Technological Innovation Creating Opportunities for Development

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

Dawson Energy Advisors Ltd.
November 2013

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


November 2013

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


November 2013

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


November 2013



November 2013

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


November 2013

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


Good
Volcanic Pumice

modified from US DOE

November 2013

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


November 2013

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


November 2013

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


November 2013

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


November 2013

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)


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

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)


 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

Other Aspects of Unconventional Resource Development
Risk of Success

Risk of Success

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


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

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


November 2013

Typical Production Profiles
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)

Commonly steep decline
rates up to 75 – 85% in
the first 18 months of
production


November 2013

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


November 2013

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


November 2013

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


November 2013

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


November 2013

The Key Questions
 Reservoir Characterization
 Reservoir modeling

THE GOAL

MAXIMIZED
 Sweet Spot identification
 Wellbore placement

RESERVOIR
EXPOSURE

 Wellbore completion

from E. Schmelzel, 2008


November 2013

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


P50
Probability of Success

P90

November 2013

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


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

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

November 2013

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


November 2013

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


November 2013

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


November 2013





November 2013

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

November 2013

Evolution of Drilling Technology

Increase in Reservoir Contact

$$$

$$

Horizontal
multilateral wells

Horizontal Wells

Unconventional
Resources

$
Vertical
wells
with
multiple
targets

Vertical
wells

Time


November 2013

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


November 2013

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


November 2013

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


November 2013

Rotary Steerable Systems consideration for efficiency gain (ROP) and
improved well bore quality (Logging/Completion activities).


November 2013

LWD considerations for preferred placement within Duvernay Formation.


November 2013


November 2013

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”


November 2013

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


November 2013

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


Modified from Hall, 2008

November 2013

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


From SPE 90697

November 2013

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


November 2013

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


November 2013

Multi-Stage fracture stimulation allows more accurate placement
of frac with specific volumes of frac fluid and proppant


November 2013

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


November 2013

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


November 2013

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


November 2013

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


November 2013

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


November 2013

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


November 2013

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


November 2013

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


November 2013

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

November 2013

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


November 2013

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


November 2013

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)


November 2013





November 2013

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

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

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

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


November 2013

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


November 2013

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


November 2013

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


November 2013

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”


November 2013

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


November 2013

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

November 2013

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


November 2013

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


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

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


November 2013

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


November 2013

Alberta’s
Emerging Shale Gas Industry
Technological Innovation
Creating
Opportunities for Development
Thank You for your Attention
November 2013

Technological Innovation Creating Opportunities for Development

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