3Down-Hole Commingling Applicable Statewide Rules:Rule 3.10This rule prevents down-hole commingling.The subject of this discussion is the administrative exception to this rule.One of the first question that may come to mind would be, what is the Commission permitting when we refer to downhole commingling?Mouse ClickThe applicable rule is 16 TAC 3.10, otherwise known as SWR 10. Mouse Click.This rule actually prevents a well from being completed commingled, (mouse click) but allows for approval of exceptions to itself
4What is Down-hole Commingling? What is a downhole commingled completion?Mouse ClickImage to the left represents a normal vertical well with sets of perfs in multiple zones. They are all producing into the same string, hence comminglingMouse Click 2 timesImage to the right shows an open-hole completion that includes more than one zone.
5Down-Hole Commingling Purpose of the ExceptionA permit to allow two or more RRC fields to be produced commingled in the same production stringWhat does the operator need from us to consider completing a well in this manner?Mouse click.This program involves granting (or denying) approval to produce 2+ RRC designated fields into the same production string.For purposes of this rule, “exception” means the same thing as “permit.” A RRC permit will outline the filing requirements for the well as part of its terms.More about this on slide 7, the slide after next.
6Down-Hole Commingling Purpose of the Exception (cont’d)Fields vs. ZonesMouse click.You may notice that the wellbore diagram from a few sides ago said “zones” but I said that the permit is for “fields.”What is the difference?A field is a regulatory definition and it could contain one zone or multiple zones. It is defined as an interval that shall be considered a single reservoir for proration purposes.Permits here are based on fields, not necessarily zones. Unless the fields are single-zone.
7Down-Hole Commingling Field 1Field 1This is the illustration from a few slides back.Mouse click.Except, the caption for “zones” is now replaced with “fields,” since we permit based on fields.This is the open-hole version.…With “zones” replaced with “fields”Field 2Field 2Field 3
8Down-Hole Commingling Down-hole commingle vs. multiple completionBoth involve completing two or more RRC fieldsIn a down-hole commingled completion, all completion intervals are producing into the same production stringTransitioning briefly to another type of well completion where a similar consideration is on the table — multiple completions. How is what we are talking about here different from a multiple completion?Mouse click.They both involve completing more than one field in the same well.In a multi completion, they are isolated from each other, and must be proven as such, in order to obtain approval. They each get their own separate production conduit. A SWR 10 is the opposite. All fields are produced together down-hole into the same conduit.Mouse clickIllustration provided on the next slide
9Down-Hole Commingling Mouse click.This is a multi completion. Notice the perfs in field 1 and field 2, and a tubing and packer set at depths between the sets of perfs. Point to the packer with the laser pointer. Field 1 and field 2 each have their own conduit downhole. Field 1 flows outside the tubing and field 2 flow inside the tubing. This wellbore configuration is unrelated to the matter being discussed in this class. But for information only, a part of the application for this type of wellbore configuration requires proof to be submitted that the conduit for field 1 is mechanically sealed from field 2.Mouse click 2x.This is a SWR 10, or down-hole commingled, completion. Notice that field 1 and field 2 do not have separate conduits. In this example, they both flow up the same string of tubing. There is no isolation down-hole.This is the type of wellbore configuration that is the subject of the down-hole commingling application process.Pause several secondsThe next 14 slides outline the information to be provided for the application process.Multiple CompletionDown-hole Commingled Completion
10Down-Hole Commingling Application proceduresFill out the 19-question datasheet:Serve notice to affected offsets.$375 application fee as of May 2012.One well per application.The application consists of a 19-question form, to be downloaded at (Mouse click) this link. Please do not modify the number formatting of this Word document when filling it out.Mouse clickService notice to affected offsets. Explained more in the next slide.Pay $375 per applicationOne application = one well
11Down-Hole Commingling Filling out the datasheet…
12Down-Hole Commingling Application header information (ITEMS NOS. 1, 2, 3)Well identification informationField identification informationSee O&G proration scheduleThe Hydrogen Sulfide (H2S) listing (http://www.rrc.state.tx.us/oil-gas/research-and-statistics/field-data/h2s/)Bookkeeping information.Mouse Click.Identify the well, and list all of the applicable fields. Mouse Click. You may have to copy and paste the prompts in the Word document. Makes sure to list all of the information for all of the fields.The information for item #3 comes from the Oil and Gas proration schedules.And the RRC hydrogen sulfide field listing. This is a key point for us because commingling one sour gas field may cause the commingled well to be subject to the Form H-9. We review the completion to ensure consistency.
