Alberta’s
Emerging Shale Gas Industry
Technological Innovation
Creating
Opportunities for Development

Dawson Energy Advis...
Major Driver for Unconventional Resource Development - Size of the Prize
Conventional hydrocarbon plays have
traditionally...
Key Messages that I hope to convey over the next 1 1/2 hours:
 Successful shale gas development consists of application o...
Topics to be Discussed
Foundation of Unconventional Reservoirs

Exploration Strategies
Contacting the Reservoir
Drilling T...
Topics to be Discussed
Foundation of Unconventional Reservoirs
Exploration Strategies
Contacting the Reservoir
Drilling Te...
Fundamental Differences Between Conventional and Unconventional Reservoirs

1000 md

High
Quality

100 md

Medium
Quality
...
Unconventional Reservoirs

Conventional Reservoirs
Conventional
Oil or Gas Reservoirs

Tight Gas or Oil
Sandstone

Shale

...
Unconventional Reservoir Continuum

Conventional Gas
Reservoirs

Tight Gas
Reservoirs

“Hybrid”
Reservoirs

Shale Gas
Shal...
Shale is just not Shale
Organic-rich Black Shale

Silt - Laminated Shale or Hybrid

Highly Fractured Shale







 G...
Conventional vs Continuous or Unconventional Type Accumulations
 Lateral pervasiveness of hydrocarbon bearing strata resu...
Resource play development is a statistical play

Recognition that within the
oil or gas field there are
going to be both h...
Aspects of Unconventional Reservoirs
Unconventional Reservoir

Conventional Reservoir

Lease area

Prospective reservoir a...
Unconventional Resource Exploration Area
 Much of the prospective
reservoir area contains
productive hydrocarbons but
not...
Other Aspects of Unconventional Resource Development
Risk of Success
Conventional Reservoirs

Risk of Success
Unconvention...
Typical Investment Profile for Unconventional Resource Development
 Shale gas exploration is capital intensive with large...
Typical Production Profiles
Conventional Reservoirs
Decline rates of production may
follow three types of curves and
gener...
Other Aspects of Unconventional Resource Development
 Production declines are relatively steep (60 to 80% in the first ye...
Observations about successful North American shale gas exploration projects
 Shale gas exploration is capital intensive r...
Topics to be Discussed
Foundation of Unconventional Reservoirs

Exploration Strategies
Contacting the Reservoir
Drilling T...
Unconventional Gas Strategy is Critical to Success
Understanding the Play




Reservoir Characterization
Resource Asses...
Unconventional Resource Play Strategy
AN INTEGRATED APPROACH TO WELL DESIGN

Completion
Strategy

Reservoir
Characterizati...
The Key Questions
 Reservoir Characterization
 Reservoir modeling

THE GOAL

MAXIMIZED
 Sweet Spot identification
 Wel...
Primary goals of initial exploration programs for unconventional plays are:
 Define rock properties of the target zones t...
Determination of reservoir properties along with stimulation and production
optimization requires a number of years of tes...
Key Variables That Influence Overall Reservoir Performance
Permeability

Total Organic
Carbon

Reservoir
Producibility

Th...
In order to be economically successful most unconventional resource play
projects require the adoption of a “manufacturing...
Pilot project testing is necessary:
 To realize continue improvement of wellbore productivity and ultimate reserve recove...
Summary and Key Points
 Shale gas exploration and development is capital intensive and requires a well
developed explorat...
Topics to be Discussed
Foundation of Unconventional Reservoirs

Exploration Strategies

Contacting the Reservoir
Drilling ...
Three key technologies form the foundation upon which the
unconventional resource potential in Canada has been unlocked

U...
Evolution of Drilling Technology

Increase in Reservoir Contact

$$$

$$

Horizontal
multilateral wells

Horizontal Wells
...
Drilling technology needs to be matched with the specific reservoir geometries
 Vertical reservoir targets may be best in...
Drilling Efficiencies and Savings have
been achieved through:
 Speed of drilling using new bit technology
(PDC bits achie...
Wellbore design for extended lateral length (>2000 m) requires proper design including
an understanding of reservoir prope...
Rotary Steerable Systems consideration for efficiency gain (ROP) and
improved well bore quality (Logging/Completion activi...
LWD considerations for preferred placement within Duvernay Formation.

Dawson Energy Advisors Ltd.

November 2013
Dawson Energy Advisors Ltd.

November 2013
Application of multiple wells from single drilling pads reduces surface footprint
Requires accurate
downhole drilling
surv...
Topics to be Discussed
Foundation of Unconventional Reservoirs

Exploration Strategies

Contacting the Reservoir
Drilling ...
Fracture stimulations are required for most unconventional
resource plays due to low permeabilities of the reservoirs
Type...
The primary goal of hydraulic fracture stimulation is to produce hydrocarbons from the
wellbore in an accelerated timefram...
Principle of Multi-Stage Fracture Stimulations
 To effectively stimulate the entire length of the horizontal leg multi-st...
Typical coil tubing
unit used for multizone fracture
stimulation

Hydraulic fracturing operations are
completed on a large...
Fracture Stimulation Parameters
 The main purpose of fracture stimulation is to create open
pathways for fluid flow withi...
Multi-Stage fracture stimulation allows more accurate placement
of frac with specific volumes of frac fluid and proppant

