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Bakken Development: Pathway to Success, Roadmap to a New Tomorrow

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Bakken Development: Pathway to Success, Roadmap to a New Tomorrow …

Bakken Development: Pathway to Success, Roadmap to a New Tomorrow

Torstein Hole
SVP US Onshore, Statoil, United States

Published in: Business, Economy & Finance

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  • 1. Bakken Development: Pathway to Success, Roadmap to a New Tomorrow Torstein Hole SVP US Onshore, Statoil, United States Lance Langford, John Plappert, Kent Evans, Michael Thibodeau, Statoil, United States Moscow, Russia | 15-19 June, 2014 Block 1: Exploration and Production of Oil and Natural Gas Forum: F04 – Unconventional oil and gas exploration and production
  • 2. Abstract The Bakken unconventional resource play located in the United States, (Williston Basin, North Dakota, Montana, and parts of Southern Canada) represents perhaps one of the largest oil deposits in the Western Hemisphere. Estimates suggest that 7 - 24 BBOE of technically recoverable resources lie within extremely tight reservoir rock sandwiched between organic rich “source” shales. Historically, companies have struggled to produce hydrocarbons in economic quantities due to the very low permeability and porosity characteristic of the Bakken formation. However the advent of new technology (horizontal drilling combined with enhanced hydraulic fracturing), favorable commodity prices, and a relatively continuous and predictable reservoir have rendered previously un-economic resources financially viable over an area covering approximately 520,000 square kilometers. Today, numerous stakeholders are in an active stage of development with more than 200 rigs operating in the Williston Basin and over 6,000 horizontal wells drilled to date. With Statoil’s prowess as a technical forerunner, the achievement of increased production and reservoir optimization is a persistent goal. In just six years, North Dakota’s oil production has grown from 100,000 BOEPD to over 800,000 BOEPD, as Statoil’s current Bakken production is on the path to exceed 50,000 BOEPD. Yet, approximately 70 - 80 percent of the wells required to optimally drain this resource remain undrilled. As such, despite meaningful achievements in total recoverable oil production, a significant opportunity for future innovation remains and substantial growth is expected. Ultimately the future pathway to continued success in unconventionals will involve technological breakthroughs and advances in Improved Oil Recovery (IOR). Therefore; the roadmap to a new tomorrow starts with the global application of Bakken innovations and operational expertise to unconventional, liquids-rich reservoirs throughout the world. Moscow, Russia | 15-19 June, 2014 Block 1: Exploration and Production of Oil and Natural Gas Forum: F04 – Unconventional oil and gas exploration and production
  • 3. Moscow, Russia | 15-19 June, 2014 An unconventional journey Forward-looking statements This presentation material contains certain forward-looking statements that involve risks and uncertainties. In some cases, we use words such as "aim", "ambition", "believe", "continue", "could", "estimate", "expect", "focus", "intend", "likely", "may", "outlook", "plan", "potential", "strategy", "will", "guidance" and similar expressions to identify forward- looking statements. All statements other than statements of historical fact, including, among others, statements regarding future financial position, results of operations and cash flows; changes in the fair value of derivatives; future financial ratios and information; future financial or operational portfolio or performance; future market position and conditions; business strategy; growth strategy; future impact of accounting policy judgments; sales, trading and market strategies; research and development initiatives and strategy; market outlook and future economic projections and assumptions; competitive position; projected regularity and performance levels; expectations related to our recent transactions, projects and discoveries, such as discoveries in the Bay du Nord prospect in the Flemish Pass Basin offshore Newfoundland as well as on the NCS; the termination of the full-scale carbon capture project at Mongstad; Statoil's interest in the OMV-operated Wisting Central oil discovery in the Hoop area; completion and results of acquisitions, disposals and other contractual arrangements; reserve information; future margins; projected returns; future levels, timing or development of