Ohio, the Region, and Licking County’s Future a Charlotte Batson March 22, 2012

Charlotte Batson Expertise in Economic Development and Shale Oil/Gas Petroleum Engineer with expertise in oil and gas field operations, lease sale evaluations, and oil/gas price analysis Project work on the Shale Gas Supply Chain for the Pittsburgh Regional Alliance Author of articles on Shale Oil and Gas, including “How Shale Gas is Redefining the Energy Landscape” in the January, 2012 Site Selection Appointed to the Mississippi Energy Policy Institute (MEPI) in 2009 by Gov. Haley Barbour © Batson & Company

Agenda Perspective on Current Situation Opportunities for Licking County Workforce Local Impacts What’s Next? © Batson & Company 20123

US Oil Production Reverses Decline © Batson & Company Source: EIA

Upstream Drivers Leasing – “Use it or lose it” – Oil plays drawing attention from low-priced gas – Industry much less “boom and bust” Oil Price: Instability in the Middle East – Another Arab Oil Embargo? – Development plans likely being accelerated © Batson & Company 20125

Where is the Utica Shale? © Batson & Company 20126

Not Just in Eastern Ohio! © Batson & Company 20127

The Map Can’t Keep Up © Batson & Company Source: ODNR

Hold on to Your Hat! Operators: Chesapeake/Total, Enervest, Anadarko, Chevron, others Chesapeake: 25,000 wells over 20 years 2012 Drilling: +40% in Ohio over 2011 Rigs: +300% over 5 years (Ohio O&G EEA) Potential for 200,000 b/d by 2020 (pass La.) © Batson & Company 20129

Current BHI Rig Count © Batson & Company

Variety in the Supply Chain Gathering and Transportation Pipelines Compressors Tanks Meters and Control Stations Inspection Tools Processing Heaters Scrubbers Separators Fractionation Equip Fischer Tropsch Catalysts Vessels Environmental Mitigation On-site Mobile Water Treatment Filters Local Water and Wastewater Treatment Marketing and Sales National integrated marketers Producer marketers Aggregators, Brokers Petrochemicals Gas-to-Liquids © Batson & Company Exploration Seismology 3D or 4D Computer Imagery Logging Data Interp. Drilling Rig and other equipment Casing and tubing Mud, cement and chemicals Hydraulic Fracturing Pumps Proppants Chemicals and other additives Water Completion Valves Screens and Filters Perforating Equipment Packers

Central Ohio Existing Industries Aerospace Polymers and Plastics Chemicals Steel R&D Auto © Batson & Company

Upstream Opportunities Supply Chain – Resource-limited – Includes logistics and transportation, especially frac sand and water – Drilling rigs, OCTG, equipment, mud, cement, chemicals, crew supplies, etc. Local Business: 18 month contracts Access to the Resource – Nucor – Shell © Batson & Company

Licking County: Well-positioned © Batson & Company

Midstream In Flux Asian LNG demand exploding Available capacity in existing lines Gathering lines Chesapeake – $900M NGL processing, pipeline (M3 Mid., EV En. Ptnrs.) – $500 million, 70 miles of pipeline (AEP, Spectra) Enterprise Products Partners: prop. ethane pipeline from OH/PA to the Texas ethane hub © Batson & Company

Opportunities for Utilities Electric Utilities – EPA regs – conversion of 28 GW coal-burning generation to gas – Ohio – 80% of its electricity from coal – AEP’s pipeline announcement Gas Utilities – Customers switching from heating oil and propane – Columbia Gas rates 19% lower than last year – PA gas utility cut rates by 52% © Batson & Company

Downstream: Refined Products Stimulated by crack spreads and abundant supply Asia: Demand for refined products exploding 2011: US was a net exporter of refined products for the first time since 1949 Polymers: important part of the shale supply chain expected to benefit from oversupply © Batson & Company

Oversupply and New Products Stimulated by natural gas oversupply LNG – Cheniere: $6B Sabine liquefaction facility for export to Asia – Have $8B+ in contracts for 7 mtpa (2 trains of 4 approved) New Products – Sasol: $10B LA facility to convert natural gas to diesel Exports to Asia – South Korea, Japan, China, India © Batson & Company

Chemicals and Fertilizers Stimulated by low natural gas price (feedstock) Chemicals ◦ US overtaking Middle East as global low-cost leader ◦ Ethylene crackers: Shell, Dow, Sasol studying ($4.5B) ◦ Reviving nitrogen based products “Prices are rising amid tight supplies for the building blocks of everything from diapers and packaging to autos and consumer electronics”, said Andrew Liveris, Chairman/CEO, Dow Chemical © Batson & Company

And Let’s Don’t Forget.. Vehicles!! Effective cost < $2/gal Fleets converting to natural gas Chesapeake and GE partnership – Natural gas and hybrid vehicle mfg. – Fueling infrastructure Companies incl. UPS testing LNG vehicles (ships) Jet fuel © Batson & Company

Workforce Full Employment Competition for Workers Construction Jobs “Boom vs Bust” Workforce Training & Housing © Batson & Company

Impacts to Licking County Roads Other: noise, dust, hours of operation, etc. Municipal Budgets First Responders Information to the Community © Batson & Company

What’s Next? “Perfect Storm” of Opportunities – Upstream – Midstream – Downstream Job Creation Management of Impacts © Batson & Company

© Batson & Company 2012 Thank You 24