...
Understanding the Reservoir is
Key to
Optimizing Production and
Reserve Recovery

This is achieved through
continuous impr...
Downhole Technologies
The mechanism by which the fracture fluid and proppant are delivered into the specific
stages of the...
Downhole Technologies
Cemented Liners
 Access to the reservoir is limited to the perforated zones and the fracture create...
Downhole Technologies
Open Hole Completions
 Relies on mechanical packers to isolate stages of the wellbore for fracturin...
Reduction of Fines
Proppant technology continues to address the issues of:
 Creation of fines from the proppant and reser...
Maximization of Reservoir Contact
 The object of reservoir stimulation is to maximize
communication between the wellbore ...
Key Elements of Hydraulic Fracture Stimulation Programs
 Choosing the right technologies for the fracture stimulation is ...
Topics to be Discussed
Foundation of Unconventional Reservoirs

Exploration Strategies

Contacting the Reservoir
Drilling ...
Micro-Seismic to Determine Effectiveness of Stimulation
 Measures micro seismic events related to the propagation of
frac...
The validity and usefulness of microseismic data is highly dependent on
the design of the microseismic program
 Observati...
Dawson Energy Advisors Ltd.

November 2013
Micro-seismic monitoring of the multi-stage fracture stimulation program allows:
 Visualization in real time of fracture ...
Microseismic events can be used
to calculate stimulated rock
volume for reserve valuations

Production contribution from v...
Observations From Field Activities in North America
 Microseismic Activity Is Very Limited For Rates < ~ 20 bpm
 From An...
Topics to be Discussed
Foundation of Unconventional Reservoirs

Exploration Strategies
Contacting the Reservoir
Drilling T...
Distribution of Canada’s Unconventional Hydrocarbon Resources
Canadian Unconventional Resource Estimates**
** Based upon C...
Development of Canada’s unconventional resources
has embraced technology and innovation as well as
addressing market chall...
Alberta’s Emerging
Unconventional Resource
Opportunities
Montney Fm tight gas
Duvernay Fm shale gas

Cardium Fm tight oil
...
Commercial shale gas development benefits
from multiple operations from multi-well pads
 Reduced environmental footprint
...
Companies are demonstrating improvement through cost reduction and increased
productivity in response to downward market p...
Technological Development
Driven by Price

Reservoir Quality
Higher Quality Reservoirs
Discreet Pool Size

$5 - $20 / bb/ ...
Social Media and the need for Factual Information
The societal issues of shale gas exploration and
hydraulic fracturing ha...
North American Markets is the Biggest The Challenge
 Oversupply of
natural gas into the
North American
market has led to ...
Alberta Opportunities and Challenges
 Alberta contains significant amounts of unconventional hydrocarbon
resources, both ...
Key Elements of Shale Gas Exploration
 Shale gas production is a statistical play. While there will be high volume produc...
Determination of reservoir properties along with stimulation and production
optimization requires a number of years of tes...
Key Messages
 Canada has abundant natural gas resources to enable natural gas to be part of a comprehensive
national ener...
In South America there appears to
be substantial potential for
unconventional resources
From the Canadian experience, comp...
Alberta’s
Emerging Shale Gas Industry
Technological Innovation
Creating
Opportunities for Development
Thank You for your A...
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Technological Innovation Creating Opportunities for Development

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Apresentação de Mike Dawson, da Dawson Energy Advisors, durante o evento promovido pelo Sistema FIEB, Fundamentos da Exploração e Produção de Não Convencionais: a Experiência Canadense.

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Technological Innovation Creating Opportunities for Development