capacity, reserves or resources; future decline of mature fields; planned maintenance (and the effects thereof); oil and gas production forecasts and reporting; domestic and international growth, expectations and development of production, projects, pipelines or resources; estimates related to production and development levels and dates; operational expectations, estimates, schedules and costs; exploration and development activities, plans and expectations; projections and expectations for upstream and downstream activities; oil, gas, alternative fuel and energy prices; oil, gas, alternative fuel and energy supply and demand; natural gas contract prices; timing of gas off-take; technological innovation, implementation, position and expectations; projected operational costs or savings; projected unit of production cost; our ability to create or improve value; future sources of financing; exploration and project development expenditure; effectiveness of our internal policies and plans; our ability to manage our risk exposure; our liquidity levels and management; estimated or future liabilities, obligations or expenses and how such liabilities, obligations and expenses are structured; expected impact of currency and interest rate fluctuations; expectations related to contractual or financial counterparties; capital expenditure estimates and expectations; projected outcome, objectives of management for future operations; impact of PSA effects; projected impact or timing of administrative or governmental rules, standards, decisions, standards or laws (including taxation laws); estimated costs of removal and abandonment; estimated lease payments and gas transport commitments are forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described above in "Financial Risk update". These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward- looking statements, including levels of industry product supply, demand and pricing; price and availability of alternative fuels; currency exchange rate and interest rate fluctuations; the political and economic policies of Norway and other oil-producing countries; EU directives; general economic conditions; political and social stability and economic growth in relevant areas of the world; Euro- zone uncertainty; global political events and actions, including war, terrorism and sanctions; security breaches, including breaches of our digital infrastructure (cybersecurity); changes or uncertainty in or non-compliance with laws and governmental regulations; the timing of bringing new fields on stream; an inability to exploit growth or investment opportunities; material differences from reserves estimates; unsuccessful drilling; an inability to find and develop reserves; ineffectiveness of crisis management systems; adverse changes in tax regimes; the development and use of new technology; geological or technical difficulties; operational problems; operator error; inadequate insurance coverage; the lack of necessary transportation infrastructure when a field is in a remote location and other transportation problems; the actions of competitors; the actions of field partners; the actions of governments (including the Norwegian state as majority shareholder); counterparty defaults; natural disasters and adverse weather conditions, climate change, and other changes to business conditions; failure to meet our ethical and social standards; an inability to attract and retain personnel; relevant governmental approvals (including in relation to the agreement with Wintershall); industrial actions by workers and other factors discussed elsewhere in this report. Additional information, including information on factors that may affect Statoil's business, is contained in Statoil's Annual Report on Form 20-F for the year ended December 31, 2012, filed with the U.S. Securities and Exchange Commission, which can be found on Statoil's website at www.statoil.com. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward- looking statements. Unless we are required by law to update these statements, we will not necessarily update any of these statements after the date of this report, either to make them conform to actual results or changes in our expectations.
  • 4. Moscow, Russia | 15-19 June, 2014
  • 5. Embrace transparency Stimulate new ideas Execute with rigour Commit passionately to HSE
