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take a closer look

Powering Your Operations with Natural Gas

Aaron Felton | Group Lead, Drilling

Sherri Zeller | Commercial Sales – Heavy Duty Non-Road Market

Dallas | May 17th | 2012

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The Shared Strategic IncentiveOur Industry

Maintaining industry leading cost structures

Creating demand through business transformation

Accelerating social currency and license to operate

Our Strategy

Having built a high-quality resource base, the greatest value creating proposition for our shareholders is to now deliver a sustainably higher growth rate and to do it at the lowest possible cost.

A six faceted approach to accelerate value creation:

Provide comprehensive disclosure of reserves and resources

Accelerate pace of development

Advance resource play hub design and development

Increase exposure to oil and natural gas liquids

Attract third party investments in undeveloped reserves and resources

Grow the market for North American natural gas

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The ANGA Collaboration

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America’s Natural Gas AllianceNGVe Committee

Working to advance the market adoption of natural gas vehicles in North America

Advancing the natural gas industry’s understanding and use of natural gas in our operations

– Implementing light duty vehicles in our fleet

– Developing opportunities to use natural gas in our operations –drilling and pressure pumping services

– Encouraging adoption by our supply chain

America's Natural Gas Alliance exists to promote the economic, environmental and national security benefits of greater use of clean, abundant, domestic natural gas.

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The Membership of ANGA

America’s Natural Gas Alliance (ANGA) exists to pursue a single mission:

“to increase appreciations for the environmental, economic and national security benefits of clean, abundant, dependable and cost efficient American natural gas”

Source: www.anga.us as of 4/30/2012

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NGV Marketing Analysis Report

Source: ANGA NGV Marketing Analysis _ TIAX LLC

$46,000

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Natural Gas UniversityThe marketplace terminology

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Terminology – Natural Gas Sources

Treated gas from the gas plant is piped back to location or gas lift lines are used to supply gas. No treating is needed.

Plant Gas

Typically gathered from existing in-field gathering lines and piped to location. Limited treating is done – liquid knockout.

Field Gas

Liquefied through refrigeration (-260 oF), stored as liquid in insulated vessels and transported to site via tractor/trailer.

LNG

Compressed into storage vessels (tubes) and delivered to site via tube trailers. Stored at 3,600 psi.

CNG

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Terminology – Natural Gas Engines

Incorporates two independent fuel systems and can run alternatively on either fuel, but only one at a time. Bi-fuel systems are used in light duty and medium duty vehicles with gasoline engines.

Bi-Fuel

Implies that only one fuel system is used. For natural gas dedicated engines, spark ignition is required for combustion.

Dedicated

Incorporates two independent fuel systems and can run on both fuels simultaneously. The engine may also run on either or one fuel alone, typically employed on diesel engines.

Dual Fuel

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Terminology – Natural Gas as a Fuel

Diesel - volumetric energy content or heating value of Diesel #2 is approximately 129,500 British thermal units (Btu) of energy per gallon (34,210 Btu/liter).

Natural gas volumetric energy content can range from 900 to 1,400 Btu per standard cubic foot, depending on gas composition.

Comparison

–If natural gas has and average 1,000 Btu, then it would take 129.5 Scf to equal the same energy content as a gallon of diesel, diesel gallon equivalent (DGE).

–Gas volumes are typically measured in one-thousand standard cubic feet or Mcf

1 Mcf ≈ 7.72 DGE

1 gallon of diesel ≈ 1.7 LNG-g

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The Recipe for CNG & LNG

DemandStorage

Infrastructure

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Natural Gas as a FuelThe value proposition and success approaches

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What Makes LNG Viable?Illustrative Full Cycle Cost Components – LNG vs. Diesel

12%

13%

7%

21%23%

24%

Sales and ExciseTax

Retailing

Distribution

LNG offers 20% to 40% savings depending on region*

LNG feed stock price is one third of diesel*

LNG per unit margin can provide at least a $4.00/mcf uplift in value to feedstock*

*$5.00/MMBtu Gas and $100/bbl oil, blended Canada/U.S. analysis

63%

14%4%

2%

8%

9%Refining /Liquefaction

Feedstock

ProfitMargin*

LNG$2.50 to $2.90/DGE

Diesel$3.70 to $5.00/DGE

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Fuel Consumption by Market Segment

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5

10

15

20

25

30

35

40

45

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Light Duty Heavy Duty Medium Duty DomesticMarine

Rail O&G SupplyChain

Displacement opportunities exclude Air, International Shipping, Military, Pipeline FuelSource: Data and forecast from EIA, Encana

Displaceable Market Volume: 73 Bcfe/d

65%

21%

5% 5% 3%(2 Bcf/d)

47 Bcf/d

15 Bcf/d

4 Bcf/d 4 Bcf/d1%(1 Bcf/d)

Most Commercially Ready

Influence on Early Adoption

Largest Opportunity

U.S. and Canada Natural Gas Use Opportunity Transportation Sector Displacement

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Promoting the Unique Value Proposition

