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Regulatory Considerations for Unconventional Resource Development Ron Stefik, AScT Resource Conservation Branch April 17 | 2009.

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Presentation on theme: "Regulatory Considerations for Unconventional Resource Development Ron Stefik, AScT Resource Conservation Branch April 17 | 2009."— Presentation transcript:

1 Regulatory Considerations for Unconventional Resource Development Ron Stefik, AScT Resource Conservation Branch April 17 | 2009

2 Veteran of Government Service!

3 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

4 Horn River Basin – Simplified Cross-section 50 m 100 m Muskwa/Otter Park Shale Klua/Evie Shale Slave Point Carbonate Keg River/ Pine Point Carbonate Depth = 2500 m TVD SouthEastNorthWest T= 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) ~ m higher silicamore calcareous

5 Horn River Basin

6 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.

7 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.

8 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.

9 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.

10 Horn River Basin Development Scheme Approval Drilling Samples 1 st 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.

11 Horn River Basin Development Scheme Approval Logging 1 st 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. submit proposed program to OGC, contacted only if modification required.

12 Horn River Basin Development Scheme Approval Example pad – minimum data requirements First 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)

13 Horn River Basin Development Scheme Approval 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.

14 Horn River Basin Development Scheme Approval 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

15 Horn River Basin Development Scheme Approval 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.

16 Horn River Basin Development Scheme Approval 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.

17 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.

18 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

19 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.

20 Heritage Regional Field – Montney “A” Simplified Cross-section 170m 130 m Upper Montney Lower Montney Avg Depth ~ 2400 m TVD Doig ss & Doig Phosphate shale Belloy carbonate West (Groundbirch) (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 / shalefine sand / silt

21 Heritage – Montney “A” 875 miles 2 OGIP ~ 87 Tcf Good Engineering Practice (GEP) approvals. - No inter-well spacing or horizontal drilling restrictions.

22 Heritage Montney Production

23 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.

24 Heritage Montney Development Scheme Approval – Sneak Preview

25 Heritage Montney Development Scheme Approval Drilling Samples 1 st 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. submit proposed program to OGC, contacted only if modification required.

26 Heritage Montney Development Scheme Approval Logging 1 st 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. submit proposed program to OGC, contacted only if modification required.

27 Heritage Montney Development Scheme Approval 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.

28 Heritage Montney Development Scheme Approval 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.

29 Heritage Montney Development Scheme Approval Good Engineering Practice (GEP) 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.

30 Heritage Montney Development Scheme Approval Good Engineering Practice (GEP) 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.

31 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?

32 Regulatory Challenges – Acid Gas Disposal Horn River gas C0 2 ~ 10+ % Montney gas H 2 S ~ % Large production volumes = large disposal requirements! Acid gas disposal wells: Heritage Montney > Belloy aquifer 1 approved: max rate of m 3 /d. observation well required. 2 other applications received. Horn River > Devonian aquifer?

33 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?

34 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.

35 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

36 Victoria Housing Market - Now More Affordable


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