tight gas in western canada - forward energy group inc
TRANSCRIPT
Tight Gas in Western Canada July 2005
1
1
Tight Gas in Western Canada: An Important and Continuing Component of
Overall Supply
R.K. (Bob) Dixon, P.Eng.
Unconventional Gas Conference, HoustonJuly 26, 2005
www.forwardenergy.ca
2
• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
Tight Gas in Western Canada July 2005
2
3
Portfolio
Plays Properties
Prospects Projects
Portfolio
Plays Properties
Prospects Projects
Discovery Recovery
Investments
GOALS
STRATEGIES
TACTICS
GOALS
STRATEGIES
TACTICS
Planning
Better information for strategic decisions
Forward Energy Group Inc
4
Geographic Regions
Large and complex basin
60°N
70
60
80
90
100
110
120
6M
49°N
5M
120
10
1
20
30
40
50
60
70
80
9 0
100
110
4M3M
Swift Current
Medicine Hat
Saskatoon
Lloydminster
Edmonton
Lethbridge
Calgary
Hinton
Grande Prairie
Fort McMurray
Fort Nelson
Fort St. John
10
20
1
30
50
40
60
70
90
80
100
120
110
126
Connected Townships
SW Saskatchewan (137)NW Saskatchewan (254)BC Plains (545)NW Alberta (699)NE Alberta (512)Central Alberta (733)EC Alberta (349)SE Alberta (744)Deep Basin (578)Foothills (227)
Petroleum Services Association of Canada
Natural Gas Supply Trends 1990 - 2002
Geographic Regionsmodified from
Tight Gas in Western Canada July 2005
3
5
• Introduction• WCSB Gas Supply Challenge• Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
6Will production grow again, sustain or decline?
• WCSB production:– Recent peak at 16.9
Bcfd in 2001– Decreased to 16.5
Bcfd in 2003– Rebound to 16.7
Bcfd in 2004
• Alberta: dominant provincial source
• BC: only region with growth trend
WCSB ProductionMarketable Gas Production by Province
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004E
Mar
keta
ble
Gas
Pro
duct
ion,
MM
cfd
Territories Saskatchewan British Columbia Alberta
Source: CAPP
• WCSB ultimate potential for ‘conventional’ natural gas: 290 Tcf (NEB/EUB)
• Unconventional resource potential: 300 – 1000s Tcf
Tight Gas in Western Canada July 2005
4
7Competing processes of decline and rate additions
• Total WCSB production flat at 16.7 Bcfd ± 0.2 Bcfd
• Decline in production from connected wells
• Rate additions from new wells onstream provide growth
• Wells onstream since 1989 produce 80% of gas
Supply Challenge: Sustain Production
• WCSB supplies 25% of consumption in US and Canada
WCSB Gas Production by Period Onstream
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Cal
enda
r Dai
ly M
arke
tabl
e G
as R
ate,
MM
cfd
Wells Onstream 1990 to 2004
Wells Onstream Pre-1990
source: Forward Energy, CAPP
8Gas price and gas connection activity correlated
• Connection activity reached record levels, above 14,000 connections, by the end of 2004
• Activity, and rate additions, responded to prices, cash flow, acquisition and capital markets, export capacity, etc.