  1. 1. Alberta’s Emerging Shale Gas Industry Technological Innovation Creating Opportunities for Development Dawson Energy Advisors Ltd. November 2013
  2. 2. Major Driver for Unconventional Resource Development - Size of the Prize Conventional hydrocarbon plays have traditionally relied on the low hanging fruit for success Unconventional resource plays have a large resource base but require more advanced technology to capture the reward Dawson Energy Advisors Ltd. November 2013
  3. 3. Key Messages that I hope to convey over the next 1 1/2 hours:  Successful shale gas development consists of application of technology coupled with operational efficiencies  Management needs to be comfortable with the size of the investment needed and the time required for a return on capital invested  A manufacturing mentality is necessary for commercial development  A thorough understanding of the reservoir is needed to quantify variables and to match completion technology with reservoir properties  The fundamental goal of all technologies employed is to maximize reservoir contact resulting in optimal productivity and EUR Dawson Energy Advisors Ltd. November 2013
  4. 4. Topics to be Discussed Foundation of Unconventional Reservoirs Exploration Strategies Contacting the Reservoir Drilling Technologies Hydraulic Fracture Stimulations Microseismic Tools and Observations Technological Success - Alberta Shale Gas Dawson Energy Advisors Ltd. November 2013
  5. 5. Topics to be Discussed Foundation of Unconventional Reservoirs Exploration Strategies Contacting the Reservoir Drilling Technologies Hydraulic Fracture Stimulations Microseismic Tools and Observations Technological Success - Alberta Shale Gas Dawson Energy Advisors Ltd. November 2013
  6. 6. Fundamental Differences Between Conventional and Unconventional Reservoirs 1000 md High Quality 100 md Medium Quality Tight Oil Larger Reservoirs More Difficult to Develop 1 md Coalbed Methane 0.1 md Tight Gas Gas Shales 0.001 md Lower Quality Increased Technology Requirements Smaller Reservoirs Easier to Develop Increased Cost to Develop Natural Resources Triangle 0.00001 md Gas Hydrates modified from Schmezl, 2009 Dawson Energy Advisors Ltd. November 2013
  7. 7. Unconventional Reservoirs Conventional Reservoirs Conventional Oil or Gas Reservoirs Tight Gas or Oil Sandstone Shale Extremely Tight 0.0001 Natural Gas from Coal Tight Oil in Limestone Very Tight 0.001 Tight 0.01 Low 0.1 Moderate 1.0 High 10.0 100.0 Permeability (mD) Poor Granite Quality of Reservoir Sidewalk Cement Note: Natural Gas from Coal reservoirs are classified as unconventional due to type of gas storage Dawson Energy Advisors Ltd. Good Volcanic Pumice modified from US DOE November 2013
  8. 8. Unconventional Reservoir Continuum Conventional Gas Reservoirs Tight Gas Reservoirs “Hybrid” Reservoirs Shale Gas Shale Oil Coalbed Methane Reservoirs The shift from conventional to unconventional reservoirs reflects a change in grain size from higher permeability, coarser grained rocks towards very fine grained rocks with low permeability Reservoir variability both vertical and geographically can lead to the development of “sweet spots” of higher permeability in the finer grained reservoir rocks Core photos courtesy of Canadian Discovery Dawson Energy Advisors Ltd. November 2013
  9. 9. Shale is just not Shale Organic-rich Black Shale Silt - Laminated Shale or Hybrid Highly Fractured Shale       Gas stored in shale and silt  Low to moderate TOC  Higher permeabilities in silty layers      High TOC & high adsorbed gas Low matrix Sw High matrix Sg Gas stored as free & adsorbed Mature Source Rock Low TOC & low adsorbed gas High matrix Sw Low matrix Sg Gas stored in fractures Shale is the source rock From Hall, 2008 Dawson Energy Advisors Ltd. November 2013
  10. 10. Conventional vs Continuous or Unconventional Type Accumulations  Lateral pervasiveness of hydrocarbon bearing strata results in large accumulations  The identification and development of the higher permeability “sweet spots” is an important consideration in the overall project economics  Resource plays can be considered a statistical play where there will be a range of producibility well profiles, and a large number of wells are required in order to achieve economic success from Midnight Oil and Gas, 2009 Dawson Energy Advisors Ltd. November 2013
  11. 11. Resource play development is a statistical play Recognition that within the oil or gas field there are going to be both high volume and low volume producers Rely on statistical average to achieve project economic return on investment Understanding reservoir properties will decrease the risk of completing low volume producing wells From Southwestern Energy, 2009 Dawson Energy Advisors Ltd. November 2013
  12. 12. Aspects of Unconventional Reservoirs Unconventional Reservoir Conventional Reservoir Lease area Prospective reservoir area Producing well Non-producing well (dry hole) Higher production area (sweet spot) Dawson Energy Advisors Ltd. Lease area Fundamental Differences  Conventional reservoir areas constrained by geological boundaries  Within the unconventional reservoir area are sweet spots of higher productivity  Most wells in unconventional reservoir are productive but some may not meet economic thresholds  Unconventional reservoirs require significant number of wells to achieve statistical thresholds of economic production November 2013
  13. 13. Unconventional Resource Exploration Area  Much of the prospective reservoir area contains productive hydrocarbons but not necessarily at economic rates  The identification of the “sweet spots” of potentially higher productivity wells is an important element of economic success Lease area Prospective reservoir area Producing well Non-producing well (dry hole) Higher production area (sweet spot) Dawson Energy Advisors Ltd.  A strong understanding of reservoir properties and the heterogeneity of the reservoir across the lease block helps in defining the presence and location of the sweet spots November 2013
