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IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 1
Drilling Technology -
The Emergence of New Risk,
From A Loss Adjuster's Perspective
Daniel C. “Dan” Mason
MatthewsDaniel International Loss Adjusters
www.matdan.com
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 2
Unconventional Gas Development
Horizontal Drilling and Hydraulic Fracturing
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 3
Shales that host economic quantities of oil and/or gas have a number of common
properties.
• Rich in organic material
• Mature petroleum source rocks
• Brittle and rigid enough to maintain open fractures
• Intervals with high natural gamma radiation seem to be the most productive
• Very low porosity and very low permeability
Taken in part from http://en.wikipedia.org/wiki/Shale_gas
“Economic Shales”
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 4
Development of shale formations has resulted from improvements in the following
technologies:
• Drilling equipment
• Monitoring instrumentation
• Hydraulic fracturing
Recent development of shale formations has contributed to the slowdown and
subsequent reversal in the decline in U.S. domestic oil and gas production.
But, from the shale drilling allegations of damage to fresh water resources have
arisen…and so have videos…
And concerns about earthquakes…as in April 2011 in Lancashire County, United
Kingdom. BBC clip 01Jun11 http://www.bbc.co.uk/news/business-13612482
Taken in part from http://www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf
Basics of Horizontal Drilling
My Water’s On Fire Tonight http://www.youtube.com/watch?v=timfvNgr_Q4
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 5
o Got it’s start in the Barnett Shale of north central Texas
o US shale gas production grew 17 percent per year from
2000 to 2006
o By 2006, shale development spread to plays other than
Barnett Shale
o From 2006 to 2010, economic production from shale
made possible by…
horizontal drilling advances
hydraulic fracturing advances
o From 2006 to 2010 U.S. shale gas production grew by an
average of 48 percent per year
o Analysts indicate shale gas production may increase
threefold from 2009 to 2035…
However, uncertainty does exist regarding technical
recoverability.
Taken in part from http://www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf
Development of U.S. Gas Shale Production
Barnett Shale gas
drilling rig onshore near
Alvarado, Texas (2008)
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 6
United States Shale Gas Basins
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 7
Taken in part from http://www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf
United States Natural Gas Production by Source
Shale gas provides the
largest source of growth
in U.S. natural gas supply
Natural gas production
by source, 1990-2035
(trillion cubic feet).
Reports indicate that
shale gas production may
increase threefold over
the next 25 years.
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 8
Worldwide Shale Reserves
http://www.eia.gov/analysis/studies/worldshalegas
Prepared April 2011 by a third consultant /paid by US Gov’nt.
Study does not consider countries where no data obtained.
Study does not consider offshore areas.
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 9
Worldwide Shale Reserves
Technically Recoverable Shale Gas Resources (in units of trillion cubic feet natural gas)
China 1,275
United States 862
Argentina 774
Mexico 681
South Africa 485
Australia 396
Canada 388 ...
Brazil 226
Poland 187
France 180
Norway 83
http://www.eia.gov/analysis/studies/worldshalegas
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 10
Greater length of producing formation exposed to the wellbore in a horizontal
well (A) than in a vertical well (B).
Source: Energy Information Administration, Office of Oil and Gas.
https://www.dmr.nd.gov/ndgs/newsletter/NL0308/pdfs/Horizontal.pdf
Vertical vs. Horizontal Drilling
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 11
Elements of a vertical well are present in horizontal
Conductor pipe
Surface casing
Intermediate casing
Production casing
Production tubing
Perforated interval
Image and certain information obtained from http://www.glossary.oilfield.slb.com/
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 12
Drilling and completion of a horizontal well
Excerpt from http://www.api.org/policy/exploration/hydraulicfracturing/hydraulicfracturing.cfm
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 13
Other horizontal drilling tactics…
Locations designed to drill multiple wells in close
proximity saves time and money, employing…
• Use of skid-mounted drilling rig systems
• Use of water-base drilling mud in upper
portion of well
• Use of oil-base drilling mud in horizontal
portion of the well
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 14
Hydraulic fracturing
The hydraulic fracturing operation will
need large quanties of
• Water
• Sand (proppant)
• Pumping equipment
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 15
Equipment associated with the hydraulic fracture operation
Frac pumps throttle up clip.
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 16
The bottom line…
Horizontal Drilling and Hydraulic
Fracturing these wellbores allows
operators to …
• develop a reservoir with a significantly
fewer number of wells, and
• significantly enhance oil and gas
recovery as well as return on
investment and total return.
Horizontal well benefits
MatthewsDaniel
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 17
Ongoing Claims
• Wellhead failures during hydraulic fracture treatments
• Casing ruptures during the fracture treatment
• Poor cement quality behind casing causing crossflow
Other Concerns
• Earthquake claims?
• Contamination of water table?
• Applicability of Policy Wording?
Claims We Have Seen
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 18
Thank you for your attention!
Please feel free to contact me with any questions.
www.matdan.com
MatthewsDaniel International Loss Adjusters
IUMI 2011 – Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 19
Other Resources:
OSPRAG cap video http://www.youtube.com/watch?v=fM-aUf1X_0o&feature=related
OSPRAG deployment exercise http://www.youtube.com/watch?v=L8d9ZcjK45E&feature=related
X Challenge: Oil Clean-up http://www.iprizecleanoceans.org/
MatthewsDaniel Houston - London