How has industry responded?WCSB: Gas Activity and Gas Prices
0
2000
4000
6000
8000
10000
12000
14000
16000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004E
Even
t Cou
nt
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
($/M
cf)
Event Count
Natural Gas, CAPP Average Wellhead/Plant Gate price
Tight Gas in Western Canada July 2005
5
9Higher production rates require higher production replacement
• Supply additions were 1.7 Bcfd in 1990, peaking at 3.9 Bcfd in 2001; 3.7 Bcfd in 2004
• Shallow declines in early years; first year decline has increased from less than 30% to 40%
• Rate additions for all wells onstream in year is the peak monthly rate
How big is the annual challenge?Gas Production by Year Onstream
Events Onstream 1990-2002
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream
Cal
enda
r Dai
ly S
ales
Gas
, MM
cfd
2002200120001999199819971996199519941993199219911990Solution Gas
1 year
3.2Bcfd
3.0Bcfd
1 year
Gas Rate Additions by Year Onstream
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year
Cal
enda
r Dai
ly S
ales
Gas
, MM
cfd
1990199119921993199419951996199719981999200020012002
1,724 1,732
1,160
2,214
3,361
2,702
2,961
3,220
3,428
3,257
3,617
3,882
3,220
3.5 Bcfd 5 year average
10
60°N
60
70
80
90
100
110
120
6M
10
49°N
120
5M
30
40
50
60
70
80
90
1
20
100
110
4M3M
Fort St. John
Fort Nelson
Swift Current
Medicine Hat
Saskatoon
Lloydminster
Edmonton
Lethbridge
Calgary
Hinton
Grande Prairie
Fort McMurray
10
20
1
30
50
40
60
70
90
80
100
120
110
126
Rate Added per TownshipMMcfd
128 to 494 (3)64 to 128 (6)32 to 64 (38)16 to 32 (159)8 to 16 (410)4 to 8 (657)2 to 4 (785)1 to 2 (725)0 to 1 (1305)
Events Onstream 1998-2002, MMcfd
Natural Gas Supply Trends 1990 - 2002
Rate Added per Township
WCSB Supply Additions
WCSB: Very large area, many producing plays, very active
Rate Added and Event Count
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream
Rat
e A
dded
, MM
cfd
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Even
t Cou
nt
First Year Rate AddedEvent Count
Tight Gas in Western Canada July 2005
6
11More, but lower productivity, opportunities at the
economic margin
• Rate added by new connections declined to 250 Mcfd per zone (2004)
• Threshold size of an economic well decreased as gas price and netback increased
• Expanded opportunity set: smaller, higher cost, lower quality, higher risk or more remote prospects
Rate Additions per Zone ConnectedWell Connection Activity and Average Rate
Additions per Well
0
100
200
300
400
500
600
700
800
900
1,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year Onstream
Rat
e A
dditi
ons
per W
ell,
Mcf
d/w
ell
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Even
t Con
nect
ion
Cou
nt
Rate Additions per WellWell Connection Count
12
Extrapolated recovery
Deliverability
Rate added• the primary measure • allocated by load factor-
adjusted first 12 month rate
Discounted productionPlant gate marketable
Supply Measures
Supply measures calculated from decline functions
Decline Analysis Example: Rate - CumINVERNESS GILBY 6-17-40-1W5 Gilby Basal Mannville BBB
0
500
1,000
1,500
2,000
2,500
3,000
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000Cumulative Production, MMcf
Cal
enda
r Dai
ly R
ate,
Mcf
d R
aw
Actual Production ProfileDecline FunctionDeliverabilityDecline Function at 77% Load FactorFirst 12 Month Rate
Extrapolated Recovery4.297 Bcf
@ 1.0 Mcfd
Initial Rate2,305 Mcf/d
Constant % Decline Rate 17.8% per year
Deliverability2,093 Mcf/d
First 12 Month Rate(Rate Added)1,602 Mcf/d
Deliverability
Rate Added
Extrapolated Recovery(or EUR)
Tight Gas in Western Canada July 2005
7
13
• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
14
To provide a comparison to the US production, we have adopted the US Energy Information Administration (EIA) definition of unconventional gas:
“Natural gas extracted from coalbeds (coalbed methane) and from low permeability sandstone and shaleformations (tight sands and gas shales) is commonly referred to as unconventional gas. Most of these resources must be subjected to a significant degree of stimulation (e.g., hydraulic fracturing) or other “unconventional” production techniques to attain sufficiently economic levels of production.”
What is Unconventional Gas?
