marcellus shale: business & job growth · marcellus shale coalition about us ‒ founded in...
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Marcellus Shale: Business & Job Growth
www.MarcellusCoalition.org
Twitter.com/marcellusgas
Facebook.com/marcelluscoalition
November 14, 2013
Marcellus Shale Coalition
About Us ‒ Founded in 2008 ‒ 300 members strong ‒ From producers to midstream to
suppliers
Our Focus ‒ Long-term development of resource ‒ Protecting the environment and
responsible use of water resources ‒ Addressing landowner, government
and public issues ‒ Benefits to our region’s future
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PA produces nearly 10% of the nation’s gas and ¼ of onshore domestic shale gas
MSC Members Produce 96% of All Marcellus Gas
Pennsylvania
Resource Potential* Proven | 14 Tcf Unproven | ~200 Tcf Unemployment Rate 7.6% *2010, EIA: Southwest Region
PA: Fast Facts
Annual production: 2+ Trillion Cubic Feet (2013, Pa. Dept. of Environmental Protection)
Number of wells: 8,982 (2011, EIA)
Total Jobs: 239,474 (2013, PA Dept. of Labor & Industry)
Tax revenue: $1.8 Billion (2012, Department of Revenue)
Royalty Payments: $567 Million (2011)
Bonus payments: $1.2 Billion (2012)
Total investment per well: $5-7 Million (2012)
Pennsylvania Jobs, Pennsylvania Workers
• PA Department of Labor and Industry
− 231,969 employees in Marcellus and related industries as of 2013 Q1*
− Core industries were 35.0% higher in 2013 Q2 than in 2010 Q2*
− Core Industry occupations • Crude Petroleum & Natural Gas Extraction
($110,119) • Natural Gas Liquefied Extraction ($100,841) • Drilling Oil and Gas Wells ($84,862) • Support Activities of O&G Operations ($70,401) • O&G Pipeline & Related Structures ($82,127) • Pipeline Transportation of Natural Gas ($85,747)
− $83,300 average core industry wage ($34,800 higher than PA avg.)*
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*Source: Marcellus Shale Fast Facts, September 2013, PA Department of Labor and Industry
Pennsylvania Jobs, Pennsylvania Workers
• PA Department of Labor and Industry
− Ancillary Industries • Non residential site preparation contractors
($53,191) • Trucking (general freight, specialized freight)
($42,582-$51,771) • Commercial & industrial machine and equipment
repair ($54,323) • Water Supply, Sewage treatment facilities, and
infrastructure construction ($45,560-$66,741) • Engineering Services ($79,147)
− $65,000 average ancillary industry wage ($16,500 higher than PA avg.)*
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*Source: Marcellus Shale Fast Facts, September 2013, PA Department of Labor and Industry
THANK YOU Supply Chain 101
Shale Economic Spectrum
Industry Segments
Exploration and Production
• Gas Field Exploration
• Well Drilling and Hydraulic Fracturing
• Gas Recovery and Production
Gathering and Gas Processing
• Gas Collection and Transportation Systems (Gathering Pipelines)
• Gas Processing (Dehy, Separation, Fractionation)
• Compression (Well Head, Gathering)
Selling and Distribution
• Interstate and LDC Transportation Systems (Transmission and Distribution Pipelines
• Compression (Transmission)
• Regulation • Metering
UPSTREAM MIDSTREAM DOWNSTREAM
Natural Gas Job Phase
Pre-drilling (Exploration)
• Geologic studies, permitting, water management, engineering/design, site preparation, environmental and safety compliance
Drilling (Extraction)
• Pipeline, compressor, well facilities construction, Hydraulic Fracturing & completions, water management, environmental and safety compliance
Production/Reclamation
• Engineering, site reclamation, environmental and safety compliance
Delivery to Market (transport, storage,
marketing)
• NG Marketers, commodity traders, logistics, storage, accounting, risk management
Fast Facts $7+ million investment
to produce each well 400+ individuals within
nearly 150 different occupations needed to complete and produce gas from a Marcellus well (MSETC, 2010)
Marcellus Multiplier
Site Construction & Preparation
DESCRIPTION: Construct the well pad and access roads BUSINESSES INVOLVED: Site design professionals (aerial mapping services, surveyors and engineers), Construction and site development contractors (heavy equipment operators, haulers, laborers, electricians), Site preparation supplies (aggregate, fencing, mulch and fertilizer), Manufacturers (pumps, safety equipment, electrical, heavy equipment) FACT: 5,000 tons of aggregate per location, using full-time operation of dozer, excavator and roller
Well Construction
DESCRIPTION: Casing and drilling of the well BUSINESSES INVOLVED: Heavy equipment operators and manufactures (Cranes, haulers, drill bits); steel and associated manufacturers; cement producers; chemical manufacturers; safety equipment manufacturers and suppliers FACT: 125 tons of locally produced cement per well FACT: 17,000 ft. of pipe needed for each well (steel casing and tubing); MSC member companies have invested hundreds of millions dollars to upgrade, expand or build new steel and pipe facilities in the region to meet shale gas industry demand