  14. 14. Other Aspects of Unconventional Resource Development Risk of Success Conventional Reservoirs Risk of Success Unconventional Reservoirs Geoscience Engineering Geoscience Much of the risk is concentrated in the front end geoscience exploration and the ability to locate natural gas reservoirs of economic size Dawson Energy Advisors Ltd. Engineering Risk is concentrated in the ability to produce economic volumes from laterally pervasive deposits of natural gas where the risk of finding hydrocarbons is low November 2013
  15. 15. Typical Investment Profile for Unconventional Resource Development  Shale gas exploration is capital intensive with large volume of investment in the early stages and return on investment throughout the life of the project To achieve economic production companies require:  Strong commodity prices  Ideally existing infrastructure (pipelines, processing facilities etc.) to lower capital costs  Advanced technologies to optimize productivity while lowering costs  Availability of equipment and materials in sufficient quantity and stability of supply < $ million annual cash flow > Investor Cash Flow Production Cumulative Cash Flow Tax Paid 0 Operating Expenditure Capital Expenditure Each bar = 1 year From Shell E&P Technology, 2009 Dawson Energy Advisors Ltd. November 2013
  16. 16. Typical Production Profiles Conventional Reservoirs Decline rates of production may follow three types of curves and generally are less than 20% per year 0 15 30 45 60 75 90 105 120 (months) Unconventional Reservoirs Commonly steep decline rates up to 75 – 85% in the first 18 months of production Dawson Energy Advisors Ltd. November 2013
  17. 17. Other Aspects of Unconventional Resource Development  Production declines are relatively steep (60 to 80% in the first year)  Companies are compelled to be on a drilling treadmill to offset production declines while at the same time growing production  As a result large land tracts of mineral tenure are required to allow for the planning of an inventory of drillable locations Dawson Energy Advisors Ltd. November 2013
  18. 18. Observations about successful North American shale gas exploration projects  Shale gas exploration is capital intensive requiring several hundreds of millions of $$ of investment before commercial production of scale is achieved  The application of key technologies that enables increased contact to the reservoir is the key to commercial success  Integration of geology and engineering disciplines to recognize the influence of geology on engineering design and ultimate productivity  Exploration and development will take a number of years to reach thresholds of production  A well established exploration strategy is necessary to ensure that:  Reservoir properties that will influence production are identified  Optimum completion technologies are applied to demonstrate repeatability  The optimal target area is identified in the lease area (sweet spot if present)  Capital efficiency  Management understanding of risk, reward and time requirements Dawson Energy Advisors Ltd. November 2013
  19. 19. Topics to be Discussed Foundation of Unconventional Reservoirs Exploration Strategies Contacting the Reservoir Drilling Technologies Hydraulic Fracture Stimulations Microseismic Tools and Observations Technological Success - Alberta Shale Gas Dawson Energy Advisors Ltd. November 2013
  20. 20. Unconventional Gas Strategy is Critical to Success Understanding the Play    Reservoir Characterization Resource Assessment Formation Properties & Analogs Address the Resource Play Challenges    Which technologies, services or products are most appropriate Operational Risk / Cost Assessment Field Trials / Pilot Build in Efficiencies of Operations and Material Management to Control Costs    Scale of operations is usually large (program drilling and completions) Remote areas may add significant cost Bundling of Services, Concurrent / Continuous Operations Dawson Energy Advisors Ltd. November 2013
  21. 21. Unconventional Resource Play Strategy AN INTEGRATED APPROACH TO WELL DESIGN Completion Strategy Reservoir Characterization Unlocking the Resource Play Application of Technology Wellbore Architecture from E. Schmelzel, 2008 Dawson Energy Advisors Ltd. November 2013
  22. 22. The Key Questions  Reservoir Characterization  Reservoir modeling THE GOAL MAXIMIZED  Sweet Spot identification  Wellbore placement RESERVOIR EXPOSURE  Wellbore completion from E. Schmelzel, 2008 Dawson Energy Advisors Ltd. November 2013
  23. 23. Primary goals of initial exploration programs for unconventional plays are:  Define rock properties of the target zones to determine how much hydrocarbon may be present  Define reservoir properties to guide in the development of the fracture stimulation program  Undertake initial stimulation testing of primary zones to quantify initial productivity  Conduct extended reservoir testing to determine decline rates and changes in reservoir pressure Reserves Exploration Activities Initial Drilling OGIP Initial Well Testing IP Initial Well Stimulation and Testing Extended Well Testing Multiple Wells And Reproducibility Of Results Resources P10 Dawson Energy Advisors Ltd. P50 Probability of Success P90 November 2013
  24. 24. Determination of reservoir properties along with stimulation and production optimization requires a number of years of testing and pilot projects Time Stage 1: Stage 2: Identification of UCG Resource Early Evaluation Drilling Exploration Tasks Preliminary geological assessment to determine potential for hydrocarbons Stage 3: Pilot Project Drilling Vertical drilling to obtain core samples for reservoir properties along with estimation of resource potential and Early horizontal drilling to evaluate well geographic limits of performance with potential field varying hydraulic fracturing technologies along with continued reservoir testing to determine engineering properties Dawson Energy Advisors Ltd. Pace of development is largely dependent on technical success, economics and market conditions and availability of equipment and materials Stage 4: Pilot Production Testing Stage 5: Advanced hydraulic fracturing testing and improvements of productivity with reduced expenditure Commercial Development Project Reclamation November 2013
  25. 25. Key Variables That Influence Overall Reservoir Performance Permeability Total Organic Carbon Reservoir Producibility Thermal Maturation Porosity Shale Distribution and Geological Setting Reservoir Fracability Regional Stress Completion and stimulation choices will be influenced by there reservoir characteristics as well as outside factors such as technology, materials and equipment availability Dawson Energy Advisors Ltd. November 2013
