Shale gas: opportunities Shale gas: opportunities and challenges for and challenges for

independents independents or, Whator, What’’s in it for me??s in it for me??

Bob Cluff (SIPES 1832)Bob Cluff (SIPES 1832)The Discovery Group Inc.The Discovery Group Inc.

Denver, ColoradoDenver, ColoradoSIPES 2009 Annual Meeting, Hilton Head, S.C.SIPES 2009 Annual Meeting, Hilton Head, S.C.

WhatWhat’’s hot...........s hot...........

Barnett Shale, Ft Worth basinBarnett Shale, Ft Worth basinold reliable, continues to deliver, old reliable, continues to deliver, independents do wellindependents do well

Woodford Shale, western Arkoma basinWoodford Shale, western Arkoma basinhard, cherty, not for the faint heartedhard, cherty, not for the faint hearted

Fayetteville Shale, eastern Arkoma basinFayetteville Shale, eastern Arkoma basindidndidn’’t work with vertical wells, continuous t work with vertical wells, continuous improvement with horizontalsimprovement with horizontals

Marcellus ShaleMarcellus Shaledark horse in the Appalachian basindark horse in the Appalachian basinUpper Devonian shales have produced since Upper Devonian shales have produced since early 1800early 1800’’ssoverpressuredoverpressured, relatively thin Middle , relatively thin Middle Devonian shale was a surpriseDevonian shale was a surprise

Haynesville ShaleHaynesville Shalehot, deep, & expensive, but monster IPhot, deep, & expensive, but monster IP’’ss

Southern margin shale playsSouthern margin shale plays

Schlumberger, 2005, Shale Gas white paper

the Marcellus and Haynesville did not appear on this 2005 slide!

and whatand what’’s not?s not?

Antrim ShaleAntrim Shaleplay is winding down as the economic limits have play is winding down as the economic limits have been reachedbeen reached

New Albany ShaleNew Albany Shalenot working for most playersnot working for most playerseven those sticking with it are less than enthusiasticeven those sticking with it are less than enthusiastic

Floyd ShaleFloyd Shalethe play that refuses to deliver despite Kent the play that refuses to deliver despite Kent BowkerBowker’’ssbest effortsbest efforts

Western Interior Cretaceous shalesWestern Interior Cretaceous shales““gas shalesgas shales”” have mostly turned out to be have mostly turned out to be siltysiltyzones zones interbeddedinterbedded in low TOC marine, gray in low TOC marine, gray shales (Mancos, Baxter, Lewis)shales (Mancos, Baxter, Lewis)

Penn shales, Texas PanhandlePenn shales, Texas Panhandleplay appears to have fizzled outplay appears to have fizzled out

West Texas BarnettWest Texas Barnett--WoodfordWoodfordhuge apparent GIPhuge apparent GIPbut deliverability and cost challengedbut deliverability and cost challenged

Who the players are.....Who the players are.....ChesapeakeChesapeakeDevonDevonSouthwestern EnergySouthwestern EnergyEOGEOGXTOXTORange ResourcesRange ResourcesEnCanaEnCanaNewfieldNewfieldPetroHawkPetroHawk& many, many more

BPBPExxonMobilExxonMobilConocoPhillipsConocoPhillipsShellShellChevron staying out?Chevron staying out?

& many, many more

First principles:First principles:If you are in a hydrocarbon productive basin,If you are in a hydrocarbon productive basin,

there will be a mature hydrocarbon source rock there will be a mature hydrocarbon source rock someplace in the section.someplace in the section.

And, if there are significant nonAnd, if there are significant non--associated gas associated gas fields in the area, fields in the area,

there must be a source rock in the gas window down there must be a source rock in the gas window down there!there!

Now, all you have to do is find it! Well, exceptNow, all you have to do is find it! Well, exceptyouyou’’ll have to lease it first,ll have to lease it first,then horizontally drill and then horizontally drill and fracfrac it,it,and produce it for years, and produce it for years, and dispose of water..................... and on and on.and dispose of water..................... and on and on.

