default/les/presenta:on-les/Manufacturing %20Renaissance%20in%20Ohio%20Powered%20by%20Oil%20and%20Gas%20from%20Shale.pdf

Investments in Ohio U/ca Shale

h$ps://www.mecseminars.com/sites/default/les/presenta:on-les/Manufacturing%20Renaissance%20in%20Ohio %20Powered%20by%20Oil%20and%20Gas%20from%20Shale.pdf

Midstream Commitments in Ohio U/ca Shale

US LNG/Natgas Exports

Global LNG Marker Prices - Daily, Feb. 2, 2009 July 31, 2012
Source: US LNG Exports: Truth and Consequence by Kenneth B. Medlock III PH.D -JAMES A. BAKER III INSTITUTE FOR PUBLIC POLICY RICE UNIVERSITY Aug 12-2012 Pg. 17

Sources: Pla$s, US Energy Informa:on Administra:on, authors calcula:on US Henry Hub (HH) (NBP) the UK Na/onal Balancing Point (JKM) the Pla$s Japan/Korea Marker And a representa:ve crude indexed LNG price from 2009 to the present

h$p://ferc.gov/industries/gas/indus-act/lng/lng-proposed-poten:al.pdf

h$p://www.eia.gov/pub/oil_gas/natural_gas/analysis_publica:ons/ngpipeline/impex_map.html

US Natgas Export Points

Proposed Natgas Pipelines for LNG Export from Alaska

h$p://www.arc:cgas.gov/alaska-natural-gas-pipeline-projects-guide-and-maps

LNG Exports
Expedited LNG for American Allies Act of 2013 Senator Barrasso and Congressman Turner introduced Feb 6th 2013 the Expedited LNG for American Allies Act of 2013 (HR 580, S 192) that would reduce barriers for LNG exports to NATO allies and Japan, giving them the same preferen:al treatment as countries that have free-trade agreements. DOE Approves non-FTA LNG Exports

Cheniere Freeport LNG

Coal

Source: h$p://pubs.usgs.gov/of/1996/of96-092/Comp/main.gif

US Coal Resources

Fuel Switching Impacts and Coal Exports

h[p://www.aar.org/~/media/aar/Background-Papers/Railroads-and-Coal.ashx

Coal vs. Natgas for Genera/on-Vola/le

h[p://www.pla[s.com/newsfeature/2012/coaltransport/map

Coal Export Terminals

China Coal Consump/on vs. the World Combined

consecu:ve year, according to newly released interna:onal data. China's coal use grew by 325 million tons in 2011, accoun:ng for 87% of the 374 million ton global increase in coal use. Of the 2.9 billion tons of global coal demand growth since 2000, China accounted for 2.3 billion tons (82%). China now accounts for 47% of global coal consump:onalmost as much as the en:re rest of the world combined. Robust coal demand growth in China is the result of a more than 200% increase in Chinese electric genera:on since 2000, fueled primarily by coal. China's coal demand growth averaged 9% per year from 2000 to 2010, more than double the global growth rate of 4% and signicantly higher than global growth excluding China, which h$p://www.eia.gov/todayinenergy/detail.cfm?id=9751&src=email

US Coal to Europe Displaces Natgas- GHG Emissions Go Up

h$p://www.bloomberg.com/news/2012-10-31/gas-golden-age-darkens-in-europe-on-u-s-coal-energy- markets.html

Global gas consump:on may rise 19 percent by 2017 from 2010 levels as demand surges in Asia and the U.S. while Europes usage drops 1.6 percent, according to the Interna:onal Energy Agency. Increasing coal-red genera:on in Europe has cut gas demand by 3 billion cubic feet a day, according to Sanford C. Bernstein & Co., about 7 percent of consump:on. The IEA last year predicted a golden age for the fuel with new exports from America to Australia. Gas for delivery next month on the Netherlands Title Transfer Facility, the mainland European benchmark, traded at 27.50 euros ($35.65) a megawa$-hour yesterday, more than double the price four years ago, according to broker data compiled by Bloomberg. Thats equivalent to $10.43 per million Bri:sh thermal units and compares with $3.69 per million Btu for front- month fuel in the U.S., which fell 43 percent over the period. German power sta:ons make a loss of 11.25 euros a megawa$-hour from burning gas, according to Bloomberg calcula:ons of the so-called clean-spark spread, which takes into account electricity, fuel and carbon prices for next month. The equivalent measure when burning European coal for delivery to Amsterdam, Ro$erdam and Antwerp shows a prot of 14.22 euros a megawa$-hour. U.S. Central Appalachian Coal Futures for the next month traded at $59.43 a short ton on Oct. 29, excluding shipping, versus $84.85 a metric ton ($93.53 a short ton) for European coal. Burning coal has contributed to a 10 percent increase in EU carbon-dioxide output this year through September, according to Bloomberg New Energy Finance. First-quarter emissions from power genera:on in the U.S. dropped to the lowest since 1992 because of increased gas usage and a milder-than-normal winter, the EIA said in an Aug. 1 report.

