patented - expansion energy llc

© 2009 - Expansion Energy LLC Expansion Energy LLC © 2013 – Expansion Energy LLC

“VRGETM” Overview Patented

Non-Hydraulic Fracturing Technology for Unconventional Oil & Gas Production

April 2013


VRGE -- Non-Hydraulic Fracturing Technology 2

Shale Gas & Shale Oil Revolution » Technology-enabled, economic production of Shale Gas & Shale Oil has dramatically increased global

output & recoverable reserves • Especially in North America – including Marcellus, Barnett, Haynesville, Fayetteville and other shale gas plays • Energy independence is now plausible for the U.S. 100+ year supply of Gas + increased Oil production • Other global shale gas regions will follow soon—China, Australia, Argentina, Brazil, South Africa, Poland, UK, etc. • Rapid expansion of Bakken Shale oil play made North Dakota the #2 oil-producing state in 2012 • Eagle Ford (TX), Niobrara (CO, WY, NE) and other U.S. shale oil regions are also rapidly developing

» Made possible by technological advances in hydraulic fracturing + horizontal/directional drilling

April 2013

Source: US Dept. of Energy – Energy Information Administration



North American Shale Oil & Shale Gas Plays – Reliant on Fracking

April 2013



Major Shale Gas Basins – A Global Opportunity

April 2013

Source: US Dept. of Energy – Energy Information Administration

Technically recoverable shale gas reserves (32 countries) = 6,622 TCF > 100 years of Supply



But Hydraulic Fracturing is Under Threat… » …from regulators, policy-makers, litigation, environmental groups and the public in the U.S. » Virtually continuous media scrutiny » Many believe chemicals & fluid additives used for hydraulic fracturing threaten groundwater & health » Concerns over water consumption—up to 5 million gallons per well

• Scarcity of water in some regions is constraining the number of wells that can be drilled » Truck traffic & road wear (up to 500 water truck deliveries + > 200 wastewater truck trips per well) » Air emission concerns—such as VOCs, benzene, formaldehyde, NOx » France banned hydraulic fracturing before it even began; Spain and others also considering bans » Specific examples:

• EPA’s Pavilion, WY investigation + other studies to determine effects of hydraulic fracturing on groundwater • EPA is developing stricter standards that fracking wastewater must meet before going to a treatment plant • Environmentalists are pressuring EPA to regulate fracking water disposal wells as “hazardous” (Class I wells) • Disposal wells are now being blamed for small earthquakes in some regions (e.g., Ohio) • Congressional investigations into the effects of hydraulic fracturing fluids on groundwater • The “FRAC Act” introduced in Congress would require regulation of hydraulic fracturing under the fed SDWA • Many state legislatures & regulators are moving toward stricter regulations on hydraulic fracturing • New York, New Jersey & Maryland have de facto moratoriums on hydraulic fracturing due to potential risks • US Centers for Disease Control (CDC) is beginning to investigate toxicity of fracking chemicals • Hydraulic fracturing-related litigation is increasing

April 2013



The Solution: “VRGETM”—A Non-Hydraulic Fracturing Technology » A unique, patented Expansion Energy technology (US Patent # 8,342,246)—available for license

» VRGETM (pronounced “VeRGE”) = “Vandor’s Refrigerated Gas Extraction” technology • For extraction of Natural Gas (NG), NG Condensates & Crude Oil from shale, sandstone & other tight formations

» A “dry fracturing” technology that replaces hydraulic fracturing

» Requires virtually no water and avoids the need to dispose of large volumes of fracking wastewater

» Because virtually no water is used, chemical/fluid additives used for hydraulic fracturing are avoided • Some of those chemicals are deemed harmful/hazardous by regulators, politicians, environmentalist & the public

» VRGE relies on the utilization of deep refrigeration (cryogenics) + energy-efficient compression • Both are accomplished with a single (mobile) cryogenic plant located at the well site—see Slide 11 - “VXTM Cycle”

» The fracturing medium for VRGE is natural gas from nearby wells or from the targeted formation itself • The cryogenic (VX Cycle) plant + cryogenic pumps produce high-pressure CNG • The NG used by VRGE eventually resurfaces and can be sold to the market or used for further VRGE fracturing

» Uses a proprietary, non-toxic, foam-based proppant delivery system » The cryogenic plant can remain on site to produce LNG — fuel for drilling rigs, frac pumps, trucks, etc.