Geologically, what is important?Geologically, what is important?ThicknessThickness –– momo’’ is is bettabettaTOCTOC –– production is from the organic rich black shales. production is from the organic rich black shales. Kerogen typeKerogen type -- Thus far, all production is from marine Thus far, all production is from marine shales with mostly Type II shales with mostly Type II kerogenskerogens..Maturity Maturity –– high maturity shales appear to have much high maturity shales appear to have much better deliverabilitybetter deliverabilityPorosityPorosity –– high high microporositymicroporosity is goodis goodHigh gas in placeHigh gas in place –– combination of h, TOC, porosity, and combination of h, TOC, porosity, and maturity (maturity (→→ Sw)Sw)““FracabilityFracability”” –– brittle shales that hydraulically fracture brittle shales that hydraulically fracture work best. Natural fractures are probably there, but not work best. Natural fractures are probably there, but not as important.as important.

ThicknessThicknessIn every play, deliverability improves with greater In every play, deliverability improves with greater target thicknesstarget thicknessTraditional subsurface mappingTraditional subsurface mapping

total unit thicknesstotal unit thicknesshigh GR zone thicknesshigh GR zone thicknesslow bulk density thicknesslow bulk density thicknesshigh resistivity shale thicknesshigh resistivity shale thicknessnet feet of neutronnet feet of neutron--density crossdensity cross--overover

can do it with paper or raster logs. This is old can do it with paper or raster logs. This is old school geology.school geology.

Typical log, West TXTypical log, West TXDOWNES 1

0 125GR

125 250GR

0.2 2000LLD

2 3RHOB

0.45 -0.15NPHI

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lower

Barnett Shale

Mississippian Lsupper

middle

lower

Woodford Shale

Devonian-Silurian Ls undifferentiated

DonDon’’t be afraid of digital logst be afraid of digital logsDigital logs (Digital logs (““LAS filesLAS files””) are widely available, but ) are widely available, but they are not freethey are not freeStandard geoscience packages like Petra, Standard geoscience packages like Petra, GeographixGeographix, can compute , can compute

net interval thicknesses above user cutoffsnet interval thicknesses above user cutoffssum any property, e.g. GRsum any property, e.g. GR--feetfeetaverage any log values, e.g. average any log values, e.g. RdeepRdeep or bulk densityor bulk density

Maps of basic log properties reveal changes in Maps of basic log properties reveal changes in shale lithology, organic content, and even gas shale lithology, organic content, and even gas saturation!saturation!

Total organic carbonTotal organic carbon

TOC, by convention in weight %, is the total TOC, by convention in weight %, is the total amount of organic carbon in the rockamount of organic carbon in the rockThis relates to:This relates to:

How much material there was to generate oil or gas. How much material there was to generate oil or gas. The adsorptive capacity of a shale to hold gas in the The adsorptive capacity of a shale to hold gas in the matrix, matrix, independent of porosityindependent of porosity

All gas shale plays occur in the black, high TOC All gas shale plays occur in the black, high TOC shale facies. None are in the shale facies. None are in the interbeddedinterbedded low low TOC or TOC or ““graygray”” shales.shales.

How do we estimate TOC?How do we estimate TOC?TOC roughly correlates TOC roughly correlates with high GR, low bulk with high GR, low bulk density, and high density, and high ∆∆TTLinear regressions Linear regressions against core data against core data provide good first order provide good first order estimatesestimatesSeparating TOC from Separating TOC from porosity can be porosity can be problematicproblematic

Hasenmueller & Leininger, 1987

RhoBRhoB vsvs TOCTOC

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Bulk density (g/cc)

Huron shale, OhioHuron shale, Ohio

2.45 or 15% LS φ

low TOC gray shales

high TOCblack shale

Devonian Ls

Net radioactive Huron ShaleNet radioactive Huron Shale

deWitt, Roen & Wallace, 1993, USGS Bull 1909-B

Net radioactive M. Devonian shaleNet radioactive M. Devonian shale

deWitt, Roen & Wallace, 1993, USGS Bull 1909-B

Kerogen typeKerogen type

All shale gas All shale gas plays are in oil plays are in oil prone, marine prone, marine ““Type IIType II””kerogen facieskerogen faciesSo called So called ““gas gas proneprone”” or coaly or coaly OM are not OM are not significant!significant!

