Founded in 1985 by president Wayne King Head office in Lloydminster, Alberta (administration, R&D, and service base) 100,000 ft² manufacturing

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1 HEATER TREATER SOLUTIONS Grit Industries Inc. and the CWT Indirect Heater

2 GRIT INDUSTRIES INC. Founded in 1985 by president Wayne King Head office in Lloydminster, Alberta (administration, R&D, and service base) 100,000 ft² manufacturing facility located in North Battleford, Saskatchewan 120-plus work force including production workers, service technicians, sales, engineering, and administration Distribution network across Canada and the USA

3 GRIT INDUSTRIES INC. Manufacturer of heating solutions for the oil and gas sectors Manufacturer of secondary containment systems Manufacturer of solids-handling equipment Provider of installation and maintenance services Innovative solutions for industry problems

4 VERTICAL HEATER TREATER Problems and Solutions

5 VERTICAL HEATER TREATER: A HISTORY VHT was developed to facilitate gas, oil, and water separation with the application of heat The VHT traditionally uses a fire tube heater which, by design, is a simplistic device with an inherently low thermal efficiency The fire tube design contributes to a high rate of structural tube failures Chemical additives were introduced to assist separation while reducing the amount of heat required - thus reducing tube failures

6 VERTICAL HEATER TREATER: PRESENT Incoming standards for the Bakken Petroleum Region (April, 2015) will result in the VHT being further utilized for Reid Vapor Pressure (RVP) reduction through the elevation of crude temperatures The result will be increased operation of the fire tube beyond traditional levels Problems, failures, and serious incidences will increase dramatically beyond the pre-chemical treating era

7 TYPICAL VHT COMPONENTS ASME pressure vessel Fire tube section (ASME or non-asme) Stack Gas fired burner head (lbs of gas) Tank temperature controls

8 FIRE TUBE SECTION-HEAT EXCHANGER Simple pipe construction of a selected diameter to provide the required transfer area for a given application Produced in a U-shape so that the inlet and outlet are at the same side of the vessel Burner flame fires into the lower pass with cooler combustion gases exiting on the upper pass End up with hot and cold ends resulting in non-uniform heating of the fluids Occupies a relatively small x-sec area of the vessel - poor heat distribution

9 FIRE TUBE: DESIGN MERITS Simple Low initial capital cost Simple means anyone can manufacture (non-asme version) - plentiful Industry is very familiar with operation

10 FIRE TUBE: DESIGN DEFICIENCIES Poor thermal efficiency (industry studies indicate 40-45% at best) Hot section is subject to extreme temperatures (direct flame impingement) High temperatures cause premature gasket failures High skin temperatures mean that the oil cannot be in direct contact with the tube, must heat the water phase (increases vessel size) High temperatures cause the water in contact with the tube to boil which leads to tube scale (mineral deposits) Tube scale reduces heat transfer and results in increased localized skin temperatures and tube degradation High temperatures reduce the life of corrosion inhibiters (coatings) Reduced heat transfer requires increasing the firing rates, which compounds the problems Tube failure is imminent

11 COLD WEATHER TECHNOLOGY (CWT) Grit Industries Inc. s CWT Product Line

12 COLD WEATHER TECHNOLOGY (CWT) Innovative heating system using two-phase thermal syphon vacuum process Requires no electrical source to operate (no pumps or motors) Virtually silent operation once it has been brought to temperature Been in use as a natural gas line heater for over 12 years throughout North America Been in use directly heating light oil in tanks for processing purposes for over six years Consistent thermal efficiencies between 70-80% (into process), third-party testing Approved for use in North Dakota and Saskatchewan for in-tank treating of light oil

13 CWT: THE PROCESS Utilizes an ASME Sec IV steam boiler Closed system under vacuum with no make-up water required Low pressure flame bed supplies heat to the water/glycol mixture causing the water to boil almost instantly, results in an exceptional response time Uses the latent heat of vaporization, efficient Steam temperature self adjusts to 250 F Uses process line temperature sensor ensuring exacting control ASME Sec IV controls insure safety

14 CWT: THE ADAPTATION - FROM SINGLE WELL IN TANK TREATING BATTERY IN TANK TREATING

15 CWT: THE ADAPTATION - TO VERTICAL HEATER TREATER PROCESS DEMO UNIT

16 CWT: THE ADAPTATION - TO

17 CWT: HEAT EXCHANGER FEATURES Purpose designed for treater applications ASME Sec VIII flange and tubes Approved for use in North Dakota Standard models with 50.5 ft² and 101 ft² of tube transfer area (will replace 0.5 mm btu/hr and 1.0 mm btu/hr fire tubes) Uses latent heat transfer (condensing steam)yielding a uniform temperature profile across the entire exchanger Multiple tube arrangement utilizes a larger x-sec area of the vessel (16 5/8 wide), yields superior heat distribution

