SHALE GAS

WHAT WE KNOW

WHAT WE KNOW WE DO NOT KNOW

WHAT DO WE NOT KNOW WE DO NOT KNOW

Supratik BanerjiRegional Technology Center (RTC)

– Unconventional GasDallas, TexasJan 11th, 2009

PETROTECH 2009: SHALE GAS FORUM

WHAT WE KNOWShale Gas WorldExamples: Barnett, MarcellusCritical factors in shale productivity optimization

WHAT WE KNOW WE DO NOT KNOWCritical factors in shale productivity optimizationShale Gas Production MechanismFracture Propagation Model…

WHAT WE DO NOT KNOW WE DO NOT KNOW…

REGIONAL TECHNOLOGY CENTERResearch Directions

CONCLUSIONS (wherever possible)

DISCUSSION POINTS

Coal, Oil, and Natural Gas Will Remain IndispensableCoal, Oil, and Natural Gas Will Remain Indispensable

Source: IEA REFERENCE CASE

1980 2004 2030

288 QUADRILLION BTU 445 QUADRILLION BTU

BIOMASSNUCLEAR

WIND / SOLAR / GEOTHERMAL

678 QUADRILLION BTU

HYDRO

OIL

NATURAL GAS

COAL

19802004

2030

The US Gas World

2000 2007

25 33

350 442

21 19.3 23.1

27%

8%

$4.25 $6.50

0

200

400

600

800

1000

1200

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

An

nu

al S

ha

le G

as P

ro

du

ctio

n,

Bcf

Fayetteville Shale

New Albany Shale

Lewis Shale

Barnett Shale

Antrim Shale

Ohio Shale

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Num

ber

of

Pro

ducin

g S

hale

Gas W

ells

Fayetteville

New Albany Shale

Lewis Shale

Barnett Shale

Antrim Shale

Ohio Shale

Conventional and Unconventional Shall Complement

Premier clean energy source ‘unconventional’ and ‘conventional’ will complement

US unconventional gas / Total gas: 46% 3.6 Trillion BoE in unconventional oil (heavy oil,

CBM, shale gas and oil) double the undiscovered conventional

80% of new gas production in the US will beunconventional

Shale gas (US only dominant player today) Reserve of 780 TCF (US) – grossly under-reported 40 – 200 BCF gas/sq mile (Barnett) 46,000+ wells drilled

BritishColumbia Alberta

Saskatchewan Manitob a

Ontario

Quebec

Newfoundland

Washington

Oregon

California

Nevada

Arizona New Mexico

Texas

Oklahoma

Ala

ba

ma

Georgia

South Carolina

VT

Utah

Idaho

Montana NorthDakota

So uthDakota

KansasColorado

Wyoming

Nebraska

Minnesota

Wisconsin

Iowa

Missou ri

Arkansas

Illinois Ohio

Maryland

New Jersey

CANADA

UNITED STATES OF AMERICA

MEXICO

Hudson Bay

SuperiorHuron

Erie

Atlantic Ocean

Gulf of Mexico

Pacific Ocean

CUBA

THEBAHAMAS

Nunavut

North West Territories

Yukon

U.S.A.Alaska

Beaufort Sea

Baffin Bay

Labrador Sea

Vancouver Island

GREENLAND

140°W160°W

120°W

120°W

100°W

100°W 80°W

80°W

60°W 40°W 20°W

10

°N30

°N

30

°N

50

°N

50

°N

14

0°W

16

0°W

60

°W20

°W

70°N

Baxter

Woodford

Barnett/Woodford

Antrim

Devonian/Ohio (Marcellus)New Albany

Barnett

Pierre

Fayetteville

Woodford/Caney

Floyd/Neal/Conasauga

Lisburne

Pearsall

BC Shales

Lewis

Mancos

Colorado Group Utica

Haynesville

BritishColumbia Alberta

Saskatchewan Manitob a

Ontario

Quebec

Newfoundland

Washington

Oregon

California

Nevada

Arizona New Mexico

Texas

Oklahoma

Ala

ba

ma

Georgia

South Carolina

VT

Utah

Idaho

Montana NorthDakota

So uthDakota

KansasColorado

Wyoming

Nebraska

Minnesota

Wisconsin

Iowa

Missou ri

Arkansas

Illinois Ohio

Maryland

New Jersey

CANADA

UNITED STATES OF AMERICA

MEXICO

Hudson Bay

SuperiorHuron

Erie

Atlantic Ocean

Gulf of Mexico

Pacific Ocean

CUBA

THEBAHAMAS

Nunavut

North West Territories

Yukon

U.S.A.Alaska

Beaufort Sea

Baffin Bay

Labrador Sea

Vancouver Island

GREENLAND

140°W160°W

120°W

120°W

100°W

100°W 80°W

80°W

60°W 40°W 20°W

10

°N30

°N

30

°N

50

°N

50

°N

14

0°W

16

0°W

60

°W20

°W

70°N

Baxter

Woodford

Barnett/Woodford

Antrim

Devonian/Ohio (Marcellus)New Albany

Barnett

Pierre

Fayetteville

Woodford/Caney

Floyd/Neal/Conasauga

Lisburne

Pearsall

BC Shales

Lewis

Mancos

Colorado Group Utica

Haynesville

Marcellus: the most promising shale gas play ??