  • 6. Moscow, Russia | 15-19 June, 2014 Our presence in North America Beaufort Sea Kai Kos Dehseh St. Johns Marcellus Eagle Ford Gulf of Mexico Stamford Washington D.C. Grand Banks Anchorage Houston Mexico City South Riding Point Terminal Grand Bahamas Calgary Bakken Austin Williston Chukchi Sea Statoil Office Statoil Asset 2013 2012 2011 2010 2008 2007 2004 1996 1987 Eagle Ford Operations Marcellus Operations Bakken 1st US Onshore Operations Eagle Ford Alaska and Marcellus Oil Sands, Canada Deepwater GoM Grand Banks, Canada Oil trading, New York
  • 7. Moscow, Russia | 15-19 June, 2014 Statoil: premium portfolio in core onshore plays Bakken Eagle Ford Marcellus
  • 8. Moscow, Russia | 15-19 June, 2014 Unconventional reservoirs: how tight is tight? 0.0000001 D 0.01 D 1 D+0.1 D0.001 D0.000001 D Permeability (Darcy) Extremely Tight Very Tight Tight Low Moderate High ConventionalTightTighter than tight Eagle Ford, Bakken Marcellus 0.00001 D 0.0001 D Very High Norwegian Continental Shelf, Samotlor, Ghawar Unconventional
  • 9. Moscow, Russia | 15-19 June, 2014 ~100m Upper Bakken Shale Middle Bakken Lower Bakken Shale Three Forks Bakken petroleum system ~150km
  • 10. Moscow, Russia | 15-19 June, 2014 150km 250km 150km North Dakota Horizontal Drilling Activity Source: IHS Enerdeq Year 2006 – 150 wells Year 2014 – 8,800 wells
  • 11. 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Barrelsperday WellCount Moscow, Russia | 15-19 June, 2014 1 2 3 4 5 6 2 First horizontal Bakken well (1987) 6 Oil production exceeds 1,000,000 barrels per day (2014) 5 First multi-stage, long-lateral (2009) 4 First lateral isolation using swell packers (2006) 3 First horizontal well with hydraulic fracture stimulation (2000) 1 First vertical Bakken well (1953) North Dakota historical production and well count BAKKEN
  • 12. Moscow, Russia | 15-19 June, 2014 Technical evolution Images courtesy of CBP Engineering and Momentive BAKKEN Contact with the reservoir Stimulation method Proppant selection Fluid systems
  • 13. Moscow, Russia | 15-19 June, 2014 Vertical well, no frac Reservoir contact area ~10 square meters Short horizontal well, no frac Reservoir contact area ~500 square meters Single, uncontrolled frac Reservoir contact area ~10,000 square meters Multi-stage frac Reservoir contact area ~100,000 square meters Improved multi-stage Reservoir contact area ~1,000,000 square meters Surface area contact with reservoir Long horizontal well, no frac Reservoir contact area ~1,000 square meters Top view Side view BAKKEN
  • 14. Moscow, Russia | 15-19 June, 2014 Frac Sleeve Stimulation Method Plug & Perf Stimulation Method vs. Stimulation method BAKKEN Plug & Perf completions improve wellbore-to-fracture connection and reduce pressure losses in each fracture 3 – 4 fracs per stage1 Frac per stage
  • 15. Moscow, Russia | 15-19 June, 2014 Increased strength and conductivity increased costs despite Higher recovery and profitability yields Natural Sand Resin Coated Sand Ceramic High Strength Particles with uniform size and shape deliver increased conductivity in the fracture system Natural Sand with irregular shape and poor sorting in the proppant pack results in reduced conductivity in the fracture system Proppant types and selection Images courtesy of Carbo Ceramics, Inc., CBP Engineering, and Momentive BAKKEN
  • 16. Moscow, Russia | 15-19 June, 2014 Fluid types and characteristics Images courtesy of Momentive BAKKEN Cross-linked Gel Fluid System • High viscosity • High proppant transport capabilities Slickwater Fluid System • Low viscosity and friction pressures • Less damage to formation Hybrid Fluid System • Slickwater initially, tail-in with Cross-linked Gel • Incorporates benefits of both fluid systems
  • 17. Moscow, Russia | 15-19 June, 2014 2005 – 2006 Single, Uncontrolled Frac Completions Frac optimization drives economic success 30km BAKKEN Williams County, North Dakota
  • 18. Moscow, Russia | 15-19 June, 2014 Star denotes artificial lift installation 2009 First 20-Stage Plug & Perf CompletionWilliams County, North Dakota Frac optimization drives economic success BAKKEN 30km
  • 19. Moscow, Russia | 15-19 June, 2014 Conclusions and Path Forward Apply best practices Take risks and adapt quickly Embrace new technology Assess and monitor success around you Design strategic evaluation projects (pilots) Remain focused on how we deliver
  • 20. Moscow, Russia | 15-19 June, 2014
  • 21. Moscow, Russia | 15-19 June, 2014 Torstein Hole SVP US Onshore Statoil, United States Author Biography Torstein has been with Statoil since 1985 and has held a range of operational and development roles in the upstream organization. More recently as Senior Vice President for Finance, Strategy and Business Development in Exploration and Production and, prior to moving to Houston in October 2011, the Senior Vice President of Operations South on the Norwegian continental shelf.