Unconventional Reservoir

From Experimental to Commercial From Experimental to Commercial Production - The Next StepProduction - The Next Step

Ron Stefik, AScT

Sr Reservoir Engineering Technologist

Oil and Gas Commission

Presentation to

Unconventional Gas Technical Forum

Victoria, BC

April 4, 2008

Variance required from normal well spacing, target areas and testing regulations!

>1 well / section for effective recovery

high well density + uniform reservoir quality =

reduced need for individual well data for

development decisions and reserves evaluation

Unconventional Gas - Premise Unconventional Gas - Premise

YES!Existing statutes allow sub-surface issues to be addressed.

Petroleum and Natural Gas Act Drilling and Production Regulation Petroleum and Natural Gas General Regulation

Available via OGC website, under “Regulations”www.ogc.gov.bc.ca

Are existing Regulations adequate for Are existing Regulations adequate for unconventional gas development ? unconventional gas development ?

Note: some changes are planned as a result of the new Oil and Gas Activities Act (OGAA).

http://www.ogc.gov.bc.ca/

Uniform “play type” = reduction or exemption;

logging and sampling.

reservoir pressure testing.

well deliverability (AOF) testing.

well spacing and target restrictions [Good Engineering Practice (GEP) approval].

Flexibility AvailableFlexibility Available

Logging and Sample WaiversLogging and Sample Waivers

High well density provides opportunity for selective data acquisition.

OGC prefers to review area drilling program for pre-approval of logging or sample waivers.

Drilling issue prevent logging?

Email or phone to request exemption.

Initial test requirement

surface data instead of bottom-hole, where appropriate

microfrac (DFIT), RFT, PID may be acceptable

exemptions may be appropriate

Annual pool testing

normally required for a % of wells each year

reduced expectation or exemption in unconventional

Well Testing – Reservoir PressureWell Testing – Reservoir Pressure

minimize flaring!

inline deliverability testing OK, Regulation allows up to 6 months from date of initial production to test

OGC permits pipeline construction prior to well completion in “resource play” areas

testing exemption available

Well Testing – AOF DeliverabilityWell Testing – AOF Deliverability

Surface Position of a WellSurface Position of a Well

Pad drilling is encouraged to minimize surface impacts.

Inter-wellhead distance normally 25 m, however, have allowed 10 m, so long as;

all potential issues are addressed, and a service plan documented.

Off-Target Production PenaltyOff-Target Production Penalty

Penalty factor (fraction < 1.00) applied to well daily gas allowable

OGC is proactive in applying penalty,

request from competitor NOT required

Penalty applies even if no well on affected

off-setting land

If off-target to Crown, penalty does apply!

Penalized well may still be economic

Gas Well Off-Target Production PenaltyGas Well Off-Target Production Penalty

Notes: 1. NS & EW distances measured to nearest corner of the spacing area2. 1 ha = 100 m x 100 m = 104m2

Example: OTF = 8 (200.0 m) (300.0 m) = 0.1778

270.0 104 m2

Gas spacing area =

1 section (DLS)

4 units (NTS)

250 m

250 m

300 m

200 m

OTF = 8 ( NS m) ( EW m)Spacing Area m2

Therefore production limited to 17.78% of DGA

Target area is 250 m inside spacing area.

target

area ~ 9

28

m

~ 698 – 820 m

Off-Target Production Penalty Off-Target Production Penalty (Example #1)(Example #1)

Well located off-target in the corner is considered to also affect spacing area in the diagonal direction

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gas target boundary

off-target to the North, West & NW

off-target only to the East

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Map Center on: B-35-E/94-B-10

File: CAPL example.MAP Datum: NAD 27 Projection: Stereographic Center: N56.60835 W122.93725 Created in AccuMap™, a product of IHS

Off-Target Production Penalty Off-Target Production Penalty (Example #2)(Example #2)

For directional/horizontal well, coordinates of “worst point of infringement” to calculate penalty

