regulatory considerations for unconventional resource development ron stefik, asct resource...

Regulatory Considerations for Unconventional Resource Development

Ron Stefik, AScTResource Conservation BranchApril 17 | 2009

Veteran of Government Service!

Horn River Regional Field – Devonian shale gas the play Experimental Schemes OGC Development Order water disposal

Heritage Regional Field – Triassic Montney tight gas the play OGC Development Order (proposed)

Unconventional Gas Regulatory Challenges

Overview

Horn River Basin – Simplified Cross-section

50 m

100 mMuskwa/Otter Park Shale

Klua/Evie Shale

Slave Point Carbonate

Keg River/ Pine Point Carbonate

Depth = 2500 m TVD

SouthEast

NorthWestT= 135 C (275 F)

Pi ~ 38 MPa (5500 psi)

T= 175 C (347 F)

Pi ~ 50 MPa (7250 psi)

k = 250 nD

Middle Devonian Carbonate

Carbonate platform (wet)

Bank edge

TOC ~ 5.7 %

OGIP > 500 Tcf (including Cordova Embayment)

~ 0 - 50 m

higher silica more calcareous

Horn River Basin

Horn River – Experimental Schemes

Experimental Scheme approval allows evaluation of production techniques.

“methods that are untried and unproven in the particular application”.

OGC will introduce a detailed guide for making application.

approval area limited in size to near-term activity.

Horn River – Experimental Schemes

3-year confidentiality for all well data, including production.

annual Progress Reports submitted.

a total of 64 Experimental approvals (many inactive);

21 Horn River formation - (Muskwa/Otter Park and/or Klua/Evie) shale.

8 Maxhamish Lake/Liard Basin area - Exshaw shale.

Unconventional Gas Resource Development

Premise:

Central pad locations - multiple horizontal wells.

High well density.

Reservoir quality variation is gradational over long distances.

Significant core sampling.

Horn River Basin Development Scheme Approval

The OGC has worked with the industry Horn River Producers Group – proposed order that covers multiple sub-surface issues.

minimum data gathering requirements.

area based on OGC field outline, updated quarterly.

applies to wells with objective of Muskwa/Otter Park and/or Klua/Evie.

normal Well Authorization application and approval process still applies.


Drilling Samples

1st well on pad: 5 m intervals from 50 m above shallowest reservoir, usually Debolt - vertical well to TD, or - horizontal well to KOP. 10 m intervals in build and horizontal section.

Subsequent wells on a pad: sampling required on one well in each stratigraphic unit, in each dominant direction. exempt from sampling above KOP. from KOP to TD at 10 m intervals.

submit proposed program to OGC, contacted only if modification required.


Logging

1st well on pad, full OH logs:

vertical well, to TD.

horizontal well, to “point of resistance” (~ 60 degrees).

neutron log to within 25 m of surface.

horizontal well, gamma ray log to TD.

Subsequent wells on a pad exempt, except for:

minimum of gamma ray log (MWD / OH / cased hole) from base of surface casing to TD.



Example pad – minimum data requirementsFirst well on pad: - samples 5 m intervals, 10 m in build &hz - full OH logs (point of resistance if hz)- neutron to 25m from surface- GR to TD

One well in opposite direction: - samples only below KOP- full gamma log (OH/cased/MWD)

All other wells on pad: - exempt from samples- full GR logs (OH/cased/MWD)


Reservoir pressure tests:

Pi - minimum of 1 test per 4 km radius (measured from well head).

Exempt from annual pool testing.

Gas well deliverability tests:

Exempt from absolute open flow (AOF) potential testing.

Gas analysis:

samples from minimum of 2 wells/pad, during initial production year.

Note – any additional tests or analyses require report submission.


Example pad – minimum data requirements

Initial reservoir pressure: - 1 test per 4 km radius, each formation

Gas analysis: - 2 wells/pad, each formation

AOF test: - all wells exempt

4 km

Annual reservoir pressure: - all wells exempt


Production:

Muskwa/Otter Park & Klua/Evie formations may be commingled.

written notification to OGC;

intervals (separate UWIs for each formation).

production allocation factors (may base on “h” value).

BC-11 form for each UWI, when commence production.


Good Engineering Practice (GEP)

As development expands beyond Experimental Schemes, operators are expected to apply for GEP approvals.

removes well spacing and target area restrictions for a specific area.

“streamlined” application requirements - ownership or consent from registered owner of petroleum and natural gas rights essential.

gas target buffer distance of 100 m (normal is 250 m).

notice of application posted OGC website for 3-week period, allow possible objections to be filed.

Horn River Field – Water Disposal

Application required for Produced Water Disposal to an underground formation.

Normally for by-product salt water disposal (SWD).

Approvals issued under Section 94 of the Drilling and Production Regulation include by definition ”…produced water or recovered fluids from a well completion or workover…”.

Slick water fracs, significant volumes of flow-back water. OGC encourages re-use of this water where possible.

Horn River Field - Water

Debolt formation (water saturated) 20,000 PPM TDS~ 400 m depth

Horn River shale~ 2500 m depth

ground level

Deep formation water

30,000 – 100,000 PPM TDS

(seawater 35,000 PPM)

Fresh water <1,000 PPM TDS

water disposal (& source?) wellproduction well

Possible Quaternary gravel channel sources?

Current water source = surface lakes

Horn River Field – Water Disposal

Application required for initial injection test, OGC guideline.

Conditional Injection Test approval (if zone favourable);

specify test injection volume.

production test, verify no hydrocarbon potential.

