PROFOUND

The ^ Effect of Shale Gas on the Global Energy Market

Nancy T. Schmitt, B.S. Envi Eng, MBA President, Taum Sauk Investments LLC Presented to AGRION AGlobalNetworkfor

LEADERSINENERGY,CLEANTECHANDSUSTAINABILITY October 8, 2013

4000

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10000

U.S. Crude Oil Production (thousands of barrels per day, MBOPD)

U.S. Natural Gas Marketed Production (millions of standard cubic feet per day, MMSCFD)

30000

35000

40000

45000

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55000

60000

65000

70000

Note: Bars in red show Energy Information Agency’s Short-term Energy Outlook forecast. Source: Production Figures: EIA 2012; American Petroleum Institute (API) Presentation, Women in Energy Forum, Syracuse, NY, 9/19/13; EIA News Release 10/3/13.

Once Again the U.S. Is World’s Largest Oil & Gas Producer

Secular Shift Undeniable By 2012

PRODUCTION RECORDS WERE SHATTERED •  U.S. had the largest increases for

both oil and nat gas prod’n of any country in the world

•  Crude oil production rose by the largest volume ever since the discovery of oil in 1859 (850 MBOPD, +14.9% YOY)

•  Marketed natural gas set a record (25.3 TCF, + 34% since ‘05)

•  NGL production reached an all time high (2.4 MMBOPD, +40% since ‘05)

•  U.S. became a net exporter of petroleum products (Δ = 3.5 MMBOPD since ‘05)

PARADIGMS SHIFTED ALL OVER THE GLOBE •  IEA labels US shale “the

biggest redrawing of the energy map for decades”

•  Putin goes on the defensive urging Russia’s energy companies to “rise to the challenge”

•  OPEC notes “ shale gas has large potential but mainly in the U.S.”

Source: 2012/2013 Annual Outlooks from EIA, British Petroleum (BP), International Energy Agency (IEA), Organization of Petroleum Exporting Countries (OPEC), The Economist

Low Prices Confirm Surplus & Highlight Bottlenecks

World Oil Prices World Nat Gas Prices

Source: IEA, Key World Energy Statistics 2013, http://www.iea.org/publications/freepublications/publication/KeyWorld2013_FINAL_WEB.pdf , web accessed 10/6/13.

Even at Low Prices, Most Reservoirs Are Profitable

Source: CF Industries Holdings, Inc., Investor Day Presentation, New York, NY, 6/11/13.

Energy Named the Biggest Growth Opportunity for the U.S.

Source: McKinsey Global Institute, Game Changers: Five Opportunities for US Growth and Renewal, Jul2013, ep. 2, ex. E1;

U.S. Fertilizer Manufacturing/Low Cost Feedstock

Source: CF Industries Holdings, Inc., Investor Day Presentation, New York, NY, 6/11/13.

U.S. Petrochemical Manufacturing/Feedstock Substitution

Source: LyondellBasell Presentation to Credit Suisse Chemical and Agricultural Science Conference, 9/17/13.

U.S. Steel Manufacturing/Innovative Partnerships

Source: Nucor Steel Presentation to Goldman Sachs Annual Global Steel Conference, 11/28/12.

In the U.S. drilling is favored where it occurs.

“Some people say there should be drilling for natural gas and oil in ________ because of the potential economic benefits. Others say there should not be drilling for natural gas and oil in ________ because of the potential environmental impact. Which comes closer to your point of view?

OH1 PA2 NY3

Allow Drilling 67% 62% 46% No Drilling 26% 30% 44% DK/NA 7% 8% 9%

Note: Most recent poll data available: 1) June 25, 2013; 2) Sept 29, 2011; 3) June 6, 2013

Source: Quinnipiac University Polling Institute, http://www.quinnipiac.edu/institutes-and-centers/polling-institute/search-releases/, Web accessed 9/16/13; Taum Sauk Investments Presentation to Women in Energy Forum, Syracuse, NY, 9/19/13.

What are the environmental/health issues?

Air emissions (VOCs), Chemical exposure,

Community stress, Consumptive water use, Earthquakes, Fugitive methane, Light, Noise, Naturally occurring radioactive materials, Radon, Soil contamination, Truck traffic, Water contamination, Well casing failure

Source: Draft Battlement Mesa Health Impact Assessment, Revision 2, Conducted by the Colorado School of Public Health, http://www.garfield-county.com/environmental-health/battlement-mesa-health-impact-assessment-draft2.aspx, Web accessed 9/16/13; Taum Sauk Investments Presentation to Women in Energy Forum, Syracuse, NY, 9/19/13.

The U.S. government’s biggest worry is harm to drinking water. Conclusions from three-year EPA study are expected in 2014.

Source: EPA, Study of the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources Progress Report Dec 2012, h,p://www2.epa.gov/sites/produc?on/files/documents/hf‐report20121214.pdf, Web accessed 9/17/13; Taum Sauk Investments Presentation to Women in Energy Forum, Syracuse, NY, 9/19/13.

What about CO2 emissions?

Source: IEA, Redrawing Energy-Climate Map, June 2013, p. 32, ex. 1.11, http://www.iea.org/publications/freepublications/publication/RedrawingEnergyClimateMap_2506.pdf; Web accessed 9/15/13.

APPENDIX

•  Expected effect of LNG exports on domestic natural gas prices •  Diagram showing conventional versus unconventional

development and land use •  Diagram showing conventional versus unconventional well

shallow zone (aquifer) casing

Even with exports, U.S. nat gas prices will remain low

Source: CF Industries Holdings, Inc., Investor Day Presentation, New York, NY, 6/11/13.

New technology allows for additional access to resources

Source: API Presentation, Women in Energy Forum, Syracuse, NY, 9/19/13.

Shale wells and conventional wells are indistinguishable across the aquifer

Typically, there are at least two strings of steel casing, encased in concrete across the ground water zones.

Source: Independent Oil and Gas Association of New York, http://www.iogany.org/files/2011IOGAFactSheet4.pdf, Web accessed 9/17/13; Taum Sauk Investments Presentation to Women in Energy Forum, Syracuse, NY, 9/19/13.