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gas target boundary

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bottom

casing ends outside of gas target area,penalty applies

can plug back or not complete toe to avoid penalty

surface

Map Center on: B-87-E/94-B-10

File: CAPL example.MAP Datum: NAD 27 Projection: Stereographic Center: N56.65013 W122.96207 Created in AccuMap™, a product of IHS

Example #1 Example #2

Daily Gas Allowable (DGA)Daily Gas Allowable (DGA)

Reserves based calculation formula

“Daily production limit”=125% of DGA

Form available www.ogc.gov.bc.ca

With off-target factor, can estimate

penalized allowable prior to drilling

Mailing Address: Resource Conservation Branch PO BOX 9329 STN PROV GOV’T VICTORIA BC V8W 9N3

Location: 1810 Blanshard St - 6th Fl Victoria BC V8T 4J1 Phone: (250) 952-0302 FAX: (250) 952-0291

APPLICATION FOR DAILY GAS ALLOWABLE (DGA) Individual Well

Form must be submitted under the authority of the Petroleum and Natural Gas Act R.S.B.C. 1996, c. 361, Drilling and Production Regulation, s.88, to the Oil and Gas Commission, at the address noted above. Information collected on this form will be used for public record in accordance with s.57 of the Drilling and Production Regulation.

Initial Application Revision No. ____________

Well Name Well Authorization No.

Field Pool

Owner’s Calculations COMMISSION USE ONLY

Factors Units Values Obtained from

Values Used in This Calculation

Branch Calculations

Depth to top gas pay mKb

Depth to bottom gas pay mKb

Assigned area A hectares

Average net pay thickness h metres

Average net porosity fraction

Average water saturation (Nominal 0.25)

Sw fraction

Initial pool pressure at MPP Pi kPaa

Formation temperature T K

Initial supercompressibility factor

Zi

Recovery factor R fraction

Unadjusted Daily Gas Allowable (103m3) =

Ah (1- S )P R

35.16398TZ

w i

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1

3.650

Name Position

Signature Company

Date Phone FAX Email

APPROVAL (for Commission use only)

Off-target penalty factor Daily gas allowable 103m3 (minimum UDGA is 60.0 103m3 in accordance with Section 1 of the Drilling and Production Regulation)

Date Effective

Field Pool

Approval Date

OGC_038_DGA Rev.06/05 Authorized Commission Employee 59070-03/WA

Application form


Off-Target Well Production Penalty WaiverOff-Target Well Production Penalty Waiver

A. Discovery Well absolute

B. Common Ownership - same lease waiver

C. Common Ownership - different lease conditional

D. Different Ownership - different lease waiver

Note: for C & D, operator may apply for waiver on proposed well before drilling


A. Discovery Well - “sufficient information has been obtained to determine that the well has encountered a previously undiscovered pool”

not first well to produce; older well with DST may qualify

operator must apply to OGC Victoria office for recognition; no specific application form

supply supporting data to build a “case”, i.e. seismic, pressure, x-sections, etc.

for unconventional gas plays, OGC recognizes regional pools, so discovery application likely

not successful!


B. Common Ownership - Same Lease

Off-target waiver is automatic under section 9.4 (oil) and 10.4 (gas) of the Drilling and Production Regulation

No application required

Two spacing areas under one PNG Lease


C. Common Ownership - Different Lease

Application required (no specific OGC form) Include cover letter stating request and attached titles map with well location plotted If title of affected lease (PNG #1 in example) expires or changes ownership, penalty may be imposed Affected title must be a P&NG Lease, not a Drilling Licence

PNG#1 PNG#2

PNG#1 & #2 both registered identical ownership


D. Different Ownership - Different Lease

Application required (no specific OGC form) Include titles map with well location and letters of consent from registered owner(s) of affected off-setting lease (PNG #1 in example) Approval is “conditional” upon ownership of PNG #1; if changes, OT penalty may be applied PNG #1 must be P&NG Lease, not a Drilling Licence

PNG#1 PNG#2PNG#1 & #2 registered different ownership

Good Engineering Practice (GEP)Good Engineering Practice (GEP)

Allow a pool (or portion) to be exploited without well spacing & target restrictions, i.e. “super” target area.