OGC posts public notice (web site) to begin objection period.

if injection test successful, and 3 week objection period concluded without valid concern, final approval.

Heritage Regional Field – Montney “A” Simplified Cross-section

170m

130 mUpper Montney

Lower Montney

Avg Depth ~ 2400 m TVD

Doig ss & Doig Phosphate shale

Belloy carbonate

West (Groundbirc

h)(variable presence and prouctivequality)

East (Swan Lake)

~36 miles

(overpressured)

generally poorer quality to west

OGIP = 87 Tcf ( ~250 Tcf in fairway?)

Pi= 21 MPaPi= 38 MPa increasing pressure gradient to west

fine silt / shale fine sand / silt

Heritage – Montney “A”

875 miles2

OGIP ~ 87 Tcf

Good Engineering Practice (GEP) approvals. - No inter-well spacing or horizontal drilling restrictions.

Heritage Montney Production

Time (years)1998 201000 02 04 06 08

030

030

6090

120

150

180

210

240

270

Cal-Day Avg GAS MMcf/day

020

020

4060

8010

012

014

016

018

0

Cumulative GAS Bcf

035

035

7010

514

017

521

024

528

031

5

Well Count count

055

0055

011

0016

5022

0027

5033

0038

5044

0049

50

Prd-Day Avg/Well GAS Mcf/day

09

12

33

45

67

8

Ratio: WTR/GAS Bbl/MMcfCum GAS 185.9 BcfCum CND 158,300.2 BblCum WTR 902,266.2 Bbl

Data As Of:WellCount:

2009-01 (BC)341/341

Unconventional Montney Trend Production 1998-122009-01

From:To:

Heritage Montney Development Scheme Approval

OGC has drafted an area based order, similar to Horn River sub-surface issues.

minimum data gathering requirements.

defined area – Heritage regional field, updated quarterly.

wells with objective of, or completion within, Triassic Montney formation.

normal Well Authorization application and approval process still applies.

Heritage Montney Development Scheme Approval – Sneak Preview


Drilling Samples 1st well on pad:

5 m intervals from 50 m above shallowest anticipated reservoir - vertical well to TD, or - horizontal well to KOP. 10 m intervals in build and horizontal section.

Subsequent wells on a pad: sampling required on one well in each stratigraphic unit, in each dominant direction. exempt from sampling above KOP. below KOP at 10 m intervals.



Logging

1st well on pad, full OH logs:

vertical well, to TD.

horizontal well, to “point of resistance” (~ 60 degrees).

** this may be waived where adequate logged wells within 250 m!

neutron log to within 25 m of surface.

horizontal well, gamma ray log to TD.

Subsequent wells on a pad exempt, except for:

minimum of gamma ray log (MWD / OH / cased hole) from base of surface casing to TD.



Reservoir pressure tests:

Pi - minimum of 1 test per 4 km radius (measured from well head).

Exempt from annual pool testing.

Gas well deliverability tests:

Exempt from absolute open flow (AOF) potential testing.

Gas analysis:

sample from minimum of 2 wells/pad, during initial production year.

Note – any additional tests or analyses performed require report submission.


Production

Montney is treated as a single formation for the purpose of production reporting.

commingling approval/notification not required for Upper/Middle/Lower Montney zones.

not separate UWIs for each completion event.

single BC-11 form when commence production.



Numerous GEP approvals have been granted, to multiple operators.

removes well spacing and target area restrictions for a specific area.

“streamlined” application requirements - ownership or consent from registered owner of petroleum and natural gas rights essential.



gas target buffer distance of 150 m (normal is 250 m).

buffer distance may be reduced < 150 m where consent from off-setting rights owners submitted.

where GEP has not yet been approved, 150 m target area buffer applies to individual gas spacing areas.

Notice of application posted OGC website for 3-week period, to allow possible objections to be filed.

Regulatory Challenges – Optimal Well Spacing

Impact of well spacing and sequence of stimulation/production on ultimate recovery.

Ideal distance (lateral and vertical) between horizontal well bores for drainage?

“In-fill” drilling and stimulation possible if intersect fractures from off-setting producing well?

Regulator to require specific density and order of operations?

Regulatory Challenges – Acid Gas Disposal

Horn River gas C02 ~ 10+ %

Montney gas H2S ~ 0.0 - 0.3%

Large production volumes = large disposal requirements!

Acid gas disposal wells:

Heritage Montney > Belloy aquifer 1 approved:

max rate of 62 103m3/d. observation well required.

2 other applications received.

Horn River > Devonian aquifer?

Regulatory Challenges - Trespass

Fracture stimulation consideration? Regulation currently addresses horizontal trespass of a wellbore (spacing areas).

Large frac treatments, possible to connect to formations above or below title interest.

Regulator to limit horizontal well placement?

X # meters from top or base of zone?

formula limiting frac size, based on distance from top or base of zone?

Off-target production penalty formula is based on interpretation of “pay” section. In unconventional gas, what is pay?

Regulatory Challenges – Microseismic Data

Seismic data, or enhanced completion data?

Not seismic data/reports for land tenure purposes.

If completion data, must submit to regulator, released 3 months to 3 years from rig release date, depending on well classification.

File data with the well being observed/fraced, not the well in which signals are received.

Summary

Two proposed Development Approvals for unconventional resources;

• capture the “right amount” of data for evaluation and development

• streamlining for industry and the regulator

• challenges/opportunities remain

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regulatory considerations for unconventional resource development ron stefik, asct resource...

Documents

horn river basin slide

approval area

pad exempt

play ogc development

approval process

gr logs ohcasedmwd slide

formation gas analysis

ogc website