h$p://www.bloomberg.com/news/2013-03-12/europe-gas-carnage-shown-by-eon-closing-3-year-old-plant- energy.html

Europe Gas Carnage Shown by EON Closing 3-Year-Old Plant

EON SEs Irsching-5 in Bavaria last year operated less than 25 percent of the :me as slumping power prices made burning natural gas unprotable by record margins. As Europes weak economy holds back electricity demand, cheaper coal, requirements to buy renewable energy and the collapsing cost of carbon permits are undercuyng gas-red plants. The pa$ern is repeated throughout Europe as u:li:es including Frances GDF Suez SA and Centrica Plc mothball gas plants. The impact is both environmental and commercial. Switching to coal increases emissions, while it lowers prot for gas plants, which generate almost a quarter of European power, and shrinks the market for suppliers led by OAO Gazprom. (GAZP) Gas-red plants are stopped three days out of four, Gerard Mestrallet, chief execu:ve ocer of GDF Suez, Frances former gas monopoly, said at a brieng on Feb. 28. The thermal industry is in crisis. There is overcapacity. The dierence between the cost of fuel and the price paid for the power generated reached a record low today. The so- called spark spread for the month ahead fell to as low as minus 18.35 euros a megawa$-hour ($23.87). Gas plants are also unprotable in France, the Netherlands, Spain and the Czech Republic, according to data compiled by Bloomberg. In the U.K., theyre barely breaking even. At the same :me, spark spreads for coal plants are protable in every European market tracked by Bloomberg as prices for the fuel drop.

US Renewables

US Solar Projects
h$p://www.seia.org/map/majormap.php

There are over 490 major solar projects currently in the database, represen:ng over 32 GW of capacity. The list shows that there is over 2.4 GW of major solar projects currently opera/ng. There remains an enormous amount of capacity in the pipeline, with over 29 GW of PV and CSP projects either under construc/on or under development. Under the Obama Administra:on, 16 projects have been permi$ed on federal lands, which will provide 6,058 MW of genera:ng capacity.

h$p://www.awea.org/newsroom/pressreleases/ocialyearendnumbersreleased.cfm

As of January 30th 2013 Installed Capacity Breaks 60,000mw

h$p://www.windpoweringamerica.gov/wind_installed_capacity.asp

Source: h$p://en.wikipedia.org/wiki/File:UnitedStatesPowerGrid.jpg

US Power Grid

CO2, Hydrocarbons, Renewables & Electric Transmission

An INGAA Founda:on study focused on the pipeline infrastructure requirements for CCS. It forecasts that between 15,000 and 66,000 miles of pipeline will be needed in the U.S. by 2030, depending on how much CO2 could be sequestered, and the use of CO2 for enhanced oil recovery (EOR). Future CO2 pipelines will likely compete with natural gas pipelines, NGLs, crude oil and rened products for labor and materials. Also the si:ng of renewables (solar/wind) and related transmission lines could compete with CO2, crude oil and natural gas infrastructure for rights-of-way, especially in highly populated areas.

CCUS Developments

US CCUS and CCS Projects

CCUS Southern/Kemper-MS Under construc:on Summit/TCEP-TX Development Air Products-TX Opera:ng Leucadia Lake Charles Clean Energy Plant LA Development Leucadia Mississippi Gasica:on Project MS Development NRG-TX Development HECA-CA Development DKRW-WY Development Peabody-Great Point-TBN Planning Leucadia Indiana Gasica:on-IN Planning ? Both Tenaska plants Taylorville Ill and Trailblazer TX cancelled June 21, 2013 CCS Southern/Plant Barry-AL Opera:ng ADM-IL Opera:ng FutureGen-IL Development

Current CO2 EOR Opera/ons

Other Inter-related Energy Ac/vi/es

GTL Advances Due to Natgas Supply/ Price

SASOL-LA & IN Shell-LA EmberClear-MS EmberClear-PA BP-AK Calumet-PA Am. GTL-PA Methanex-LA South Meth.- LA

Shale Gas Liquids Drive Petchem Growth

h$p://www.argusmedia.com/~/media/Files/PDFs/Mk:ng/Argus%20NGL%20Shale%20Gas%20Special%20Report.ashx

h$p://www.houstonchronicle.com/news/ar:cle/Price-to-pollute-hits-record-high-4608417.php

