Oil and Gas 101: A civil conservationPresented to the Sandoval County Commission

December 10, 2015By: Karin V. FosterExecutive Director

Independent Petroleum Association of New Mexico

Chronology of a well

• Geological review – is the resource there?• Leasing - How does an oil company obtain

properties?• Drilling and Completion: How are resources

extracted?• Regulations: What government oversight is

there? • Other FAQs: Is there impact to water?

Fundamentals of Petroleum and Reservoir engineering

• Overview of hydrocarbon properties• Geology overview• Reservoir mechanics• Formation evaluations

Hydrocarbon properties• Oil and gas are the liquid and gaseous forms of petroleum• Petroleum is a any naturally-occurring hydrocarbon found beneath

the earth• Petroleum hydrocarbons occur in a variety of states

• Increase in Carbon and hydrogen Increase in chemical bonds Increase in energy content.

GAS Volatileliquid

Liquid Semi-solid solid

Natural gas Condensate Crude oil Tar/Bitumen Shale

The Origin of Hydrocarbons• Source Rock

– Where the hydrocarbon originates

• Reservoir Rock– Where the hydrocarbon is

stored• Seal Rock

– Prevents seepage• Traps

– Anticlines– Faults– Pinchouts

– Source: WWW. Greatsouthlandminerals. com

Geology and Geophysics

• Where do we look? Sedimentary Basins– Depressions in the earth’s crust allow for

deposition and accumulation of sediments

San Juan Basin is listed as a top ten producer of Natural Gas in the US

Source: EIA.gov/oil-gas/rpd.topfields.pdf Dec 3, 2015

Structural Geology - definition

• Study of geological features produced by:– Deformation of the Earth’s crust

• Fold or fault

– Feature within a rock• Fracture• Bedding surface

– Spatial arrangement of rocks

Structural geology - features

Source: RMMLF Oil and Gas short course, Ehrman from Montello Resources

Identification of drill prospects - seismic• Method to determine the depth and orientation of

rock formations without drilling

Source: Baker Hostetler

Identification of drilling prospects

Leasing – gaining access to the resource

1. Increased leasing activity– Landmen, usually on contract with companies do title

searches at the county court house– Talking to land owners about obtaining the rights to

sever minerals (subsurface) and using surface to build locations, roads etc.

2. Permitting with Oil Conservation Division/ BLM 3. Bonding with NMOCD / BLM / SLO

Regulatory requirements to prior to drilling

• Whose mineral are you extracting? – Private or State Trust – Private Contract, State lease

and NMOCD oversight– Federal - BLM

• Whose surface are you crossing? – Private or State Trust – Private contract as required by

SOPA, State Right of way permits, NMOCD oversight– Federal – BLM with MOU

• Split estate is a common issue in New Mexico

Identification of drill prospects – exploratory drilling

• The prospective geologic structure has been identified• How do we verify the interpretation? Drill a well• Numerous wellbore orientations

Identification of drill prospects- drilling

Identification of drill prospects - drilling• Types of wells

– Wildcat Well• Pure exploratory development / new area• What is the extent of the resource?

– Development Well• In a developed field or extension of an existing field

– Dry Holes• Economic amounts of oil and gas are not present

– Abandoned Well• Dry hole that has been filed with cement (plug and

abandoned) and the ground has been restored.

Identification of drilling prospects - drilling

Well completion – typical process

• Drill wellbore• Evaluate formation (well logging etc.)• Run casing into wellbore• Cement casing string into place• Perforate pay zone• Install tubing string• Identify stimulation requirements• Bring well on production

Well completion

• Reservoir stimulation– May be necessary due to low permeability– Common stimulation methods

• Chemical stimulation - acidizing• Physical stimulation – hydraulic fracturing

– Hydraulic fracturing is the dominant technique in modern completions, especially in shales and tight gas reservoirs

Well completion

• Hydraulic fracturing– Fractures are induced by pumping fluids into a

formation at high rates and pressures• Polymers and cross-linked gels• Foams

– Once fractures are created, proppants are pumped down to prop them open and create higher permeability

• Sand• Ceramic beads

Hydraulic fracturing

Regulatory requirements during drilling/fracking operations

• Depending on whose mineral you are extracting –NMOCD and/or BLM for APD– Dictates location and direction of well, surface

impacts, surface facilities, ingress and egress, disposal of drill cuttings (closed loop systems), disposal of water from drilling and hydraulic fracking operations

– NMOCD reporting of constituents used in HF operations

– FracFocus

Other regulatory requirements

• Monitoring air quality – NMED and EPA and BLM– Environmental Quality Control Act– Clean Air Act

• EPA and Army Corps of Engineers – Waters of the US

• EPA and BLM – Hydraulic fracturing regulations• BLM, SHPO, NMSLO – Cultural resources• Surface

Fiscal impacts on a county of exploratory drilling• Unknown until the operator knows the resource (after

that first well is operational)• The Impacts of Oil and Natural Gas Production in New

Mexico on Sandoval County A Summary of Important Economic and Revenue Issues

• In 2013, Sandoval County producers shipped 1,080 thousand barrels of oil worth $86 million and 394.1 million MCF of natural gas worth $1.639 billion.

• Source: New Mexico 31, 2014 report, “Oil and Natural Gas Production in New Mexico”

What does production in Sandoval County mean for direct revenues?

Severance Tax and Capital Outlay

Thank you!

• Please use IPANM as a resource to you. If I don’t know the answer, I can find someone who will.

• Consider also asking – New Mexico Tech– New Mexico Oil Conservation Commission

Karin V. FosterExecutive Director, IPANM

(505) 238-8385