13Down-Hole Commingling Notice Requirements (ITEM NO. 4)One of three notice categories will apply:InitialNon-initialBlanket orderHow to determine category:Statewide Rule 10 exception database.Central Records ( )These are the notice requirements.Mouse clickThe categories are…Initial: all operators on scheduleNon-initial: Opposite of initial. Pause briefly. No kidding. Notify offsets only. Please refer to the rule for a specific definition of offsets.Blanket order: no notice at all. In addition some of the application items can be omitted.Pause several seconds before advancing to next slide but don’t need to say anything
14Down-Hole Commingling Notice Requirements (ITEM NO. 4) (cont’d)InitialAll operators in each field are considered affectedNon-InitialAll offset operators in the field are considered affected.Blanket orderNo notice requiredFill out only items 1-4 and 8 on the applicationThese are the notice requirements.Mouse clickInitial: all operators on scheduleNon-initial: offsets only. Please refer to the rule for a specific definition of offsets.Blanket order: no notice at all. In addition some of the application items can be omitted.
15Down-Hole Commingling Application RequirementsDetermine the correct notice category (ITEM NO. 4)Drilling permit and schedule history (ITEM NOS. 5, 6, 7)Is the well permitted in each field? (yes/no)Not currently permitted in one of the fields Need New PermitIs the well currently on schedule in each field? (yes/no)Not on schedule in one of the fields Need New PermitNeed new/amended drilling permit? (yes/no)The existing drilling permit has been closed Need New PermitThe application consists of, in a nutshell, the notice category, (Mouse click) and various pieces of actual wellbore data, the first of which is the well history (Mouse click) with regard to permits granted, and (Mouse click) completions filed.Mouse clickDoes the well need a new drilling permit?If the well is not already on schedule in one of the fields, it might need a new or amended permit to add that field. I won’t read the following, but this is an explanation of why.Pause several seconds before advancing to next slide, but don’t need to say anything
16Down-Hole Commingling Application Requirements (cont’d)Pressure information (ITEM NOS. 9 and 13)Shut-in pressureFlowing pressureCapable of flowing without artificial lift?For wells in low-pressure zones / well-developed areas, it is reasonable for estimates to be providedContinuing from the last slide, the application next consists of pressure information. The operator must give a representation of the shut-in and flowing pressures for each field. It is common for estimates to be provided, particularly for cases involving pumping oil wells.
17Down-Hole Commingling Application Requirements (cont’d)Wellbore diagram (ITEM NO. 11)Tops of cement must be adequate. Comply with Statewide Rule 13Perfs for each field must be clearly indicated.Service list (ITEM NO. 12)The applicant certifies that notice has been served to each affected operator. Notice period is 14 days.The next piece of information is the wellbore diagram. This is a notable part of the application for two main reasons: Firstly, the wellbore construction must be compliant with Rule 13. The RRC cannot approve a well completion if the construction is not adequate. And secondly We must know which perforations go with which field. It is important to make sure that the field designation for a well is geologically appropriate. If we approve the application, it is important to make sure that the completion report for the commingled well makes sense when the formation record is compared against what was shown on the application.Mouse click.The next piece of information is certification of notice. After identifying the correct notice category, the operator must serve notice by mail and certify that it has done so.
18Down-Hole Commingling Inadequate top of cement for production casingOn the previous slide I mentioned the importance of adequate wellbore construction.This is an example commingled wellbore diagram showing 3 sets of perfs in 3 RRC designated fields. There is surface casing (point with laser pointer), intermediate casing (point), and production casing (point). Gray indicates top of cement. Notice that the top of cement on the production casing does not cover field 1 per Rule 13 requirements. We may be unable to approve this well completion due to noncompliance with Rule 13 well construction requirements. The operator must take care of this issue prior to being able to receive an allowable for the well, commingled or not.
19Down-Hole Commingling Application Requirements (cont’d)Production information (ITEM NOS. 10 and 17)Producing capabilities of each zoneEconomic limit and ultimate recovery without comminglingEconomic limit and ultimate recovery with comminglingUltimate recovery for each zone=higher with commingling than withoutContinuing the application requirements. Production information for each field. The application requires you to give data on individual producing capabilities. There is some degree of variability in the information we receive here, but the main point to make is that the economic life of the well will be longer with commingling versus without.
20Down-Hole Commingling Application Requirements (cont’d)Evidence of fluid compatibility (ITEM NO. 16)Operators are responsible for:Produce in a practicable mannerAccounting for scale build up and treatmentThe next requirement addresses fluid compatibility within the wellbore. This means that combining fluids from two different intervals might result in solids being formed and becoming caked-up somewhere downhole. As we recognize it is not practical to perform an individual laboratory test of each field in every well, the operator is expected to represent that they have the ability to produce the well in a practicable and prudent manner.
