kuuskraa case study 1 barnett shale china workshop apr 2010

7/28/2019 Kuuskraa Case Study 1 Barnett Shale China Workshop APR 2010

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Case Study #1.Barnett Shale: The Start of the Gas Shale Revolution

Case Study #1. Barnett Shale:Case Study #1. Barnett Shale:The Start of theThe Start of theGas Shale RevolutionGas Shale Revolution

Prepared By:

Vello A. Kuuskraa, PresidentADVANCED RESOURCES INTERNATIONAL , INC.Arl ing ton , VA

Prepared for:

Gas Shale Development Workshop

Sponsored by:

U.S. Department of EnergyU.S. Trade and Development Agency

Beijing, ChinaApril 2010

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Presentation OutlinePresentation Outline

1. Introduction and Status

2. Historical Perspective

3. Game ChangerInsights

4. Overview of Exploration, ReservoirCharacterization and Development

5. Assessing Improving Well Performance6. Lessons Learned

7. Concluding Thoughts


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1. Introduction and Status

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Introduction and StatusIntroduction and Status

The gold standardof gas shale development is the BarnettShale, Fort Worth Basin of North Texas.

The Barnett Shale gas play introduced the wide-scale use ofintensively stimulated (hydraulically fractured) horizontal wells whichhave enabled deep gas shales to become economically productive.

The Barnett Shale (Newark East field) has already produced 7Tcf from nearly 14,000 wells.

With daily production of over 5 Bcf per day, the BarnettShale/Newark East is today the largest natural gas field in the U.S.


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Barnett Shale

Ft. Worth Basin

Location of the Barnett Shale in North TexasLocation of the Barnett Shale in North Texas

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Source: Railroad Commission of Texas, 2010

Newark East, Barnett Shale Natural Gas Well Coun t(1993 thro ugh 2009)

Initially, the BarnettShale was developed withvertical wells.

Horizontal wells wereintroduced in 2002 andhave become the dominantwell design choice.

Barnett Shale Core Area

*Successful wells

07-08

04-06

01-03

96-00

90-95

1,810131

1,008904

762,001

3500

1215

Horizontal*

Wells

Vertical*

Wells



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Gas production from theBarnett Shale has gownrapidly in recent years.

Additional production isfrom associated gas fromBarnett Shale oil wells.

Ann ual Produ cti on

1.8

1.6

1.1

0.7

0.5

0.4

Tcf/Year

4.42008

4.82009

3.02007

2.02006

1.42005

1.02004

Bcfd

Newark East, Barnett Shale Natural Gas Well Production(1993 thr ough 2009)

Source: Railroad Commission of Texas, 2010

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Reservoir Properties: Barnett Shale The Barnett Shale was thefirst deep gas shale (7,000 to8,000 feet deep) to becommercially developed.

The gas shale is in twointervals, a thick, rich LowerBarnett and a leaner UpperBarnett.

The gas in-place, in the Core

Area is +150 Bcf/mi2, with about40% from adsorbed gas and60% from freegas.

+150Total Gas In-Place (Bcf/mi2)

60Adsorbed Gas (Bcf/m i2)

3,500 psiPressure

90 Free (Porosity) Gas (Bcf/mi2)

6%Porosity

390 Net Thickness

430 Gross Thickness

7,500Depth


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Geologic and reservoir assessments are used to target horizontal wells into therich, brittle interval of the shale.

Source: Chesapeake Energy

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2. Historical Perspective


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Historical PerspectiveHistorical Perspective

The U.S has been producing natural gas from shallow,organically rich fractured shales for many decades, including:

The underpressured Huron (Devonian) Shale, Appalachian Basin.

The wetAntrim Shale, Michigan Basin

Natural fractures were considered to be essential for flow rates.Adsorbed gas was the dominant gas storage mechanism. The claysin dryshales were thought to be water sensitive.

These shallow, 1,000 to 3,000 feet, shales were developed withlow cost vertical wells and small fracs.

Gas production rates were modest but long lasting. Typical gasrates were 100 to 200 Mcf per day per well, with reserves of 0.25 Bcfto 0.5 Bcf per well.

JAF028191.PPT12 April 6, 2010


Eastern U.S. Gas Shale BasinsEastern U.S. Gas Shale Basins

Source: Advanced Resources International

Lower Huron Shale

0.4 Bcfed

Ant rim Shale

0.3 Bcfed


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Deep gas shales, such as the Marcellus Shale in theAppalachian Basin were known to exist. However, except for areaswith intense natural fractures, the deep shales (much like deep coals)were considered to have essentially no permeability.

