1. Professional Logistics Group
Shale Development in Argentina:
The Evolving Supply Chain
Prepared for
April 17, 2013 Buenos Aires, Argentina
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2. About PLG Consulting
» Boutique consulting firm specializing in logistics, engineering, and
supply chain
 Established in 2001
 Over 90 clients and 200 engagements
» Headquarters in Chicago USA, with team members throughout
the US and with “on the ground” experience in:
 North America / Europe / South America / Asia / Middle East
» Consulting services
 Strategy & optimization
 Assessments & benchmarking
 Transportation assets & infrastructure
 Logistics operations
 M&A/investments/private equity
» Key industry verticals:
 Oil & gas
 Chemicals & plastics
 Wind energy & project cargo
 Bulk commodities (minerals, mining, agricultural)
 Industrial manufactured goods
 Private equity

3. Argentina Resources vs. ROW
» Argentina has 774 Tcf of technically
recoverable shale gas
 This is the world’s third largest assessed endowment,
behind only China (1,275 Tcf) and United States (862
Tcf)
» 2.5 billion barrels of proved oil reserves South American Shale Gas Resources
» Potential for dramatic increases in
production through shale development
» Extensive existing energy infrastructure
Source: Americas Petrogas
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4. Neuquén Basin
» Neuquén Basin is focal point
for unconventional
development in Argentina
 Most “tangible” shale play outside of
North America
 Most productive basin (estimates)
– 260,000 bbls/day & 2.6 Bcf/day
» Gas potential
 407 Tcf technically recoverable shale
gas
» Vaca Muerta liquid potential
 800 MMbbls of potential recoverable
oil in Vaca Muerta Shale
 Condensate in transition windows
Source: Americas Petrogas
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5. Vaca Muerta
» In 2011, YPF announced a large discovery of shale oil in the Loma La
Lata field in the Neuquén basin in the Vaca Muerta shale formation
 “High quality crude in over-pressured conditions, and with high thickness….” - YPF
 “Better prospect than US comparable basin….” - YPF
» Estimated size of which is to be believed 800 million barrels of
recoverable shale oil
Source: Americas Petrogas 2013 Source: YPF
Source: Azabache Energy Inc. 5

6. Vaca Muerta vs. Bakken – Single Well
Lifetime Production Comparison
Vaca Muerta Horizontal Well (10 fracture stages) Bakken Horizontal Well (28-32 fracture stages)
Source: CAP IV SEN Source: J. Mason – Oil Production Potential of the North Dakota Bakken (2012)
Estimated Ultimate Recovery Estimated Ultimate Recovery
@ 25 years: 389,000 bbl @ 25 years: 500,000 bbl
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7. Investments in Argentina
Shale Development
» YPF push to develop Neuquén Basin
 YPF’s plan is to spend $35 billion through 2017 to aggressively
develop Neuquén Basin
 Plan to boost capital investments by 60 percent in 2013
 Need to raise billions of dollars over next few years in order to
aggressively develop shale
» Chevron $1 billion deal with YPF for Vaca Muerta
 Deal for an estimated 100 wells over 1 year period
 YPF transfer 50% interest in two oil fields in Vaca Muerta
 May eventually expand to ~2,000 wells for ~$15 billion
» Bridas $1.5 billion deal with YPF for Vaca Muerta
 Deal for an estimated 130 wells over 2 years
 YPF transfer 50% of its rights in two oil fields in Vaca Muerta
 Most of the development will involve shale oil, but there are also
plans for exploitation of wet gas
» Multinational E&P interest with fracking expertise
entering the market
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8. Resources and Experience Can Be
Applied in Argentina
» Expect far-ranging implications beyond oil and
gas
 Energy
 Transportation
 Manufacturing
 Balance of Trade
» Both opportunities and risks in global market
 Fracking inputs
 Well outputs and downstream products
» Outside resources will need to be imported
 Experienced personnel
 New rigs
 Drilling supplies, including proppants
 Key learnings from N.A. shale development experience
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9. The Shale Development
Revolution – Big Picture
New Technologies
• Hydraulic Fracturing
• Horizontal Drilling
Market Drivers Continuous Evolution
• Supply & Demand • Constant Change
• Customers • Rapid Change
• Price
• Logistics
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10. Hydraulic Fracturing and
Horizontal Drilling
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11. Hydraulic Fracturing
Equipment Staging Area
Frac Tanks/Fluid Storage
Data Van
Chemical Trucks
Blender
Pump Trucks
Sand Storage
Unit
Source: JPTOnline.org 11