Price to Pollute Hits Record High

June 18th The price to pollute is at a record high, with traders recently paying $270,000 for the right to emit 1 ton of vola:le organic compounds, a key ingredient in ozone, or smog. That's up from $4,500 per ton in January 2011. The record sale involved the city of Houston, which had 14.3 credits for vola:le organic compounds to sell a\er upgrading equipment at its Almeda Sims sewage treatment plant. The city also sold credits for 12.4 tons of nitrogen oxides, another ingredient in ozone, for $151,000 per ton to Amerex Brokers, a Sugar Land-based rm. The soaring price of smog credits - each equal to 1 ton of pollu:on - means the market is doing its job: prodding industry to reduce emissions. The allowances have become so valuable that for the rst :me since the system began nearly a decade ago, companies are looking for ways to cut emissions in order to sell their excess credits as a bo$om-line booster, traders said. "As the market price has signicantly increased over the past two years, it has sent signals to companies to make reduc:ons in emissions" of vola:le organic compounds, said Mike Taylor, who manages the emissions trading desk at Houston-based Element Markets. The brokerage rm assisted the city of Houston in the record sale, which was reported last week to Texas regulators. The market for these state-issued allowances, ocially called Emission Reduc:on Credits, appears to be driven by chemical makers, who are looking to expand in the Houston area a\er years in the doldrums. Despite the bull market, traders are worried about liquidity - the ease with which the allowances can be traded. There are so few available credits in greater Houston that NRG Energy has asked regulators to let it buy some from the Dallas-Fort Worth area to cancel out emissions of vola:le organic compounds at its coal-red power plant in Fort Bend County. The state environmental quality commission, however, has not allowed trades that are not in the same region. The market run began as Chevron Phillips Chemical Co., Celanese Corp. and other chemical makers started making plans to expand because of cheap and abundant natural gas

Panama Canal Expansion and Its Impact

It could be the single biggest game changer for the export of US energy and related commodi:es to the Far East. LNG Exports rst export facility online in 2015 Coal Exports major expansions of GC terminals NGL Exports long term export contracts Transporta:on Fuels Exports-from foreign and US crude, GTL and CTL projects Crude Oil Exports talk to open up lower 48 restric:ons Petrochemical Exports world scale new builds and expansion underway in the GC Annual capacity will increase by about 2,000 addi:onal ships. Capacity in terms of TEU will almost triple from 4,500 to 12,000. Bulk capacity in deadweight tons will more than double. From 52,000 to 119,000 (h$p://people.hofstra.edu/geotrans/eng/ch1en/appl1en/
table_panama_new.html)

What the Panama Canal Expansion Means to Shipping

h$p://people.hofstra.edu/geotrans/eng/ch1en/appl1en/table_panama_new.html

Arc/c Shipping Routes

Aug 26th 2012 China became the latest country to navigate the Northern Sea Route last week when its vessel Snow Dragon arrived in Iceland. Linking the Pacic Ocean to the Atlan:c, the Northern Sea Route allows ships to cut down on travel :me from Asia to Europe by edging through the icy waters between north Russia and the North Pole. Un:l now, ships have been forced to pass by Indonesia, India, the Gulf and nally through the crowded Suez Canal which saw almost 18,000 vessels chug through last year alone before reaching the Mediterranean. Following a northern course instead west above Canada or east above Russia cuts the journey :me by half, as pointed out by Chairman of Norway-based Tschudi Shipping, Felix H. Tschudi, in an interview with Japanese daily Asahi Shimbun. "If a cargo ship with a maximum load capacity of 40,000 tons can pass through the Northern Sea Route, that will shorten the journey by 22 days and cost $839,000 [670,000 euros] less than going through the Suez Canal." The ar:cle also notes that 1,000 tonnes less fuel is needed for the northern journey. Also known as the Northeast Passage, the Northern Sea Route has only recently become accessible to large vessels due to the mel:ng of the Arc:c. Germany was the rst Western power to make the h$p://www.france24.com/en/ journey in 2009, and was soon followed by Japan, Denmark, 20120826-arc:c-melts- Canada and the UK. developers-new-shipping- In 2011, a total of 37 vessels made the trip. But this year saw record levels of thaw, allowing Chinas icebreaker an easy passage, northern-sea-route-russia- with the crew repor:ng an astonishing lack of ice as they skirted china-ice-loss the North Pole

Arc/c Resources

The U.S. Geological Survey (USGS) has completed an assessment of undiscovered conven:onal oil and gas resources in all areas north of the Arc:c Circle. Using a geology based probabilis:c methodology, the USGS es:mated the occurrence of undiscovered oil and gas in 33 geologic provinces thought to be prospec:ve for petroleum. The sum of the mean es:mates for each province indicates that 90 billion barrels of oil, 1,669 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids may remain to be found in the Arc:c, of which approximately 84 percent is expected to occur in oshore areas.
h$p://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdf

Ques/ons & Thank You!

Michael E. Moore
VP Energy Commodi/es and Advisory Services FearnOil Inc. (a division of Astrup-Fearnleys) www.fearnleys.com Execu/ve Director North American Carbon Capture Storage Associa/on www.naccsa.org mmoore@fearnoil.com Tel: 281-759-0245

NSPS
President to announce his new climate change ini:a:ves on Tuesday-CCS likely in the mix NGOs can le since the EPA missed its deadline are wai:ng to see what the Presidents announcement will look like on Tuesday Class II vs. Class VI will be in the mix NSPS GHG reduc:ons on current power generators Abundance of shale gas Renewable Fuel Standard Renewables geyng cheaper RCRA

h$p://www.rrc.state.tx.us/eagleford/EagleFordOilProduc:on.pdf