Transcript Slide 1

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Kerogen Oil Production Group, LLC
1.
KOPG is an early stage start up company engaged in the design and
licensing of process technology to produce kerogen oil (liquid similar
to crude oil) from surface mined oil shale in an economic and
environmentally responsible manner.
2.
KOPG’s process is based upon a “unique assemblage” of
previously proven technologies, and thus is considered to be
patentable.
3.
A provision patent submission was made in May 2012, and a Patent
Cooperation Treaty submission (int’l patent protection) will be made
in November 2012.
4.
Our goals in our discussion with you include:
A. Sharing our plans and vision
B. Soliciting your thoughts, and
C. Gauging your interest as a possible participant in KOPG’s future
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Kerogen Oil Production Group, LLC
CEO: Chuck Keracik
• COO Red Leaf Resources
• Exec Officer Abu Dhabi National Energy Co
• 30+ yrs with BP Amoco
• BS ChE University of Pittsburgh
• MBA Houston Baptist University
• Amoco Research Petrophysics Program
CFO: Murray Air
• Senior Advisor, The Taffrail Group
• VP, British Petroleum
• CFO, Ok Tedi Mining (Papua New Guinea)
• 30+ yrs with BP Amoco
• BS Ind. Mgt. Georgia Tech
• MBA Harvard Business School
COO: Evan Jones
• Principal Talbot and Webster, LLC
• 30+ yrs with BP Amoco
• BA Knox College, Chemistry and Math
• MBA Indiana University
• Research, Montana State University
The information in this document was prepared by representatives or associates of the Kerogen Oil Processing
Group (KOPG). The information herein, and the sources of the information, are believed by KOPG to be reliable,
but neither KOPG nor its representatives or associates make representation and/or warranty as to the accuracy
or completeness of such information. All amounts, discussions etc are considered to be illustrative and cannot
be assured to be indicative of actual facts, amounts or results. Any use, disclosure, distribution, dissemination,
copying or reproduction of this document without the prior written consent or approval from KOPG is strictly
prohibited and also governed by the provisions of signed Non-Disclosure Agreements where applicable.
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Oil Shale Resource Potential
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The Resource: Kerogen
• The solid organic material found in
organic rich shale, aka oil shale
• Oil shale is the sedimentary rock
from which all naturally occurring
oil has been derived
• Over geologic time, some shale is
“thermally matured” with depth of
burial, and the kerogen is “cracked”
to generate oil and gas that
migrates to fill oil and gas
reservoirs or remain in the shale
• Not all shale gets buried deep
enough to thermally mature – it is
these near surface shale
deposits that are the target for
KOPG technology
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Resource: Shale Play Types
as a function of depth / thermal maturity
Earth’s Surface
<300 ft
~1,000 ft
Ex-situ
Thermally Mature Shale
Mostly oil
Heating at
Surface
In-situ
Heating of
Subsurface
.
Targeted niche of
KOPG technology
Wet gas
Bakken
Niobrara
Dry gas
Eagleford
Thermally
Immature
Shale
Barnett
E. Marcellus
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Resource: Scope of US Oil Shale
• ~1 trillion barrels recoverable via pyrolysis
from near surface shale (USGS)
• These resource have been recognized to be
strategic since 1912 (Office of Naval
Petroleum and Oil Shale Reserves)
• >>100 yr supply
• Prospective global oil shale potential of 3 to
4 trillion barrels
• Significant DOE and industry effort to
commercialize oil shale since 1970s oil crisis
• Today there is no commercial US oil
produced from surface shale
• Process nut has yet to be cracked due to::
–
Technology
–
Economics
–
Environment
• Without processing technology which meets
these criteria, this enormous untapped
resource is Moose Pasture
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US Oil Shale vs Conventional
Resources
Billions of Barrels
US Oil Shale Technically Recoverable Resource
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Why has surface oil shale not been exploited?
