ASSESSING SHALE GAS RESOURCE PLAYS

Energy Experts Believe

Oil is Finite

GLOBAL: All oil supplies, 1930-2050

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

YearT

ho

us

an

ds

of

ba

rre

ls o

f o

il p

er

da

y

OPEC OIL

NON-OPEC OIL

OIL SANDS

DEEPWATER OIL(OPEC and non-OPEC)

LIQUIDS GAPCNG, LNG, FT-GTL,

biomass, other replacement

strategies. Reduce through energy

efficiency and energy conservation?

REFINERY GAIN

Demand is not

E&P Business:Oil Price, Margin, Size & Value

high ti

de =

high

operat

ing

cost

s

low

tide

=

low o

peratin

g

cost

s

High Margin Asset

*Low Margin Asset

LowOil

Price

HighOil

Price

Global Shale Gas Volumes

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

North &South

America

Eastern &WesternEurope

FormerSovietUnion

MiddleEast &NorthAfrica

Sub-Saharan

Africa

China

Tight Gas

Coalbed Methane

Gas Shales

Source: Rogner 1997

GIP TCF

Over 32,50032,500 TCF of gas identified worldwide from Unconventional Reservoirs

Despite Early Stages of Exploration Huge Amounts of Shale Gas

is estimated in different parts of world

HC RelatedNon conventional

Resources

Oil resources Gas resources

Oil Shales Tar sandsClastic/carbonates

ReservoirsShale/coalReservoirs

Heavy oil

Tight Gas

Basin Centered Gas

Shale Gas

Coal Bed methane

LBM/CMM

Ravi Misra

Bas

in C

ente

red

gas

Tig

ht G

as

Sha

le G

as

Attractive, Hottest Business OpportunityAcross Globe

Shale Gas is key to USA Energy Basket US 2008 ytd. production of Shale Gas

is 3.23 TCF 17% of total US gas production from

Shale Gas India’s total annual Conventional Gas

production is only 26% of US Shale Gas production (Schlumberger)

Shale Gas

What is shale Gas?

Shale gas is natural gas contained within shale sequences. The gas is stored in shale in two major ways:

As adsorbed gas on kerogen (insoluble organic matter). In this respect, it is similar to natural gas from coals.

The adsorbed gas portion range between 20% (Barnett Shale) and 85% (Lewis Shale).

UTICA SHALES, NEW YORK

Continuous type regionally pervasive self contained natural gas playsContinuous type regionally pervasive self contained natural gas plays in Shale/Shaly Formations in Shale/Shaly Formations

Play Type Identification is Critical

For Assessment and Exploration

Thermogenic

Biogenic Mix Type

Gas Shales contain significant portions of both adsorbed gas and interstitial pore gas

Reservoir Reservoir Location Average (%) of Gas Content in Interstitial

Porosity

Average (%) of Gas Content Adsorbed

Lewis Shale/Siltstone San Juan Basin 75-85 15-25

Barnett Shale Ft. Worth Basin 35-75 25-65

Antrim Shale Michigan Basin 15-25 75-85

New Albany Shale Illinois Basin 25-35 65-75

White Speckled Shale Alberta 55-75 25-45

…..Contd.

NO TWO SHALES ARE ALIKE

But look for right combination of shale characteristics

SHALE TYPING IS ESSENTIAL

PLAY CHARACTERISTICS

Continuous type plays Cover large arial

extent

Large net thickness (on average)

Traits which differ from coals

*Gas Saturations Adsorbed and Free Gas*

PRINCIPAL TYPES OF GAS STORAGE PHENOMENA

• Natural Fracture Systems often Control the Success or Failure of Stimulation Attempts

• Natural Fracture Geometry can Change Laterally and Vertically with Lithology related Mechanical Properties and Stress Changes

Dual Permeability System

The Flow Path

SHALE PLAY EVALUATION

Generation Potential (source)

Storage Potential (reservoir)

Production Potential (Productivity)

The Fundamental Aspects for Evaluation

EVALUATION CRITERIA

TECHNOLOGICAL

Gas assessment related

Drilling and completion related

Stimulation and production related

COMMERCIAL & ECONOMIC

GEOSCIENTIFIC

Geological

Geochemical

Petrophysical

Reservoir

Geological Parameters

Shale Thickness (>100M)