Tight Gas in Western Canada July 2005
8
15
Resource Quality
Low
High
Technology Requirement
High
Low
-Ultra Tight Gas Plays
-Deep CBM-Shale Gas
-Gas Hydrates
-Tight Gas-CBM
-Undiscovered Conventional
-RemainingReserves
-ProducedVolumes
Resource Triangle
-Tight Gas
16
Identification Issues• U.S. agencies currently report natural gas production in
the Lower 48 states from conventional and “unconventional” sources
• Canadian agencies do not (yet) distinguish production from tight sand or shale reservoirs from conventional gas production
• The Alberta EUB only recently began to identify production from coalbed methane wells separately
• Confidentiality provisions delay some information release, thus potentially obscuring more recent trends
Tight Gas in Western Canada July 2005
9
17
WCSB Gas Production, by Resource Type
0
2
4
6
8
10
12
14
16
18
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Bcf
d
ShaleCoalbed MethaneTight (3 plays)Conventional
Tight gas is significant for both USA and Canada
US-Canada Gas Production Profiles
• Lower 48 gas production flat at 50-52 Bcfd; WCSB plateau at 16-17 Bcfd• CBM and shale gas in WCSB not yet on radar• 3 major plays for Tight* gas in WCSB • Tight gas in lower 48 at 20% of total 2004 production vs 28%
contribution in WCSB• Conventional* gas in decline
Lower 48 Natural Gas Production by Resource Type
0
10
20
30
40
50
60
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003E 2004E
Bcf
d
Gas ShalesCoalbed MethaneTight SandsConventional
Source:EIA
CBM: 60 MMcfd in ’04Shale: nil
18
Unconventional Gas, as % of Total WCSB
0%
5%
10%
15%
20%
25%
30%
35%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Tight gas – currently 30% of WCSB output
WCSB Unconventional Gas
• Tight* gas: Selected three plays as examples where tight gas dominates• With decline in conventional, tight gas becoming greater share of the mix
WCSB Gas Production, by Resource Type
0
2
4
6
8
10
12
14
16
18
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Bcf
d
ShaleCoalbed MethaneTight (3 plays)Conventional
2004 gas rates• Shale: nil• CBM: 60 MMcfd• Tight*: 5.0 Bcfd• Conventional*: 11.6
Bcfd
CBM: 60 MMcfd in ’04Shale: nil
Tight Gas in Western Canada July 2005
10
19
• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
20
Coalbed Methane in WCSB
• Resource potential: 300-400 Tcf gas in place; 10-20 Tcf recoverable (various sources)
• Recent startup – WCSB production at 170 MMcfd
• Only commercial production to date from the Horseshoe Canyon coals, in Alberta
• Experimental pilots operating in BC and in Alberta –production levels not yet material
Tight Gas in Western Canada July 2005
11
21
CBM plays in Alberta• Horseshoe Canyon and Belly
River coals– Upper Cretaceous– Typically dry gas production– Focus of most of current activity
• Ardley (Scollard) – Upper Cretaceous– Limited activity to date
• Mannville Group– Lower Cretaceous– Often with associated water– Experimental pilots, results often
confidential
22
Coalbed Methane Production• Production rate
increasing dramatically– 60 MMcfd annual
average in 2004– 110 MMcfd exit rate
– Dec04– 170 MMcfd est. rate
– Jun05• CBM now
contributing 1% of total WCSB
Coalbed Methane Production: Alberta
0
20
40
60
80
100
120
140
2002
-01
2002
-03
2002
-05
2002
-07
2002
-09
2002
-11
2003
-01
2003
-03
2003
-05
2003
-07
2003
-09
2003
-11
2004
-01
2004
-03
2004
-05
2004
-07
2004
-09
2004
-11
2005
-01
2005
-03
Gas
Rat
e, M
Mcf
d
0
200
400
600
800
1000
1200
1400
Cum
ulat
ive
Wel
l Cou
nt
Gas RateWell Count
• Recent start; high growth rates• 3000+ wells drilled to date; 1000 wells onstream by end Dec04 (EUB
designation)
Tight Gas in Western Canada July 2005
12
23
Coalbed Methane Opportunities and Challenges
• Significant resource potential
• Value drivers increasing with strengthening of commodity prices and technology improvements
• Due to their location, CBM properties often have the benefit of existing infrastructure and stakeholder familiarity
• Surface land and land user impacts
• Major challenges– sufficient resources of permeability-thickness – (the cost of) water handling
24
• No current recognized gas production from shale zones
• Values for resource estimates large numbers
• Experimental work being undertaken – results are confidential
• Some production occurring as commingled production with sand stringers, whether inadvertent or planned
Shale Gas in WCSB
Tight Gas in Western Canada July 2005
13
25
• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
26
• In the US, “tight gas reservoirs generally are defined as gas-bearing rocks with an in-situ permeability to gas of less than 0.1 md” (Spencer, 1989)
• Since in-situ permeability data is not publicly reported for gas zones in the WCSB, we have estimated tight gas production on the basis of a number of criteria, including stratigraphic group, geographic region, the occurrence of fracture stimulation or horizontal drilling and depth
What is Tight Gas?