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Mining Costs Killed Oil Shale in the 70s/80s
Dramatic Increase in Nominal Oil Price
Dramatic Increase in Mining Efficiency
(versus Early 80s)
(versus Early 80s)
Productivity (tons/man-hr)
Surface Mine Productivity (Coal)
30
25
20
15
10
5
0
1983
1993
2003
Sources: Annual Coal Report, (and predecessor report titles),
DOE/EIA-0584 (years 1993-2003), DOE/EIA-0118
(years 1976-1992) Energy Information Administration.
Oil Price ($/bbl) Mining ($/bbl) %Revenue Mining ($/ton)
1983
$29
$26
~90%
~$13*
2012+
$100
$20
~20%
~$10*
* Nominal price of sub-bituminous PRB coal
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Industry has been Pre-occupied with
Processes that Combust or Burn Shale
• Many kerogen oil extraction technologies involve the burning of kerogen
residue (char) to provide the heat source for pyrolysis reactions
– This heat is derived from either combustion gases or
– From hot recycled shale particles
•
•
•
•
These methods were favored during the late 70s/ early 80s
Examples: Paraho I, Kviter, Fushun, Enefit, Petrosix, ATP, etc.
Today these processes account for all global production (20,000 bopd)
Problems:
–
–
–
–
–
–
Often lower yield (part of oil product is consumed)
Often lower API
High emissions and poor carbon footprint
Spent shale can be an environmental problem (due to high temperature)
Water often consumed to cool hot shale
Complex retort apparatus required (all are continuous processes)
• Despite improvements in surface mining efficiency, these technologies
still have not been embraced due to economic and environmental
drawbacks
• In its conception, the KOPG Process has been designed to avoid these
problems
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KOPG’s Process Technology
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KOPG’s Unique Process Technology
Key Characteristics:
Steam & Pyrolysis Vapors
@400-700F
• Surface facility in which crushed shale is
heated in a steel vessel, aka retort kettle
• Super-heated steam is used as heating
medium
• Batch Process, whereby a volume of
crushed shale sequentially undergoes a:
–
–
–
–
Insulation
Pre-Heating Phase
Peak Heating Phase
Cooling Phase
Empty & Recharge Phase
• Multiple retort kettles are laid out in an
array, each with batches of shale
operating at different phases of heating &
cooling
Super Heated Steam
Injected @ 750F to 900F
Chute
Perforated Distributor Plate
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KOPG Technology Advantages
•
Mechanically and operationally simple
•
Employs proven physical principles
•
Low Capex/bbl and high ROCE versus typical E&P projects
•
100% of solid kerogen in the rock is converted to products
•
~7% of the energy in the oil and gas produced is required to heat the rock to pyrolysis
temperatures (KOPG recycles this thermal energy)
•
Suitable for remote areas
–
Energy Self Sufficient (produced gas is used for fuel)
–
Net Water Producer (native water is liberated from raw shale)
•
Carbon footprint lowered by using produced gas (>50% hydrogen)
•
Spent shale, returned to mining site for reclamation, has been steam cleaned and
water washed
•
All processing is done in contained facility where emissions can be minimized /
managed
•
Ideal candidate for Cogeneration (electricity and steam)
•
No wellbores, no fracking, no aquifer pollution risk
In sum, KOPG technology is capable of satisfying relevant technical,
commercial & environmental design criteria
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Economics of KOPG Process
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KOPG’s Business Model
Revenue to Licensees
$
1 trillion barrels
KOPG Technology
Licensing
Preferred Mining Contractors
Preferred EPCM / O&M Contractors
Preferred EPC Contractors
Transportation
Refining
Drives Licensee Return
Drives KOPG Investor Return
Profits, Royalty & Gov Take
KOPG ORI
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Example Commercial Development
(Single 10,000 barrels per day unit)
• 20 yr Project
• 73 mmbo
• $350 million Capex ($5/bbl)
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Return for KOPG Licensee
(Single 10,000 barrels per day unit)
Attractive Pre-tax Income
$/bbl
100
Quality Discount
80
60
40
Transportation
Netback Price
Process Opex
20
Mining Opex
Capex
0
Revenue
-
Cost
-
ORI to KOPG =
Profit & Government
Take
Benefits:
• Massive Reserve & Production Adds / Replacement
(73mmbo & 10,000 bpd for each unit development)