21Down-Hole Commingling Application Requirements (cont’d)Zone ownership (ITEM NO. 8)Interests between all commingled intervals must be identicalIf not application to be set for hearingReporting field selection (ITEM NO. 19)Operator request is accommodated if possibleGas wells: Field with most restrictive gas allowable unless they are all 100% AOF (Absolute Open Flow)Oil wells: Field with lowest bbl per day allowableHorizontal/vertical commingled completions: Field that has the horizontal drainhole in itItem 8, royalty and working interests.Mouse Click.The administrative application process can only accommodate identical ownerships, or Mouse Click notice and opportunity for protest, and situation-specific evidence must be provided to establish which owners get paid what percentage of the commingled production.Item 19, reporting field selection.Not necessary to answer, because there are various conventions on what field is required to be the reporting field. Conditions summarized here for reference. Pause several seconds, then advance to next slide
22Down-Hole Commingling Application Requirements (cont’d)Why not multiple completion? (ITEM NO. 14)Mechanically impractical?Economically impractical?Plan if application not approved? (ITEM NO. 18)Examples include: well will not be economical to drill at all; complete one zone and leave the other(s) unrecovered; complete one zone at a time; etc.Justification of why the well can’t be a multiple completion. Among the common reasons received, which are generally acceptable,Mouse Click.For example, liquid loading for gas zones.Or, production casing is not wide enough to accommodate two strings of tubing for two rod pump strings.Or, early abandonment due to each zone being marginal to begin with.Justification of why a SWR 10 is the only way to prevent waste of resources.Mostly, the point is made that doing single-zone completions will make the well not be worth drilling. Or, that a particular zone will be left unrecovered.
23Down-Hole Commingling Application Requirements (cont’d)Crossflow and migration (ITEM NO. 15)The well must comply with SWR 3.7.A down-hole commingling exception should not be proposed as a resolution to a violation of cementing and isolation requirements.This is the last slide on application requirements. Pause for a few seconds. The last point we will discuss here for the application itself is to address is whether it is operationally valid to commingle field 1 and field 2 in the first place.This is the matter of fluid migration. Before the well existed, fields 1 and 2 were vertically separate from each other. When the wellbore penetrated the zones, and the casing was perforated, there is now a conduit between them that didn’t exist before. The following is an excerpt from Rule 7. I won’t read it here, but it essentially says that the well has to be setup so that fluid migration does not happen.One of the pieces of information in the application requires the operator to ascertain whether commingling fields 1 and 2 will not, for example, cause fluid migration from field 1 into field 2.Mouse clickIf the wellbore construction is judged to be inadequate, such as the example from 3 slides ago, this will be a matter that needs to be taken care of before we can consider approving a SWR 10 completion.
24Down-Hole Commingling Completion Requirements (cont’d)SWR10 Exception should be approved before the completions are filed.A well is considered non-compliant if the application has not been approved by the Railroad Commission Engineering Department.The operator should reference SWR 10 approval in the remarks section of the completion.After the application itself, how do you report the well on the completion forms?Mouse Click.Receive an approval prior to doing the work.The well could be subject to penalty action if commingled without approval.If an approval exists, document it in the remarks section of the G-1/W-2.
25Down-Hole Commingling Completion Requirements (cont’d)complete at a later date“leave permit open for future SWR 10”Must report perforations, formation tops, and completion intervals for each field completed.The SWR 10 approval letter must be attached and the fields must match the drilling permit.Approved fields should be valid, i.e. not consolidated .Drilling permit. Spent or saved? The permit will be considered spent, and closed, unless specifically requested left openMouse Click.Need to know which perfs belong to which field. Make sure the formation record is consistent with the commingled field selection.Attach the SWR 10 approval document.Make sure the drilling permit fields are consistent.
26Down-Hole Commingling Completion Requirements – OIL WELLSFile one W-2 for the reporting field only.Must have an approved Drilling Permit.Existing lease # should be listed in the work over section of the Packet Data.For oil wells in oil only fields, only 1 lease number will be carried on schedule at a time.If the commingled well tested as an oil well.Mouse Click.File one W-2 for the reporting field. Your approval letter indicates the reporting field.Again, the drilling permit fields must be consistentAs far as lease numbers go, treat the completion the same way as if it were a single completion in the reporting field.The entire commingled well can only be on schedule once, with 1 number.
