vrge non-hydraulic fracturing technology - expansion energy llc - final - nc - oct 2013.29683744

2009 - Expansion Energy LLC Expansion Energy LLC 2013 Expansion Energy LLC

VRGETM Overview Patented

Non-Hydraulic Fracturing Technology for Unconventional Oil & Gas Production

October 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 soonChina, 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

Source: US Dept. of Energy Energy Information Administration



North American Shale Oil & Shale Gas Plays Reliant on Fracking



Major Shale Gas Basins A Global Opportunity

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 consumptionup 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 concernssuch as VOCs, benzene, formaldehyde, NOx France banned hydraulic fracturing before it even began; Spain and others also considering bans Specific examples:

EPAs 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



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

VRGETM (pronounced VeRGE) = Vandors 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 no water and avoids the need to dispose of large volumes of fracking wastewater

Because no water is used, chemical/biocide/fluid additives used for hydraulic fracturing are avoided Some of those chemicals are deemed harmful/hazardous by regulators, politicians, environmentalists & 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 sitesee 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, safe/benign, 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 stepsdrilling, perforation, etc.are the same as for hydraulically fractured wells



Fracturing Issues Avoided by Not Fracking with Water

Use of water is the root cause of hydraulic fracturings 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 waterwhich constrains the flow of oil & gas Fluid viscosity issues

Disposal of contaminated wastewaterin 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 watercausing 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

Eliminating the use of water avoids most of frackings political/regulatory threats.



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 sitea 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 safe, proprietary 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)

Meta-NG is nearly as dense as a liquidand 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 streamNG clean-up



VRGE Process Schematic

Oil- and/or Gas-Bearing Formatione.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

Environmentally Benign Foaming

Fluid


Flow Chart of VRGE Process Steps Part 1

Produce CCNG TM at well site Pressurized cryogenic NG

(using a VXTM Cycle LNG plant)

Mix

Natural Gas

(from a nearby well or targeted

formation)

Mix

Safe/Benign

Non-Aqueous (or Water-Based)

Liquid

Proppant

Pump CCNG to high pressure with

cryogenic liquid pump(s)

OPTIONAL

Warm with waste heat from the Prime Mover of the LNG/CCNG plant

Liquid + proppant is energized

by CNG

Produce low-pressure cryogenic NG at well site

(using a VXTM Cycle LNG plant)

To Part 2



On-site LNG plant

(VXTM Cycle)

Separation

Foam is sent down-hole to Fracture the formation

+ Deliver proppant

Produced hydrocarbons (Oil, Gas, Condensates)

Return of energized foam ingredients ,

+ Produced water

To market

Return / Re-use

From Part 1: High-Pressure, Proppant-Carrying Foam

Key

= Natural Gas

= Non-Aqueous (or Water-Based) Liquid/Vapor

= Produced Water

Dispose

Methane +

NGLs NGLs

LNG/CNG

The process (Parts 1 & 2) is repeated for each stage of fracking to be completed per well

(similar to stages of hydraulic fracturing)


Flow Chart of VRGE Process Steps Part 2



VRGE Process Steps 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 plantsuch as a VXTM Cycle LNG plant 3. The CCNG is pumped to high pressure with a cryogenic pump(s) 4. As the high-pressure CCNG warms, it becomes high-pressure CNG 5. Warming of the high-pressure CCNG (to CNG) can be accelerated by waste heat from the CCNG plant 6. The high-pressure CNG is then blended with a proprietary, safe/benign, proppant-carrying foam 7. The energized warm, high-pressure CNG+foam+proppant is sent down-hole to the well bore 8. The high-pressure CNG+foam creates, extends and holds open fissures in the underground

formation, and also carries proppant into those fissures 9. 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)



Hydraulic Fracturing CO2 Nitrogen Gelled VRGE (Water + Chemicals) Foam Foam Propane (CCNG Foam)

Requires "Importing" Fracturing Fluids to Well Site Yes Yes Yes Yes No

Significant Truck Traffic/Costs Yes Yes Yes Yes No

Cost for Fracturing Fluid $ $$ $$ $$$ $

Water Consumption High Medium Medium None None

Requires Waste Fluid Disposal High Medium Medium Medium None

Viable Where Water is Scarce No Somewhat Somewhat Yes Yes

Liquid Used for Foaming N/A Water Water Gel Safe, Non-Aqueous Liquid (or Water)

Recycling of Foaming Liquid N/A No No N/A Yes

"Contamination" of Produced Hydrocarbons Yes Yes Yes Yes No

Requires Chemicals to Mitigate Effects of Water Yes Yes Yes No No

Viscosity Control Chemicals Chemicals Chemicals Chemicals Temperature & Physical State

On-Site LNG Production + Separation of NGLs No No No No Yes

Requires Pipeline to Get Natural Gas to Market Yes Yes Yes Yes No

VRGE vs. Other Fracturing Technologies



Optimal Technology Combination: VRGETM + VXTM Cycle Two Expansion Energy technologiesVRGE + VX Cycleare highly complementary The VX Cycle is an ultra-small-scale LNG/CCNG production plantas 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 up to 100,000 GPD are manufactured by Dresser-Rand Co. (Houston, TX) The VX Cycle is:

Energy-efficient70% to 85% NG conversion efficiency Compact and mobilecan be skid-mounted, truck/trailer-mounted or containerized Affordably priced Low-cost to operate Able to be fully automatedfor 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



VRGEs Environmental & Safety Advantages Eliminates the use of watera precious resource that is scarce in many regions

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

Needs no chemical additives or biocides 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 Eliminates trucked water deliveries and reduces number of compression trucks/trailers

Reduced fuel consumption Reduced diesel exhaust (from truck engines & diesel compressors) Reduced road dustan air quality/emissions issue

Reduced truck traffic = improved highway safety (a major concern in producing regions) Smaller well sites & well pads Reduced noise levels VRGEs 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.



VRGEs Economic Advantages Greater oil & gas production (See next slide.) Lower well costs vs. hydraulic fracturing many fewer trucks/deliveries + less equipment Eliminates costs for water consumption & transport 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 & biocides Reduced truck traffic = less need for road repairs/expansionsa key issue in oil & gas basins Smaller well sites & well padsreduces well construction costs VRGEs on-site CCNG plant can produce LNGfor additional revenues VRGEs on-site CCNG plant can separate NGLs from the NG streamfor additional revenues VRGEs 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

VRGEs capital costs & operating costs are far lower than hydraulic fracturings costs.



VRGEs 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 eliminating the use of water

Greater oil & gas productione.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 VRGEs CNG-energized system provides similar benefitswhile 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 viableby providing a truckable LNG product VRGEs cold (dense) gaseous NG increases pipeline take-away capacity (in BTU terms)

VRGE increases the effectiveness of fracturing and production.



VRGEs 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 marketboth 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



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]

Slide Number 1Slide Number 2Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Flow Chart of VRGE Process Steps Part 1Flow Chart of VRGE Process Steps Part 2Slide Number 12VRGE vs. Other Fracturing TechnologiesSlide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20

vrge non-hydraulic fracturing technology - expansion energy llc - final - nc - oct 2013.29683744

Documents

shale oil regions

hydraulic fracturing

global shale gas regions

recoverable shale gas

major shale gas basins

fracking water disposal

water truck deliveries

groundwater epa