Pipe Wreckers, LLC

Team I Daniel Arnett, Karthik Paga, Dicong Qiu, Matthew Swenson, Abdul Zafar

1 Executive Summary

Journey Pipe Wreckers will be a wholly-owned subsidiary of Moon Wreckers Inc, focusing on developing robotic retrieval units for extrication of objects in cost critical industrial operating environments. Having a clear mission statement and focused teams would aid us in the process of delivering space-grade technology for having a positive social impact.

Value Proposition Pipe Wreckers focuses on addressing the need for extrication technology in pipeline environments where failure is extremely costly. We work with our customers by balancing their adoption of tetherless robotic systems by augmenting the advantages of a tether for retrieval operations. ​ ​ Industry The oil industry relies on pipelines for the cost efficient transport of crude and refined petroleum products. Approximately 2.2 million miles of pipelines in 120 countries support material transport. Long lengths of these pipelines are inspected and cleaned using passive devices known as pipeline inspection gauges (PIGs). While pigging is vital to the proper functioning of a pipeline, they occasionally get stuck inside their pipelines. There are existing risk mitigation strategies, but methods for retrieval of a stuck pig that do not involve the interruption of pipeline flow are lacking.

Customer Our prime customers are large oil and gas companies invested in the process of transport the crude oil and products to and from refineries. Secondary customers include companies transporting different materials, such as ammonia or water.

Product Solution

2 We propose a Robotic Retrieval Unit, R U​ , to remotely and autonomously extricate entrapped objects ​ such as PIGs. To develop the extraction technology, we will first develop a robotic retrieval unit capable of extracting pipe inspection robots from nuclear enrichment pipelines.

Team In the Moon Wreckers team: Karthik Paga, David Qiu, Matt Swenson, Dan Arnett, Abdul Zafar, all Masters of Robotic Systems Development at Carnegie Mellon.

Funding Requirements Alpha-stage funding has been provided by NASA’s Office of Small Business Programs (OSBP) for a related enterprise involving lunar rovers. We are seeking an additional $1,000,000 to develop a fully realized nuclear pipe retrieval robot. We intend to earn or raise an additional $5,000,000 to develop a hydrocarbon pipeline compatible robotic retrieval unit.

2 Market Analysis

US Nuclear Gaseous Diffusion Pipe Market

There are two inactive but intact gaseous diffusion uranium enrichment facilities in the United States: the Paducah Gaseous Diffusion Plant in Paducah, Kentucky, and the Portsmouth Gaseous Diffusion Plant in Piketon, Ohio. The Portsmouth site contains over 15 miles of potentially uranium contaminated piping that the DOE plans to use robotic inspection methods to test for uranium content. The savings for this project at the Portsmouth site are conservatively estimated at over 40 million USD. The Paducah plant is 117% the size of the Portsmouth plant, and savings from the initial deployment of the robotic inspection method are expected to increase as compared to the Portsmouth site.

US Oil Pipeline Market

As per International regulations, oil and gas pipelines have to conduct pigging operations regularly in order to sustain their operations and avoid catastrophic failures. Exceptions do exist in terms of past incompatible designs, but around 60% of the world’s pipelines are piggable.

The United States alone contains over 200,000 miles of crude and refined oil pipelines, which in 2014 moved a collective 16.2 billion barrels of oil. US pipeline mileage grew 9.5% from 2009 to 2014, for a total of 12,028 miles. This is a huge market.

In 1994, a law in the US was passed requiring all new pipelines constructed to be piggable. ​ Pipeline pigging has numerous benefits to the operators of pipelines: ● Cleaning pigs in crude oil pipelines can scrape accumulated paraffin wax off of pipeline walls, increasing flow rate. ● “Intelligent” pigs can collect data on the condition and thickness of pipeline walls, allowing pipeline owners to focus repair and maintenance efforts on problem areas.

Direct numbers on the frequency of stuck pigs difficult to find or does not exist, but the quantity of literature available for dealing with it using conventional methods implies that it is a significant and recurring problem.