Transportation & Logistics
DESCRIPTION: Moving materials to and from the well site BUSINESSES INVOLVED: Rail, barge and trucking companies and operators; asphalt producers; road grading and paving contractors; sand and water suppliers; GPS and spatial analysis services FACT: 180 rail cars of sand used for an 8-well pad site (smaller footprint w/ more production) FACT: 300 truck loads of recycled water are needed for a new well
Water Management
DESCRIPTION: Water supply and management BUSINESSES INVOLVED: Manufacturers and assemblers (tanks, pipe, steel coil, pumps); chemical manufacturers and suppliers; water and sand suppliers; transportation companies and CDL operators FACT: Shale Gas industry has led to startups and expansions of Pennsylvania companies including mobile treatment equipment for water recycling FACT: MSC Member Company invested $500,000 to upgrade Johnsonburg Municipal Authority’s public water distribution system
Pipelining & Processing
DESCRIPTION: Construction of gathering lines to connect well pads to Compressor Stations and gas distribution systems; Construction and operation of Compressor Stations BUSINESSES INVOLVED: Engineering and site design services (aerial mapping, surveyors and engineers), Construction services (heavy equipment operators, haulers, laborers, electricians), Site preparation supplies (aggregate, fencing, mulch and fertilizer), Steel, vessel, and compressor engine suppliers, designers and manufacturers FACT: More than $1 million invested for each mile of gathering line FACT: More than $1.3 billion invested in pipeline and processing (PSU, 2010)
Well Site Completion & Maintenance
DESCRIPTION: Restoration of the well pad and maintenance of the producing well(s) BUSINESSES INVOLVED: Solar panel and metering device manufacturers; landscaping companies; top soil suppliers; road aggregate suppliers; fencing suppliers FACT: 14,000 Pine and Oak Trees planted for 6.23 miles on edge of ROW in state forests located in Clinton and Lycoming Counties (Williams Companies),
Commitment to Sourcing Locally
Historic opportunity for this generation and beyond
Public acknowledgment of the need and benefits to sourcing and hiring locally
Supports economic growth
Makes good business sense
How do you enter the Supply Chain?
• Understand the Industry − Culture − Contractual Nature − Compliance Component − Vendor Requirements
• Know your product/service • Offer solutions • Network & build relationships • Meet and exceed expectations
Understand the Priorities
• Safety 1st ‒ Federal, State, and Company:
mandatory health and safety training and testing for employees
‒ Prime Contractors & Subs must be compliant
• Geographically dispersed worksites ‒ < 1 year at each site
• Continuous Operations ‒ 24/7 ‒ Non-traditional hours ‒ Weather exposure ‒ Travel required
How do you fit?
• Contractor/Sub-contracting: − Prime Contractor – holds contract with
operator − Sub-contractor – hired for a particular
service/deliver product
• On-Site Services − Safety sensitive
• functions completed on or within close proximity to the well, facilities, or pipeline (i.e. drill contractor, well service operations, welder, vacuum truck, roustabout, dirt contractor, etc.).
− Material supply or other services • provided to a site but not hands on
work (i.e. supply company, delivery service, etc.)
• Off Site Services
How do you get in?
• Contractor Compliance Programs − Risk Management Tool
• ISNetworld • Veriforce • PEC Premiere
• Vendor Enrollment − Company specific requirements
• Master Service Agreement (MSA)
− Contract that includes most of the terms that govern future transactions
• Contracting Opportunities
− Long term, Bid event, RFQ, One time
A project of the Marcellus Shale Coalition
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www.marcellusonmainstreet.org
Online Business Directory
Opportunities
Recommended Practices – Ongoing
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From the very basic:
Tips for those hunting near active areas of development
the universally relevant: Acknowledging the need and benefits
to sourcing and hiring locally Promoting small, disadvantaged
businesses Ensuring companies know the rules of
the road Underscoring community safety as top
priority to the highly technical:
Pre-Drill Water Supply Surveys, Responding to Stray Gas Incidents, Water Pipelines, Pipeline Boring
8 published – 20 more in development
Industry Improvements
• State Review of Oil & Natural Gas Environmental Regulations (STRONGER) – a national non-profit organization dedicated to assessing states’ regulations and assisting in strengthening them – PA DEP Oil and Gas program is “well-managed, professional and meeting its program objectives.”
