HEATER TREATER SOLUTIONSHEATER TREATER SOLUTIONS

Grit Industries Inc. and the CWT Indirect HeaterGrit Industries Inc. and the CWT Indirect Heater

GRIT INDUSTRIES INC.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

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

GRIT INDUSTRIES INC.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

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

VERTICAL HEATER TREATERVERTICAL HEATER TREATER

Problems and SolutionsProblems and Solutions

VERTICAL HEATER TREATER: A HISTORYVERTICAL 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

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

VERTICAL HEATER TREATER: PRESENTVERTICAL 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

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

TYPICAL VHT COMPONENTSTYPICAL VHT COMPONENTS

ASME pressure vessel

Fire tube section (ASME or non-ASME)

Stack

Gas fired burner head (lbs of gas)

Tank temperature controls

ASME pressure vessel

Fire tube section (ASME or non-ASME)

Stack

Gas fired burner head (lbs of gas)

Tank temperature controls

FIRE TUBE SECTION-HEAT EXCHANGERFIRE 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

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

FIRE TUBE: DESIGN MERITSFIRE TUBE: DESIGN MERITS

Simple

Low initial capital cost

Simple means anyone can manufacture (non-ASME version) - plentiful

Industry is very familiar with operation

Simple

Low initial capital cost

Simple means anyone can manufacture (non-ASME version) - plentiful

Industry is very familiar with operation

FIRE TUBE: DESIGN DEFICIENCIESFIRE 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

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

COLD WEATHER TECHNOLOGY (CWT)COLD WEATHER TECHNOLOGY (CWT)

Grit Industries Inc.’s CWT Product LineGrit Industries Inc.’s CWT Product Line

COLD WEATHER TECHNOLOGY (CWT)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

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

CWT: THE PROCESSCWT: 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

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

CWT: THE ADAPTATION - FROMCWT: THE ADAPTATION - FROM

SINGLE WELL IN TANK TREATINGSINGLE WELL IN TANK TREATING BATTERY IN TANK TREATINGBATTERY IN TANK TREATING

CWT: THE ADAPTATION - TOCWT: THE ADAPTATION - TO

VERTICAL HEATER TREATERVERTICAL HEATER TREATER PROCESS DEMO UNIT

CWT: THE ADAPTATION - TOCWT: THE ADAPTATION - TO

CWT: HEAT EXCHANGER FEATURESCWT: 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

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

CWT: HEAT EXCHANGER FEATURESCWT: 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

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

CWT: IMAGESCWT: IMAGES

CWT: IMAGESCWT: IMAGES

CWT: HEAT EXCHANGER OPTIONAL LAYOUTSCWT: HEAT EXCHANGER OPTIONAL LAYOUTS

CWT: ADDRESSING FIRE TUBE DEFICIENCIESCWT: ADDRESSING FIRE TUBE DEFICIENCIES

FIRE TUBEFIRE TUBE Low Efficiency (40-45%)

Excess fuel consumption

Increased GHG emissions

Oversized burners (lbs of gas pressure)

Increased exchange area

Low Efficiency (40-45%)

Excess fuel consumption

Increased GHG emissions

Oversized burners (lbs of gas pressure)

Increased exchange area

CWTCWT Independently tested at 70-80%

Up to 60% fuel savings

Reduces GHG emissions

Low press. flame bed (oz gas pressure)

Independently tested at 70-80%

Up to 60% fuel savings

Reduces GHG emissions

Low press. flame bed (oz gas pressure)

CWT: ADDRESSING FIRE TUBE DEFICIENCIESCWT: ADDRESSING FIRE TUBE DEFICIENCIES

FIRE TUBEFIRE TUBE Non- uniform heating

Extreme heat at burner end causes premature gasket failures

Excessive heat results in coating failure

Non- uniform heating

Extreme heat at burner end causes premature gasket failures

Excessive heat results in coating failure

CWTCWT Steam provides uniform temperature

profile across the exchanger

Maximum 250° F steam temperature with ability to operate lower as required, within gasket specifications

Operates within coating specifications

Steam provides uniform temperature profile across the exchanger

Maximum 250° F steam temperature with ability to operate lower as required, within gasket specifications

Operates within coating specifications

CWT: ADDRESSING FIRE TUBE DEFICIENCIESCWT: ADDRESSING FIRE TUBE DEFICIENCIES

FIRE TUBEFIRE 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

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

CWTCWT 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

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

CWT: ADDRESSING FIRE TUBE DEFICIENCIESCWT: ADDRESSING FIRE TUBE DEFICIENCIES

FIRE TUBEFIRE TUBE Fire tube inspections consist of waiting for

leakage to become obvious

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

Fire tube inspections consist of waiting for leakage to become obvious

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

CWTCWT With no scaling or heat degradation,

inspections become virtually unnecessary

Independent 3rd party destructive testing puts the boiler life at over 40 years, with a predicted exchanger life at over 15 years

New regulations easily met

With no scaling or heat degradation, inspections become virtually unnecessary

Independent 3rd party destructive testing puts the boiler life at over 40 years, with a predicted exchanger life at over 15 years

New regulations easily met

FIRE TUBE AND CWT ECONOMICSFIRE TUBE AND CWT ECONOMICS

FIRE TUBEFIRE TUBE Low initial capital cost

High cost of operation

Short life cycle (2 - 3 yrs)

High life cycle / maintenance costs

Low initial capital cost

High cost of operation

Short life cycle (2 - 3 yrs)

High life cycle / maintenance costs

CWTCWT Higher initial capital cost

High efficiency ensures low cost of operation

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

Higher initial capital cost

High efficiency ensures low cost of operation

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

ECONOMICS: THE COST OF STATUS QUOECONOMICS: THE COST OF STATUS QUO

Ex: 600 bbl/day oil production, $50/bbl, 24 month fire tube life cycle, 3 day replacement timeEx: 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

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

ECONOMICS: CWT SOLUTIONECONOMICS: 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)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

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

RECAPRECAP

CWT Indirect Heater: Innovative - Safe - EconomicCWT 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

Certified equipment

Safe

Efficient

Durable

Silent

12 month warranty on parts and labour

Low life cycle cost 8% of the fire tube

PAYMENT OPTIONSPAYMENT OPTIONS

385 (equivalent to 500,000 BTU/hr fire tube)385 (equivalent to 500,000 BTU/hr fire tube)

Purchase: $46,000.00

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

Purchase: $46,000.00

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

770 (equivalent to 1,000,000 BTU/hr fire tube)770 (equivalent to 1,000,000 BTU/hr fire tube)

Purchase: $56,000.00

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

Purchase: $56,000.00

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

GRIT INDUSTRIES INC.GRIT INDUSTRIES INC.

Lloydminster Main Office:10-50-1-4 Airport Road NW

Lloydminster, Alberta

T9V 3A5

Canada

1-877-TRY-GRIT (879-4748)

P: (780) 875-5577

F: (780) 808-8415

Lloydminster Main Office:10-50-1-4 Airport Road NW

Lloydminster, Alberta

T9V 3A5

Canada

1-877-TRY-GRIT (879-4748)

P: (780) 875-5577

F: (780) 808-8415

North Battleford PlantP:(306) 445-6695

F: (306) 445-2812

North Battleford PlantP:(306) 445-6695

F: (306) 445-2812