SOM in transmitted light,SOM in transmitted light,a.k.a. a.k.a. ““strew mountsstrew mounts””

Oil prone, amorphous OM

Gas prone, phytoclasts

www.millenni.demon.co.uk

Thermal maturationThermal maturation

http://www.uky.edu/KGS/coal/coalkinds.htm

Changes to kerogen with Changes to kerogen with maturationmaturation

Kerogen is gradually transformed as liquid Kerogen is gradually transformed as liquid and gaseous HC are generatedand gaseous HC are generated

TOC goes down as hydrocarbons are TOC goes down as hydrocarbons are expelled from source rockexpelled from source rockKerogen moves from high H content to low H, Kerogen moves from high H content to low H, OI also decreases (down and slightly to the OI also decreases (down and slightly to the left on VK diagrams)left on VK diagrams)Residual or spent kerogen resembles Type IV Residual or spent kerogen resembles Type IV with low HI and low OI (ultimately, graphite / with low HI and low OI (ultimately, graphite / pure C)pure C)

Two things are thought to happen when a gas Two things are thought to happen when a gas shale enters the shale enters the ““gas windowgas window””

more gas has been generated, so it is far more likely more gas has been generated, so it is far more likely the bottle is completely filled with gasthe bottle is completely filled with gasgas flow through the rock appears to be significantly gas flow through the rock appears to be significantly improved improved

•• might be changes in the pore structure and pore throats, might be changes in the pore structure and pore throats, probably from volume changes of the kerogen itself,probably from volume changes of the kerogen itself,

•• or maybe microfractures were created during the maturation or maybe microfractures were created during the maturation process, process,

•• or something we donor something we don’’t understand happened.t understand happened.

PorosityPorosityShale porosity is not well understoodShale porosity is not well understoodCore measurements indicate shales have 1 to Core measurements indicate shales have 1 to 12% effective helium porosity12% effective helium porosity

usually called gas filled porosity, this doesnusually called gas filled porosity, this doesn’’t count t count the pore space filled with clay bound waterthe pore space filled with clay bound water

SEM studies suggest much of this is associated SEM studies suggest much of this is associated with organic matter, but there is with organic matter, but there is no correlationno correlationbetween TOC and porositybetween TOC and porosityFor logs both kerogen and porosity look about For logs both kerogen and porosity look about the same, so peeling them apart is problematicthe same, so peeling them apart is problematic

Gas in placeGas in place

GIP is a combination ofGIP is a combination of““free gasfree gas”” in the porosityin the porosity

•• just like gas in a sandstone, you need to know saturation, just like gas in a sandstone, you need to know saturation, porosity, and gas volume factorporosity, and gas volume factor

““adsorbed gasadsorbed gas”” on the organicson the organics•• a function of organic matter type, maturity, organic content, a function of organic matter type, maturity, organic content,

and gas compositionand gas composition•• measured in the laboratory using measured in the laboratory using ““isothermisotherm”” experimentsexperiments

““absorbedabsorbed”” or dissolved gasor dissolved gas•• this is usually ignored or lumped in with adsorbed gasthis is usually ignored or lumped in with adsorbed gas

total total sorbedsorbed gas = all threegas = all three

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0 200 400 600 800 1000 1200 1400 1600 1800Pressure (psi)

y = 14.217x - 32.974R2 = 0.9733

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Total organic carbon (%)

incr

easi

ng T

OC

Langmuir Langmuir volumevolume

GIP log calculationsGIP log calculationscompute temperature and pressure as function compute temperature and pressure as function of depthof depthcompute Langmuir parameter Vcompute Langmuir parameter VLL from density from density log or TOC log as a curvelog or TOC log as a curve

have to decide how to approximate Phave to decide how to approximate PLL and and temperature effecttemperature effect

compute compute GcGc in SCF/ton from Langmuir equationin SCF/ton from Langmuir equationGIP/acGIP/ac--ft = 1359.7 * ft = 1359.7 * RhoBRhoB * * GcGc

1 g/cm1 g/cm33 = 1359.7 tons/ac= 1359.7 tons/ac--ftft

cumulate the GIP/accumulate the GIP/ac--ft curve over the well to get ft curve over the well to get GIP/ac, convert to BCF/miGIP/ac, convert to BCF/mi22

Free gas calculationFree gas calculation

most companies presently playing gas most companies presently playing gas shales assume they are mostly a free gas shales assume they are mostly a free gas system, like a very tight siltstonesystem, like a very tight siltstoneGIP (GIP (mcfmcf/ac/ac--ft) = 43.56 * ft) = 43.56 * φ ∗ φ ∗ SSgg / / BBgg