• Water management through recycling / reuse and technological innovations that have improved just in the last 5 years.
• CNG (field gas) / LNG - powering rigs, onsite equipment and vehicles - dedicated natural gas engine to power a rig = nitrogen oxide (NOx) emissions reductions by up to 64 tons per year / up to 65% cost savings
Center for Rural PA Study • >40% of 1.2 million private water wells do not meet safe drinking water
standard, separate from industry activity • Another 20% percent of wells contained pre-existing methane • support water well standards across the board, only PA & Alaska lacking
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Shale Gas – Global Opportunity
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North America 1,931 trillion cubic feet
Opportunity and Competition
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Private Investment
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Source: Marcellus Center for Outreach and Research, 2013 Source: Survey of MSC Member Companies, 2013
Through 2010-2012 over 4,500 wells drilled resulting in approximately $31.5 billion private investment
2013 projection: $13.5 billion Leasing and bonuses Exploration Drilling and completion Pipelines and processing Royalties
Shale Development in Pennsylvania
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Increases in Production
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Paid by Natural Gas Industry
Overall taxes since 20061 > $1.8 billion
State and local taxes in 20112 $1.23 billion
Road construction investments since 20082 ~ $1 billion
Royalty payments to state in 20113
Susquehanna County in 2010
$107 million
$133 million
Permitting and enforcement fees to increase DEP personnel since 2009 4
$40.5 million
Impact Fee in first two years 5 > $400 million
Revenue for Pennsylvania
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1 – Fox News, July 23, 2013 2 – On-going Survey of Marcellus Shale Coalition Members 3 – Pennsylvania Department of Conservation and Natural Resources, 2011 4 – Pennsylvania Department of Environmental Protection, 2013 5 – Pennsylvania Public Utility Commission (2007-2011 grandfathered wells plus 2012 assessment)
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Act 13
Act 13 of 2012 amends Title 58 of the Pennsylvania Consolidated Statutes (Oil and Gas Act of 1984) Impact Fee - Per well fee assessed and collected on unconventional wells Municipal Uniformity – Authority to enact uniform development standards at the
municipal level was challenged and this provision uncertain until State Supreme Court issues a decision.
Substantial revisions to environmental protections for both surface and subsurface activities – including but not limited to: • Increased record keeping for transportation of waste water fluids • Source reporting for air contaminant emissions • Strict spill prevention requirement during drilling and hydraulic fracturing • Increased permitting, siting, and protection of water supplies • Well control emergency response
Public Policy Landscape
Act 13 Impact Fee
34 | MARCELLUS SHALE COALITION Source: PUC
Impact fee allocation data rounded to nearest 1000
$216,409,200
$144,272,800
$17,500,000
$12,000,000
$7,500,000
$2,000,000 $2,000,000
$2,000,000 $1,500,000
$1,500,000
Impact Fee Allocations 2011 & 2012 $400MM+ Local Government
Marcellus Legacy Fund
Natural Gas Energy Development Program
Department of Environmental Protection
County Conservation Districts & Conservation Commission
Fish and Boat Commission
Public Utility Commission
Department of Transportation
PA Emergency Management Agency
State Fire Commissioner
Act 13 Impact Fee
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Boroughs & Cities
$12MM
Townships $112MM
Counties $75MM
Excludes Marcellus Legacy Fund & Housing Affordability and Rehabilitation Fund
Impact Fee Payment 2011 & 2012 County and Municipal Government $200MM
Savings for Consumers
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• Heating / Electricity Generation • EIA: Family of four in an 1,800 sq. ft.
home can save about $1,500 a year, or 60%, by switching to gas.
• Natural gas vehicles
• Consumer products
• Combined heat and power applications
• Feedstock for industries and other liquids use
Source: Philadelphia Inquirer, May 19, 2013
“Decoupling” of Oil and Gas Prices
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U.S. Power Generation
Monthly coal- and natural gas-fired generation equal for first time in April 2012
CHP Attracting Public Sector Attention
Combined heat and power (CHP) plant: A plant designed to produce both heat and electricity from a single heat source. The term is being used in place of the term "cogenerator".