The early drilling results from the Barnett Shale, includingMitchell Energys 1981 discovery well - - the C.W. Slay No. 1, tendedto validate the conventional wisdom of essentially no permeabilityindeep shales.

The C.W. Slay #1 well had a modest initial productionrate of 120 Mcfd after cleanup.

The initial vertically drilled wells had low EURs of about

0.4 Bcf/well, not much different than the shallow (andmuch cheaper to drill) Huron and Antrim Shale wells.

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For the next twenty years, the Barnett Shale operator, MitchellEnergy, continued experimenting with larger fracture designs, morerigorous reservoir characterization and lower cost well drilling andstimulation.

This formal process of learninghelped double the productivityof the Barnett Shale vertical wells, making the play economic.

The recognition that gas shales contained a major second gasstorage mechanism (porosity) and that one could create the essentialflow paths in a deep shale reservoir with intensively fractured

horizontal wells changed the game.

But, I am getting ahead of myself.


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3. Game Changer Insights

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Game ChangerGame Changer Insights and ActionsInsights and Actions

A series of actions and insights changed the gamefor theBarnett Shale.

The 1998Oil and Gas Journal article (Kuuskraa, et al, 1998)provided a very different interpretation of the Barnett Shale thanaccepted as the conventional wisdom. The article stated that:

In addition to adsorbed gas, porosity is a key gas storagemechanism in deep shales.

The vertical wells were draining only a small area, 10 to 30 acres,not large 320 acre areas.

The gas resource concentration was rich and the size of the BarnettShale play was large, at least 10 Tcf.

Mitchell Energy recognized that higher injected energy wasbeneficial and that the Barnett Shale was not water sensitive. Itbegan to use lower cost, large volume slick waterlow proppantconcentration fracs.


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Game Changing Insights and ActionsGame Changing Insights and Actions

The final game chancinginsights came from refracturing theolder, vertically drilled Barnett Shale wells.

Recognized that the second (or third refracture) was contactingadditional shale reservoir.

The refracs of older wells increased gas reserves to over 2 Bcf/well.(Subsequent refracs of more modern, more efficiently completedwells added about 0.5 to 0.6 Bcf per refrac.)

This provided the evidence that it was possible to createsufficiently permeable flow paths in deep gas shales.

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RefracturingRefracturing PreviouslyPreviouslyStimulated Shale WellsStimulated Shale Wells

Devon Denton Creek Trading Co. No. 1 Well

Fracture Reorientation

Barnett Shale/Newark East Field

10

100

1,000

10,000

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Time, Years

GasProduction,

Mcf/d Cum =2.2

Bcf EUR =2.9 Bcf

J ohnson No. 2 Well

10

100

1,000

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Time, Years

GasProduction,

Mcf/d

Cum =1.8 BcfEUR =2.9 Bcf


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Performance ofPerformance ofRefracedRefraced WellsWells

The Denton Creek Trading #1 well became the poster childforthe refrac program and the recognition that one could create apermeable gas shale reservoir:

The well was drilled in late 1992 and was completed from 7,738 to8,007. It was stimulated with a large frac containing 789,000 gal waterand 1,548,000 lb sand.

From late 1992 through early 2000 (6 years), the well recovered 0.8Bcf, was producing 140 mcfd, and had an EUR of 1.0 Bcf.

In 2000, the well was refractured, restoring the gas rate to 1,000 Mcfd;since the refrac, the Denton Creek Trading #1 well has produced anadditional 1.4 Bcf and has an EUR of 2.9 Bcf.

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Performance of Refractured Barnett Shale Wells*Performance of Refractured Barnett Shale Wells*(1999(1999--2000 Program)2000 Program)

*Based on analysis by Advanced Resources.

**Cumulative gas recovery at date of refrac.

***Cumulative gas recovery as of April 2008

2.53.20.7Average

2.52.91.80.40.31984Johnson #25

2.23.02.10.80.61992Ted Morris #14

2.73.32.20.60.41991Logan #23

3.54.02.60.50.41993Talley #12

1.92.92.21.00.81992Denton Creek #11

Increased

Recovery

(Bcf)EUR

Cum

Recovery***EUR

Cum

Recovery**DateWell Name

After Refractu re

(Bcf)

Original Stimulation

(Bcf)


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4. Overview of Exploration,Reservoir Characterizationand Development

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Bend ArchBend Arch -- Fort Worth Basin:Fort Worth Basin:StratigraphicStratigraphic ColumnColumn

Mississippian-age, organic-rich shale,

Unconformablyoverlies OrdovicianEllenburger Group limestone,

Overlain by Pennsylvanian MarbleFalls Fm.