Shale Depth (<2500M)

Areal extent Shale Type (silty) Shale brittleness

(low Poissons ratio & high Youngs Modulus)

GEOCHEMICAL EVALUATION

What makes the shale a good SOURCE for gas plays

TOC

Vro

TR

Thickness

Kerogen type

HI/O2

Biogenic-Thermogenic ratio

Multiple Methane Adsorption Isotherms, Antrim Shale Well

Organic Matter Type Effect Sapropelic Kerogens generate twice the

volume of gas as do Humic Kerogens but oil interfere with release of gas until >1.0Vro

Humic Kerogens (III) generates mainly gas starting at 0.5 Vro

Type I Kerogen starts gas generation at higher maturity than type II and Type III Kerogens

Iso Tmax plot

Iso Maturity Map

Martini 2003

Shale Gas Composition

Petrophysical

Log Motifs of producing Marcellus gas shales

Reservoir Characteristics

Type of shale- composition variability Clay volume,type Microporosity Permeability Fracture density, orientation,

connectivity Diagenetic effects (fracture fillings) Geomechanical properties Stress elements Reservoir pressures and

Temperature

Adsorbed gas

Free gas

15-85%

85-15%

Composite Reservoir Property Evaluation

Well Pressures

Reservoir characterization in Barnet Shale

ASSESSING PRODUCTION POTENTIAL

High resolution heterogeneity ismeasured via continuousscratching along the length ofthe core

Results provide a profileof unconfined strengthand its variability alongthe length of the core

Shale Reservoir Heterogeneity Measurement

RESERVOIR ANISOTROPY The implication of anisotropy is that material properties are different in the vertical direction (perpendicular to bedding) and horizontal direction (parallel to bedding), and that properties vary strongly with orientation to bedding.

Anisotropic properties can be obtained via laboratory

testing (core scale) and 3D seismic (reservoir scale)

Reservoir Anisotropy

1 cm1 cm

CalciteCalciteCalciteCalcite

Humble No. 43 Yarborough & Allen, Ward County, Texas, Section 66, E. J. Brady SurveyHumble No. 43 Yarborough & Allen, Ward County, Texas, Section 66, E. J. Brady SurveyComer (1991) location C2, sample C2-5Comer (1991) location C2, sample C2-5

Humble No. 43 Yarborough & Allen, Ward County, Texas, Section 66, E. J. Brady SurveyHumble No. 43 Yarborough & Allen, Ward County, Texas, Section 66, E. J. Brady SurveyComer (1991) location C2, sample C2-5Comer (1991) location C2, sample C2-5

0.2 mm0.2 mm

Fractured Woodford, Permian BasinFractured Woodford, Permian Basin

10.1 % TOC0.55 % Ro

Type II Kerogen

10.1 % TOC0.55 % Ro

Type II Kerogen

7175 ft7175 ft

TECHNOLOGICAL & ENGINEERING ISSUES

DRILLING COMPLETION STIMULATION FRACTURING PROPPANTS

Pinnate Drilling PatternAfter, Doug Wight, NAPE 2005

Fishbone Drilling Pattern

A StandardShale GasWellConstruction

Typical Completions Vertical wells Horizontal wells

Surface

Woodford

Lower Barnett

Upper Barnett

Surface

Barnett

Minimum horizontal stress

Vertical Stress

Maximum horizontal stress

A Multistage Completion Design

Completion Objectives

Create complex fractures that will feed a main fracture connected to the wellbore

Minimize the near wellbore tortuosity to reduce chance for screen-out

Create a conductive path to allow flow of stimulation fluids as well as reservoir fluids

Main Fracture

Branch Fractures

Fracture orientation & well placement

Well Spacing in Different Shale Plays

Fluid Compatibility w/ Shales

Some shales sensitive to fresh water and/or extreme pH environments

Lab testing recommended for fluid compatibilities

CST tests can be performed quickly

Shale pack test provide more data but more time intensive

Sensitivity of clay control additives with a shale core sample

**Compatibility Testing is a Critical Step**

Fractures in Shale

Initial Shale Stimulations

Large volume of water(80,000barrels)