  26. 26. In order to be economically successful most unconventional resource play projects require the adoption of a “manufacturing “ style of operations. This is to ensure that the project achieves:  Optimization of Reservoir Production  Employs Economies of Scale and Economic Benefits  Continuous Improvement of Productivity while at the same time reduction in production costs  Sufficient land base to support ongoing drilling and development plans that account for steep decline of initial production rates  Service sector alliances that will allow continuous operations and economies of scale Dawson Energy Advisors Ltd. November 2013
  27. 27. Pilot project testing is necessary:  To realize continue improvement of wellbore productivity and ultimate reserve recovery  Demonstrate technology repeatability for large scale commercial development From Encana Dawson Energy Advisors Ltd. November 2013
  28. 28. Summary and Key Points  Shale gas exploration and development is capital intensive and requires a well developed exploration strategy to enhance the probability of success  A staged exploration approach allows key reservoir knowledge to be obtained during the exploration programs prior to corporate commercial decisions being made.  Understanding of the reservoir is critical to develop the most effective drilling and completion technologies that will improve the prospects for commercial production  Development of repeatability as well as production optimization is necessary before commercial development begins  Shale gas reservoirs are heterogeneous and there will be variability from region to region. The key is to understand the reservoir properties to be able to identify variables that will impact producibility Dawson Energy Advisors Ltd. November 2013
  29. 29. Topics to be Discussed Foundation of Unconventional Reservoirs Exploration Strategies Contacting the Reservoir Drilling Technologies Hydraulic Fracture Stimulations Microseismic Tools and Observations Technological Success - Alberta Shale Gas Dawson Energy Advisors Ltd. November 2013
  30. 30. Three key technologies form the foundation upon which the unconventional resource potential in Canada has been unlocked Unconventional Gas Resources Horizontal Drilling Micro-Seismic Monitoring Multi Stage Fracturing Dawson Energy Advisors Ltd. November 2013
  31. 31. Evolution of Drilling Technology Increase in Reservoir Contact $$$ $$ Horizontal multilateral wells Horizontal Wells Unconventional Resources $ Vertical wells with multiple targets Vertical wells Time Dawson Energy Advisors Ltd. November 2013
  32. 32. Drilling technology needs to be matched with the specific reservoir geometries  Vertical reservoir targets may be best intersected using vertical or deviated wells  Thick laterally persistent shale reservoirs are best intersected using horizontal wells or horizontal with a multi-lateral configuration Courtesy of Halliburton Dawson Energy Advisors Ltd. November 2013
  33. 33. Drilling Efficiencies and Savings have been achieved through:  Speed of drilling using new bit technology (PDC bits achieve penetration rates of up to 80 m/hr)  Multiple drill string assemblies that reduce tripping time  Geosteering in real time in horizontal and multilateral wells  Automation of rig floor equipment eliminating additional manpower  Fit for purpose rigs that can move on site without teardown  Improved drilling fluids for solids removal and borehole stability From Range Resources, 2010 Dawson Energy Advisors Ltd. November 2013
  34. 34. Wellbore design for extended lateral length (>2000 m) requires proper design including an understanding of reservoir properties, geological barriers and regional stress regimes Drilling of horizontal wells with the horizontal legs being up to 3500 m in length Multi stage fracture stimulations using slick water and sand to essentially “create reservoir” in rock that would not have been previously been considered reservoir quality Dawson Energy Advisors Ltd. November 2013
  35. 35. Rotary Steerable Systems consideration for efficiency gain (ROP) and improved well bore quality (Logging/Completion activities). Dawson Energy Advisors Ltd. November 2013
  36. 36. LWD considerations for preferred placement within Duvernay Formation. Dawson Energy Advisors Ltd. November 2013
  37. 37. Dawson Energy Advisors Ltd. November 2013
  38. 38. Application of multiple wells from single drilling pads reduces surface footprint Requires accurate downhole drilling surveys to ensure proper borehole separation between parallel horizontal legs as well as optimal reservoir drainage Multiple wells from a single pad allow optimal materials management and cost savings through the employment of a “manufacturing process” Dawson Energy Advisors Ltd. November 2013
  39. 39. Topics to be Discussed Foundation of Unconventional Reservoirs Exploration Strategies Contacting the Reservoir Drilling Technologies Hydraulic Fracture Stimulations Microseismic Tools and Observations Technological Success - Alberta Shale Gas Dawson Energy Advisors Ltd. November 2013
  40. 40. Fracture stimulations are required for most unconventional resource plays due to low permeabilities of the reservoirs Type of fracture stimulation used is defined by:  Depth and number of reservoirs to be stimulated  Reservoir quality  Type of wellbore (vertical versus horizontal)  Fluid sensitivity  Geomechanical properties of the reservoir  Availability of equipment and materials  Economic assessment of wellbore deliverability Dawson Energy Advisors Ltd. November 2013
  41. 41. The primary goal of hydraulic fracture stimulation is to produce hydrocarbons from the wellbore in an accelerated timeframe by creating a series of pathways from the wellbore to the natural fracture or permeable flowpaths within the reservoir In unconventional reservoirs, the hydraulic fracturing process is critical due to the low permeability Silt - Laminated Shale or Hybrid Highly Fractured Shale Organic-rich Black Shale Migration of hydrocarbons to the induced fracture Dawson Energy Advisors Ltd. Modified from Hall, 2008 November 2013