According to the US Government’s Pipeline Open Data Standard (PODS), a total of 171 oil and gas pipeline companies1 operate in the US alone. Of these 51% directly constitute (large and small) Pipeline Operators and a strong 49% are provide service for the existing oil and gas pipelines.

The North American region has been incorporated for analysing the market specific to oil and gas pipeline industry. Further data has been incorporated from information available on public domain from organization such as US FERC, US National Association of Manufacturers (NAM), Interstate Natural Gas Association of America (INGAA) and also Worley Parsons company.

1 https://www.pods.org/membership/current-members/ 3

Operating Volumes in the US alone:

From the above table, we infer that in the year of 2014 a sum total of transported oil for commercial, vehicles fuel and industrial purposes is approximately equal to the same received by Electrical Power companies which equals 6.4 Billion barrels of oil.

Next (following page) we record the capacity and geolocation of the some of the major operating pipelines across and within the United States. The capacity of a pipeline is defined as the volume that ​ can be supported or contained in the pipeline. We notice that the those operating from the Gulf of ​ Mexico to the United States and the from the Midwest to the Central US have the highest capacities, 6 Billion and 3 Billion barrels of oil respectively.The capacity of a pipeline is defined as the volume that can be supported or contained in the pipeline

Some of the major operating companies have been listed above. We also notice that operating range of the pipelines has only increased on remained constant over the past three years. This can be attributed to the fact that the design life of a pipeline operating oil is about 60 years. This can be further corroborated with investment and maintenance cost that cre associated with pipelines transporting oil.

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From the above Oil Pipeline Investment pie chart, it can be clearly inferred that a major portion of the pipeline investment is during the initial years for construction and post which the fittings and lining the pipes along with the pumping station equipment make up for about 30% and 20% respectively.

Finally, we note that major portion of the construction include the cost of operation of the labor in hazardous environment (apart from the engineering costs such as surveying and inspection).

Even with such high operating costs and Billions of dollars of investment Oil and Gas companies have recorded a net income of approximately 9.5 Billion and 5 Billion in the year of 2014.

5 Competition Analysis

The direct competition for Pipe Wreckers include conventional and unconventional methods for un-plugging a stuck pig. Conventional methods, such as relaying pipelines, dissect the stuck regions (in case pigs with trackers), higher differential pressure adoption and injecting a secondary pig, are being continuously adopted by traditional service providers. Unconventional methods have been surfacing since the last 5 years, such as ice-plugging2 and delivering pressure pulses high in energy & volume into the pipeline3, owing to greater mileage in pipeline construction and operation impetus.

Considering that we have identified that our proposed product has a first mover advantage instead of ​ ​ performing a traditional competition analysis, we include our analysis and prediction on one of most ​ likely competitor based on current trends in services/ products offered.

Tube Tech International4 has been operating since 25 years and specializes cleaning and inspection methodologies for recovering performance from fouled oil and gas, refinery and petrochemical ​ assets. It a privately-held company founded in 1988 in Rayleigh, Essex. It’s clients have included HOLLYFRONTIER, TEXACO, SAUDI ARAMCO, EXXON MOBIL, CHEVRON, OMAN LNG, TOTAL, QATAR Petroleum. Recently, Tube Tech demonstrated techniques for subsea pipeline challenges by ‘hot tapping’ (connecting to an existing pipeline without interrupting pipeline flow) into a pressurised system using just two access points and removing the pig via a less known drilling method with the operation lasting a week, including cleaning the remainder of the line to production standard using a variety of cleaning heads to suit heavy scale and other fouling characteristics.

TD WIlliamson Offshore Services5 delivers safe integrity solutions for subsea pipeline work, including ​ a major focus on developing new innovations to deal with challenging pipeline blockages. TDW is large company established in 1920 in Oklahoma. The company has been providing solution for hot tapping and plugging, pipeline cleaning, geometry and MFL inspection, pigging, and non-tethered plugging pig technology services for any pressurized pipeline system. The company’s SmartPlug isolation plug modules have been used in conjunction with its remotely-operated SmartTrack tracking and pressure-monitoring system, for example in the removal of an object or blockage, or replacement of a faulty shutdown valve (SDV).