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Cross-sectional view of the Barnett Shale shows Core Area in Wise &Parker Counties has thicker, deeper Barnett Shale. Thick Viola Simpson fracbarrier protects against the wet karsticEllenburger limestone. The BarnettShale becomes thinner and shallower into Tiers 1 and 2, while Viola frac barrierpinches out.

TIER 1CORE TIER 2

Barnett ShaleBarnett Shale NE to SW Cross SectionNE to SW Cross Section

NE SW

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More Rigorous Definition of Gas InMore Rigorous Definition of Gas In--PlacePlaceIn 1999, a major effort was launched to define the resource

concentration of the Barnett Shale:

Two Upper and Lower Barnett conventional cores of 90and 60

Two 10pressure cores in Lower Barnett

This established a much larger gas in-place and significantlychanged the development strategy for the Barnett Shale.

Upper and Lower BarnettLower Barnett OnlyPay Interval

14553GIP (Bcf/mi2)

Related to TOCFixedAdsorb ed Gas

25%50 to 60%Water Saturation

4.5% to 6%3.7%Porosity

Updated ValuesOriginal Values


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Mapping ofMapping ofBarnett ShaleBarnett Shale

ThicknessThickness

Barnett Shale is thickest inthe deep Core Area (up to900 feet thick).

About 200 ft thick in Parkerand Hood Counties (Tier 1).

Less than 100 ft thick furtherwest.

Shale thickness correlateswith gas in place and per-well recoveries.

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More Rigorous Definition of Gas InMore Rigorous Definition of Gas In--PlacePlace

Free Gas. The more

rigorous characterization of

the Barnett Shale increased

gas filled porosity (free gas)

by two-fold.

Ads orbed Gas. The

pressure core showed that

gas stored by adsorption was

120 scf/ton in the rich (5.2%

TOC) Lower Barnett

compared to an earlierestimate of 42 scf/ton.

Adsorp tio n Iso therm (Gas Con tent v s. Pressur e)

Shallow Gas Shales Deep Gas Shales

Total

Porosity

Sorbed


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Better Understanding of Thermal Maturi tyBetter Understanding of Thermal Maturi ty

Initially, due to less favorable gas production from lower thermalmaturity areas, development was restricted to areas with vitrinitereflectance (Ro) values (cuttings-based) of 1.4 or greater, limiting theprospective areas.

Subsequent assessments showed that the Ro value in cores wastypically 0.2 greater than in cutting, helping expand the prospective area.

Better understanding of the maturation of the Barnett Shale helpedlower the Ro cuttoff value to 1.15 to 1.25 (from core) greatly increasing theprospective area.

Further analysis also showed that many of the early well failures in thelower Ro areas were due to lack of fracture containment rather thaninsufficient thermal maturity.

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Maximum thermal maturity inCore Area (Ro =1.5%).

Barnett Shale becomes oil-prone below Ro =1.15%.

Thermal maturity declines tothe north and west.

Efforts are underway in thethick, lower Ro areas to thenorth to develop acombination shale oil andshale gas play.

Barnett ShaleBarnett ShaleThermal MaturityThermal Maturity

Fort Worth Basin

Al l Barnett Wells


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Barnett Shale PlayBarnett Shale Play

BoundariesBoundaries

Well productivitychanges rapidly dueto geology.

Core Area is deeper,thicker and highermaturity with EURs ofover 2 Bcf/well.

Extension Area wellsare thinner, shallowerand lower maturitywith EURs of less

than 1.5 Bcf/well.

Core AreaWells

ExtensionArea Wells

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5. Assessing Improving WellPerformance


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Assessment of WellAssessment of Wel l

PerformancePerformance

Early assessmentof Barnett Shalewell performance, using a two layerreservoir model (including a thin, highpermeability zone as the flow path and athick, essentially impermeable, shaleinterval), established the mind-setthatthe hydraulic fractures were long (1,200feet) and the drainage area was large(320 acres/well).

Reassessment of Barnett Shalewell performance established that actualfracture lengths were much shorter on

the order of 200 feet, and the drainagearea per well was limited to 15 to 30acres, leading operators to reconsidertheir well spacing strategies.