12. Shale Development Supply Chain
and Downstream Impacts
Inputs >> Wellhead >> Direct Output >> Thermal >> Fuels >> Raw Materials >> Downstream Products
All Manufacturing
Generation Steel
Process Feedstocks
Proppants Fertilizer (Ammonia)
Gas Home Heating (Propane) Methanol
OCTG
Other Fuels
Chemicals NGLs
Feedstock (Ethane) Chemicals
Water Byproduct (Condensate)
Crude
Petroleum Products
Cement
Petrochemicals
Other Fuels
Gasoline
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13. Hydraulic Fracturing Materials
Inputs and Logistics – Per Well
Source to Transloading to
Materials Waste Water
Transloading Wellhead Site
~500 Total
Proppants 40 160 Truckloads
OCTG (Pipe) 5 20
Chemicals 2 8
Clean Water/ Oil/Gas/NGLs
Local source ~1,000
Cement
Truck, Rail,
47 Total ~1,200 Total
Pipeline
Railcars Truckloads
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14. Proppants Demand
» Shale development in Argentina just in
Vaca Muerta: Proppants and Water Demand
very early stages
» Demand for imported proppants will
increase significantly
» Optimal logistics model for proppants
and water will have to be “invented”
Source: Azabache Energy Inc.
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15. Proppants Supply
and Logistics
» Need to import proppants
 Proppants are currently imported from Brazil and USA,
companies are looking at China
 Curimbaba out of Brazil has a very large deposit of high-grade
bauxite which is used to make ceramic proppants
 The USA has large deposits of high quality frac sand and
experience with USA’s shale plays
 China also has numerous ceramic proppant producers
» Logistics challenges for proppants
 Neuquén basin is located in remote desert
 Proppants coming from Brazil can take up to 45 days to arrive
on site via rail and trucks on unpaved roads
» Despite challenges, a range of options exist for
both natural sand and ceramics
 Global market trends that Argentina shale plays can take
advantage of in both supply and logistics
 Existing transportation infrastructure in Argentina
 Over time, logistics models will evolve and innovate
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16. Processed Sand Total
Delivered Cost
» Benchmark cost (US) with well-executed » Potential for significant cost add-ons
performance caused by strategic and tactical issues
 Example unit train movement from Wisconsin to Texas  Sub-optimal logistics network design or
with total delivered cost of approx. $180/ton infrastructure
 Poor planning and/or execution
 Logistics drives ~60% of total delivered sand cost
 Uncompetitive sand price
 Poor sand quality
» N.A. logistics model for proppants has
evolved to reduce costs, improve
efficiency
Source: PLG analysis 16

17. Innovation Case Study:
Ceramic Proppants from China
» Ceramic vs. natural sand decision driven by
technology, cost (yield)
» Phase one innovation optimizes logistics of
existing containerized supply chain
 Route and terminal changes
 Use of boxcars
 Net payload improvements
 Natural flow of containers exploited
 45% cost reduction impact
» Phase two innovation converts to breakbulk
 Additional 12% cost reduction impact
Import
Destination
Origin
Export
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18. Break Bulk Logistics Flow
Origin Port of Export Loading
Ocean Transport Port of Entry Destination
Import
Destination
Origin
Export
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19. N. A. Correlation of Operating Rig
Count with Sand and Crude
Shipments
120,000 2500
Operating On Shore Rigs
All Sand Carloads
Petroleum Carloads
100,000
1,972 1,965
1,948
1,911 2000
1,864
1,814 1,798
1,763
1,762
Operating Onshore Rigs
1,695 1,691
1,665
80,000 1,604
Sand Carloads
1,467 1500
1,270 1,299
60,000
1,073
939 1000
886
40,000
500
20,000
0 0
2007 Avg. 2008 Avg. 2009 Quarterly Data
2010 2011 2012 2013
STCC 14413 (sand) and 13111 (petroleum) Data sources: US Rail Desktop, Baker Hughes 19