THE GOLD RUSH XTO: Acquires 152,000 acres from Linn Energy at $600M (April 2008); additional production: 25 MMcfe/d, average well reserve: 2 Bcfe, Resource potential: 2-4 Tcfe SouthWestern: to spend $26 M in drilling 3 vertical wells Chesapeake: plans 165 wells by 2009, 6 times the current number EXCO Resources: $150 M for additional acreage; CNX Gas: estimates shale resources between 1.3 – 5.2 Tcf: Rex Energy: 16,000 acres of additional acreage; Atlas Energy: sees 4-6 Tcf from Marcellus with 150 vertical wells in the next 18 months; Chief Oil and Gas: 4 more wells in ’07; Cabot Oil and Gas (100,000 net acres leased, two vertical wells producing 800-1000 Mcf/d, 20 well program for 2008; East Resources: 70 well program (mostly vertical)

THE RUN UP Chesapeake, Range and others: Acreage positions All operators: Good gas kick, but not commercially productive Range Resources: December ’07 press release PennState Univ: Reserves assessment (Jan ’08) All others: We cannot miss the boat (again) Rigs: ??, Pumping companies: 5

SOME NUMBERS, IN NO PARTICULAR ORDER

1 2.5 600 120 54000 6000

168-516 50 200 25 5 60

Barnett -- The activity continues …

Gas Shales: you mean they are ”reservoirs” ?

Challenges Formation evaluation Completion design Modeling and forecasting

What are they? Organic-rich shales Source rocks TOC : Adsorbed and free gas

Common traits of gas shale reservoirs Abundant gas (40 to 150 BCF/section) Low porosity (~ 5%) Very low permeability (~ 200 nD) Low recovery efficiency (8 to 12%) Naturally fractured (mineralized ??) Low water saturation (~ 20% ??) Require fracture stimulation Long well life and large developments

Why are shale “reservoirs” challenging ?

-- Heterogeneous and Anisotropic.

-- Complex clay morphology

-- Free and adsorbed gas

-- Organic maturity and type.

-- Complex fracture networks

-- Sensitive to acids and frac fluids.

Mixed siliceous/argillaceous(Reservoir)

Clay Rich (Non-reservoir)

Calcite Rich (Non reservoir) Silica Rich (Reservoir)

So, what is the problem?

Understand production mechanism– Physico-chemical processes– Characterize fluid and rock properties and interaction

Reservoir characterization– Geomechanical modeling– Production forecasting

Completion Design and Execution– 3D fracture design– Tailored products/processes for execution– Hz completion strategy

High gas saturation

High matrix permeability

High pore pressure

Low fluid sensitivity; especially shale gas

Fracturable (resulting in large surface area)

Easy to drill (strong and non-abrasive)

Continuous, homogeneous, and extensive

Wish List for Successful Tight Gas Production

The three most important elements in tight gas plays: Heterogeneity, Reservoir quality, and Completion quality.

The three most important elements for defining Reservoir Quality: Gas in place (adsorbed and interstitial), Fluid saturation (gas, water, and mobile oil), and Permeability (Pore pressure would be 4th).

The three most important elements defining Completion QualityFracture containmentRock fracturability (?)Chemical sensitivity to fracturing fluids

Defining the Viability of a Tight Gas Play

Technology Used: MicroSeismic and Simultaneous Fracturing

Current Operating Procedures: Pumping the Pond

Fracture Geometry Information from Horizontal Image LogsVariable Induced Fractures Infers Variable Stress

Transverse Fractures Only:

H >> h

No Fractures:

High ’

Long & Trans Fractures:

Low ‘ & H ~ h

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400

Long, Narrow Fracture Fairway

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Wide Fracture Fairway

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No Fractures

Work in progress

Understanding of complex fractures vs. longer simpler fractures

Determine connected surface area created (fracture widths, fluid

absorbed)

Optimize fracture conductivities (fluid sensitivity, proppant

transport, etc)

Advance interpretation of micro-seismic data

Shale Gas Developments

Why are the shales full of gas, and not water ? Can we map shale continuity through surface

methods?Seismic?Resistivity?

What is the production mechanism at such high CPs?

Imbibition?Is there a better liquid than water?

How can we design and control fracture propagation?

What is the best proppant? Fluid?How do we make them go around transverse fractures?

EGR using CO2?Gas desorption at higher temperatureExperimental study of gas shale pyrolysisRelationship between maturity and porosity, fluid saturation

ISSUES

Conclusions: Key Parameters for Gas Shale Plays

Thermal MaturitySaturationsStorageAdjacent water bearing formationsMineralogy, Faults and FracturesOrganic richness, Matrix PermeabilityThickness

Fluid compatibilityFracture containmentFracture orientations

Hydraulic & naturalFracture complexityFracture conductivityStress

Geology & Reservoir Engineering

Conclusions: Shale ≠ Shale ≠ Shale

THANK YOU

PETROTECH 2009: SHALE GAS FORUM