φφ is porosity available for gas storage, is porosity available for gas storage, v/vv/vSSgg is the gas saturation, is the gas saturation, v/vv/vBBgg is the gas formation volume factor, is the gas formation volume factor, rcf/scfrcf/scf

We calculate this as a continuous curveWe calculate this as a continuous curve

Total gasTotal gas

Convert the adsorbed gas content from Convert the adsorbed gas content from SCF/ton (coal units) to MCF/acSCF/ton (coal units) to MCF/ac--ftftFree gas is in same unitsFree gas is in same unitsSum the two to get total gasSum the two to get total gasCumulate from bottom up. Cumulative Cumulate from bottom up. Cumulative gas is in MCF/ac, usually converted to gas is in MCF/ac, usually converted to BCF/miBCF/mi22

Schlumberger Shale GasAdvisor example

Total GIP Barnett + Woodford Total GIP Barnett + Woodford (BCF/ sq mile)(BCF/ sq mile)

GeomechanicalGeomechanical propertiesproperties

““FracabilityFracability”” is everythingis everythingif the shale wonif the shale won’’t t fracfrac, you won, you won’’t produce gas.t produce gas.

The more brittle the rock, the betterThe more brittle the rock, the betterthink think ““peanut butterpeanut butter”” vs. vs. ““peanut brittlepeanut brittle””, you choose, you choose

A brittle rock in an isotropic stress field tends to A brittle rock in an isotropic stress field tends to shatter when its shatter when its fracedfraced

ideally, you get a broad elliptical fracture field with ideally, you get a broad elliptical fracture field with closely spaced closely spaced fracsfracs in multiple directions (in multiple directions (““complex complex fracture patternfracture pattern””))

Barnett shale fracture patternBarnett shale fracture pattern

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West-East (ft)

Sout

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(ft)

• Frac monitored from nearby observation well with microseismictechnology • Large single stage slickwater frac in center (red) well• Distinct linear “streets and alleys” pattern develops over time• 5 offset wells killed

Pinnacle Technologies

What determines brittle behavior?What determines brittle behavior?

PoissonsPoissons ratio and ratio and YoungsYoungs modulus (E) are the modulus (E) are the key rock parameters; the key rock parameters; the insituinsitu stress field is the stress field is the key area parameterkey area parameter

Brittleness Brittleness ““indexindex”” is a composite of PR and Eis a composite of PR and E

Difficult to get without modern shear sonic Difficult to get without modern shear sonic (dipole) logs, preferably run in anisotropy mode(dipole) logs, preferably run in anisotropy modeBut,But, simple correlations with DTC might get you simple correlations with DTC might get you close enough with evaluation of borehole close enough with evaluation of borehole breakouts and other stress indicationsbreakouts and other stress indications

Halliburton equation50% YM/50% PR

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dynamic YE

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Halliburton brittleness index

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YE

• YME is highly correlated with bulk density and sonic logs

What should you do?What should you do?

If you are in a gassy basin, there could If you are in a gassy basin, there could well be shale gas potential under youwell be shale gas potential under youDo your homework first. You can get 70% Do your homework first. You can get 70% of the picture without ever drilling a well.of the picture without ever drilling a well.

basic subsurface geologybasic subsurface geologyTOC and porosity from log analysisTOC and porosity from log analysisgeochemistry from cuttings or nearby coresgeochemistry from cuttings or nearby coresrock mechanics from sonic logs and caliper rock mechanics from sonic logs and caliper logslogs

Develop the play concept, lease the coreDevelop the play concept, lease the corePartner up to drill a science or a proofPartner up to drill a science or a proof--ofof--concept wellconcept well

demonstrate presence of mobile gasdemonstrate presence of mobile gasmagnitude of gas in place resourcemagnitude of gas in place resourcesome minimum level of deliverability after some minimum level of deliverability after fracfrac

Development will require horizontal Development will require horizontal drlgdrlg and and fracingfracing. Gets $$$$$ quickly. Few of these plays . Gets $$$$$ quickly. Few of these plays work on a low cost, vertical well basis.work on a low cost, vertical well basis.

Thank you!Thank you!

Got questions?Got questions?www.discoverywww.discovery--group.comgroup.com