Oil and Gas: Subsectors, Equipment, and Services. Prepared for Networks Northwest. Prepared by Rosa Cude. Consolidated Management Solutions, LLC

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Oil and Gas Subsectors, Equipment, and Services Oil and Gas: Subsectors, Equipment, and Services Prepared for Networks Northwest This work was supported by The Michigan Strategic Fund, Pure Michigan Export Grant Prepared by Rosa Cude Consolidated Management Solutions, LLC September 13, 2014

ABSTRACT The scope of this report will classify upstream subsectors in the oil and gas industry. Following will be a listing of services and equipment within the subsectors. Upstream activities are stages in oil and gas exploration and production. Part I will address activities in oil and gas location, and initial and essential activities. Part II will address products and services in exploratory drilling. Lastly, Part III will identify activities in the recovery process. Also included will be products used in unconventional methods of extraction. Conventional methods are deemed as standard industry methods. The report will include products and services utilized in hydraulic fracturing and horizontal drilling methods of extraction. These methods are recognized as unconventional methods. Tar sands, oil sand, oil shale, and offshore drilling are excluded in this report. The report will assist Michigan companies in identifying opportunities in needed products and services in the oil and gas industry.

TABLE OF CONTENTS ABSTRACT... i EXECUTIVE SUMMARY... 1 PART I SUBSECTORS - FUNDAMENTAL ACTIONS AND LOCATION ACTIVITIES... 2 FINANCE, LEGAL, INSURANCE, LAND... 2 SURVEYS... 3 EDUCATION AND RISK MANAGEMENT... 4 PART II SUBSECTORS - EXPLORATORY DRILLING... 5 SITE PREPARATION AND INFRASTRUCTURE... 5 EXPLORATORY DRILLING AND DRILL SET-UP... 6 AUXILIARY EQUIPMENT... 8 STAFFING... 8 PART III SUBSECTORS- RECOVERY... 9 EQUIPMENT... 9 MAINTENANCE... 10 DISTRIBUTION... 10 PLUG and ABANDON... 10 REFERENCES... 11 ii

EXECUTIVE SUMMARY This report identifies upstream oil and gas subsectors and business opportunities. The purpose of this report will be to identify products and services within each subsector. This report does not include offshore drilling, tar sands, oil sands or oil shale. Upstream activities are stages in oil and gas exploration and production. Part I will address activities in oil and gas location and initial and essential activities. Part II will address exploratory drilling and Part III will address recovery. The four subsectors in Part I: Financial/Legal/Insurance, Land, Surveys, and Education/ Risk Management. The four subsectors in Part II: Site Preparation/Infrastructure, Exploratory Drilling/Rig Set-Up, Auxiliary Equipment, and Staffing. Part III subsectors: Equipment, Maintenance, Distribution, Plug and Abandonment. This report will include products used in conventional and unconventional methods of extraction. Conventional methods are deemed traditional and standard industry methods. Unconventional methods are for example, methods utilized in hydraulic fracturing and horizontal drilling. Hydraulic fracturing is a process by which a water solution is pumped down a well and into formations under high enough pressure to cause the formation to crack open, forming passages through which oil can flow into the wellbore. The report will assist Michigan companies in identifying opportunities in needed products and services in the oil and gas industry for both domestic use and for export. 1

Subsectors Part I- Fundamental Actions and Location Activities Financial/Legal/Insurance Land Surveys Education/Risk Management Part I- Subsector Equipment and Services Needs Part I subsectors address the initial and essential activities in oil and gas exploration. Financial / Legal / Insurance / Land After the site location has been determined, numerous steps are taken to further the exploration process. Commercial Banking Contracts, Purchases Agreements, Royalty Agreements, Lease Agreements. Joint Ventures Land Purchase Leased Land Mineral Rights Novel Financial Arrangements Private Equity 2

Production Sharing Contract Public Investment: Subsidies, Credits Right of Ways/Easements State and Local Ordinances Surety Bonds Surface Rights Unitization Surveys Surveys are conducted prior to drilling a test well. The survey results will help to determine whether exploratory drilling is warranted. The types of surveys that are or can be conducted to answer these questions are: Geological- Geologists evaluates area formations, surfaces, outcropping for insight in the probability that oil and gas are present. Seismic- Survey measuring the earth s energy and vibration. For this type of survey geophones are used. An artificial seismic event is caused underground and geophones measure seismic activity at the surface from the impact below. A vibration truck pounds the earth and the information is gathered by the geophone. The information is a two dimension grid. Current technology allows for information to be processed and detailed in three dimensions for greater detail. Magnetic- Use of a magnometer is used to measure magnetic properties and strength formations and determine whether the data is consistent with oil and gas discoveries. Gravimetric- Use of gravimeter to measure the earth s gravitational fields. Such information also gives insight into the likelihood of finding oil and gas. Aerial Sensing- Aerial landscape imagery for surface mapping. Survey Equipment/Technology Computer Technology Explosives Geophones Gravimeter Magnometer Satellite Technology Sniffers Vibration Truck 3

Survey Services Consultants Engineers Geologists Geophysicists Education/Risk Management Permits and agency approval are obtained and implemented. Assessment of Stakeholder Risk/Minimizing Stakeholder Risk Emergency Response: EPA, Fire Department, Police Department Government Agencies: EPA, DEQ, DNR, OSHA Media Outreach- Local/National Permits Stakeholder Education 4

