Shale Gas Development and Hydraulic Fracturing

New Brunswick Building Trades Council Angie Leonard, Senior Advisor, CAPP

June 26, 2012

Presented By

The Canadian Association of Petroleum Producers (CAPP)

The New Brunswick Oil & Natural Gas Association

(NBONGA)

New Brunswick O&NG Task Group

What Is CAPP?

● CAPP’s mission is to enhance the economic sustainability of the Canadian upstream petroleum industry in a safe and environmentally and socially responsible manner, through constructive engagement and communication with governments, the public and stakeholders in the communities in which we operate.

● CAPP represents companies, large and small, that explore for, develop and produce natural gas and crude oil throughout Canada.

● CAPP’s member companies produce more than 90 per cent of Canada’s natural gas and crude oil with revenues of about $100 billion-a-year.

What Is NB Oil & Natural Gas Association?

● In 2011 the NBONGA was formed to facilitate the effective exploration, development, production, transmission and distribution of New Brunswick’s hydrocarbon resources in an environmentally safe and sustainable manner

● In December, 2011 the NBONGA and CAPP joined to form a Task Group

● The Task Group's objective is to engage with communities, business leaders, governments and people interested in an open, fact-based dialogue about natural gas and oil development

Advancing the 3Es the 3Es

● Generating Economic Benefits Jobs and revenues across North America

● Providing Energy Security Safe, secure and reliable energy Large energy resource potential

● Providing Environmental

Stewardship Strong regulations Technology advances

• Significant energy demand growth: Population, standards of living

• Need all forms of energy: Increasing role for renewables

Continuing reliance on hydrocarbons

Increasing role for non- conventional crude oil & natural gas

• Technology is a key lever for sustainable growth Production

Cost competitiveness

Environmental performance

Global Primary Energy Demand

How will demand be met?

•2000

•390 TCF* •70 years of supply

• Technological advances have “unlocked” vast unconventional gas resources. • Resource assessments are ongoing (GSC, NEB, and others) in many new areas, and new

opportunities continue to emerge (Eastern Canadian shale gas, etc.)

•*Estimated Recoverable Marketable Gas

•Existing Conventional •(WCSB)

•Northern •Offshore

•Produced

•Existing Conventional •(WCSB)

•2010

•700 - 1300 TCF* •100+ years of supply

•Northern

•Coalbed Methane

•Offshore

•Tight Gas

•Shale Gas

•Produced

North American Shale Gas Play

•Source: DNR NB

Economic Impacts

ARKANSAS:

● Market Value (2010) - $13.1 billion ● Employment(2008) – 9,164 ONG industry ● Industry average salary $72,579; state average $36,800 (2010)

Source: State of Arkansas 2011

•Source: DNR NB

NB Proven and Potential Resources

Current Natural Gas and Oil Industry in New Brunswick:

● First oil well drilled at Dover in 1859 ● 300 wells were drilled in NB by 2010

● Since 1990, 40 Oil wells drilled and 40 Natural Gas wells

● 30 Natural Gas wells are currently producing

● 9 wells have been horizontally drilled, 5 gas and 4 oil

● Since 1990 49 wells have been fraced in NB

Exploration Process:

Normally 4 Stages:

1. Initial exploration • airborne techniques such as gravity gradiometry, this covers

large areas and seeks significant geological structures, which have the potential to contain hydrocarbons.

2. Geochemical surveys • on the ground may be conducted, such as soil gas

hydrocarbon geochemistry. 3. Geophysical surveys (seismic)

• looking for specific locations where hydrocarbon may exist in significant quantities (hydrocarbon traps)

4. Drill exploration wells If successful the wells would be prepared for production, if

not the company would move to another target.

Geophysical Exploration (Seismic):

1. Used to identify underground geological structures such as faults, fractures and petroleum bearing formations and aquifers.

2. A seismic wave is created on the surface of the ground using a controlled energy source (Vibroseis truck, or small explosive charge).

•Vibroseis truck •Seismic charge

Geophysical Exploration (Seismic):

3. Seismic wave travels into the earth and is reflected off of subsurface formations back to surface where it is recorded by receivers (geophones).

4. Analyzing the time it takes for the seismic waves to reflect off of subsurface formations and return to the surface, a geophysicist can map subsurface formations and anomalies.

Drilling Operations:

● Shale zone accessed through vertical, then directional or horizontal drilling

● Shale gas formations are deep in NB (1500m to greater than 2000m)

● Water aquifers are typically 100-250m deep

● 3 layers of steel casing and grout:

Surface casing Intermediate casing Production casing

How does hydraulic fracturing work?

● Approximately 4,000 cubic meters (4 million litres) of water is used to fracture each stage of a well

● Total water used at the 4 major Shale Plays in the US is less than 1% of total water usage in each state

● Fracing fluid consists of 99.51% water and sand and 0.49% chemical additives

● All chemical additives are disclosed by industry to regulators before fracing occurs

Hydraulic Fracturing (Fracing) - con’t

● Flow back water is recycled for reuse in other fracs or sent to designated, regulated waste disposal centers

● Time to build a well pad, drill well, frac and complete well is

generally 6-8 weeks ● Once well is in production the well head and water storage

tanks are left on site and the remainder of the well pad is reclaimed

● Each well pad is approximately 3-5 acres and can

accommodate up to 20 wells

Multi-Well Pads

Vertical Well Pad Horizontal Well Pad

Advantages of Multi-Well Pads: • Reduction of land use for the pad, access roads & pipelines • Easier monitoring of site and enforcement of regulations • Conducive to establishing and enforce traffic/trucking corridors • Optimization of location • Establish and enforce noise, light, air emission and water plans

•Source: ERCB 2011

What does this mean for Canada?

