1. 1 Copyright - 2011 TBD America, Inc. All rights reserved. UGAS 2012 Unconventional Gas Asia Summit November 5 – 8, 2012 Dr. Barry Stevens President TBD America, Inc. a Technology Business Development Consulting Group

2. Copyright - 2011 TBD America, Inc. All rights reserved. 2 Improve Understanding of Key Unconventional Gas Enabling Technologies by Identifying Gaps and Proposing Solutions 1.Introduction 2.Objective 3.China ‘s Energy Landscape 4.Shale Gas Extraction 5.Fracture Conductivity 6.Fracture Design 7.Fracture Placement 8.Wellbore Integrity 9.Will Casing and Cementation Last Forever? 10.Closing

3. CHINA’ S ENERGY LANDSCAPE Copyright - 2011 TBD America, Inc. All rights reserved.3 Coal and petroleum make up nearly 90 % of China’s energy inventory 60 % of China’s coal supplies were used to generate electricity, the remaining 40 % was consumed by industry Natural gas comprised 3 % of China’s energy inventory 2 % of China’s electricity was generated from natural gas Petroleum remains king of transportation 55 % of petroleum supplies are imported Renewables plays a very minor role in China’s Energy inventory Why Natural Gas? We are a Carbon Based Society. Unlikely Renewable Energy Will Make a Near Term Impact on China’s Energy Inventory. Natural Gas is the Cleanest Burning Fossil Fuel Cost-Effective Unconventional Gas Extraction Technologies Have Produced Low-Cost Natural Gas Assets in Vast Quantities. Supply Bonanza Makes Natural Gas a Highly Competitive Fuel. Fuel-Switching to Natural Gas is Relatively Easy and a Financially Sound Investment. CHINA’S ENERGY LANDSCAPE The Door is Wide Open for Natural Gas to Replace Coal and Petroleum in China’s Energy Landscape.

4. WELLBORE INTEGRITY Copyright - 2011 TBD America, Inc. All rights reserved.4  Meeting casing quality and connection requirements as outlined in API Spec. 5CT.  During cementing, using the best available mud displacement method to avoid mud channels.  Using both top and bottom cementing plugs.  Providing thin and low permeable filter cake from the drilling fluid.  Reducing cement slurry filtration to avoid “bridging” during cement setting.  Reducing slurry chemical shrinkage to a minimum and improving the bonding.  Using right angle setting slurries reduces the amount of time in which gas can migrate within the unset cement.  Using lightweight cements avoids cement losses in the case of weak (surface) formation.  Using inflatable annular casing packers to enhance a standard cement job by providing specific points of isolation.  For surface casing applications, cement should always come to the surface, without exclusion.  Pressure testing the integrity of formation strength below a casing shoe to ensure adequate sealing is mandatory.

5. SHALE GAS EXTRACTION 5Copyright - 2011 TBD America, Inc. All rights reserved. Augment Analytical Data with Sophisticated Software Finite Element Analysis (FEA) Rock Mechanics --> Hydraulic Pump Schedule

6. Conductivity (C f ) is a measure of the fracture’s ability to transmit fluids CONDUCTIVITY Copyright - 2011 TBD America, Inc. All rights reserved. 6 Conductivity = kfrac*wfrac kfkf Determining Realistic Proppant Conductivity Laboratory testing – conducted to include as many realistic damage factors as feasible Well testing – what do we infer from pressure transient or decline curve analyses? Field results – how does well production change when fracture width or proppant quality is altered? API- RP- 19D ISO 13503-5

7. DESIGN Copyright - 2011 TBD America, Inc. All rights reserved. 7 “Slickwater” Frac Sequencing Acid Stage Pad Stage Prop Sequence Stage Flushing Stage Design Parameters Fluid Type Viscosity Requirements Fluid Rheology Economics of Fluid Experience With Local Formations Laboratory Data on the Formation Material Availability Proppant Selection Slickwater Frac Design Characteristics Stimulate the Formation, Enhance the Return, or “Flowback” of the Slickwater Solution Following Well Stimulation, Increase the Production of Gas from the Reservoir. Desired Fluid Behavior Low Leak-off Rate Ability to Carry the Propping Agent Low Pumping Friction Loss Easy to Remove from the Formation Compatible with the Natural Formation Fluids Minimum Damage to the Formation Permeability Break Back to a Low Viscosity Fluid for Clean Up After the Treatment Turbulent and Laminar Flow The turbulent flow frictional loss in the wellbore and perforations is important to design and perform a fracturing treatment. The frictional losses are used to predict the surface treating pressure and injection rate. The Laminar Flow Behavior of the Fluid is Critical to the Design of Proppant Transport and Fracture Flow Geometry.

