BHP Billiton - The New Era of Shale

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BHP Billiton - The New Era of Shale

  1. 1. Contents | Zoom in | Zoom out For navigation instructions please click here Search Issue | Next Page The New Era of Shale BHP Billiton Petroleum SUPPLEMENT TO ®Contents | Zoom in | Zoom out For navigation instructions please click here Search Issue | Next Page
  2. 2. qM qMPrevious Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® Contents 2 The Company 4 Operating Principles 6 The Growth of U.S. Onshore Oil and Gas 10 Building the Wells 12 The Move into Shale 14 The Eagle Ford Shale 22 The Permian Basin 26 The Haynesville Shale 30 The Fayetteville Shale 34 Zero Harm 36 Good Neighbors 38 Avoiding Potential Roadblocks 40 Company Profiles qM qMPrevious Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  3. 3. qM qMPrevious Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® “Every time we look at the opportunities in our shale oil and gas plays, they get larger. MIKE YEAGER CHIEF EXECUTIVE BHP BILLITON PETROLEUM We know the resources are there. Our job is to deliver them safely and in an environmentally responsible way. We are in this business for the long haul, and we are going to do it right.” qM qMPrevious Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  4. 4. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®2 BHP BillitonThe CompanyHouston-based BHP Billiton Petroleumdelivers nearly one fourth of the annual earningsof the BHP Billiton Group.BHP Billion Petroleum’s exploration, development, Philippines, India, and Malaysia. Between 2007 andproduction, and marketing activities span more than 2011, BHP Billiton Petroleum brought five world-classa dozen countries. The company holds significant developments on stream.positions in the deepwater Gulf of Mexico andonshore United States as well as in Australia, the The company entered the onshore shale business with the $4.75 billion Fayetteville Shale acquisition in April, 2011, but that wasUnited Kingdom, Algeria, Trinidad and Tobago, and just the first step. It strengthened its U.S. onshore position later inPakistan. It also has promising prospects in the the year through the $15 billion acquisition of Petrohawk EnergyBHP Billiton Petroleum’s Seismic Processing and Imaging Team has numerous technology projects with research institutions around the world. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  5. 5. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 3BHP Billiton Petroleum’s Shenzi deepwater platform in the Gulf of Mexico began production in 2009.Corporation, which gave it major stakes in the Haynesville, Eagle BHP Billiton Petroleum has close to 4,000 employees globally,Ford, and Permian basins to complement its Fayetteville position. and is deeply committed to their safety. The company has theSince then, the U.S. onshore workforce has doubled. BHP Billiton systems in place to ensure its employees return home unharmedPetroleum operates some 45 land drilling rigs in the United States in at the end of the day, and it continually strives to improve itsaddition to its deepwater drilling around the world. sterling safety performance.BHP Billiton Petroleum is now among the largest independent As a global producer, exporter, and consumer of energy, BHP Billitonoil and gas companies in terms of both its total production and understands the need to conserve energy and the risks of climateresource base. Its shale assets in North America are some of the change. Since 2006, it has achieved an 16 percent reduction inmost valuable, high-quality resources in the world. greenhouse gas emissions per volume of production, exceeding its public target of a six percent reduction by 2012.The company’s business is built on a powerful platform ofrigorous safety standards, high quality oil and gas resources,functional excellence, operating discipline, and financial strength.It has the people and skills to take on complicated and diverseopportunities, and the flexibility to move quickly to deliver valuein any environment. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  6. 6. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®4 BHP BillitonOperating PrinciplesThese five basic operating principles shape everythingBHP Billiton Petroleum does as a company and serveas its pledge to local communities.1. To be the safest company in the industry We are committed to restoring the environment when we complete our operations to ensure it is We carefully develop and rigorously implement safety as healthy and robust as before we arrived. and operating systems, properly train our people, and will not compromise our behavioral standards. 3. We will safeguard and manage water resources We only work with contractors who share our commitment to safety. We minimize our impact on fresh water by utilizing alternate sources wherever possible. We partner with local communities to prepare them to respond to unplanned events. We do not dispose wastewater into any surface source (streams, lakes, rivers).2. We will protect the land where we operate We do not drill or conduct hydraulic fracturing operations unless we are confident that groundwater will be protected. We install and operate our wells and facilities in the most environmentally sensitive manner. 