Canadian Natural GasFull Potential: Unconventional Gas Development in Canada

Full Potential

Unconventional Gas Development in CanadaNatural gas from unconventional sources will be an important engine of growth and employment n

for Canada’s natural gas production industry. New technologies have unlocked the vast potential of natural gas from unconventional sources. n

According to a 2010 estimate by the Canadian Society for Unconventional Gas, Canada has a n

natural gas resource base between 700 -1300 Tcf, enough to support current production levels for well over 100 years.Stringent and comprehensive regulations govern unconventional natural gas development in n

Canada. The natural gas industry continues to work with regulators and policymakers to ensure development is conducted in a responsible manner on an ongoing basis.

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If Canada is to achieve its energy and environmental objectives, Canadian natural gas must be recognized as a core strategic asset.“”

Canadian Natural Gas is smart energy: it is an abundant growing domestic resource; a signifi cant source of revenue; an affordable energy choice; a safe and reliable fuel; the cleanest-burning hydrocarbon; and a fl exible partner in generation and in transportation. If Canada is to achieve its energy and environmental objectives, Canadian natural gas must be recognized as a core strategic asset. Natural gas is a foundation of a sustainable energy future.

Technology has made it possible to economically produce more natural gas than previously thought possible. These advances in horizontal drilling and reservoir stimulation techniques have led to greater robustness of North American natural gas supply. The industry continues to work with regulators and policy makers to ensure that development is conducted in a responsible manner. Stringent and comprehensive regulations govern both conventional and unconventional natural gas development in Canada. These regulations address the impact of unconventional natural gas development on land, air and water.

Summary

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There is nothing chemically unusual about unconventional natural gas compared with conventional gas. All natural gas recovered from below the Earth’s surface formed millions of years ago by the decay of organic matter trapped in geological formations. The term “unconventional” refers to the types of reservoirs where the gas is found, and in some cases the mechanism of storage in the reservoir. The traditional way to produce conventional natural gas is by drilling a well that taps into rocks in the subsurface where gas is stored under compression in the pores of permeable rock. This gas is easily produced. However, natural gas also occurs in other geological formations, where the gas is an integral part of less permeable types of rock formations. These widespread gas fi elds are found in several regions in Canada and form the basis for the country’s unconventional gas industry.

The three most common types of unconventional natural gas are:

SHALE GASFound in extremely fi ne-grained, essentially impermeable sedimentary rocks requiring complex reservoir stimulation to help the natural gas fl ow.

TIGHT GASFound in the pore space of sedimentary rocks that have very low permeability. Reservoir stimulation is required to recover tight gas resources.

COAL BED METHANE (CBM)Formed during the process of coalifi cation. In this process, methane is generated and trapped as peat turns into lignite and later into coal. In coal seams, methane is primarily stored by adsorption to solid hydrocarbon molecules. A range of reservoir stimulation methods are used to recover the resource.

It’s Not Unusual A Brief History of Unconventional Gas Development in Canada

Until the mid-1990s the majority of Canadian natural gas production came from conventional gas resources. Rapid growth of unconventional gas production in the US began in the early 1990’s as a result of declining conventional production and tax incentives for unconventional resource development. Canadian development has lagged by about a decade.

Hydraulic fracturing technology has been used for oil and gas development for 60 years, beginning in the US with its application in Canada quickly following. Fracturing was fi rst completed in Canada in the Pembina Cardium oil fi eld in the 1950s. It continued with thousands of completions in shallow gas wells in the Medicine Hat area.

Fracturing technology is now used to enhance production rates and resource recovery in most oil and gas development areas. Without fracturing, the majority of new wells in the WCSB would not be economical. The same is true of oil development currently taking place in the Bakken shale oil play in southeast Saskatchewan.

Based on National Energy Board deliverability estimates for the end of 2009, natural gas production from unconventional sources accounted for 36.5% of Canadian gas supply, up from 34.5% in 2008.

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Reservoir stimulation by fracturing was fi rst developed in the United States in the 1950s to increase production, typically in conventional vertical wells. Horizontal wells have experienced signifi cant growth in the last few years. These wells have the benefi t of allowing access to unconventional natural gas as well as environmental benefi ts. These benefi ts include the ability to consolidate multiple gas wells into a single location, leading to a signifi cantly smaller footprint from well pads, roads, pipelines, and surface facilities. Unconventional natural gas production does not use a single technique that is universally applied to every geological formation. Each gas well is a unique situation

requiring careful analysis and advanced knowledge to match the well’s parameters with the methods used.

To take advantage of the many benefi ts this domestic unconventional gas resource offers as a clean, reliable, affordable, and fl exible energy source, it is often necessary to employ reservoir stimulation techniques, often referred to as fracturing or “fraccing.” However, it is worth noting that not all unconventional gas resources require fracture stimulation to produce gas.

Hydraulic fracturing is the process of creating pressure deep underground, after a gas well is drilled, to fracture or crack the rock at the bottom of the well. This is done by

pumping a fl uid, often containing a suspended proppant (typically sand), down into a wellbore in order to increase productivity of a well. The substances used for fracturing are carefully matched with the geology of the site to ensure the best results.