20. U.S. Sand Mining
Overcapacity: New Reality
» Growth in Wisconsin sand
mining industry has slowed
 60 mine/processing operations
proposed June 2011 – June 2012
 Four (4) proposed June 2012 –
January 2013
» Decline in sand pricing
» Excess supply and
processing capacity
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21. Proppant Sourcing and
Logistics Options
» Multiple sourcing options
 Ceramic from Brazil From USA
 Ceramic from China From
Brazil
 Natural sand and ceramic from US
» Viable port, liner service to Bahia Blanca
 Existing container and breakbulk service
 Dry bulk vessels would require significant investments
 Storage and handling systems
 Tank trucks From China
» Existing rail infrastructure
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22. Representative Transportation Costs –
Proppants to Bahia Blanca Port
~$55/mt
~$10/mt ~$90/mt
~$140/mt
~$100/mt
~$110/mt
Ceramic via container
Natural sand or ceramics via break bulk
Natural sand or ceramics via container
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23. Overcapacity of Pumping HHP
in the USA
» Estimated 25% excess capacity end of 2012
 Declining rig count
 Move from gas plays to liquid rich plays has caused an oversupply of pumping capacity since liquid
plays typically require lower pumping capacities
 Improved efficiencies of frac operations
 Overbuild of pumping capacity
Source: Baker Hughes Source: Baker Hughes
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24. Overcapacity of Pumping HHP
in the USA (continued)
» Capacity outlook
 “Without a meaningful jump in rig count, it’s going to take
several quarters to chew through the excess horsepower
capacity” - Baker Hughes CEO, March 19, 2013
 In December 2012, Halliburton estimates that countries outside
North America hold more than 80% of the world’s shale gas
reserves but under 20% of the pressure pumping capacity that is
required to extract it
» Pricing pressure
 The decline in natural gas drilling and influx of equipment into
the industry has resulted in pricing pressure for hydraulic
fracturing services which is expected to persist through 2013
 Pricing pressure has been seen in all USA basins
» Opportunity for redeployment of equipment and
trained personnel to international shale plays
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25. Shale Play Product
Flows Outbound
» Natural Gas
 Majority via pipelines, some trucks
» Natural Gas Liquids (NGLs)
 Requires processing (fractionation)
 3-9 gallons/MCF (thousand cubic feet)
– Ethane 63%
– Propane 22%
– Butane 8%
– Pentane 5%
– Other 2%
– Condensate (liquid hydrocarbons)
» Crude Oil
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26. Potential Shale Development
Impact on Domestic Fuel Supply
» Over 50% of electricity generation in Argentina is fueled by natural gas
» Despite major proven reserves, Argentina is net importer of natural gas
 Fuel imports in 2011 were $9.4 billion
 Local demand in Argentina and large Government of Argentina focus to reverse energy sector’s recent decline
– Last November, Argentina announced wellhead prices would rise to $7.50/MMBtu for “new gas” from wellhead average of about $2.5/MMBtu
in the Neuquén Basin
 Government is looking to become net fuel exporter
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27. Prospects for Natural
Gas Exports
» Global market conditions
represent significant long-
term demand for LNG
 Asia, Europe primary markets
» Opportunity for Argentina if
US continues to restrict
exports
Source: Total
Source: Total Source: Waterborne Energy Inc. Data in $US/MMBtu 27