Suez Water Advanced Solutions6 is a French MNC, owned by Utility Services Group a 120 year old water and waste management service provider, with operations primarily in water, electricity and natural gas supply, and waste management. Countering the conventional low cost foam pigs which risk

2 https://www.ice-pigging.com/en/applications/3/oil-gas-pipe-cleaning 3 http://www.offshore-technology.com/features/featuresmart-solutions-for-subsea-pipeline-blockages/ 4 https://www.tubetech.com/services/pipe-pipeline/ 5 http://www.tdwilliamson.com/company/about-us 6 https://www.utilityservice.com/suez.html 6 getting stuck, the company introduced ice-pigging7 for use in pipeline where the topology limits the use of a solid pig. They claim “Ice Pigging is capable of navigating bends, changes in diameter, butterfly ​ valves, and obstructions that may otherwise render the pipe work unpiggable.” Such Ice pigs are relatively very long compared to solid pigs and work by gradual removal of the contaminant. The method is being claimed to be effective for pipes of length 5 to 10 km and best suited for shorter distances with greatest flexibility for adapting to varying pipe diameters 50 mm to 700mm. Ice pigs are typically 500m in length, operated by pressurized water along the pipeline.

Paradigm Group’s Paradigm Flow Services has been operating since 2010, a relatively small ​ company with headquarters in Scotland. PFS has been working on their new technology Pipe-PulseTM ​ and Pro-PulseTM - non-intrusive methods for clearing blockage in subsea pipelines. Claiming that the ​ “pulse (controlled pressure wave transmitted through the oil) would slow down/prevent ​ altogether the deposition of wax without effecting flow rate and can be deployed from the host asset.” According to their recent case study8 on the detection and removal of stuck pigs “Pipe-Pulse quickly removed the stuck pig and 10 tons of wax, with no requirement for site excavation works, enabling pipeline to resume operations. Within 12 hours of pulsing, sufficient blockage adhesive breakthrough was achieved, enabling the pig and entrained wax to be mobilised approx. 25 km to the receiver.”

7 https://www.ice-pigging.com/en/applications/3/oil-gas-pipe-cleaning 8 http://www.paradigm.eu/flow/assets/pipe-pulse_find-block-detect-and-remove-stuck-pig.pdf 7 Products and Services

Product #1: Nuclear Pipe Retrieval Robot

Target User: DOE and Fluor Corporation ​ Context: One of the first methods for refinement of weapons grade uranium from naturally occurring ore was gaseous diffusion, in which uranium hexafluoride was pumped through an extremely long series of membrane filled pipes until a significant portion of U238 had been removed. This method was discontinued after the advent of centrifugal enrichment, leaving tens of miles of irradiated piping per plant in decaying buildings. However, not all sections of all pipes are irradiated enough to be considered nuclear waste by the DOE. Nuclear waste disposal is significantly more costly than standard waste disposal, so properly identifying which sections of pipe are too irradiated is important. This process is extremely time consuming and expensive to do manually, and a robotic solution is being developed by CMU.

Pain Points The robotic solution cannot be allowed to fail and remain in the pipes, but adding a tether increases cost, complexity, and the total amount of contaminated material to dispose of at the end of the project for an unlikely eventuality.

Product Our product is a small, tethered, teleoperated robot capable of driving through pipes as narrow as 8” in diameter and latching on to the end of the nuclear pipe inspection robots. The robot tether is attached to a high powered winch that can extract both robots from whatever obstacle is impeding them.

Service Our billing model for this service would essentially be a retainer fee. After being paid to develop the product, we would provide and assist in the operation of the retrieval robot whenever a pipe inspection robot became entrapped, potentially billing extra for unplanned deployment expenses.