8. Copyright - 2011 TBD America, Inc. All rights reserved. 8 1.Decide the value of ΔP perf to be allocated for the Limited Entry back pressure. A value of at least 200-300 psi is recommended since a value of this magnitude should be observable in the total P surface. For example, let’s select 280 psi as the designated value for ΔP perf. 2.With the established value for ΔPperf, use the following re- arrangement to determine the rate/perf (Q): Q = D2 C √ΔP/ρ / 0.487 If we use 280 psi, and the following data concerning the perforations: D = 0.42 in. (Average diameter of perforations) C = 0.95 (Coefficient of roundness of jet perforation, 1.0 is round) ΔPperf = 250 psi ρ = 8.33 lb/gal Then, Q = 2.0 BPM/perf 3.Based on the calculated rate/perforation, Q, the injection rate for the Limited Entry fracturing treatment will then need to be determined, based on the maximum allowable surface treating pressure (Psurf) based on Surface Pressure Components Equation. The following table shows the number of perforations for several possible injection rates and the number of perforations possible for the various rates. 4.Based on the pay zones and desirable distribution of the fracturing treatment, the perforations (see Table above) can be specified for the Limited Entry treatment. It is suggested that the perforation “batches” be selected in even number increments to facilitate perforation placement and phasing. An example of possible distribution of perforations is show in this Figure, which represents multiple pay intervals to be treated using Limited Entry based on data from the previous Table: Injection Rate: 40 BPM Total Number of Perforations: 20 Perforation Friction Pressure: 280 psi Perforation Diameter: 0.42 inches Perforation Phasing: 180o (Wireline Conveyed) Surface Pressure Components P surface = BHTP + ΔP friction + Δ P perf + ΔP net - ΔP hydrostatic Where P surface = Suface Pressure, is determined from BHTP = Bottomhole Treating Pressure (Frac Gradient x Depth), psi ΔP friction = Treating pipe friction pressure (psi) @ injection rate, psi Δ P perf = Friction pressure through perforations, psi ΔP hydrostatic = Hydrostatic pressure, psi Orifice Flow Equation ΔPperf = 0.237 ρ Q2 / D4 C2 Where: ΔPperf = Total perforation friction, psi Q = Flow rate through each perforation, BPM/perf D = Diameter of perforation, in. C = Perforation coefficient (0.95. for round perforation) ρ = Fluid density, lbs/gal PLACEMENT Limited-entry Fracturing Finite Element Analysis Number of Perforations Perforation Spacing Near Wellbore Effects Fracture Pressures Stresses, etc.

9. WILL CASING & CEMENTATION LAST FOREVER Copyright - 2011 TBD America, Inc. All rights reserved.9 “Recently, a University professor argues that “the cement and steel casings that will be used in the Karoo basin of South Africa would deteriorate and fail over time, resulting in the upward migration of fracking fluids to ground water zones. Is this true?”

10. CLOSING Copyright - 2011 TBD America, Inc. All rights reserved. 10 Success Factors Achieving a Low-risk, Safe and Productive Operation Integrating Various Services into a Seamless Operation Up-front Planning Designing Multi-Functional Frac Fluids Understanding Baseline Conditions Adjusting for Realistic Conditions

11. 11 Copyright - 2011 TBD America, Inc. All rights reserved. TBD America, Inc. is a global Technology Business Development consulting group serving the public and private sectors in the shale gas, CNG, waste-to-energy, wastewater, and renewable energy industries. Services include, but not limited to, development, commercialization, feasibility studies and technology transfers. Our multi-discipline team of trained professionals has the experience to support projects in an ever changing technological, economic and competitive landscape in unconventional resources, especially shale gas and oil.

12. Barry Stevens, PhD President TBD America, Inc. www.tbdamericainc.com barry@tbdamericainc.com THANK YOU Copyright - 2011 TBD America, Inc. All rights reserved.12