Energy Related Business Opportunities

in India

Jeffrey C. Dawson

June 29, 2006

The Energy Industry Today

Oil Prices at All Time High– Exceeding $60/bbl– Total Proven Reserves ~1.12 Trillion Bbl

Natural Gas Regarded as Fuel for 21st Century– Total Proven Reserves ~ 183.8 Trillion m3

India’s Contribution ~10 Billion BOE– 2.1 Billion Bbl Oil Production in 2005– 32 Billion m3 Production in 2005– ~0.5% Reserves and 15% of Global Population

Indian Strategies to Meet Demand

Exploration of Conventional Reservoirs Production from Unconventional Reservoirs

– CBM and Gas Hydrates

Enhanced Oil Recovery in Aging Fields– MEOR and CO2 Injection

– Alkaline - Polymer - Surfactant Sweeps

Indirect Participant as Product Supplier– Supporting the Global Energy Infrastructure

Infrastructure Support of Energy Industry Oilfield Chemicals

• ~$4 Billion Annual Market• 5.4% Annual Growth

– Well Construction Chemicals– Drilling Fluid Chemicals– Cementing Chemicals

– Completion– Heavy Brine & Sand Control -Unconsolidated Formations– Stimulation - Fracturing and Acidizing Chemicals

– Production Chemicals– Corrosion Control - H2S and CO2

– Inorganic Deposition (Scale) Removal– Organic Deposition (Wax) Removal– Water Management (9 bbl water : 1 bbl oil)

Infrastructure Support of Oil and Gas Industry Chemicals

• Enhanced Oil Recovery -Preparing for the Future – Speciality Polymers– Speciality Surfactant Blends

Equipment• Drilling Rigs• Tubulars and BOP• Speciality Pumps• Compressors• Motors and Generators• Downhole Tools

Case History Guar Gum

– Primary Viscosifier for Hydraulic Fracturing• Hydraulic Fracturing is a Stimulation Process

• ~32,000 metric ton per year

– ~40% Global Production from western India– Most Domestic Suppliers Import Guar Splits

• Convert Splits to Flour in the US Plants

• Manufacture Guar Derivatives

• Cost Fluctuations for Questionable Reasons

• Number of Suppliers Declining

Guar Gum

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Case History

Connect with Indian Suppliers – Objective: Locate Reputable Indian Guar Suppliers that

will Supply Sufficient Quantities of Quality Product at Lower Costs

– Initiated in 2000 – Requirements

• Low Cost of Product

• High Quality Potential

• Large Capacity (MM lb/yr)

Case History– Quality Control

• Long Term Quality Assurance– Expected deterioration in quality – Expected large variation between shipments– Either would be intolerable

• Emphasis on Quality – Placed Burden on “Distributing” Company (PfP)

• Product Undergoes Four Levels of QC/QA– Oil Dispersion Viscosity– Water Dissolving Rate– Solution Viscosity– Gel Viscosity– Fracture Damage Potential

Case History

Distributing Company Responsibilities– Communication w/in Both Cultures– Quality Assurance– Scheduling and Inventory Management– Cost Management

• Multiple Indian Suppliers

– Continuous Improvement

Case History Advantages

– Low Cost Product– Continuous Quality Improvement

• Exceeded Expectations– Higher Quality Products

– High Consistency

• Created “New” Premium Grade of Guar Gum– Lower Concentration of Guar Required

• Success Induced Effort to Source Other Products– High Strength Proppants and Other Polymers

– Completion Brines and Specialty Surfactants

Case History

Disadvantages– Forecasting Requirements

• Excessive Transportation Time• Excessive Quality Control Testing • Emphasis on Scheduling and Planning • Local Inventory Build-Up

– Preventing “Out of Spec” Material• Unable to Return• Stress on Pre-shipment Sampling

– Performance Verified before Shipment Leaves India

• Stress on Scheduling

Questions

Private Research Entities

Private Research Entities

Global Economy and Market Pressures– Stiff Competition– Company Structure to be more Competitive – Research Regarded as Necessary Evil Cost– Research - Minimize Time to Commercialization

Fundamental Understanding of Technology– No Direct Income– Multi-Tasking Responsibilities - No Time Allowed – Expensive -

Answer - Various Forms of Out-Sourcing

Private Research Entities

India’s Contribution– Large Population of Technically Skilled People

• 112,000 Engineering Graduates in 2004

• 2001 Census - 2.6 MM Engineers/Scientists

Research Factories???– Western Company/Customer Indian Technocrats– Managing Company

• Provide Skilled People (Temporary Agency)

• Provide Physical Assets– Laboratory Space

– General Lab Furniture and Basic Equipment

– Telecommunications to Support Project Review

• Conducts Marketing and Sales for Concept

Private Research Entities

Research Factories???– Managing Company

• Understands Both Cultures

• Affiliated to Existing Educational Institutions– Tap into Technical Population

– Company Customer • Enter into Contract Agreements (People/Physical Assets)

• People become Temporary Employees to Company Customer

• Provide Specialty Equipment

• Company Customer Owns all IP

• Benefit - Low Cost Research– Fundamental Research– New Product Development

Oil and Gas Production Opportunities

Oil and Gas Production

India’s Energy Status– 15% of World Population– 3% of Global Energy Consumption

• 6th Largest Consumer

– 33 Million ton/yr Oil Production– 40 Million scmd– Energy Deficient

New Discoveries

Current Focus - Exploration and Production Latest Finds

– Reliance - 300 BCM Gas Krishana Godavari

– Cairn - 100 BCM Gas Rajasthan

– Cairn/Tata/ONGC - 80 MMSCD/5 yr Gas Offshore Gujaret

– Cairn - 200 MM BOE Gas and Oil K.G. Basin

– GAIL India - 60 MMSCD/20 yr

– CBM

Demand Outpacing Domestic Supply

Enhanced Oil Recovery

Recent Agreements w/ China– Develop and Share EOR Technology

Benefits of EOR– Primary Production 10-15% Recovery– Secondary Recovery (Waterfloods) 10-30% Additional– Tertiary Recovery (EOR) 45-80% Additional

Requires Individualized Approach– Formation composition and Lithography – Aqueous Phase Composition– Crude Oil Composition

Current Methods MEOR

– Microbial Enhanced Oil Recovery

– Inject Specific Live Bacteria/Food to Produce CO2

CO2 Injection– Reduces Oil Viscosity and Re-Pressurizes Reservoir

Alkaline - Surfactant - Polymer Flooding– BJ Services Preparing for the Next Phase - EOR– BJ Services Investing in Biosurfactants

• Specifically Designed to Match Reservoir Requirements

– BJ Services Offers AquaCon Polymer System• Relative Permeability Modifier for Water Control

• Core Flow Testing Suggest Excellent Polymer Flood Product

Thank You