27Down-Hole Commingling Completion Reports - GAS WELLSFile a G-1 for each field.“Initial Potential” for the reporting field“Well Record Only” for each non-reporting field.The reporting field cannot be a 100% AOF field unless all of the fields are 100% AOF.A combined G-10 test for all producing intervals is required.All production should be reported to the reporting ID #. Additional non-reporting zones are carried on schedule with a SWR 10 code that are not eligible for an allowable.If the commingled well tested as a gas well.Mouse Click.File one G-1 FOR EACH FIELD. Your approval letter indicates the reporting field. The test information goes with this oneAs noted previously, we check for 100% AOF status for each field.File one G-10 for the commingled production.The entire commingled well will go on schedule in each field, with 1 unique ID number for each field.
28Frac Port CompletionsWhat questions does this raise with regard to down-hole commingling?The technology allows multi-stage fracture stimulation without cementing the production linerUses open-hole packers for interval confinementStatewide Rule 13 does not recognize open-hole packers for vertical confinementFor the last 4 slides of your handout, we would like to transition to a discussion of some questions that we generally receive on open-hole packer completion systems. More specifically, how do they, or do they not, relate to the subject matter of SWR 10 applications?Mouse clickTo start with, we often see this completion method in horizontal wells in the lower Wolfcamp in Ward, Reeves, and Culberson counties; and in the Taylor Cotton Valley in Rusk and Panola counties, to name two examples. It allows multi-stage fracture stimulation to be performed in an uncemented production liner.Rather than traditional cemented casing, each frac stage is confined with open-hole packers, one on either side of a frac port that is initially covered by a sliding sleeve. There is a mechanism for opening the sliding sleeve when ready to perform the frac stage. The question is, what happens if the open hole packers straddle more than one “zone”?The completion may have SWR 13 issues because SWR 13 does not recognize open-hole packers for vertical confinement
29Frac Port CompletionsExample: a horizontal well with an open-hole packer completion system“Field 1” is exposed to uncemented pipe. SWR 13 violation.Is the exposed formation really “down-hole commingled”?Field 1This is an example of a horizontal well completion in the Eagle Ford formation. Notice also the caption for Austin Chalk, which overlies the Eagle Ford.Mouse click.Assume that the Austin Chalk is productive and that it is represented as “field 1.”Mouse click 2x.With the laser pointer, point to the casing right next to “field 1.”Notice that the Austin Chalk, field 1, is uncemented. Is this a SWR 13 violation? As we interpret section (b)(3) and (b)(4) of SWR 13, this well does not comply because a productive interval is exposed behind pipe.Relating to the subject matter of this class, is the Austin Chalk down-hole commingled with the Eagle Ford?Field 2
30Frac Port CompletionsField 1 is not considered down-hole commingled. Field 1 does not have a completion interval in the production string.A Statewide Rule 10 exception cannot resolve this issue.Field 1Mouse click 3x.Pause . Continuing from the last slide…Mouse clickWe would say NO, the Austin Chalk is not really down-hole commingled. It does not have its own completion interval, and the well was not constructed so as to give the Austin Chalk its own completion path into the production string. It is simply exposed behind pipe.One might inquire, if the open-hole packer doesn’t count for isolation, isn’t this the same as if there was nothing there at all, therefore making this commingled?That point by itself is a Catch-22.Pause several seconds.The well is unapprovable due to not complying with Statewide Rule 13 to start with, because the zones aren’t adequately isolated along the backside of the pipe regardless of calling this a commingled completion.Paraphrasing Statewide Rule 10: After notice and an opportunity for a hearing, the commission may grant a SWR 10 approval if commingled production will prevent waste or promote conservation or protect correlative rights. The well is neither constructed in a manner compliant with Statewide Rule 13, nor does the completion setup actually seek to include the Austin Chalk in the completion interval.A SWR 10 exception cannot be proposed as a resolution to this issue. You must have an actual completion interval in field 1 in order for this to work.Field 2
31Frac Port Completions Completion Requirements Producing interval section includes “range” you are producing out of.The range is still evaluated like the perforations for proper field designation and audited for SWR 10 compliance.List in remarks that you are using a frac port, open hole packer etc. system.Note that this does not necessarily prevent wells with open-hole packer completions. They can be valid if the well complies with the position outlined in the previous slide.Mouse clickTo fill out the G-1/W-2, the interval that is producing into the frac port should be listed as the producing interval range.Once reported on the G-1/W-2, the producing interval is evaluated for SWR 10 compliance. Here, they are simply seen part of the producing interval for the well.It is helpful if the remarks explain the use of this type of completion method.
32CONTACT USFor Technical Questions related to the SWR 10 Exception to Down-hole Commingle contact the Engineering Unit :For Questions related to Completion filings for SWR 10/Down-hole commingled wells contact the Proration Unit :