Benefits Our product allows the DOE and Fluor to safely use a cheaper and more effective robotic solution than they otherwise would be able to. We provide physical insurance that the product they want works the way they want it to.

Pricing

Initial Development Fee $1,000,000

Additional structure fee $1,000,000 + Per deployment costs

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Product #2: PIG Puller

Target User: Fluor Corporation ​ We will leverage our relationships with Fluor Corporation to expand into supporting their pipeline business, but our target customers are any large pipeline installer or maintainer.

Context: Hydrocarbon pipelines require constant maintenance and cleaning to deal with the buildup of paraffin wax and other contaminants that can restrict the flow of product in a pipeline. The clearing of these buildups (and internal pipeline inspection) is accomplished via “pigging”: using a passive plug slightly wider than the diameter of the pipe forced through by the pipeline’s own pressure to scrape the sides.

Pain Points PIGs get stuck on a frequent basis, and it is often extremely difficult to find where they are, or dislodge them. While they are stuck, PIGs can reduce or even stop flow of product in the pipeline. Removing them can sometimes entail reversal of flow in the pipeline, or even cutting open the pipeline directly to pull it out. Any of these scenarios can easily cost tens of millions of dollars for an oil pipeline operator.

Product Our product is a sealed robot capable of travelling through pipelines, latching onto PIGs, and forcing them through their current obstructions or pulling them backward out to a retrieval point.

Service Fundamentally, our service involves using our PIG Puller to noninvasively and robustly retrieve stuck PIGs from pipelines for a per service fee. As our customer base and financial capability improves, we will expand our product offerings to a “rapid response” service where pipeline companies pay an annual fee in exchange for a guaranteed 12, 24, or 36 hour response time.

Benefits Our product allows pipeline companies to recover stuck PIGs faster and with significantly less expense and interruption to their normal operating procedure for less cost than traditionally available techniques.

Pricing

Use-based Service Fee $500,000 + Impact/Severity

Annual Subscription Fee $5,000,000 + Additional costs by location of pipeline.

9 Go-to-Market Strategy

To reach market we will start by delivering on our first government contract in spring, 2018. This will provide funding to develop early prototypes capable of extricating entrapped pipe-crawler systems. Due to the different sizes of pipes we project that the pipe-crawler systems to be under development and reiteration for another 5 years.

With each new pipe-crawler system we could propose corresponding rescue systems capable of extricating the pipe-crawler in the event it becomes entrapped. Developing systems to rescue pipe-crawlers will provide a steady source of early funding as well as experience developing systems used in the real world, on a smaller scale than those used by the oil and gas industries.

Beyond the nuclear cleanup operations we will network with our connections at Fluor. We will need to build or gain access to analogous pipelines and PIGs to test and develop our first PIG extrication system. Once a system can be demonstrated to successfully extricate a stuck PIG, we will propose contracts to early adopters.

10 Operations Roadmap

Figure: operations roadmap

Initial Startup Phase The Pipe Wreckers Company already received an initial fund from a government contract on safeguarding the autonomous robotic inspection on nuclear pipes. Our primary focus during the initial startup phase, i.e. the year 2018 to 2019, is the research and development (R&D) of our minimum viable product (MVP) for the this contract. Agile development is applied to the process of developing our first product, so we will have a close relationship with our sponsors during the development and after the delivery of the initial version. As for the technological focus, we will emphasize revalent technologies that facilitate the purpose of autonomously extricating stuck nuclear pipe inspection robots from highly radio-active nuclear pipes, namely

● Autonomous Robot Localization and Navigation in Pipes, which will be different from most of the state-of-the-art robot localization and navigation technologies, because the distinctive setup of the pipeline environment; 2 ● Autonomous Docking, which endows the R U​ with the capability of capturing a stuck robot ​ inside a pipe.

We are also going to recruit our engineering team during the initial startup phase, which is crucial to meet the incoming rapid growth and accumulation of technology by implementing a feasible solution to safeguarding the nuclear pipe inspection robots. The recruitment of the service group follows as a preparation for entering the industrial markets.