» Refrigeration from the cryogenic plant can also be used to separate NGLs from the NG stream • On-site extraction of: propane / ethane / butane / isobutane / pentane

» Pre-fracking steps—drilling, perforation, etc.—are the same as for hydraulically fractured wells

April 2013



Fracturing Issues Avoided by Not Fracking with Water

» Use of water is the “root cause” of hydraulic fracturing’s main drawbacks & public concerns » The main reason chemicals and fluid additives are used for hydraulic fracturing is to

counteract the negative effects of water, such as: • Swelling of the underground formation (e.g., shale) • Surface tension of water—which constrains the flow of oil & gas • Fluid viscosity issues

» Disposal of contaminated wastewater—in underground wells or above-ground pits • Fracking chemicals/fluid additives cause concerns about groundwater quality & human health • Insufficient number of wastewater treatment plants equipped to treat fracking wastewater • Disposing large volumes of wastewater underground can cause geologic disturbances

» Consumption of large volumes of water—causing concern for policy-makers & the public » Scarcity of water in some regions may limit the number of wells that can be drilled » The majority of fracking-related truck traffic is for water & wastewater transport

• Highway safety concerns • Road wear / road re-construction costs

Virtually eliminating the use of water avoids most of fracking’s political/regulatory threats.

April 2013



How VRGE Works – A “MetacriticalTM” Technology » VRGE uses a dense, cryogenic non-liquid fluid phase of NG that Expansion Energy calls “MetacriticalTM”

• MetacriticalTM NG (“Meta-NG”) is natural gas above its critical pressure & below its critical temperature • MetacriticalTM natural gas is synonymous with “cold compressed natural gas” (“CCNGTM”) • Ideally, Meta-NG is produced at the well site—a balance of refrigeration & compression • Optimally, the Meta-NG plant is a “VXTM Cycle” LNG/CCNG plant (see Slide 11)

» Natural gas is both the fracturing medium + part of a proprietary, non-toxic proppant delivery system • Little or no water is sent down-hole to the well bore • NG used to make the Meta-NG comes from the targeted formation itself or from a nearby well(s)

April 2013

» Meta-NG is nearly as dense as a liquid—and thus can be pumped like a liquid with relatively little energy

» Extracted oil, NG and/or NG condensates evacuate the well bore the same way they exit a hydraulically fractured well

» After initial fracturing, the on-site VXTM Cycle plant can either be moved to a new well or can remain at the original well site to: • Produce truckable LNG (e.g., from stranded wells) or cold, dense NG (to

increase pipeline take-away capacity) • Extract NGLs from the NG stream • “Knock out” CO2, N2 and water from the NG stream—NG clean-up



VRGE Process Steps

April 2013

1. Natural gas is supplied from a nearby well(s) or from the targeted formation itself 2. NG is converted to CCNGTM (Meta-NG) by an on-site cryogenic plant—such as the VXTM Cycle 3. The CCNG is pumped to high pressure with a cryogenic pump 4. CCNG is then warmed & expanded by waste heat from the CCNG plant to make high-pressure CNG 5. The high-pressure CNG is then blended with a proprietary, non-toxic, proppant-carrying foam 6. The “energized” warm, high-pressure CNG+foam+proppant is sent down-hole to the well bore 7. The high-pressure CNG+foam creates, extends and holds open fissures in the underground

formation, and also carries proppant into those fissures 8. Pressure is then reduced, leaving proppant to hold open the fissures, thus liberating oil and/or NG

Optional Bonus Feature – “Thermal Shock” The CNG+foam+proppant can be sent down-hole cold (e.g., -20° F) to “shock” the warm formation,

making it brittle and creating/extending fissures

The process is repeated for each “stage” of fracking to be completed per well (similar to stages of hydraulic fracturing)



VRGE Process Schematic

April 2013

Oil- and/or Gas-Bearing Formation—e.g., shale

(~5,000-10,000 ft. sub-surface)

NG pipeline to market

LNG/CCNG Storage Tank

(can be mobile)

Truck delivery of LNG and/or Oil to market

Proppant Storage

CCNG Plant – e.g., VX Cycle (skid- or trailer-mounted)

Cryogenic CCNG Pump

Proppant Hopper/Blender (skid- or trailer-mounted)

Heat Exchanger (waste heat from

CCNG plant)

High-Pressure C

NG

+ Foam + Proppant

Extracted Oil and/or Gas

Non-Toxic Foaming Fluid



Optimal Technology Combination: VRGETM + “VXTM Cycle” » Two Expansion Energy technologies—VRGE + VX Cycle—are highly complementary » The VX Cycle is an ultra-small-scale LNG/CCNG production plant—as low as 6,000 gal/day » VX is the best choice for cost-effectively producing LNG/CCNG on-site at small-scale » All VX Cycle plants < 100,000 GPD are manufactured by Dresser-Rand Co. (Houston, TX) » The VX Cycle is:

• Energy-efficient—70% to 85% NG conversion efficiency • Compact and mobile—can be skid-mounted, truck/trailer-mounted or containerized • Affordably priced • Low-cost to operate • Able to be fully automated—for off-site control • Manufactured using only “off-the-shelf” components • Durable and long-lasting, with few moving parts ( > 20 years useful lifetime) • Provides refrigeration for extraction of NGLs – propane/ethane/butane/isobutane/pentane

» VX produces dense LNG/CCNG that can be stored in on-site tanks • LNG can be trucked to nearby pipelines, then re-gasified • Can provide LNG fuel for nearby drilling rigs, frac spreads, trucks and construction equipment