Subsectors- Part II- Exploratory Drilling Site Preparation/ Infrastructure Exploratory Drilling/ Rig Set-Up Auxilary Equipment Staffing Part II- Equipment and Service Needs Once a decision has been reached to proceed with a test well, the drilling site is prepared. Along with the site work, equipment is brought in and services are contracted for the rig set-up. Site Preparation/Infrastructure Access/Road Construction Building Construction Bulldozer Excavation and Leveling Excavation of Reserve Pit (Water Discharge) Generators Land Clearing Paving Permits Signage 5

Trailers: Offices/Housing/Food Tractor Truck Exploratory Drilling/Rig Set- Up Exploratory drilling refers to the drilling of the main well hole. The information gathered from the exploratory well and from coinciding testing will determine the viability of the well. Drilling rig components found on and around rig. Accumulator Annulus Additives Blender- Mixes liquids and sand. Blowout Controller Blowout Preventer (BOP) Blowout Preventer Stack Breaker House Bulk Mud Components Storage Casing Catline Boom and Hoist Line Catwalk Choke Manifold Collar Console Crown Block Degasser Derrick Board Diesel Engines- Powers the electric generator. Doghouse Drawworks Drill Bit- Steel Tooth Rotary Bit, Insert Bit, Polycrystalline Diamond Compact Bit, Diamond Bit Drill Line Drill Pipe Drill String- Consist of: Drill Pipe, Heavy Collar, Stabilizer, and Drill Bit. Electric Cable Tray Electric Control House 6

Engine Generator Sets Fuel Tanks Hydraulic Hoist Iron Roughneck Kelly Kelly Bushing Mast- Lifting Unit Monitoring Equipment- SCADA (Supervisory Control and Data Acquisition) Monkeyboard Mud Gas Separator Mud- Liquid solution used in preventing drill from overheating Mud Pit Mud Pump Mud Pump Separator Mud Return Line Mud System Personnel Pipe Racks Pipe Ramp Rig Platform Rotary Hose Rotary Table Sand SCR House/Top Drive Separator Shale Shaker Slips Stabilizer Standpipe Swivel Tong Top Drive Traveling Block Turntable Weight Indicator 7

Auxiliary Equipment Cameras Cement Truck Cranes Drill Stem Testing Fire Extinguishers, Medical Supplies Flowback Monitoring and Analysis Health Risk Assessment Heater Hydraulic Fluids and Additives Lighting Monitoring Wells Oil Tanks Pipe Racks Safety: Harnesses, Hard Hat, Clothing, Gloves, Safety Glasses Spill Clean-Up: Dry Chemical, Foam and Gas Extinguishing System Trucks- Transportation of Equipment, Power Supplies, Drilling Equipment Waste Removal Water Storage Tank Water Tank Water Well Welding Equipment Well Logging Staffing Personnel: Skilled and Unskilled Personnel: Training 8

Subsectors- Part III- Recovery Equipment Maintenance Distribution Plug and Abandon Part III- Equipment and Services Needed Based on the exploratory well information, the well is completed. Completion refers to a well moving from the exploratory phase to the production phase. Equipment Casing: Conductor Casing, Surface Casing, Production Casing Chromatography Christmas Tree Downhole Pressure Sensors Drill String:- Consists of Drill Pipe, Heavy Collar, Stabilizer, and Drill Bit Enhanced Oil Recovery (EOR) Evaluation: Chemical Injection, Gas Injection, and Thermal Electric Submersible Pump Expanders Gas Lift 9

Hydraulic Pump Packer Perforated Liner Perforated Pipe Perforating Gun Pumpjack Safety/Fire Equipment: Extinguisher, First Aid, First Responders Solar Panel- Energy/Power for Monitoring Equipment Tubing Maintenance Pumpjack Technician Services Recompletion Security/Monitoring Service Well Monitoring Well Workover Maintenance Distribution Pipeline Pipeline Integrity Trucks Rail Plug and Abandonment When it has been determined that the well is no longer producing, it is capped and abandoned. Cement Plugs Cement Coiled Tubing 10

References Breitling Energy. (2012). Drilling Into Oil-Field Equipment. Retrieved from http://www.breitlingenergy.com/drilling-into-oil-field-equipment/ Deutsche Bank Market Research. (2013).Oil and Gas for Beginners. Retrieved from http://www.wallstreetoasis.com/forums/db-oil-gas-primer-2013. Energy From Shale. (2014). Retrieved from http://www.energyfromshale.org/ Freudenrich, Ph.D., C.& Strickland, J.(n.d.). Retrieved from http://science.howstuffworks.com/environmental/energy/oil-drilling.htm Hilyard, J. (2012). The Oil and Gas Industry: A Nontechnical Guide.Tulsa, OK: Penn Well Investopedia. (n.d.). The Industry Handbook: The Oil Services Industry. Retrieved from http://www.investopedia.com/features/industryhandbook/oil_services.asp King, Ph.D., H. (n.d.). Hydraulic Fracturing of Oil & Gas Wells Drilled in Shale. Retrieved from http://geology.com/articles/hydraulic-fracturing/ Northern Territory: Department of Mines and Energy. (2012). Unconventional Oil and Gas. Retrieved from http://www.nt.gov.au/d/minerals_energy/?header=what%20is%20the%20difference%20 between%20conventional%20and%20unconventional%20gas? Shale Stuff. (n.d.). Process of Fracking. Retreived from http://shalestuff.com/education/fracking/fracking 11

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