4. We will minimize air emissions from our We look for opportunities to drill multiple wells from a single pad to reduce the size of our surface footprint. operations We conduct environmental assessments prior to We conduct our operations in a manner the execution of work to properly plan for and that minimizes flaring and venting. minimize the impacts of our operations. We use alternative or cleaner-fuel source technologies. We have one of the most modern and operationally efficient drilling fleets in the onshore industry. 5. We will be a good neighbor to our communities We look for ways to make our operations less intrusive to the community. We publicly disclose the chemicals that are used in our hydraulic fracturing operations. We work with state and local officials to find workable solutions to common industry problems. We give back to the community in a meaningful way through social investment and partnerships. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  7. 7. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 5Safety is BHP Billiton Petroleum’s primary concern. The companyrecognizes that the business of finding, extracting, and deliveringhydrocarbons is full of potential hazards, and its commitment tothe safety of its employees and contractors is one reason that,statistically, they are less likely to be injured at work than they arein their own homes.Every employee and contractor, no matter what their position, hasthe right and obligation to speak up if they have doubts about anyactivity. If they can’t be certain of the task at hand, they are requiredto either stop the job or do whatever it takes to ensure their ownsafety and that of those around them.Is the approach working? Yes. In its U.S. onshore operations, manyof the safety standards established by BHP Billiton Petroleumhave improved not only its own safety performance, but that of itscontractors and other operators as well. Eagle Ford Drilling and Completions Manager Michael Bloom prepares a group of journalists for a drillling rig site visit. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  8. 8. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®6 BHP BillitonThe Growth of U.S.Onshore Oil and GasIt’s no secret that recent advances in hydraulicfracturing and well completion are opening vastnew oil and gas resources. The biggest fields byfar are in North America. An increasing portion of BHP Billion Petroleum’s North American portfolio consists of what are known as unconventional oil and gas plays. While shale oil and shale gas are considered unconventional resources, the term refers only to the source rock, not the high-value liquids and natural gas that come from it. Two basins in particular, the Eagle Ford and the Permian, account for about 40 percent of all the unconventional oil and gas activity in the United States. What are shale and tight gas reservoirs? In conventional reservoirs, hydrocarbon molecules are able to squeeze between the grains of relatively porous rock. Above that porous zone, however, there must be what geologists call a “trap” or “seal” to keep the oil and natural gas from migrating all the way to the surface. Shale reservoirs are different. Shale and other “tight” reservoirs don’t need traps and seals, because the source rock itself is the trap. Hydrocarbons are caught within pore spaces that are significantly smaller and more restrictive, and are also absorbed onto the clay mineral particles that make up the shale. The only way hydrocarbon molecules can move around is through natural and artificial cracks. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  9. 9. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 7A matter of scaleOne of the biggest differences in shale oiland gas fields is the large number of wellsneeded to extract the resource. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  10. 10. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®8 BHP BillitonAn abundance of opportunity exists in shale in the lower 48 states.Source: Energy Information Administration based on data from various published studies. Updated: May 9, 2011.Geologists have long been aware of the oil and gas contained in out the small operators and forcing changes within the industry.shale, but didn’t have a way to recover it economically. That changed That’s nothing new in the oil and gas business. What’s importanton a significat scale in the mid-2000s, thanks to improvements in a to remember is that discovering, producing, and delivering50-year-old technology known as hydraulic fracturing, or “fracing” hydrocarbons is a long-term venture. Fields take years, evenfor short. Fracing uses water pressure to create networks of tiny decades, to develop. The