Effective for “downspacing” or areas of horizontal drilling.

No inter-well minimum distance specified, OGC expects economics and geology to dictate.

Usually no production restrictions, however individual allowable(s) may be applied to lease-line wells.

Flexibility in locating wells to access resource and minimize surface impact.


Example gas pool under GEP approval(contiguous full spacing areas)

• off-target locations• HZ wells crossing multiple spacing areas • increased density

OGC requires evidence that “downspacing” will result in increased recovery, not just recovery acceleration. (production decline vs. volumetric)

However, not an issue in recognized unconventional resources.

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File: Dawson Cr Montney GEP.MAP Datum: NAD27 Projection: Stereographic Center: N55.85875 W120.16283 Created in AccuMap™, a product of IHS

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File: CAPL example 2.MAP Datum: NAD 27 Projection: Stereographic Center: N55.85031 W120.15762 Created in AccuMap™, a product of IHS


non-contiguous area receives

separate approval

contiguous lands single approval

However both areas may be included in a single application if for the same pool.


Individual allowable(s) may be applied to lease-line locations,

Production from each of these gas spacing areas may be limited to a daily

gas restriction

(example 60 103m3/d)

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Map Center on: A-48-J/94-H-1

File: capl example 3.MAP Datum: NAD 27 Projection: Stereographic Center: N57.20004 W120.21297 Created in AccuMap™, a product of IHS

based on objection(s) received.


Approval does not have any affect on lease tenure (conversion or continuation).

Pooling still required to produce incomplete gas spacing areas.

GEP areas range in size from one gas spacing to hundreds.

May be approved for land held under a Drilling Licence, provision that PNG Lease selection made prior to production.

Buffer area usually 250 m, opportunity to decrease if both off-setting parties agree.

Note: see ogc.gov.bc.ca “Good Engineering Practice – Background Article”

GEP Application GuidelineGEP Application Guideline

ogc.gov.bc.ca

GEP ApplicationGEP Application

Notice of application posted on OGC website; 3 week period for objections to be filed.

Not a requirement to notify off-setting lease owners of application but suggested good practice if objection expected – early resolution will speed final approval.

Decision if objection is valid at discretion of OGC, no hearing process but applicant allowed to respond.

Approval subject to specified conditions.

Approval transfers to new operator.


Usually applied for area of common interest, but not a requirement. Consent letter(s) required from all registered lease owners, including brokers.

example letter on website

Fictitious Oil Company Limited 200, 300 – 4th Ave SW Calgary, AB T2P 2T2 October 24, 2006 Oil and Gas Commission Resource Conservation Branch PO Box 9329 Stn Prov Gov’t Victoria BC V8W 9N3 Attention Ron Stefik: RE: Consent to Application for Good Engineering Practice Please be advised the Fictitious Oil Company Limited, as a registered tenure owner of: Petroleum and Natural Gas Lease(s) # 1234, 2345 and 3456, hereby consents to inclusion of those lands within the application made by Serendipity Oil Company Limited, dated October 23, 2006, for Good Engineering Practice for the Lucky field Bluesky “A” pool. Sincerely, Signed Gus Gusher Exploitation Engineer


example Approval

APPROVAL 06-06-060

THE PROVINCE OF BRITISH COLUMBIA PETROLEUM AND NATURAL GAS ACT

DRILLING AND PRODUCTION REGULATION OIL AND GAS COMMISSION

IN THE MATTER of a Good Engineering Practice (GEP) scheme of Northpoint Energy Ltd. (Northpoint) for producing the Altares field Halfway “B” gas pool without well spacing and target restrictions. NOW, THEREFORE, the Commission, pursuant to Part 8, Division 6, Section 101 of the Drilling and Production Regulation, hereby approves the GEP scheme of Northpoint for drilling wells without spacing and target restrictions, as such scheme is described in an Application from Northpoint to the Commission dated July 27, 2006 and related submissions. This scheme is approved, subject to the conditions herein contained and, in particular: 1. The area of the project shall consist of:

94-A-5: Block D - units 20, 30, 40, 50, 60, 70, 80, 90

94-B-8: Block A - units 11-13, 21-23, 31-33, 41-43, 51-53, 61-63, 71-73, 81-83, 92-95 Block H – units 2-5, 12-15, 22-25, 32-35, 42-45, 52-55 and 62-65.