Entry to Major Market (Industrial Applications) Industrial applications, especially those for the oil pipelines, will become our major market, which shall contribute to over 90% of the revenue during the company growth period. In the oil industry, pipeline systems require routine inspection and cleaning, where PIGs (pipeline inspection gauges) are used to perform these two tasks. But these instruments can get stuck in a pipe, which happens frequently leading to a loss of million dollars per day if the situation has not been mitigated.

11 With the technologies, talents, service and operational experience gained during the initial startup 2 phase, proper modification and customization of our product, the Robotics Retrieval Units (R U​ ), will ​ lead our company to the application of extricating those entrapped PIGs in the oil pipeline system, helping oil companies to save millions of potential loss per day whenever PIG entrapment happens. By providing services to the oil industry, the use based service fees or annual service subscription fees are expected to constitute a majority of our annual revenue as we explore the oil industrial market.

Besides the oil industry, there exist a considerable number of industries that also use pipeline systems, such as the natural gas industry. The entry to these markets will follow after that to the oil industry, bringing a secondary contribution to our revenue.

Growth and Maturity The expectation is that the revenue contribution from industrial market will gradually replace that from government contracts. As the domestic market has been developed, we will start our global expansion to other countries from 2024, providing safeguard to pipeline systems. A year after delivering the global expansion strategy is an appropriate time to start our initial public offering (IPO) and transform the Pipe Wreckers Company from a private company to a public one, so as to welcome the rapid growth period of our company form 2025 to 2030. Ater 2031, the PIGs extrication market is expected to become saturated gradually, which also signifies the maturity of our company.

12 Team and Organization

Organizational Structure PWC will have 3 main divisions: research and development (R&D) division, customer support division, and sales division.

● The R&D division will develop new technologies and build prototypes in the laboratory, also perform necessary testing and quality assurance. They will investigate new application scenarios, and then design and conduct experiments to determine if the new prototype design can fulfill the use case. They will work with the customer support and sales teams to generate new products that fulfill the customers’ needs.

● The customer support division will serve as a team that helps customers deploy and install the device, perform on-field assistance to address the instant needs of the customers, and collection feedback from the customers to send to the R&D division, so as to improve the product. This is the team that will keep in touch with the customers in routine, and provides immediate help to the customers.

● The sales division will seek out new customers and new industries for our products and services, and maintains existing customer relationships. They will find potential customers that can extend our existing technology and introduce it to new application scenarios as well as customers for whom PWC can develop new solutions to outstanding problems.

PWC will cultivate entrapped objects extrication technology and knowledge within different teams to ensure that the company maintains sufficient talent pools.

Legal Structure The company will be structured as a Limited Liability Company, and also as a subsidiary of the Moon Wreckers, Inc. This will reduce the complexity of the company’s management while maintaining protections for the owners. The five owners of the company are Daniel Arnett, Karthik Paga, Dicong Qiu, Matthew Swanson, and Abdul Zafar.

13 Personnel Initially, most of the roles in the company will be fulfilled by the company owners. After we make some majority progress on our MVP for the nuclear pipe project, we shall start recruiting more engineers, and the service and sales group follows. The initial engineer team shall be less than 10 persons and the initial service and sales group shall be less than 3 persons, during the first two years.

The roles for each person are listed below:

Daniel Arnett - CEO, sales, and customer relations Karthik Paga - Lead electrical engineer, hardware systems engineering Dicong Qiu - Lead software engineer, software architect Matthew Swenson - Project Manager, structural designer Abdul Zafar - Lead test engineer, lab, and equipment manager

As the company grows, we will need to expand the divisions. We will start to hire for the following positions after one year:

● Research & Development Engineers ● Test Engineers ● Technicians/Interns ● System Engineering ● Product Managers ● Service Engineers

After two years, we will start to hire for the following positions:

● Chief Financial Officer ● Chief Technology Officer ● Production Leads ● Marketing/Sales/Customer Relationship Associates ● Lobbyists

After three years, we will start to hire for the following positions:

● Product/Project Managers ● Senior Engineers

14 Financial Projections

Revenue Model As mentioned in the market strategy and operations roadmap, the initial fund comes from a government contract. This startup fund contributes to the first half million dollars to begin the R&D of our project. The following service fees of this project and those from more incoming government contracts are projected to help our company go through the technological growth period from 2019.

