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2

INTRODUCTION: WHAT DOES SCHUEPBACH ENERGY DO?

• Early history:

• Shale Gas in Marcellus (divested)

• Various shale gas projects in Europe:

• France (legal action)

• Switzerland (active)

• Denmark (technically unsuccessful)

• Current:

• Focus on conventional exploration:

• Spain

• Activities with focus on conventional exploration and, as a second step, possible unconventional

exploration (upside potential) (Parana Basin)

• Exploration in untested basins, or limited tested, where the conventional plays are much more

economic and feasible

• Unconventional plays are more difficult and expensive to prove; lack of equipment

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IMPORTANT GENERAL AND TECHNICAL REMARKS

• Water:

• Very sensitive topic for the public

• Most people are of the opinion that - like air - it belongs to everybody

• Proper well construction isolates aquifer (conventional and unconventional wells)

• Fracing operations are well below the aquifer

• Percentage of water usage for fracing is minimal compared to other usages

CEMENT AND CASINGS PROTECT THE AQUIFER FROM CONTAMINATION

HYDRAULIC FRACTURING MONITORING

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BARNETT SHALE WATER USAGE

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Source: Gas Technology Institute, Aug 2010

Barnett Operations = 1.7%

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LANDSCAPE AND FOOTPRINT

• Well pads with up to 16 horizontal wells

• Surface area needed for production facilities is only 0.02% of the drainage area of 16 wells

• Impact on landscape minimal compared to wind turbines

STATE OF THE ART PRACTICE – DRAINAGE AREA

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STATE OF THE ART PRACTICE- DRAINAGE AREA

5,500 ft / 1,700 m

20,500 ft / 6,200 m

0 1,000

Scale In Meters

Surface Area For Drilling & Fracing: 2.5Ac (1 Hectare)

Sub-Surface Drainage Area: 2,600 Ac / 10,500,000 m2 (1,050 Hectare / 10.5 Km

2)

Surface Area For Production: 0.5 Ac / 2,000 m2 (0.2 Hectare / 0.002 Km

2)

Ratio: Surface Area / Sub-Surface Area: 0.02%

(FUTURE DEVELOPMENT)

8 Wells

8 Wells

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TRADITIONAL VS HORIZONTAL WELL AREA USAGE

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WHY IS SHALE GAS SO SUCCESSFUL IN THE US AND NOT IN OTHER COUNTRIES?

• Shale gas/shale oil was initially developed by independents rather than by

major corporations

• Accept higher risks

• “No gain without pain”

• Constantly applying and developing new techniques

• Availability of land

• Oil/gas rights belong to individuals (mineral owners, who are usually also

the landowner) and not the State

• Negotiations are conducted directly with the mineral owner rather than

the State

• Win – win situation; both sides make money (lease bonus + royalties)

• Availability of equipment

• State governments are familiar with gas/oil operations; regulations exists

• Willingness of the government to provide affordable energy and supply security

• Decreasing carbon is not the main objective

WELL DRILLING

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RESULTS IN THE US

• Drastic increase of reserves and production (liquids production have now surpassed Saudi Arabia and Russia)

• Increased employment opportunities

• Low energy prices (various industries returning to the US; increased manufacturing)

• Higher tax revenues

• Supply and security

EUROPE

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• Compared to US:

• High unemployment

• High energy prices

• Supply and security problems

• What to do?

• Allow shale gas/oil production is one solution

• Focus on affordability and supply security, not on carbon foot print

• Provide a win – win situation for local governments and land owners in form of a royalty

• Streamline environmental permitting

• New techniques like propane fracing

U.S. DRY GAS PRODUCTION (TRILLION CUBIC FEET PER YEAR)

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Shale gas offsets declines in other U.S. supply to meet consumption growth and lower import need.

Sources: History: EIA, Annual Energy Review 2013. Projections: National Energy Modeling System

Shale gas production leads growth in production through 2040

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U.S. dry natural gas production

trillion cubic feet

Source: EIA, Annual Energy Outlook 2013 Early Release

0

5

10

15

20

25

30

35

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Associated with oil

Coalbed methane

Tight gas

Shale gas

Alaska

Non-associated onshore

Non-associated offshore

Projections History 2011

Adam Sieminski

January 21, 2013

EUROPE’S CURRENT SUPPLY BUBBLE WILL BURST...

15 From Gas Strategies - EAGC Pre-conference Workshop, Nov. 2010

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OPPOSITION

• Against fracing • 200,000 fracs per year in the States with no major environmental or health problem

• Against any hydrocarbon exploration/production • Natural Gas is a transition energy, much cleaner than coal

• Concern that a dramatic increase in oil/gas reserves extends the life of these reserves and decreases the incentive to find alternative energy sources

“The Stone Age did not end because for lack of stones…”

From Thomas Friedman