The combination of the pumping rates and pressures causes the rock to fracture or crack. Once the treatment is complete, some or all of the frac fl uid can be recovered by fl owing back the well. If a proppant was used, it is left behind, propping open the fractures. The newly created fracture enables natural gas, oil, frac fl uids and formation water to fl ow to the wellbore.

A Wellspring of Innovation

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Although hydraulic fracturing has been in use for over 50 years, the increase in the production of unconventional natural gas particularly in the United States, coupled with a rise in public awareness about the environment, has led to questions about the various technologies and practices. These questions led the U.S. Environmental Protection Agency (EPA) to announce in March 2010 that it was launching a comprehensive independent scientifi c review of environmental impacts from hydraulic fracturing. The EPA’s last study, conducted in 2004, found no link between hydraulic fracturing and the contamination of drinking water.

In Canada, regulations ensure that groundwater and the environment are protected, including in relation to hydraulic fracturing. The specifi c regulations vary between jurisdictions but in all cases groundwater and the

hydraulically fractured zone are isolated to prevent potential cross-fl ow of fl uids between the natural gas-producing intervals and groundwater aquifers.

The Canadian natural gas industry takes public concern very seriously and is committed to providing the best available information about all aspects of natural gas production and use, as well as identifying and addressing areas of concern. The industry’s overall commitment to high environmental standards means that companies are continuously adopting new technology and identifying and adopting best practices.

DRINKING WATEROver more than fi fty years, fracturing has not been found to have caused damage to groundwater resources. Evidence submitted by the Interstate Oil and Gas Compact Commission (representing governments and regulators with jurisdiction over the U.S. oil and gas industry) to The House Committee on Natural Resources, Subcommittee on Energy and Mineral Resources on June 18, 2009, references a July 2002 review by member states of 948,597 oil and

Growing Business and Growing Environmental Awareness

Fact:Fracturing has not been found to have caused damage to groundwater resources.

Unconventional Gas & The Environment: For Further Reading

National Energy Boardhttp://www.neb.gc.ca

The NEB is a key Canadian regulator in the energy sector. The NEB also provides information about natural gas, oil and electricity. Its site contains regional and national information about the natural gas industry, including the 2009 document, A Primer for Understanding Canadian Shale Gas.

Canadian Society for Unconventional Gashttp://www.csug.ca

CSUG is an industry-funded not-for-profi t organization formed to support the exploration and development of Canadian unconventional gas resources. The site includes videos and animations on how unconventional gas resources are responsibly developed.

Energy in Depthhttp://www.energyindepth.org

Energy in Depth is a U.S. industry-sponsored website which provides considerable information on hydraulic fracturing and additives used in the process, as well as links to government reports and websites that discuss the process and environmental risks.

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natural gas wells that had been fracced since the use of the technology began. No harm to groundwater was attributable to hydraulic fracturing in any of these wells. On average, 35,000 wells are hydraulically fractured in the United States each year, bringing the aggregate total to well over 1,000,000 wells to date.

Concerns have occasionally been raised in the United States by landowners who believe that the integrity of their water wells has been compromised by ground disturbances caused by fracturing, leading to contamination by gasses, hydrocarbons or chemicals. In Alberta, similar concerns have been expressed in relation to fracturing at shallow depths for the production of coalbed methane.

Independent investigations of incidents initially reported as attributable to hydraulic fracturing have consistently determined that hydraulic fracturing was not the cause, although in some cases the

determination has been made that the incident was caused by operator error in natural gas well construction or by leaks during the transportation or storage of materials. In other cases, the water supply or water well concerns have been found to be the result of water well construction or maintenance problems.

Regulation of the Canadian oil and gas sector is designed to protect drinking water. The Alberta regulator, for example, requires natural gas development to provide a substantial buffer (both vertically and laterally) between any shallow stimulation interval and existing water wells, in addition to the isolation of the aquifer and the fractured zone. Alberta has also increased the focus on water well education and standards in oil and gas producing areas.

Natural gas well construction is an industrial activity and as such it is heavily regulated in all Canadian jurisdictions. Unlike the common domestic water well, construction of an oil or gas well results in multiple concentric pipes that are cemented into place. This provides mechanical strength as well as hydraulic isolation of aquifers from production zones, preventing cross-contamination.

Canadian regulations and operational practices provide assurance that the risk of accidents has been minimized and the appropriate oversight is in place.

The chemicals used as fracturing additives are also sometimes cited when there are concerns about drinking water. These additives vary in amount and composition, typically making up less than one per cent in total of the fracturing fl uid (the rest being water and proppant). These fl uids are injected deep in the earth, thousands of metres below the level of drinking water aquifers.

Fracturing companies are competitive and engage in signifi cant research and development to develop effective fracturing fl uids and processes. While many fracturing additives are benign, there are some chemical additives used that are listed as dangerous substances in Canada under the Canadian Environmental Protection Act. These chemicals are commonly used by various industries, for a variety of purposes. In all cases, through the Canadian Environmental Protection Act, Environment Canada regulates how these substances are handled, used and disposed

Fact:Canadian regulations and operational practices provide assurance that the risk of accidents has been minimized.