» VX boosts pipeline capacity by providing a more dense (colder) NG product

April 2013



VRGE’s Environmental & Safety Advantages » Virtually eliminates the use of water—a precious resource that is scarce in many regions

• Lack of water has constrained oil & gas production/drilling in certain regions

» Needs no chemical additives to counteract the effects of water • Reduces threats to groundwater / public health / worker health

» No contaminated fracking waste streams • Only normal “produced water” from the underground formation needs disposal

» Eliminates the need for transport/treatment/disposal of fracking wastewater & chemicals » Reduces the need for water trucks and reduces the number of compression trucks/trailers

• Reduced fuel consumption • Reduced diesel exhaust (from truck engines & diesel compressors) • Reduced road dust—an air quality/emissions issue

» Reduced truck traffic = improved highway safety (a major concern in producing regions) » Smaller well sites & well pads » Reduced noise levels » VRGE’s on-site LNG/CCNG plant allows capture & sale of “associated gas” (instead of flaring)

More energy-efficient & resource-efficient than hydraulic fracturing.

VRGE greatly reduces political & regulatory threats! April 2013



VRGE’s Economic Advantages » Greater oil & gas production (See next slide.) » Lower well costs vs. hydraulic fracturing — many fewer trucks/deliveries + less equipment » Virtually eliminates costs for water consumption & transport » Virtually eliminates costs for transport, treatment & disposal of fracturing wastewater » Eliminates the need for new (or upgraded) wastewater treatment plants » Reduces the need for new disposal wells » Substantially reduces costs for chemical/fluid additives » Reduced truck traffic = less need for road repairs/expansions—a key issue in oil & gas basins » Smaller well sites & well pads—reduces well construction costs

» VRGE’s on-site CCNG plant can produce LNG—for additional revenues

» VRGE’s on-site CCNG plant can separate NGLs from the NG stream—for additional revenues

» VRGE’s on-site CCNG plant can be used for “re-fracs” (re-completions) » Far less energy is consumed for VRGE vs. hydraulic fracturing = lower energy costs » The NG used by VRGE for fracturing eventually resurfaces and is sold to the market

VRGE’s capital costs & operating costs are far lower than hydraulic fracturing’s costs! April 2013



VRGE’s Well Performance & Efficacy Advantages

» Oil-bearing & gas-bearing formations do not “like” water (from hydraulic fracturing) • Water causes swelling of shales + creates surface tension that restricts the flow of oil & gas • Chemicals/fluids are used in hydraulic fracturing to reduce swelling + weaken surface tension • VRGE avoids this drawback by virtually eliminating the use of water

» Greater oil & gas production—e.g., from use of “gas-energized” fracturing fluid • Wells fracked with CO2- or N2-energized foams perform better than hydraulically fractured wells • Higher production + shallower “decline curves” • Can also reduce the amount of proppant and pressure required for fracturing • VRGE’s CNG-energized system provides similar benefits—while avoiding the costly “importing”

of fluids (CO2, N2, etc.) to the well site

» VRGE-produced oil & gas is not contaminated with nitrogen, CO2 or chemicals

» Optional “thermal shock” (subjecting the formation to cold temp.) can create more fissures

» VRGE allows stranded NG wells to be viable—by providing a truckable LNG product

» VRGE’s cold (dense) gaseous NG increases pipeline take-away capacity (in BTU terms)

VRGE increases the effectiveness of fracturing and production!

April 2013


VRGE -- Non-Hydraulic Fracturing Technology 15 April 2013

VRGE’s Addressable Market » Total global fracking market is currently ~ $20 billion/year

• Includes fracturing only (not drilling, site construction, etc.) » U.S. is ~ 80% of current fracking market—both in terms of $ and # of frac jobs

• Nearly 120,000 frac jobs per year in the U.S. » U.S. and global markets continue to grow » U.S. will rely heavily on fracking in order to maintain/grow oil & gas production » Revenue potential from VRGE is in the billions of $!

Source: EnergyTribune.com, Michael Economides


VRGE -- Non-Hydraulic Fracturing Technology 16 April 2013

Targeted VRGE Users/Licensees: Fracturing Services Companies » A somewhat consolidated industry

» The 3 largest fracturing services companies have ~ 65% combined global market share • Halliburton / Schlumberger / Baker Hughes

» Next 3 largest have ~ 15% combined global market share • Weatherford / Frac Tech / Trican

» Several dozen smaller companies make up the remaining ~ 20% global market share

Source: EnergyTribune.com, Michael Economides



Seeking Industry Partners for VRGE

Expansion Energy is seeking industry partners to license, co-market & demonstrate the VRGE technology, including:

» Oil & Gas Producers » Fracturing/Completion Services Companies » Manufacturers of Oil & Gas Production Equipment

Interested parties are invited to contact us for further discussion.

Contact Information

David Vandor, CTO, Co-Founder & Managing Director Tel.: 914-631-3197

Email: [email protected]

Jeremy Dockter, Co-Founder & Managing Director

Tel.: 917-653-5418 Email: [email protected]

April 2013

patented - expansion energy llc

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