  42. 42. Principle of Multi-Stage Fracture Stimulations  To effectively stimulate the entire length of the horizontal leg multi-stage fracture technology is necessary  Single stage stimulations tend to leave much of the intersected reservoir un-stimulated due to preferential flow of fracture fluids  Isolation technologies allow the horizontal leg to be divided into discrete stages that can be stimulated individually  Stage fracturing ensures that the maximum amount of fracture energy can be applied into a defined area thus making a more effective fracture with greater number of fractures or a greater fracture half length Radioactive tracer log indicates that only 3 of 6 perforations accepted fracture fluid Dawson Energy Advisors Ltd. From SPE 90697 November 2013
  43. 43. Typical coil tubing unit used for multizone fracture stimulation Hydraulic fracturing operations are completed on a large scale and require specialized equipment Completion techniques as well as size and amount of equipment will be dependent on the depth of the reservoir, size of fracture stimulation and number of fracs designed for the well Dawson Energy Advisors Ltd. November 2013
  44. 44. Fracture Stimulation Parameters  The main purpose of fracture stimulation is to create open pathways for fluid flow within the reservoir either by creation of fractures or intersection of existing fracture systems  Ideally the reservoir rock should be “brittle” so that it fractures easily  Mineral content of the shale component will determine “fracability” of reservoir – ideally a silica rich shale is preferred Sheared and slickensided fractures Open vertical fractures From Hall, 2008 Dawson Energy Advisors Ltd. November 2013
  45. 45. Multi-Stage fracture stimulation allows more accurate placement of frac with specific volumes of frac fluid and proppant Dawson Energy Advisors Ltd. November 2013
  46. 46. Understanding the Reservoir is Key to Optimizing Production and Reserve Recovery This is achieved through continuous improvements and experimentation in drilling, completion and production techniques From Southwestern Energy, 2009 Dawson Energy Advisors Ltd. November 2013
  47. 47. Downhole Technologies The mechanism by which the fracture fluid and proppant are delivered into the specific stages of the multi-stage fracturing operation is critical to the successful fracture stimulation There are many types of technologies that address the access to the reservoir with minimization of formation damage. These systems are built around two fundamental approaches:  Cemented Liner  Open Hole (non cemented liner or no liner) Both of these approaches have advantages and disadvantages and may not be suitable under all reservoir conditions Dawson Energy Advisors Ltd. November 2013
  48. 48. Downhole Technologies Cemented Liners  Access to the reservoir is limited to the perforated zones and the fracture created beyond the cemented liner  Provides stability to the wellbore and ensures proper isolation during fracturing stages  More cost effective (the frac job takes longer but downhole tools costs are signficantly lower  Most service companies provide varying types of multi-port borehole isolation technologies for cases wellbores Liner or production tubing is cemented into the wellbore in the horizontal leg Perforations penetrate through liner as well as the wellbore cement into the formation courtesy of Halliburton Dawson Energy Advisors Ltd. November 2013
  49. 49. Downhole Technologies Open Hole Completions  Relies on mechanical packers to isolate stages of the wellbore for fracturing  Enables fracture fluid and proppant to travel into the natural fracture system unconstrained by perforation locations  Ideally suited for operations where time is critical but usually more costly than conventional cemented fracture stimulations courtesy of PackersPlus Dawson Energy Advisors Ltd. November 2013
  50. 50. Reduction of Fines Proppant technology continues to address the issues of:  Creation of fines from the proppant and reservoir  Integrity of the proppant material under pressure and temperature From Carboceramics Dawson Energy Advisors Ltd. November 2013
  51. 51. Maximization of Reservoir Contact  The object of reservoir stimulation is to maximize communication between the wellbore and the reservoir  Reservoir communication can be in the form of intersecting existing fracture systems or creating a fracture network in the reservoir rock surrounding the wellbore Definition of Stimulated Rock Volume (SRV) The amount of reservoir rock stimulated that contributes to the ultimate recoverable volume of natural gas produced from the wellbore Length of lateral stimulated Fracture network width Fracture height SRV = fracture network height x fracture network width x length of stimulated lateral Dawson Energy Advisors Ltd. November 2013
  52. 52. Key Elements of Hydraulic Fracture Stimulation Programs  Choosing the right technologies for the fracture stimulation is dependent foremost on the reservoir itself.  The operator must have a good understanding of the reservoir properties in order to design the proper fracture treatment program  Each reservoir will have its own unique characteristics and early stage exploration activities are required to determine these reservoir properties  Other factors determining the choice of fracture stimulation are:  Availability of equipment and technology  Availability of fracture fluids and proppant  Number of stages required the total size of each stage  Relative cost Dawson Energy Advisors Ltd. November 2013
  53. 53. Topics to be Discussed Foundation of Unconventional Reservoirs Exploration Strategies Contacting the Reservoir Drilling Technologies Hydraulic Fracture Stimulations Microseismic Tools and Observations Technological Success - Alberta Shale Gas Dawson Energy Advisors Ltd. November 2013
  54. 54. Micro-Seismic to Determine Effectiveness of Stimulation  Measures micro seismic events related to the propagation of fractures within the reservoir  Requires one or more observation wells to allow proper mapping of location geographically and vertically of microseismic events  Can be run independently or as permanent seismic arrays in field to be developed  Provides a 3D image of fracture propagation that can be measured in real time during the fracture stages  Allows fracture propagation trends to be identified and adjusted for additional stages so fractures can be contained within zone  Identifies areas of poor fracture generation or geological barriers to effective stimulation Dawson Energy Advisors Ltd. November 2013