Figure: revenue model

The entry to the industrial market begins in about 2020 or 2021, around the revenue peak from government contracts by about 7.5 million dollars annually. During 2020 to 2025, the government contracts revenue still contributes to the majority of the revenue constitution, but the revenue components from oil pipeline and other pipeline industries shall gradually grow and finally replace the government contracts to become the major revenue components.

Based on the market analysis, the projections for the revenue after the company matures are around 24 million dollars and 12.5 million dollars from oil pipeline industry and other pipeline industries, respectively. At that point, it is expected that we will not invest on government contracts or projects anymore.

15 Profit Model To analyze the profit scale of the Pipe Wreckers Company (PWC) in long run, it is necessary to understand the cost or investment projections. The cost mainly comes from research and development 2 (R&D) investment and product prototyping. The individual cost to manufacture a R U​ is estimated at ​ around $5,000 to $20,000.

During the initial fund (MVP development) and technological growth periods, the PWC will invest intensively on developing its technology and accumulating IPs, so as to prepare for the entry to industrial market. During the period around the first investment peak, a negative profit curve is expected. We may compensate the negative profits by loan or external investments to our company.

Figure: profit model

After entering to the industrial market, the investment to R&D during 2022 shall decrease to create a nice profit curve so as to meet the IPO, after which the R&D investment will increase again for the variety development of different industries and continuous improvement. From 2022 to 2027, a profit plateau is expected by gaining around 5 million dollars of profit per year. In 2028, the middle of the company growth phase, a rapid growth in profit is projected, since the second peak of R&D investment and operational cost is met, and the technologies of the PWC shall become matured, so the R&D cost will rapidly decrease and only the inevitable operational cost will remain. And an annual profit of over 25 million dollars is estimated after the maturity of the PWC.

16 References

[1] 'Pigs' play crucial role in pipeline maintenance ​ [2] Pipeline Consulting & Applications ​ [3] David Wint, difficult to pig pipelines ​ [4] http://www.pipeline-research.com/wp-content/uploads/2015/11/WhyStuck.pdf ​ [5] https://www.npr.org/templates/story/story.php?storyId=5627707 ​ [6] http://www.pipedata.net/store/books/Book04/Book04_TOC.pdf ​ [7] New techonology revolutionises gas pipeline checks ​ [8] http://www.tdwilliamson.com/SolutionsEngine?condition=99&industry=9 ​ [9] http://www.wmsym.org/archives/2012/panels/079-156.pdf ​ [10] World Nuclear Power Plants in Operation ​ [11] https://www.nei.org/Knowledge-Center/Nuclear-Statistics/World-Statistics ​ [12] https://www.researchandmarkets.com/research/kd86ks/intelligent ​ [13] https://en.wikipedia.org/wiki/Pipeline_transport#Oil_and_natural_gas ​ [14] http://www.aopl.org/pipeline-basics/about-pipelines/ ​

17 Appendix I - Tables and Charts

Market Penetration (courtesy of Worley Parsons company)

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Capacity of pipelines operating in the US alone:-

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Consolidated List of Major Oil and Gas pipelines operating in the US and their capacities in Million cubic feet per day ​ ​

9 Million cubic feet per day (MMcf/d)

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Thus we can safely conclude that companies operating Oil and Gas pipelines look out for a first mover advantage and tend to take higher risks in incorporating latest technology for improving their revenues, reducing maintenance cost and most important of all reducing downtime (both scheduled and unscheduled).

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