28. Shale Development
NGL Impacts
» “Wet gas” sources identified in Neuqin Basin
» NGLs fractionation facilities proximal to production
 “Y-grade” must be separated into purified products
» Abundant supplies have sparked chemical industry
renaissance in US
 Ethane is “cracked” to make ethylene, the most basic building
block in the chemicals supply chain HDPE Calculated Cost
 USA is now the low-cost producer of ethylene-based chemicals due 2500
to abundant supplies of ethane from shale plays (up to 60% raw 2000
materials cost advantage)
$/Ton
1500
 Over $15B in new announced ethylene expansions will come on-
line over the next five years, increasing capacity by 33% (11 1000
MMmt) 500
 Up to 40% of new chemical production will be exported 0
» Similar opportunity exists for Argentina’s already
significant chemical industry
Sources: CMAI, TopLine Analytics, and Alembic analysis,
2012
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29. Natural Gas & Petrochemical
Downstream Products
Feedstock/
Intermediary
Low-Density Food packaging, film, Finished
Polyethylene trash bags, diapers, toys
Products
House wares, crates,
High Density
drums, food containers,
Polyethylene
bottles.
Siding, windows,
Ethylene
Vinyl Chloride PVC frames, pipe, medical
Dichloride
tubing
Antifreeze Pantyhose,
Natural Gas, Ethylene Ethylene carpets, clothing
Fibers
OIl Oxide Glycol
PET
Miscellaneous Bottles, film
Ethane, Ethyl Polystyrene
Styrene
Naphtha, etc. Benzene SAN Insulation, cups
SBR
Linear Latex Instrument lenses,
Detergents house wares
Ethylene Alcohols Miscellaneous
Vinyl Acetate Tire, hose
Adhesives, coatings, textile/
paper. finishing, flooring Medical gloves,
Miscellaneous carpeting,
coatings

30. Potential Shale Development Benefits
for Argentina’s Chemical Industry
» Chemicals already an
important industry in
Argentina, but
challenged with raw
materials supply
» New feedstocks from
shale development
may help reverse
chemicals trade deficit
» Argentina could have
advantaged position in
Latin America vs. US
chemical exports
» Potential for expanded
trade with Europe and
Asia
Source: HSBC Source: HSBC
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31. Shale Development Impact on
Crude Oil Market Dynamics
» Similar to natural gas,
shale development
represents opportunity for
increased exports and
trade balance impact
» Argentina will be
advantaged by continued
US restrictions on crude
exports, particularly for Source: YPF
shale peer light/sweet
grades
» However, expect added
competition from Brent
sources
» Neuquén Basin sits on or
near conventional plays Source: BG Group
already supported by
existing infrastructure 31
31

32. Conclusions
•
New Technologies
Hydraulic Fracturing
» Argentina still in early stages of shale development – expect rapid and
• Horizontal Drilling
continuous change
» Sourcing and logistics model for large-scale fracking still needs to be
designed and implemented
 Water
Market Drivers Continuous
•
•
Supply & Demand
Customers
Evolution  Proppants
 HHP/rigs
• Price • Constant Change
• Logistics • Rapid Change
» Like the technology and markets themselves, logistics will evolve and
reduce costs, improve efficiency over time
» Fortunately, a viable logistics infrastructure already exists in Argentina
» Global market conditions in logistics and sourcing can work to Argentina’s
advantage
Source: YPF
 Proppants
 HHP
“I wouldn't rule out that 2013 is going to  Primary outputs
be a painful year for us from the point of
 Downstream products
view of getting hold of equipment, from
the point of view of getting the people ...
but when you're growing it's a pain that » Opportunity and benefits can extend well beyond oil and gas
you willingly tolerate.”
-YPF President Miguel Galuccio
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» Leverage learning, experience, and resources of other shale plays

33. Professional Logistics Group
Thank You!
For follow up questions and information, please contact:
Taylor Robinson, President
+1-508-982-1319 / trobinson@prologisticsgroup.com
Graham Brisben, CEO
+1-708-386-0700 / gbrisben@prologisticsgroup.com
Jean Arndt, Vice President
+1-630-505-0273 / jarndt@prologisticsgroup.com
Jay Olberding, Analyst
+1-636-399-5628 / jolberding@prologisticsgroup.com
This presentation is available at:
WWW.PROLOGISTICSGROUP.COM
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