• Low Capex ($5/bbl)
• Attractive Pre-tax Income ($20/bbl)
• High ROCE
• Significant Upsides with Scale
–
–
Lower Oil Price Penalty
Lower Assumed Transport Cost
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Return for KOPG Investors
Revenue Drivers:
• Initial licenses issued in 2014/15
• First license in commercial production by 2017
• Assumes only thirty 10,000 barrel per day licenses by 2028
• KOPG receives 5% ORI on 2.2 billion barrels
Cost Drivers:
• $27mm for 3-Phase Work Program & Organization Costs to point of
positive cash flow in 2017
• Thereafter, minor Organization and R&D expenses
Net Cash Flow:
• Cash Flow of $10mm p.a. in 2017 steadily rises to $250mm p.a. in 2028
• Enterprise NPV10 approaching $1 billion
• Significant multiple on initial investment possible, i.e. 10x to 100x
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Timeline and Next Steps
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KOPG Timeline
2012
2013
2015
2014
2016
Final US and Country Patent Submissions
Provisional Patent Filed
Preferred Global EPCM Contractor Engaged
KOPG Established
Join HTC
Int’l Patent Sub
University & Nat Lab Engaged
Phase 1
License #1
License #2
Phase 2
Phase 3
Period of Organizational
Expansion
Initial Capital Raise
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KOPG Funding Needs
For Front-end Loading Thru 2016
Phase 1A
$0.3mm
Technical & Commercial Feasibility Study
Phase 1B
$3mm
Lab Analysis & Simulation Tools (Design Basis)
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•
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(University & Nat Lab)
Phase 2
$6mm
Phase 3
(KOPG)
1/10 scale for critical engineering dimensions
$7mm
Single Full Scale Retort Prototype
$11mm
Business Operation
(Global EPCM Contractor)
Other
Pilot Demonstration Apparatus
•
(Global EPCM Contractor)
Kinetics (reaction rate)
Fluid Properties Characterization
Equation of State Model (EOS)
Thermodynamics & Heat Transfer
Compositional Finite Difference (CFD) Simulator
Materials & Metallurgy
Environmental Analysis (spent shale)
•
•
•
•
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Establish operational reliability
Business Development
Office & Administration
Legal: patent, licensing, etc.
Of this, $7 spent in 2016 (Success Case)
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Purpose of the Work Program
Phase 1 technical work is being undertaken to calibrate modeling tools used to forecast oil, gas and water production
rates, oil quality, steam requirements, etc. These tools will be used to size prototypes and optimally size a commercial
scale development system.
Phases 2 & 3 technical work includes the construction of a reduced scale prototype and single full scale retort kettle to
demonstrate, for the avoidance of any doubt, that a commercial scale operation will work as intended.
Our project management focus is therefore directed toward eliminating investment risk arising from:
• Cost
• Schedule
• Production Rate & Operability
The work program is not designed to prove that the technology will work, but rather to properly “front end load” a
common solution applicable to all future development projects.
Technical elements of the KOPG process which have been previously proven include:
• Pyrolysis
• Phase behavior of hydrocarbon systems
• Thermodynamics and heat transfer
• Fixed / expanded bed reactor technology
• Gravel bed filtration
• Steam generation facilities
• Production facilities
• Mining operations
• etc.
The primary risk is considered to be the operating reliability of a commercial scale retort kettle. As this is a
manufacturing operation, each retort kettle will need to be efficiently emptied of spent shale and reloaded with raw shale
approximately 2 times per day. This risk can be readily mitigated by the work program.
In sum, KOPG Process is a unique assemblage of previously proven technologies.
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Process Design Considerations
KOPG Investor
Capital
Technical
Feasibility
• Hydrous Pyrolysis
Proven
• Work Program to
Validate Process
KOPG
Success
Environmental
Responsibility
• Contained Surface
Processing
• No Water Required
• Energy Self Sufficient
• >50% H2 fuel
gas
Land Reclamation
(to high standard)
Licensee Project
Returns
Commercial Viability
• Vast Resource
• Low Capital Requirements
(on per barrel basis)
• Exceptional Returns
KOPG Investor Returns
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