2. The requirements of Section 10 of the Drilling and Production Regulation are hereby

waived, provided that gas wells within the project area are not completed nearer than 250 m to the sides of the approved project area.

3. The gas wells within the project area may be produced without individual well

allowable restrictions. 4. This approval may be modified or rescinded at a later date if deemed appropriate. _____________________ Doug McKenzie Director Resource Conservation Branch DATED AT the City of Victoria, in the Province of British Columbia, this 10th day of October 2006.

area description

pool specific

waiver of well spacing & targets but 250 m buffer

no production restriction

HornHorn RiverRiver Basin - Basin - Jean Marie GEP areas comparisonJean Marie GEP areas comparison

Montney Play - existing GEP approval areasMontney Play - existing GEP approval areas

depleted or wet reservoir preferred

if hydrocarbon reservoir, injection below water contact

below shallow / near surface aquifers

injection pressure must be below 90% of formation fracture gradient

must control P & NG rights to ¼ section (1 unit)

Water Disposal Well - considerationsWater Disposal Well - considerations

Water DisposalWater Disposal

Application notice posted to OGC website, for possible objections.

Limited “test” injection volume may be approved before / during formal application process.

May dispose of both produced water or recovered fluids from a well completion or workover (includes fracture treatment fluids ie “slick water fracs”).

Challenge to industry – recycle frac water, use saline zones (Debolt) as “water storage”.

proximity to source facility (shorter the pipeline the better)

confinement of the injected gas competent cap rock, effect on rock matrix lateral plume migration

protection of hydrocarbon, mineral and groundwater resources potential to effect nearby wells and future production / drilling in area

equity interests

wellbore integrity – cement, casing, packer, tubing, safety valve

public and environmental safety – air monitoring

must control P & NG rights to full gas spacing area

Acid Gas Disposal Well - considerationsAcid Gas Disposal Well - considerations

Acid Gas DisposalAcid Gas Disposal

WA# Disposal Zone Approval Date

464 WGSI BUBBLES b-19-A/94-G-08 Baldonnel June 27, 1997

7908 BURLINGTON BURNT a-94-A/93-O-08 Baldonnel October 21, 2004

7961 ANADARKO CARIBOU c-04-G/94-G-07 Halfway September 20, 2000

10585 ANADARKO CARIBOU a-A30-G/94-G-07 Debolt March 30, 1998

9637 PC ET AL JEDNEY a-79-J/94-G-01 Baldonnel October 31, 1996

427 PC ET AL JEDNEY b-88-J/94-G-01 Baldonnel October 31, 1996

7979 PC ET AL PARKLAND 15-17-81-15 W6M Basal Kiskatinaw February 22, 2001

10503 BRC HTR ET AL RING d-49-B/94-H-16 Debolt April 6, 2000

5787 CNRL SIKANNI a-32-I/94-G-03 Debolt January 31, 2005

9887 CNRL W STODDART 01-33-87-21 W6M Halfway June 14, 2001

11398 CNRL W STODDART 07-34-87-21 W6M Halfway September 18, 1998

1517 TALISMAN SUKUNKA a-43-B/93-P-05 Pardonet-Baldonnel March 21, 2002

12 wells approved for acid gas disposal

Commingled ProductionCommingled Production

OGC avoids mapping sub-units, removing commingling as an issue.

single Montney, not Upper and Lower

individual well, pool or area based approvals.

Project DataProject Data Reservoir projects (including GEP) data file at;

www.ogc.gov.bc.ca

“Drilling Data for all wells in B.C.” – Excel file

For past Project applications or approvals, contact;

Steven Glover (250) 952-0293

[email protected]

OGC has digital shape files for GIS systems, also digitizing pool net pay maps and pool designation areas Lori Miller (250) 261-5713 [email protected]


mailto:[email protected]

Documents

Unconventional Reservoir