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Commonwealth Recycled Energy Economic Development Alliance Promoting Marcellus Shale Gas‐Fired Combined Heat & Power (CHP)
PA Power Plants
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• Vienna, Va.-based Moxie Energy plans to build new combustion-turbine plants, each capable of providing power to 750,000 homes, in Asylum Township, Bradford County, and Clinton Township, Lycoming County
• More conversions from coal to natural gas
image – tva.com
NGV Market Penetration
Neighborhood Air Emissions
Neighborhood Air Emissions Base Case (Diesel) vs. CNG Case
42% Reduction
88% Reduction 91% Reduction
lbs.
/yea
r
Dialogue & Education MSC Pennsylvania Roadmap Study • MSC’s contribution to nationwide NGV
conversation
• Only 150,000 NGVs in U.S. with millions worldwide
• 17 new fueling stations for fleets
• Begin with fleet conversions and urban infrastructure focus to achieve better air quality, lower noise, lower cost
• $5 million reduction in annual fuel costs for PA fleet operators
• A direct impact on nearly 1,300 PA jobs
• A reduction of NOx emissions, particulate matter emissions, and greenhouse gas emissions
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Legend
Marcellus Shale Formation
Wet Gas Region
“Wet Gas” Region of Marcellus Shale
Sources: Pace Global; Equitable Resources, MarkWest, Atlas Energy, Range Resources, and Caiman Energy.
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Average Composition in Wet Gas Region
Methane, 74.2%Ethane, 15.6%
Propane, 5.5%Iso Butane,
0.7%Normal
Butane, 1.4%Iso Pentane,
0.5%Normal
Pentane, 0.5%
Hexanes+, 1.1%
Liquids, 25.3%
Source: Pace Global; NiSource Gas Transmission and Storage Presentation to WVONGA Spring Meeting May 6, 2010 p.5
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Gas Processing Gas Dehydration, Separation and
Fractionation • Northeast Marcellus is “dry”
Southwest is “wet” (contains more Natural Gas Liquids)
• Gas processing is required to condition production gas to proper “pipeline quality” for end users
• Dehydration removes saturated water entrained in production gas (typically to below 7 lbs/MMcf)
• Cryogenic processing separates the NGLs from the production gas lowering the BTUs to proper levels (980 – 1100 BTU/cf)
• Fractionation separates the NGLs into individual marketable products (ethane, propane, natural gasoline)
Separation Oil, Gas, Water
Oil and/or Gas Reservoir
5,000- 16,000 ft deep
Well
Compression
Gas Treating, Processing and Fractionation
Water Injection Well
Natural Gas (Methane)
Home Heating/Cooking
Electric Power
LNG (Liquefied and shipped)
Industrial Boilers/Furnaces Interstate Gas Pipelines
Gas
Oil Water
Petrochemical Plants
Ethane
Propane
Oil Refineries
Butanes
Natural Gasoline
Unleaded Gasoline
Diesel
Asphalt
Jet Fuel
Other
Glad Baggies
Plastics
Alcohols
Styrofoam
Other Chemicals Propane, Butanes, Gasoline's
Home Heating, Cooking Transportation, Industrial fuel
CNG (Fleet Fuel, Buses, etc)
Interstate Oil Pipelines
Propane
Exploration and Production (Upstream) Gathering, Compression, Treating, Processing, Transportation (Midstream) Petrochemical and Refining (Downstream)
Segments of the Oil and Gas Industry
Gathering Pipelines
Source: MarkWest Energy Partners - 160,000 barrels of crude oil a day
The Ethane Factor
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Shale and manufacturing
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• About 1/3 of all of the energy used in the USA consumed by manufacturing
• Lower feedstock and energy costs could reduce energy costs by $11.6 billion annually through 2025
Price Waterhouse Coopers (Dec. 2011) "Shale Gas: A renaissance in US manufacturing?"
Companies returning to USA: 1. Dow Chemical
2. Formosa Plastics
3. Chevron Phillips Chemical Co
4. Bayer Corp
5. Westlake Chemical
6. Shell Oil; CF Industries
7. Santana Textiles
Boston Consulting Group estimates international companies to invest at least $50 billion through the end of decade on projects that take advantage of low-price natural gas
International Interest in the Marcellus
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Energy Independence
Source: U.S. Energy Information Administration Note: Petroleum production includes crude oil, natural gas liquids, condensates, refinery processing gain, and other liquids, including biofuels. Barrels per day oil equivalent were calculated using a conversion factor of 1 barrel oil equivalent = 5.55 million British thermal units (Btu).
THANK YOU!