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of, and what concentrations are allowed. In Canada, the industry recognizes the public interest benefi ts of being transparent about fracturing additives while still maintaining its competitive advantages. Companies are also increasingly devoting research and development efforts to developing green fracturing fl uids that do not include any toxins and are made up of food-safe additives and products that do not bioaccumulate.

PRODUCED WATERWhen water is produced with natural gas from a gas well, it is separated from the natural gas. This water is responsibly disposed of in one of the following ways:

In Western Canada, natural n

gas producers are required by regulation to re-inject produced water into saline zones located far below the base of groundwater protection, using water disposal wells.

In other regions, because n

there are no disposal wells water is treated and disposed of as required by provincial regulation.

In some cases, the water n

is re-used for industrial purposes.

Some of the fracturing fl uid is also recovered from wells both following the reservoir stimulation, and also during subsequent natural gas production, along with water that may occur naturally within the reservoir. Fracturing fl uid and all other water produced is contained for re-use or transportation to a disposal well or other disposal facility, according to regulatory requirements.

WATER USEWater is typically used in drilling and for hydraulic fracturing operations to create a fracture network or enhance the inherent fracture network in low permeability conventional reservoirs as well as unconventional reservoirs. A typical fracturing operation in a horizontal well with modern, multi-stage hydraulic fracture stimulations might use between 1 and 5 million gallons (3500 m3 to 15000 m3) of water, considerably more water than traditional operations. In a full scale fi eld development

Fact:Fracturing additives are injected deep in the earth below the level of drinking water aquifers.

Unconventional Gas & The Environment: For Further Reading

Interstate Oil and Gas Compact Commissionhttp://www.iogcc.state.ok.us

The IOGCC represents the oil and gas governments and regulators in the U.S. Five Canadian provinces and one territory are affi liate members.

Groundwater Protection Councilhttp://www.gwpc.org

The GWPC is an organization of U.S. state groundwater regulatory agencies. The site’s library provides links to a number of reports, papers, and submissions which address environmental and groundwater risks associated with oil and gas development.

United States Department of Energy, Offi ce of Fossil Energyhttp://www.fossil.energy.gov

Includes the paper, Modern Shale Gas Development in the United States: A Primer (April 2009). This report was prepared for the Offi ce of Fossil Energy and the National Energy Technology Laboratory by the Groundwater Protection Council and ALL Consulting. It provides an overview of shale gas development, operations, regulation, risks, and groundwater protection, including hydraulic fracturing.

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scenario operators might drill several hundred natural gas wells a year (across an area of thousands of square km). Therefore, a signifi cant amount of water is required for reservoir stimulation. The quantity of water that natural gas producers can use for reservoir stimulation is regulated by various provinces.

The natural gas industry is also aware that multi-stage hydraulic fracturing operations for shale gas and tight gas development are water intensive and reducing that intensity is a priority. To reduce water intensity, operators are pursuing a variety of strategies which include processing and recycling recovered frac fl uids, the use of non-potable brackish and saline water from subsurface reservoirs, and the evaluation and use of other fl uids as an alternative to water (carbon dioxide, nitrogen).

As is the case for water used for drilling operations, approvals for water use are required from the responsible regulatory

agency or government department. Regulators and governments have a variety of mechanisms or controls available to manage water use and mitigate potential impacts including the ability to limit the rate at which water is used from any source and the ability to specify aggregate water use limits for operations. Governments and regulators commonly use these mechanisms to manage resource developments (mining operations, enhanced oil recovery projects), as well as agricultural operations (irrigation), industrial and commercial operations (shopping malls, resorts) and recreational facilities (golf courses, ski hills).

LAND DISTURBANCE Emerging production technologies means that today’s wells are drilled more effi ciently with less impact on the land than in the past. Today’s drill rigs create less waste, and are smaller and more effi cient so they can be moved easily from place to place with less impact on the land.

One technique that is being widely used by industry is horizontal and directional drilling. With these drilling techniques, companies are able to reach oil and gas reservoirs

at greater distances from the surface hole, horizontally and at angles rather than straight vertical drilling. Drilling multiple wellbores from a single pad location (pad drilling) also helps to minimize environmental impact on the surface. Gas companies have successfully used this technique to access reservoirs under water bodies as wells as from outside of environmentally sensitive areas, avoiding habitat or other environmental disturbance within protected areas.

When a well is no longer productive, the surface is restored, according to environmental permits. Depending on location, it can take fi ve years or more to complete the reclamation of the land. The process includes plugging and capping the well, removing equipment, cleaning up any residual chemicals, replacing topsoil, and re-planting the site with the appropriate vegetation. A government reclamation certifi cate or other approval is issued when the work meets regulated requirements.

For more information:info@canadiannaturalgas.cawww.canadiannaturalgas.ca

Fact:When a well is no longer productive, the surface is restored, according to environmental permits.

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Canadian Natural Gas is a made-in-Canada advocacy project sponsored by the following associations:

Canadian Energy Pipeline AssociationAssociation canadienne de pipelines d’énergie