  55. 55. The validity and usefulness of microseismic data is highly dependent on the design of the microseismic program  Observation Well Distance and number of observation sites  In Canada, typical distance from observation well to stimulated well are:  Shallow Gas – 150 m  Foothills Tight Sands – 700 m  Issues  Same Pad Operations  Other Cultural Noise (e.g., Production)  Treatment Factors  Viewing Angle  Seeing As Much Of The Fracture As Required  Avoiding Breaking Into The Observation Well  Receiver Depth  Straddling  Above Dawson Energy Advisors Ltd. November 2013
  56. 56. Dawson Energy Advisors Ltd. November 2013
  57. 57. Micro-seismic monitoring of the multi-stage fracture stimulation program allows:  Visualization in real time of fracture propagation enabling adjustments to be made during the stages to ensure that the fractures are staying within zone  Identification of previously unrecognized geological barriers  Determination of optimal horizontal well spacing  Determination of stimulated rock volume (SRV) for reserve determination Micro-seismic monitoring of fracture events for each staged stimulation allows the lateral and vertical envelope of the fracture stimulated rock to be determined Dots represent individual micro-seismic events that occur during the fracturing of the reservoir Track of the horizontal wellbore Courtesy of Nexen, 2011 Dawson Energy Advisors Ltd. November 2013
  58. 58. Microseismic events can be used to calculate stimulated rock volume for reserve valuations Production contribution from various stages to overall wellbore production can be observed and calibrated to reservoir heterogeneity or effectiveness of stimulation techniques Dawson Energy Advisors Ltd. November 2013
  59. 59. Observations From Field Activities in North America  Microseismic Activity Is Very Limited For Rates < ~ 20 bpm  From An Offset Observation Well  Higher Stimulation Rates Generate More And Larger Microseisms  Larger Volumes Generate More And Larger Microseisms  Microseismic Activity In Horizontal Wells Is Increased By Limiting Fracture Entrances  Uncemented Laterals Often Have Considerably Less Activity  Highly Tectonic Environments Often Are Good Microseismic Candidates  High Stresses, Large Shear, And More Fracture Planes (Oblique)  Thick Reservoirs Are Likely To Generate Stronger Microseisms  Vertical Fractures (Most Common) Will Be Larger (Larger Slip Area) Dawson Energy Advisors Ltd. November 2013
  60. 60. Topics to be Discussed Foundation of Unconventional Reservoirs Exploration Strategies Contacting the Reservoir Drilling Technologies Hydraulic Fracture Stimulations Microseismic Tools and Observations Technological Success - Alberta Shale Gas Dawson Energy Advisors Ltd. November 2013
  61. 61. Distribution of Canada’s Unconventional Hydrocarbon Resources Canadian Unconventional Resource Estimates** ** Based upon CSUG 2010 Appraisal of Original Gas in Place (OGIP) Natural Gas from Coal Shale Gas Tight Gas 801 Tcf 1111 Tcf 1411 Tcf Major Sedimentary Basins containing potential unconventional hydrocarbon resources (excluding gas hydrates) Identified Resource Play Targets Natural Gas from Coal (NGC) Shale Gas Liard Basin Tight Gas (sands and carbonates) Tight Oil Bowser Basin Western Canada Sedimentary Basin Anticosti Basin May 12, 2011 Appalachian Basin Maritimes Basin Sydney Basin February 2013
  62. 62. Development of Canada’s unconventional resources has embraced technology and innovation as well as addressing market challenges and environmental considerations 2004-2006 2006-2008 Reservoir Characterization “Science of the reservoir” Technological Application “How do we produce the resource” Technological progression in resource development is based upon continuous improvement to achieve greater economic returns but influenced by outside forces such as market, environment and opportunity Dawson Energy Advisors Ltd. 2009-2010 Technological Evolution “How do we produce the resource at economic rates given the North American market issues” 2011-2012 2013 - ? Technological Innovation “How do we produce the resource in a responsible manner that respects industry commitment to society and the environment” Technological Transfer “How can we transfer our knowledge to new plays in different geological settings as well as geographic environments” November 2013
  63. 63. Alberta’s Emerging Unconventional Resource Opportunities Montney Fm tight gas Duvernay Fm shale gas Cardium Fm tight oil Viking Fm tight oil Exshaw Fm tight oil Note: Exshaw Fm is stratigraphic equivalent to Bakken Fm in Saskatchewan Map does not illustrate coalbed methane potential in province Dawson Energy Advisors Ltd. November 2013
  64. 64. Commercial shale gas development benefits from multiple operations from multi-well pads  Reduced environmental footprint  Effective materials management for continuous operations  Equipment and operational efficiency  Surface infrastructure efficiencies for long term production From Encana Dawson Energy Advisors Ltd. November 2013
  65. 65. Companies are demonstrating improvement through cost reduction and increased productivity in response to downward market pressure in North America Montney Performance History $MMCDN 3.5 $6.45 7 Cost/Interval Supply Cost* 6 $4.55 2.5 5 $4.10 $3.20 $3.40 $3.17 4 $3.15 $2.76 1.5 1.0 3 NYMEX DCT costs / interval 3.0 2.0 $/MMBtu 2 $1.50 0.5 $0.94 $0.81 $0.63 $0.51 $0.55 1 $0.50 0.0 0 2006 Vertical 2006 2007 4 6 2008 8 2009 2010 2011 9 13 14 2012F 15 Completion Stages *Supply Cost is defined as the flat NYMEX price that yields a risked IRR of 9% and does not include land or G&A costs. Courtesy of Encana Dawson Energy Advisors Ltd. November 2013
  66. 66. Technological Development Driven by Price Reservoir Quality Higher Quality Reservoirs Discreet Pool Size $5 - $20 / bb/ Vertical wells $20 - $60 / bbl Vertical wells with Fracture Stimulation $20 - $60 / bbl Horizontal wells $60 - $120 / bbl Horizontal wells with Staged Fracture Stimulation $120 / bbl+ Key technologies of horizontal drilling and multi-stage fracturing Vertical Vertical with Frac Horizontal Horizontal with Multi-Stage Frac Low Quality Reservoir Larger Geographic Distribution of Resources modified from Penn West, 2011 Dawson Energy Advisors Ltd. November 2013