Small volume of propping agent

High pump rate with low proppant concentrations

Attempt to stimulate multiple perf clusters at one time

Other Considerations

High viscous gels may create bi-winged fractures

High initial pressure may be due to damage near wellbore

Cement / mud in fractures Small volume of acid can

help overcome damage Microsiesmic helps in

monitoring the stimulation pattern

Shale Well

Shale Types & Fracture Types

Improvement in Shale Reservoir Characteristics after Treatment

Increasing Frequency of Frac Jobs

Selecting Prop pants

Embediments

crushing

Monitoring Stimulation Job Effectivity

A typical Hydrofrac Operation For Shale Gas Stimulation Job

Type of well & completion impacts on production

Shale Gas Resource Estimation

MAKING UNCONVENTIONAL GAS RESOURCE ESTIMATES IS DIFFICULT

Does not lend itself to finding-rate models Does not follow rules of field size distribution or

discovery process models Requires prudent incorporation of “technology

progress” for drilling efficiencies, well costs and reserves per well

Requires considerable data, acceptance of geologic variability, and numerous “expert judgment” calls.

Assessing the size and quality of unconventional gas is a challenge:

WHY UNCONVENTIONAL GAS RESOURCE ESTIMATES DIFFER!

Given their “continuous” nature, the size of an unconventional gas play (recoverable resource) is determined by:

(1) play area; (2) well spacing; (3) well performance; and, (4) expectations for success.

The Williams Fork (Mesaverde) tight gas play illustrates how moderate differences in assumptions can lead to widely different estimates.

U.S. Geologic Survey(2003)

Advanced ResourcesS. Basin

Only(2004)

ASSUMPTIONS

Play Area (mi2) 1,989 1,008

Developed (%) 3% 4%

Well Spacing (acres/well) 73 20

EUR/Well (Bcf) 0.91 1.21

Success/Availability Factors (%) 20% 83%

RESULTS

Recoverable Resource (Tcf) 3.1 31.3

SHALE GAS PLAY ECONOMICS

BARNETT OHIO ANTRIUMNEW ALBANY LEWIS

Depthmeter 1980-2590 610-1524 182-670 152-610

915-1828

Well cost(Rs. Crores) 2-2.7 0.9-1.35 0.81-1.12

0.56-0.67

1.12-1.35

Completion costs, (Rs. crores) 0.45-0.67 0.11-0.22 0.11-0.22 0.11

0.45-1.35

Well + completion cost (Rs.crores) 2.45-3.37 0.2-1.57 0.92-1.34

0.67-0.78

1.57-2.70

Well spacing, Acres 80-160 40-160 40-160 80 80-320

ECONOMICS OF DIFFERENT SHALE PLAYS IN USA

Cost profiles for shale plays: (Barnett, Fayetteville and Woodford)

Expected natural gas prices to average about $7 per MMBtu in 2007. The major shale plays show robust economics at a lower price, $6 per MMBtu.

Base Case Downside case

$6/MM Btu Henry hub

$4.5/MM Btu Henry hub

Barnett core 131% 57%

Barnett core 59% 8%

Barnett core 32% -105

Fayetteville 51% 7%

Woodford 61% 135

REFERENCES Fayetteville Gas shale evolution, Richard F.Lane,2006 Fractured shale gas potential in New York, David G. Hill,

Tracy E. Lombardi,& Jon P. Martin (2004) Custom technology makes shale resource profitable.

Glenda Wylie, Ron Hyden, Von Parkey, Bill Grieser, Rick Middaugh, Trends in unconventional gas, Oil & Gas Journal, 2007

Unconventional gas, topic #29,National petroleum council, Stephen Holditch et al, 2007

Shale gas-Focus on Marcellus Shales, 2008. Lisa Sumy, for the oil & gas accountability project, Earthworks

Dan Jarvie ,Humble geochemical studies

ACKNOWLEDGEMENT Author is indebted to Sh D. K. Pande, Director

(Expl) ONGC & ONGC Management for permission and support

Author acknowledges and thanks various Cos. engaged in shale gas E&P business and providing the necessary data in public domain which made it possible to comprehend and effectively communicate to the distinguished audience which will go a long way in popularizing shale gas in India.

THANKS