wells being drilled now will be productivecracks in the rock. To hold them open, sand and minute amounts of for at least the next 30 years.a gel-like thickener are added to the water. At the end of 2012, the company’s onshore holdings stood at 1.6But what about market changes? million acres. Since it will take 20 years just to develop the shale resources it knows are in the ground, the fields themselves will beAfter BHP Billiton Petroleum acquired a stake in the U.S. shale active for at least the next 50 years. Few industries have lead timesoil and gas industry, the price of natural gas in the United States as long as this, or capital expenditures as large.dropped to the lowest level in years. Such low prices are squeezing qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  11. 11. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 9The drillers control room, known in the industry as the “dog house,” on one of BPH Billiton Petroleum’s brand new Eagle Ford rigs built tocompany specifications.Supply and demand drives the market. While the United States now What about liquids production?has an oversupply of natural gas, Europe and Asia do not. Thatwill likely change in the next few years as more liquefied natural By the end of 2012, BHP Billiton Petroleum’s onshore fieldsgas (LNG) receiving terminals in the United States are converted to were delivering 270,000 barrels of oil equivalent per day to U.S.export terminals. When it becomes relatively easy to export natural customers. The hydrocarbons are a mix of oil, natural gas, andgas, world prices should be more uniform. natural gas liquids in the current market, the liquids sell for more than dry gas. Since many of the company’s onshore fields haveOther factors are changing the market as well. Low prices are the capacity to produce more than 50 percent liquids, it has theencouraging some electric power producers to shift from coal to gas, flexibility to leave the dry gas in the ground for now and keep itsand chemical plants are increasing capacity to take advantage of the crews and equipment busy producing more liquids, including cruderelatively low cost of natural gas liquids. The demand for natural gas oil, which continues to sell at strong prices.and natural gas liquids is certain to grow in the United States, thelargest and most mature market in the world. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  12. 12. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®10 BHP BillitonBuilding the Wells At the surface After geologists and reservoir engineers determine where the wells should be, crews level the site, construct a lease road, erect the drilling rig, and place support facilities on the pad. For efficiency, and to minimize disturbance at the surface, BHP Billiton Petroleum typically drills and completes several wells from a single pad, directing each wellbore to a different part of the target zone. When the wells are to be hydraulically fractured, an array of large trucks, pumps, storage units, and control systems will be brought in for several days. Once all the wells are completed, the perimeter of the site is restored as close as possible to its original condition, leaving only a minimal surface footprint. Surface drilling and casing Drillers start a new well by drilling a hole to a depth of approximately 80-100 feet, and installing a large-diameter pipe called a conductor casing, which is then cemented in place. Protecting the water table Once the conductor casing is set, drilling continues to a depth that state regulatory agencies determine is well below the level of any fresh ground water. The heavy pipe called surface casing is then installed and cemented in place by pumping cement down the pipe. The cement circulates to the bottom of the surface casing and rises back to the surface on the outside of the casing, forming another layer of protection and strength. Horizontal drilling Shale wells are usually completed with a horizontal section. As the wellbore continues downward and it approaches the target shale, drilling engineers guide the drill bit, curving the borehole until its path is horizontal or nearly so. The finished hole may run horizontally for a mile or more through the hydrocarbon-rich layers of rock. Production Casing The drilling phase is finished after drillers install and cement an additional set of piping from the bottom of the well all the way back to the surface, forming yet another barrier between the rock and the inside of the well. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  13. 13. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 11 Manufacturing wells In most shale fields, operations continue around the clock. Depending on the reservoir, wells typically take 10-20 days to drill. BHP Billiton Petroleum drills several wells from each pad in a manufacturing-like process.Perforating Hydraulic FracturingIn a critical part of the completion phase, portions of the production Because shale is too dense for hydrocarbons to flow through itcasing are perforated by a series of small explosive charges, creating on their own, the wells are stimulated by pumping in fluid—holes that are about an inch in diameter and extend as far as usually water and thickeners—and sand under very high pressure.18 inches into the surrounding rock. These perforations provide a Downhole, the fluids push out through the perforations into theconduit for fluid and sand to be pumped into the reservoir during the rock formation. The pressure is great enough to break the rock andfracing stage, and afterward allow hydrocarbons into the wellbore release hydrocarbon molecules from microscopic voids in the shale.so they can flow or be pumped to the surface. The sand, called proppant, holds the fractures open so the fluids can flow into the wellbore and to the surface. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  14. 14. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®12 BHP BillitonThe Move into ShaleThrough purchases in 2011,BHP Billiton Petroleum acquired majorpositions in four of the largest onshore oiland gas fields in the United States.Two of the assets are what the industry calls liquid- People know usrich, which means the hydrocarbons they produce BHP Billiton Petroleum’s onshore acreage in the United States liesare largely oil and natural gas liquids, as opposed in regions where people have a long history in the oil and gasto dry gas. In some areas, the proportion of total business and the industry is an important part of the economy.liquids production is as high as 80 percent. The At the end of 2012, the company was producing 270,000 barrels ofcompany’s holdings in shale basins across Texas, oil equivalent per day from these onshore fields. That number will grow throughout 2013, driven by more than $4 billion in drillingLouisiana, and Arkansas contain some 8.0 billion and completion and facility development.barrels of oil equivalent, a U.S. domestic resourcethat we will be producing over the next 50 years. Using local contractors, BHP Billiton Petroleum is building the infrastructure to bring valuable gas and liquids to market. In 2012, it installed some 140 miles of new pipeline in the Eagle Ford and Permian shales, and is building another 200 miles of pipeline in 2013. Over the next few years, the company will add six new processing plants and lay about 800 miles of pipeline in the Eagle Ford alone. Development in the Permian includes some 600 miles of pipeline, as well as gas dehydration, compression, and cryogenic facilities. These large, long-life, and low-cost assets hold tremendous volumes, with potential for significant future development. Together, they make BHP Billiton Petroleum one of the industry leaders in some of the most productive shale basins in the United States. BHP Billiton Petroleum’s size and scale give it the flexibility to respond to market conditions. In financial year 2012, the company adjusted its shale development plans to focus on oil rather than gas, while maintaining its capability to ramp up in the future when natural gas prices rebound.A diversified portfolio of onshore oil and gas opportunities providesextraordinary flexibility to respond to changes in the market. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  15. 15. qM qMPrevious Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billi on 13 BHP Billiton 13 P Billiton ll n Home-grown energy BHP Billiton Petroleum works closely with landowners to minimize its footprint. Shale proving to be an economic boon to the U.S. – 1.75 million jobs created in past few years. – New jobs expected to grow to 3 million in 2020. – $2.5 trillion in government revenue by 2035. – Nearly 2% of U.S. GDP over next three years. Source: U.S. Chamber of Commerce qM qMPrevious Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  16. 16. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®14 BHP BillitonThe Eagle Ford ShaleHydrocarbons in economic quantities werediscovered in the Eagle Ford shale in 2008.Since then, the region has become the epicenterof shale operations in Texas, and one of thepremiere plays in North America. The Eagle Ford spans more than 400 miles of south-central Texas. The heart of the play is about 50 miles wide and has an average thickness of 250 feet. It is a giant resource that will be productive for many years to come. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  17. 17. qM qMPrevious Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 15 qM qMPrevious Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  18. 18. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®16 BHP Billiton BHP Billiton Petroleum’s average hydrocarbon production from the Eagle Ford, which includes the Black Hawk and Hawkville fields, is over 50 percent liquid hydrocarbons. With an attractive product mix of condensate and natural gas liquids, the Eagle Ford Shale is rated among the lowest cost plays in North America. As a result, the economics of dry gas have much less effect on company activities. “The rigs are working flat-out,” says Eagle Ford Production Unit Manager Steve Pastor. “Our success is due in part to the fact that we’re in the sweet spot of the basin. Geologically, it is among the best of the best.” According to a study by the independent research and consulting group, Wood Mackenzie, BHP Billiton Petroleum has the second most valuable position in the Eagle Ford.The Eagle Ford includes a vast rural area of south-central Texas.Hydraulic fracturing at night in the Eagle Ford Shale. Drilling and completions operations run non-stop, lessening America’s dependence onforeign oil and gas. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  19. 19. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 17The field produces three products. First is the crude oil andcondensate, which is a high-value lighter form of crude oil. Nextis dry gas, which can often go straight into interstate pipelines BHP Billiton Petroleum’sand be sold directly into the market. Between the two are natural Technology Goalsgas liquids—ethane, propane, butane, and pentane—which are • Model and understand production complexitiestypically separated out in gas processing plants. associated with nano-permeability reservoirsIn 2012, BHP Billiton Petroleum produced nearly 100,000 barrels ofoil equivalent per day from the Eagle Ford Shale, with half of that • Lead the industry in the development of staticbeing hydrocarbon liquids and the rest, dry gas. In the next few and dynamic shale reservoir modelsyears, the company aims to produce 300,000 barrels equivalent perday from the Eagle Ford. Six new processing plants will be needed to • Improve hydraulic fracturing efficiency,handle the volumes. BHP Billiton Petroleum will be adding 800 miles development planning, and ultimate energyof pipeline, and has already spent more than a billion dollars on the recoveryinfrastructure. • Identify, assess, and implement breakthroughReservoir modeling technologyCommercial amounts of hydrocarbons were discovered in the EagleFord Shale in 2008. The region has since seen an extraordinaryamount of development as one of the premiere shale plays inNorth America. What BHP Billiton Petroleum brings to the tableis financial strength and technical depth to make the most of thisoutstanding resource.“If we can unlock the secrets of the Eagle Ford, we can apply that technology elsewhere around the world.” Vice President of Development Planning Rob Kase. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  20. 20. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®18 BHP Billiton“We are now working on dynamic reservoir models of the field,”says Rob Kase, Vice President of Development Planning. “That’swhat we do for conventional reservoirs, but it has never been donein a shale like the Eagle Ford. “Reservoir models are computer-based simulations of a field’sgeology. Specialists construct them using seismic data andinformation from wells. Dynamic 3D models help engineers andgeoscientists predict how fluids will move through a reservoir.Accurate models help them plan the location of new wells anddevelop strategies for enhancing recovery.The reason no one has created a dynamic model for a shale reservoiris that the permeability of the rock is so much less than it is in aconventional oil and gas reservoir. The rock is so “tight” that someof the parameters geoscientists would use to model a conventional Eagle Ford Production Unit Manager Steve Pastor (left) with Eaglereservoir just don’t apply. Ford HSEC Supervisor Harry Barnes.“The conventional approach is difficult to use in the Eagle Ford,”Kase says. “In a well-connected reservoir with higher permeability,you can calculate the flow or drainage rate based on the reservoir not a strong correlation between the characteristics of the reservoirparameters. Here, because the rock is so dense and varied, it creates and how much production you can expect from the wells.a significant challenge.” “Shale gas recovery factors generally run in the mid to high teens,The flow rate from a single well, for example, can be deceiving. The and oil recovery factors between five and seven percent,” Kasefluids might be entering the well at a uniform rate throughout the says. “If we can build a dynamic reservoir model for the Eagle Ford,length of the completion zone, or the majority of the fluids might be I believe we can improve recoveries significantly. This will have acoming from a narrow zone that just happens to have more natural significant impact on not only production rates, but the value of thefractures in the rock. Without a good model of the reservoir, there is asset. The really big prize, however—if we can unlock the secrets qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  21. 21. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 19 in revenue, created 38,000 full-time jobs, and added $211 million to local government revenues in south-central Texas. Today, communities in the 14 counties that make up the Eagle Ford are building new schools and hospitals and launching training programs to help people realize the benefits of shale oil and gas development in the regions surrounding their communities. The study projects that up to 116,000 full-time jobs will be created by 2021. Water in an arid land The Eagle Ford has no surface water to speak of. Much of the area is quite arid, but there is a world-class aquifer that has an immense volume of fresh water in a porous sandstone that is 400 to 500 feet thick. The problem is, the water is extraordinarily deep. While most freshwater aquifers are no more than 400 feet below the surface, one has to drill much deeper down to reach this one. Cities can afford to get their water from this source, but many ranchers and farmers can’t.BHP Billiton Petroleum Chief Executive J. Michael Yeager (left) on avisit to the Eagle Ford.of the Eagle Ford—will be the ability to apply that technologyelsewhere around the world.”Adjusting to the marketLow natural gas prices in the United States have caused dramaticshifts in the way producing companies manage their fields. Suchcycles, driven by supply and demand, have been the nature of thepetroleum industry since 1859.In BHP Billiton Petroleum’s case, it has shifted assets to producemore hydrocarbon liquids and less dry gas. Since the Eagle Ford andPermian are its most liquids-rich fields, they are getting the mostattention. Near the end of 2012, the company was running 8 rigs inthe Permian Basin and 30 in the Eagle Ford.A new fleet of drilling rigs, most of them purpose-built for workingin shale, are now being delivered from fabrication yards on the TexasGulf Coast. Several units are already in service and the rest will be inthe field by mid-2013. By then, all 45 BHP Billiton Petroleum drillingrigs will be the safest, cleanest, and most energy-efficient in the field.A boost for local communitiesExploration, development, and production in the Eagle Ford Shalehas contributed to the economic revitalization of the region. To get enough water for drilling and hydraulic fracturing, we haveAccording to a 2012 study by the University of Texas at San Antonio, drilled a number of fresh water wells and turned them over tothe shale gas projects in 2011 alone generated just under $20 billion private landowners. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  22. 22. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®20 BHP BillitonTo get the water needed for drilling and fracing wells in the are typically used for drilling only one or two wells on a pad. ThatHawkville area of the Eagle Ford, BHP Billiton Petroleum is drilling equipment is easier to move from one site to another. The skidderthese extra-deep water wells and turning them over to private rigs are designed to drill multiple wells on a pad. They are morelandowners in exchange for a share of the water. That gives it complex because they include a skidding system that allows thethe water it needs, and the property owners are happy to have a derrick to move quickly from one well to the next.”reliable source of fresh water. How much is needed? The amountof water needed per well for hydraulic fracturing varies from one If the idea is to drill appraisal wells, as is done in the Permian, thenfield to the next, but three to five million gallons is a ballpark figure. the rigs need to be easy to move. If the rigs will be drilling largeWhile that sounds like a lot, it is small compared to the daily water numbers of development wells, as they are in the Eagle Ford, thenconsumption of a power plant or the irrigation needs of a large rigs on skids are the answer.farm. To ensure that it is not taking too much water or harmingthe aquifer in any way, the company has retained the services of a “All 45 of our new rigs have much better control systems than thePh.D. geologist who lives in the area. As a landowner himself, he units they are replacing,” Cardno adds. “That makes them morerepresents the community and advises local water boards. suited to drilling the type of short-radius horizontal wells we want. These rigs can drill the curve and lateral sections of the wellboreThe drilling program much more efficiently and with a high degree of precision.”When BHP Billiton Petroleum took over drilling in the Eagle Ford, it The new equipment is also more automated than ever before.put a lot more hardware in the field, including 30 new rigs built to Drillers, for example, can enter set points, then take their hands offits specifications. the controls and let the rig’s computers guide the drill string.“Our rig fleet is entirely composed of modern AC rigs split between “These advanced rigs are inherently safer than the older ones,”fast movers and skidders,” says Derek Cardno, the company’s vice Cardno says. “A lot of the hazards have been designed out.”president for global drilling and completions. “The fast moversA finished well site in the Eagle Ford field. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  23. 23. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND® BHP Billiton 21“We’re trying to change the way folks think about safety in their day-to-day business. That’s going to take constant vigilance.” Vice President of Drilling Derek Cardno.Safely managing change numbers of rigs. An engineer and superintendent work together, and each has a certain number of rigs supported by a small team.With 45 drilling rigs in BHP Billiton Petroleum’s U.S. onshore fleet,part of the challenge is managing them consistently. “The hard part is getting a consistent message across all work fronts,” Cardno says. “We’re managing that through a lot of“We are a bigger organization now,” Cardno explains. “Smaller interaction. I receive direct reports daily. We have a morningcompanies are used to working with fewer rigs. We work that way meeting every day to go through the operations and discuss issues.ourselves in the conventional business, where we had only eight or Managers do the same down the line.”ten work fronts at any one time around the world. They were runby a small team. Everyone knew how each other worked. Now, in The drilling organization also brings all of the field personnel togetherthe unconventional plays, we are geared up to run 45 rigs and nine every three to six months. The goal is to get the same message outfrac spreads, so we have 60-70 work fronts. That is a lot to get your to everyone about the company’s expectations and its requirementsarms around.” for safety, performance, and quality. It is also an opportunity to gain valuable feedback from the field.Consistency is one of the most difficult things to achieve in dailyoperations. When you consider that the drilling program spans “We are doing it with our service providers as well,” Cardnonot only the Eagle Ford, but three other large fields as well, the says. “We’ve met with vice presidents and CEOs of all our servicechallenge is huge. companies. We brought them all together to make sure everyone understands what we expect in terms of safety, quality, andWhat Cardno and his team did is divide the drilling organization performance. We’re making great strides, but we cannot getinto smaller, more manageable chunks: Drilling managers look over complacent. We’re trying to change the way folks think about safety ina certain number of rigs. Drilling superintendents oversee smaller their day-to-day business. That’s not going to happen overnight.” qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®
  24. 24. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®22 BHP BillitonThe Permian BasinThe Eagle Ford is liquids-rich, but the PermianBasin, which covers some 75,000 square miles ofwest Texas and southeastern New Mexico,has a very high percentage of crude oil.Although BHP Billiton Petroleum is still drilling sine waves slowly through the earth, pushing up mountains in someappraisal wells, it is seeing liquid hydrocarbon places and leaving basins in between.production from shale in the range of 75 percent. The Permian is huge, and anything but consistent. There are multiple layers of hydrocarbon-bearing rock with names like Wolfcamp,The best wells are in the 30,000 square-mile Midland Basin and in Sprayberry, and a blend of the two known as the Wolfberry. Thethe smaller Delaware Basin, which lies to the west. Many operators Permian includes the north and south Midland basins, a Centralare working in various parts of the Permian, which accounts for Basin Platform and the Delaware Basin. BHP Billiton Petroleum’sabout 20 percent of all the drilling in the United States today.BHP Billiton Petroleum has more than 440,000 acres of undevelopedland under lease. What is it finding? One of its appraisal wellspeaked out at 500 barrels of oil and six million cubic feet of gasper day. It’s too early to tell how many such wells it will have, butits Permian drilling program calls for 60 new wells in 2013, andthe company is just getting started. An area known as the SouthMidland is largely unexplored, but many companies are starting todrill there now. It is a very new play for the industry in general, andthere is a lot of optimism because liquids production in some areascould be as high as 90 percent.Portions of the Permian Basin have been producing conventionaloil and gas since the 1920s. In 2012, the conventional part of thePermian produced the energy equivalent of a million barrels ofoil per day. Now, with the ability to recover hydrocarbons fromunconventional plays, production from the Permian could reach twomillion barrels per day by 2020.Challenging geology of the PermianThe basin itself was formed as part of the Ouachita orogeny,a 50-million-year era of mountain building caused when thecontinents we now call North and South America bumped togethersome 300 million years ago. The continental collision sent huge Lee Higgins is BHP Billiton Petroleum’s top geoscientist evaluating the Permian Basin. qM qM Previous Page | Contents | Zoom in | Zoom out | Front Cover | Search Issue | Next Page qM M Mq q Qmags THE WORLD’S NEWSSTAND®

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