18 CWT: HEAT EXCHANGER FEATURES Lowering the water-oil interface level increases the capacity of existing treaters (or decreases the heat requirement) by heating the oil directly The water flow through removes the bare minimum of heat as the water is not the heating medium Eliminates natural drafting when idling Horizontal treater configurations available

19 CWT: IMAGES

20 CWT: IMAGES

21 CWT: HEAT EXCHANGER OPTIONAL LAYOUTS

22 CWT: ADDRESSING FIRE TUBE DEFICIENCIES FIRE TUBE Low Efficiency (40-45%) Excess fuel consumption Increased GHG emissions Oversized burners (lbs of gas pressure) Increased exchange area CWT Independently tested at 70-80% Up to 60% fuel savings Reduces GHG emissions Low press. flame bed (oz gas pressure)

23 CWT: ADDRESSING FIRE TUBE DEFICIENCIES FIRE TUBE Non- uniform heating Extreme heat at burner end causes premature gasket failures CWT Steam provides uniform temperature profile across the exchanger Maximum 250 F steam temperature with ability to operate lower as required, within gasket specifications Excessive heat results in coating failure Operates within coating specifications

24 CWT: ADDRESSING FIRE TUBE DEFICIENCIES FIRE TUBE High skin temperatures requires heating of the water phase Heating of the water phase causes scaling leading to external tube degradation and decreased transfer efficiency Use of low grade fuels can lead to internal tube corrosion CWT 250 F skin temperature allows for direct heating of the oil 250 F skin temperature prevents tube scaling maintaining transfer efficiency throughout the units life Requires clean dry gas. Internal vacuum eliminates internal exchanger corrosion

25 CWT: ADDRESSING FIRE TUBE DEFICIENCIES FIRE TUBE Fire tube inspections consist of waiting for leakage to become obvious CWT With no scaling or heat degradation, inspections become virtually unnecessary Industry indicates fire tube life can be as low as two years at current firing rates New regulations will require fire tubes to be operated for longer intervals resulting in an increased failure rate Independent 3 rd party destructive testing puts the boiler life at over 40 years, with a predicted exchanger life at over 15 years New regulations easily met

26 FIRE TUBE AND CWT ECONOMICS FIRE TUBE Low initial capital cost High cost of operation CWT Higher initial capital cost High efficiency ensures low cost of operation Short life cycle (2-3 yrs) High life cycle / maintenance costs Low temperature vacuum system has a proven extended life cycle (boiler at over 40 years, exchanger predicted to be 15 yrs) Low life cycle / maintenance costs

27 ECONOMICS: THE COST OF STATUS QUO Ex: 600 bbl/day oil production, $50/bbl, 24 month fire tube life cycle, 3 day replacement time Vacuum truck to pull down treater fluids $1,000 Crew to disconnect and prep for fire tube pull $1,500 Picker truck to pull and reinstall fire tube $1,500 Cost of replacement fire tube, gasket and freight (non-asme) $4,000 Crew to replace fire tube, reconnect and commission $2,000 Disposal $500 Lost cash flow $90,000 Total cost (providing no spills, fires, injuries, liabilities) $100,500 Equivalent yearly cost of replacement $50,250

28 ECONOMICS: CWT SOLUTION Ex: 600 bbl/day oil production, $50/bbl, 15 year exchanger life cycle, 30 year boiler life cycle, 3 day replacement time (i.e. one exchanger replacement over 30 year period) Vacuum truck to pull down treater fluids $1,000 Crew to disconnect and prep for exchanger pull $2,000 Picker truck to pull and reinstall exchanger $2,500 Cost of replacement exchanger/gasket/freight (ASME CERTIFED) $17,500 Crew to replace exchanger, reconnect and commission $2,000 Disposal $500 Lost cash flow $90,000 Total cost (at year 15) $115,500 Equivalent yearly cost of replacement (over 30 years) $3,850

29 RECAP CWT Indirect Heater: Innovative - Safe - Economic Certified equipment Safe Efficient Durable Silent 12 month warranty on parts and labour Low life cycle cost 8% of the fire tube

30 PAYMENT OPTIONS 385 (equivalent to 500,000 BTU/hr fire tube) Purchase: $46, (equivalent to 1,000,000 BTU/hr fire tube) Purchase: $56, Lease: $2,750 per month 50% of payments in first year can be applied to buyout as a credit Annual PM service included Operational issues (such as caused by dirty, wet gas) not covered Lease: $3,350 per month 50% of payments in first year can be applied to buyout as a credit Annual PM service included Operational issues (such as caused by dirty, wet gas) not covered

31 GRIT INDUSTRIES INC. Lloydminster Main Office: Airport Road NW Lloydminster, Alberta T9V 3A5 Canada North Battleford Plant P:(306) F: (306) TRY-GRIT ( ) P: (780) F: (780)

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