Well #3 Production History

Well #3 Type-Curve Match

4 Stella Young, Wise Co., TX

4 Stella Young, Wise Co., TX

Gas

Water

Source: Advanced Resources International, 1998

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Initial Barnett Shale Well PerformanceInitial Barnett Shale Well Performance

The initial vertical wells, drilled into the Barnett Shale during 1985 to 1990,provided only modest reserves of 0.4 to 0.5 Bcf/well.

The introduction of high volume slick water, low proppant concentrationstimulations, plus adding the Upper Shale interval, increased reserves to 0.8 to 1.0Bcf/well.

Source: Advanced Resources, 1998*As of mid- 1997

195140.830.337,514-7,7467Type well

160210.940.627,300-7,5284Type well

B. Subsequent 217 well (1991-96)

190301.160.786,884-7,0803Special well

95130.510.386,943-7,1332Type well

115110.390.327,558-7,7331Type well

A. Init ial 74 wel ls (1985-90)

Fracturewing, ft

Drainage,Acres

EUR,Bcf

Cum. Prod.,Bcf*

CompletionInterval, ft

Well


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Barnett Shale Core Area:Barnett Shale Core Area:

Modern Day Well PerformanceModern Day Well Performance

The introduction of horizontal wells increased well performance by aboutthree-fold. Recent well performance has been declining as operators arestepping outinto lower quality portions of the maturing Core Area.

2.81,0081.09042004-2006

Successful

Horizontal Wells

Successful

Vertical Wells

(Bcf/w)(# Wells)(Bcf/w)(# Wells )

1,810

76

3

1

0.6

1.3

1.7*

2.3*

2007-2008

2001-2003

1996-2000

1990-1995

131

2,001

500

215

3.2

2.4

5.1

1.2

*Includes improved performance from refracs.

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Cased, Cemented, Perforated and Isolated Horizontal Wellbore

A 12 Stage Open Hole Completion System Using Open Hole Packers for Mechanical Diversion

Lower Damage, More Effective Horizontal WellLower Damage, More Effective Horizontal Well

Completions Provide Higher Reserves Per WellCompletions Provide Higher Reserves Per Well

Initial Barnett Shale Well Completions

Latest Barnett Shale Well Completions

*Typically 18,000 barrels of water and 400,000 pounds of sand per stage


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0

200

400

600

800

1,000

1,200

1,400

1,600

0 6 12 18 24 30 36 42 48 54 60 66 72

Month

AvergageTime-ZeroProductionRate(Mcfd/well)

Barnett Core Area Hz Wells (2001-2006)

Horizontal Well ProductionHorizontal Well Production Type CurveType Curve

2001-2006 Type Curve1,084 Hz wellsEUR: 2.8 Bcf

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6. Lessons Learned


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The Core Area of the BarnettShale with 150 Bcf/mi2 starts out withan inherent advantage over theextension areas with much leaner 50Bcf/mi2 resource concentration.

Similar high and low resourceconcentration areas exist in each ofthe gas shale plays we haveevaluated.

Lesson #1. HighLesson #1. High--QualityQualityResource Areas Provide theResource Areas Provide the

Essential Foundation forEssential Foundation forSuccessSuccess

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A detailed look at over 1,000horizontal wells drilled between 2001and 2006 in the Core Area showsconsiderable variations in wellperformance:

Lesson #2. Even in HighLesson #2. Even in High--Quality Resource Areas,Quality Resource Areas,

Individual Well PerformanceIndividual Well PerformanceWill Vary GreatlyWill Vary Greatly

The statistical average well in the CoreArea has an EUR of 2.8 Bcf.

The best 10% of the wells in the Core

Area have EUR/well of over 7 Bcf. The lowest 40% of the wells in the

Core Area have EUR/well of only 1.2Bcf.

A small number, 43 wells (4%) are

dry(non-productive)

Barnett EUR Distribut ion

Barnett Core Horizontal Well Distribution

(2001-2006)

0.10

1.00

10.00

100.00

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Percent of Sample

EUR

Barnett Core Horizontal

Low Value

(Bcf)

High Value

(Bcf)

10% 108 7.3 5.4 15.120% 217 4.2 3.4 5.430% 325 2.7 2.0 3.440% 434 1.2 0.1 2.0Total 1084 Avg.

dry holes 43Well Count 1127

Success Rate 96%

2001-2006Successful

Wells

EUR/Well

(Bcf)

Range


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Lesson #3. 3D Seismic is Widely Used in the BarnettLesson #3. 3D Seismic is Widely Used in the BarnettShale to Avoid Faults and KarstsShale to Avoid Faults and Karsts

Source : Devon

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Operators have achievedsuccess with refracturing lowerperforming shale wells locatedin otherwise geologicallyfavorable areas.