● Jobs (Upstream from Western Canada Natural Gas) 317,000 – the number of jobs natural gas sector is expected to provide

(direct, indirect and induced) across Canada by 2035 9,693,000 – number of person years of employment provided by natural

gas industry between now and 2035 $339 billion – amount natural gas employees will earn over next 25

years

● Revenue, Royalties, Taxes (To all Canada from Western Can. NG) $15.1 billion – amount natural gas provided in export revenue $1.5 trillion – natural gas expected to contribution to Canada’s GDP over

the next 25 years $199 billion – natural gas industry will generate in royalties $170 billion – natural gas industry will generate in federal taxes $130 billion – natural gas industry will generate in provincial taxes

Types of Economic Benefits

Direct Benefits: the spending by natural gas companies and other sectors of the

economy that are also stimulated by these expenditures Indirect Benefits: supply chain opportunities Induced Benefits:

rounds of transactions throughout the economy set of by workers, hired directly or indirectly, spending their wages on goods and services

Canadian Jobs created by Upstream NG Industry in British Columbia (thousands)

Source: CERI: Economic Impacts of Drilling and Operation of Gas Wells in Western Canada – June 2011

•Incremental 110,000 jobs! • Social infrastructure concerns (schools, hospitals) • Training requirements (highly specialized and

technical) • Could be more factoring in pipelines and LNG

infrastructure.

Natural Gas Workforce Information: (Marcellus Shale Education and Training Center)

● Each well requires 420 individuals working in 150 different occupations to complete and produce gas from one well

● Each well creates approx 13 Direct FTE’s per year ● If you include Direct, Indirect and Induced jobs the

estimates are 32 – 58 FTEs per well, varies by jurisdiction ● If 200 wells per year…2,600 Direct jobs per year and 6,400

to 11,600 total jobs per year, supported by the natural gas industry

Supply Chain Opportunities:

● Construction, manufacturing and transportation ● Drilling, completion and production ● Geological and geophysical ● Pipeline and associated infrastructure ● Environmental & other consulting services ● Legal & land ● Natural gas distribution ● Service industries, logistics & distribution ● Retail, food, health, education & financial services

Not Just Traditional NG Businesses:

● Work boots, uniforms & uniform cleaning

● Well pad cleaning

● Alternate housing – RVs, mini-homes

● Fencing

● Concrete

● Landscaping & irrigation

● Security, EMTs

● Engineers, lawyers, accountants, surveyors, etc

● Home sales, hotels, restaurants, entertainment, retail, auto sales (especially pickup trucks)

● Catering

McCully Field, Sussex

McCully Field, Sussex

McCully Field, Sussex

McCully Field, Sussex

Impressions of Energy Sources

2%

5%

12%

23%

29%

29%

34%

38%

44%

45%

49%

57%

72%

75%

82%

90%

18%

18%

47%

27%

31%

33%

51%

39%

39%

30%

39%

31%

21%

21%

12%

7%

80%

77%

41%

50%

40%

38%

15%

23%

17%

25%

12%

12%

7%

4%

6%

3%

0% 20% 40% 60% 80% 100%

Oil from imported sources

Coal

Shale or unconventional gas

Oil from Canada's oil sands

Nuclear

Oil from Canadian sources

Hydrogen

Natural gas

Canadian natural gas

Bioenergy made from crops

Bioenergy made from forest residues

Bioenergy made from animal waste

Bioenergy made from household garbage

Hydro electricity

Wind

Solar

Positive Neutral Negative

•Harris Decima, June 2011

Guiding Principles for Hydraulic Fracturing

1. We will safeguard the quality and quantity of regional surface and groundwater resources, through sound wellbore construction practices, sourcing fresh water alternatives where appropriate, and recycling water for reuse as much as practical.

2. We will measure and disclose our water use with the goal of continuing to reduce our effect on the environment.

3. We will support the development of fracturing fluid additives with the least environmental risks.

4. We will support the disclosure of fracturing fluid additives.

5. We will continue to advance, collaborate on and communicate technologies and best practices that reduce the potential environmental risks of hydraulic fracturing.

Operating Practices for Hydraulic Fracturing

Summary…

Based on: • Positive effects on NB’s

economy • NB’s energy needs and energy

portfolio • Cleanest burning fossil fuel • Industry’s commitment to:

• Responsible development • Accountability and transparency • Strong regulatory frameworks and

enforcement policies • Lessons learned from other

jurisdictions and history • Scientific research and continued

industry improvements

The Ask…

Support Responsible Exploration and Development of Shale Natural Gas in NB

THANK YOU

QUESTIONS?

Angie Leonard

Senior Advisor, NB Angie.Leonard@capp.ca

www.capp.ca