30 Drilling Rigs

100 Mine Haul Trucks

10 Ferries

150 Locomotives

1000 Class 8 Tractors

40,000 Cars

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The Approaches to Transformation SuccessDedicated Natural Gas

Gas ConditioningIn-field

Conditioning / Treatment

RegasificationLiquefaction

LNG

Field Gas

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The Approaches to Transformation SuccessDual-Fuel Natural Gas

Gas ConditioningIn-field

Conditioning / Treatment

RegasificationLiquefaction

CNG Station

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Potential Costs OpportunitiesIllustrative Example of Approaches

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Diesel Dual-Fuel LNGDedicated

Field GasDedicated

Fue

l Cos

t pe

r D

ay

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The Considerations of Transformation Success

Diesel

Dual-Fuel

Field Gas

LNG

Strong

Moderate

Weak

Savings Mobility Supply Quality Environment

1919

The Current Supply Source Model

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The Drilling Rig Design of Experiments2011 Focal Points

Indicates dual-fuel

Indicates dedicated field gas

Indicates dedicated LNG

$11 Million $11 Million saved in 2011saved in 2011

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Natural Gas for Drilling RigsA Case Study: Using LNG Fuel for Rig Power in MCBU

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Encana’s Rig GasificationWhy We Are Motivated

Driving Change

Strategic Alignment

– Abundant supply of fuel

– Leading by example

Clean – Emissions Reduction

Domestically Produced, Locally Consumed

Technology Advancement Stewardship

Cost Savings

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2009 2010 2011

#2 Online #2 Online (November 2010)(November 2010)

NLA Natural Gas Rig Initiative Kickoff

(Middle 2009)

Fuel options Review(October 2009)

Collaboration Session with Prometheus and Ensign

(December 2009)

Prometheus contract signed(January 2010)

Ensign contract signed(January 2010)

Risk Assessment Meeting

(April 2010)

#1 Online#1 Online(August 2010)(August 2010)

Two Ensign generator skid conversions complete

(May 2010)

LNG equipment complete

(June 2010)

Idea Becomes RealityAbout One Year in the Making

#3 Online#3 Online(March 2011)(March 2011)

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LNG Fuel System

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Deployment – Bundrick Pad in NLA

Safety

– Risk assessment

– Location and isolation

– Training

– Design

Operation

– Seamless transition from diesel, no interrupts

– Average 4 day supply of fuel with 2 tanks

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Results

21 wells, ~350,000 feet drilled

1.7 million gallons of diesel displaced (40,625 bbls)

$1,200 to $1,500 per day saved for dedicated LNG

Demonstrated feasibility of LNG as a fuel

Transfers to other producers

No downtime due to fuel

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Insights & Opportunities

Perception and education

– Address fear of unknown with crews

– Involve local emergency responders

Logistics

– More critical managing fuel supply from the rig

– Must anticipate impacts from severe weather

Location design

– LNG skid needs to be incorporated in the location standard

Engine management

– 2 engines at lower loads is not better than 1 engine at peak load

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Encana NGE LNG Regasification SolutionsNew in 2012

All-weather design

Fully integrated safety system

Active pressure management

Remote monitoring

13,000 gallons storage

31,500 scfh vaporization rate (~9,225 LNG/day)

Requires 177 kW power and instrument air

120 psi MAWP

AugustJuly JulyJuneMayAprilMarchFeb

RFS #2

RFS #3

RFS #4

RFS #1 More to Come

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Emerging Technology and Other Options

Field Gas

– Ultimate in operating cost savings.

– Used 250-450 Mcf per day.

– More components between fuel source and engines as compared to LNG set-up

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Emerging Technology and Other Options

Two recent announcements by major manufacturers

– Cat – Dynamic Gas Blending

– Cummins – High Horsepower Dual Fuel

General Specs

– Expect 1st Half 2013 availability

– Up to 70% replacement of diesel with gas

– Bolt-on component installation

– New engines and retrofits

– Accepts up to 55% inerts (CAT Only)

Thank You

Aaron Felton

469.461.2412

aaron.felton@encana.com

Sherri Zeller

720.876.5145

sherri.zeller@encana.com

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Supplemental Material

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CNG Station Types

Suction Gas

DryerSystem

Compressor

Buffered Fast-Fill System

Suction Gas

DryerSystem Temperature

Compensation

Fill Hoses

Compressor

Time-Fill Fueling Station

#4

Suction Gas

DryerSystem

Compressor

Cascade Fast-Fill System

Prio

rity Fill

Sequ

enc

ing

Tempe

rature

Compe

nsa

tion

Low

Med

High

Ground Storage

FillHoses

#1

#2

Storage Bypass

Tem

per

atur

e

Com

pens

atio

n

Buffer Storage

FillHoses

#1

#2

#3

#2

#1

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Natural Gas Liquefaction (Mixed Refrigerant)

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Natural Gas Liquefaction