The Pittard #6H horizontal

well was refracced in late 2007,more than doubling its gasproduction rate.

Lesson #4. Horizontal Barnett Shale Wells MayLesson #4. Horizontal Barnett Shale Wells MayAlso Benefit f romAlso Benefit f rom RefracsRefracs

Pittard #6H Production

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2003

2004

2005

2006

2007

2008

2009

2010

Time, Years

GasProduction,

Mcf/d

Cum = 1.7 Bcf


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Lesson #5. Directional and Horizontal Drilling Is Key toLesson #5. Directional and Horizontal Dril ling Is Key to

Urban Barnett Shale DevelopmentUrban Barnett Shale Development

The Barnett Shale underlies much of the Dallas/Ft. Worth area.

Carrizo O&G drilling 24 hz

laterals from a single padat UT Arlin gton. Royaltiesworth ~$105 MM @ $5/Mcf.

Source : Carrizo

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Lesson #6. We Have Not Yet Solved the Issue ofLesson #6. We Have Not Yet Solved the Issue ofOptimum Barnett Shale Well SpacingOptimum Barnett Shale Well Spacing

Given the rich concentration of gas in-place in the Barnett Shale,operators are still examining the topic of optimum well spacing.

The most common field design is to drill two 2,500 laterals per section,spaced 1,320 apart (80 acre/well).

Some operators are drilling one longer lateral of 3,500 to 4,000 feet persection, spaced about 1,000apart (80 acre/well).

Currently, 80 acre/well spacing is providing 15 to 20% recovery of GIP.

Closer well spacings of 40 acres/well could increase recovery of GIP by10 to 15% but at lower incremental reserves per well.

Pilot efforts are underway testing well spacing of 20 acres/well to raiseoverall gas recovery to over 50% of GIP.


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Optimum Well Spacing (Operator A)Optimum Well Spacing (Operator A)

Source: Devon Energy (2009)

80 acres per well (1,000apart)

187 wells online (2.5 Bcfper well)

40 acres per well (500apart)

57 wells online (2.3 Bcfper well)

20 acres per well understudy

Al ternat ive Well Spac ing Designs Performance of CloserSpaced Wells

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Optimum Well Spacing (Operator B)Optimum Well Spacing (Operator B)

Initial development on 80 acre well spacing will recover only a modest(19%) fraction of gas in-place.

Downspacingto 40- and 20-acre would increase the recovery of gas in-place to over 50%, although well performance would decline.

Source: XTO (2009)


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6. Concluding Thoughts6. Concluding Thoughts

Shale gas source rocks can have high gasstorage capacity 100 to 200 Bcfe / mi2.

Extremely low permeability shales can beunlocked using horizontal drilling and massivehydraulic stimulation.

The Barnett Shale opened up a new classof natural gas resources by demonstrating that:

These breakthroughs have enabled theBarnett Shale to become the largest naturalgas field in the U.S.

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The Barnett ShaleThe Barnett Shale Lessons LearnedLessons Learned

Helped Compress theHelped Compress theDevelopment Pace ofDevelopment Pace ofthe Fayetteville Shalethe Fayetteville Shale

Source: Republic Energy Co., PI-Dwights(IHS Energy), Southwestern Energy

Source: Tudor, Pickering, Holt & Co. Securities, Inc., Arkansas Oil & Gas Commission

We collapsed the learningcurve dramatically


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6. Concluding Thoughts6. Concluding Thoughts

Todays active pursuit of deep gas shales - - the Fayetteville,Marcellus, Haynesville and Horn River shales in North Americaand the numerous gas shales in China and other countries - -could make gas shales the largest undeveloped natural gasresource in the world.

JAF028191.PPT48 April 6, 2010


AdvancedResources

Internationalwww.adv-res.com

Office Locations

Washington, DC4501 Fairfax Drive, Suite 910Arli ngton, VA 22203

Phone: (703) 528-8420Fax: (703) 528-0439

Houston, Texas11490 Westheimer, Suite 520Houston, TX 77042Phone: (281) 558-6569Fax: (281) 558-9202

kuuskraa case study 1 barnett shale china workshop apr 2010

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