  67. 67. Social Media and the need for Factual Information The societal issues of shale gas exploration and hydraulic fracturing has dominated the headlines in many geographic regions, particularly in areas that do not have a long history of oil and gas exploration Most of the concerns are predicated on misinformation for example “Gasland” Dawson Energy Advisors Ltd. November 2013
  68. 68. North American Markets is the Biggest The Challenge  Oversupply of natural gas into the North American market has led to a dramatic price collapse where the current economics of natural gas production are challenged  Companies have responded by shifting their focus to higher priced commodities such as tight oil and liquids rich natural gas Government of Nebraska website Dawson Energy Advisors Ltd. November 2013
  69. 69. Alberta Opportunities and Challenges  Alberta contains significant amounts of unconventional hydrocarbon resources, both shale gas, liquids rich shale gas and tight oil  Competitive production from other basins within North America has meant that companies exploring for these resources have needed to achieve improvements in productivity whole at the same time lowering production costs to remain competitive  Applications of new technologies in drilling, completions and production as well as analytical techniques has enabled many operators to achieve economic rates of return even in a price constrained market  As commodity prices recover, the continued application of these technologies will enhance the economics of these unconventional resource plays  Many exploration and service companies are looking at deploying these technologies internationally into emerging unconventional global resource plays Dawson Energy Advisors Ltd. November 2013
  70. 70. Key Elements of Shale Gas Exploration  Shale gas production is a statistical play. While there will be high volume producers (in the technical “sweet spot of the reservoir geographic area)a there will also be wells that underperform in terms of gas production.  Understanding the geological variability of the reservoir both vertically and geographically is critical to optimizing productivity of the individual wellbores.  Placement of horizontal wells within the reservoir to intersect the most prospective layers within the shale reservoir and to recognize the implications of horizontal stress is an important aspect of the drilling.  Geophysical logging and petrophysics is required to identify reservoir properties that will influence the fracture propagation and effectiveness  Knowledge of reservoir properties is critical in designing an fracture stimulation program that will link into the natural fracture network of the strata  Micro-seismic monitoring is an integral part of shale gas exploration to effectively visualize the placement of the fractures as well as determine the volume of reservoir stimulated for reserve calculation Dawson Energy Advisors Ltd. November 2013
  71. 71. Determination of reservoir properties along with stimulation and production optimization requires a number of years of testing and pilot projects Time Stage 1: Stage 2: Identification of UCG Resource Early Evaluation Drilling Exploration Tasks Preliminary geological assessment to determine potential for hydrocarbons Stage 3: Pilot Project Drilling Vertical drilling to obtain core samples for reservoir properties along with estimation of resource potential and geographic Early horizontal drilling to evaluate well limits of potential field performance with varying hydraulic fracturing technologies along with continued reservoir testing to determine engineering properties Dawson Energy Advisors Ltd. Pace of development is largely dependent on technical success, economics and market conditions and availability of equipment and materials Stage 4: Pilot Production Testing Stage 5: Advanced hydraulic fracturing testing and improvements of productivity with reduced expenditure Commercial Development Project Reclamation November 2013
  72. 72. Key Messages  Canada has abundant natural gas resources to enable natural gas to be part of a comprehensive national energy strategy  Technological achievements in horizontal drilling, multi-stage fracture stimulation and microseismic monitoring are enabling the economic development of numerous low permeability reservoirs in Western Canada  Over supply into a market constrained North American market has led to short term economic challenges for industry and government  Industry has responded by becoming more efficient as well as employing technological innovation to remain competitive  Government has tailored their royalty and fiscal regime to include the unique aspects of unconventional resource development  The key to long term sustainability is to expand export opportunities to beyond North America and to increase the domestic utilization of natural gas through transportation and power generation Dawson Energy Advisors Ltd. November 2013
  73. 73. In South America there appears to be substantial potential for unconventional resources From the Canadian experience, companies and government need to recognize:  Capital requirements will be much higher than originally anticipated  A minimum of 4 to 5 years will be needed to complete exploration prior to making a commercial decision  Analogues from existing producing shale basins are valuable but understanding the unique reservoir properties of the basin itself is critical for success  Application of core technologies such as horizontal drilling, multi-stage fracturing and microseismic form the foundation but the unique reservoir properties of a specific basin will require innovation and experimentation to optimize productivity Source: EIA World Shale Gas Resources Report, April 2011 Dawson Energy Advisors Ltd. November 2013
  74. 74. Alberta’s Emerging Shale Gas Industry Technological Innovation Creating Opportunities for Development Thank You for your Attention Dawson Energy Advisors Ltd. November 2013
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