Tight Gas in Western Canada July 2005
14
27
• For the purpose of this analysis, we illustrate three types of tight gas plays, as examples: – Shallow (SE Alberta/SW Sask.)– Jean Marie– Deep Basin
Tight Gas Play Examples
Three tight gas plays – all on growth trends
WCSB Gas Production, by Resource Type
0
2
4
6
8
10
12
14
16
18
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Bcf
d
ShaleCoalbed MethaneTight (3 plays)Conventional
• The key uncertainty is the proportion of tight gas production from fracture-stimulated Mesozoic zones deeper than 6000 feet
Tight Gas - Three Plays
0
1000
2000
3000
4000
5000
6000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Gas
Rat
e, M
Mcf
dDeep BasinJean MarieShallow - SE AB/SW SK
28
• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
Tight Gas in Western Canada July 2005
15
29
• Shallow fracture-stimulated, low-permeability Upper Cretaceous reservoirs in the Sweetgrass Arch area of southeast Alberta and southwest Saskatchewan
• Well depth: 2000-2500 ft, predominantly vertical
• 2004 production: 1.7 Bcfd in 2004, 10% of WCSB production
• 95% of the over 33,000+ events connected since 1990 have been fracture stimulated
Shallow: SE Alberta/SW Saskatchewan
30
100 miles
CanadaUSA
Alberta | Saskatchewan
60°N
70
60
80
90
100
110
120
6M
49°N
5M
120
10
1
20
30
40
50
60
70
80
90
100
110
4M3M
Swift Current
Medicine Hat
Saskatoon
Lloydminster
Edmonton
Lethbridge
Calgary
Hinton
Grande Prairie
Fort McMurray
Fort Nelson
Fort St. John
10
20
1
30
50
40
60
70
90
80
100
120
110
126
Connected Townships
SW Saskatchewan (137)NW Saskatchewan (254)BC Plains (545)NW Alberta (699)NE Alberta (512)Central Alberta (733)EC Alberta (349)SE Alberta (744)Deep Basin (578)Foothills (227)
Petroleum Services Association of Canada
Natural Gas Supply Trends 1990 - 2002
Geographic Regionsmodified from
Shallow Tight Gas
• Medicine Hat
Abbey/Lacadena
Tight Gas in Western Canada July 2005
16
31
Shallow Tight ProductionShallow SE AB/SE SK
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Gas
Rat
e, m
mcf
d
0
10000
20000
30000
40000
50000
60000
70000
Cum
ulat
ive
Wel
l Cou
nt
Gas RateWell Count
Shallow SE AB/SW SK
0
200
400
600
800
1000
1200
1400
1600
1800
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
mm
cfd
wells onstream 1990-2004wells onstream prior to 1990
• Intense activity: 1.8 Bcfd from 66,000+ wells onstream (to Apr05)
• Average well rate: 33 Mcfd
• Steady production to 2000, 9%/year growth rate since
Infills, extensions and new discoveries
32
Rate Added from Shallow Tight Gas SandsUpper Cretaceous in SE Alberta and SW Saskatchewan
0
50
100
150
200
250
300
350
400
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream
Rat
e A
dded
, MM
cfd
0
1000
2000
3000
4000
5000
6000
7000
8000
Zone
s C
onne
cted
Rate Added, MMcfdZones Connected
Shallow Tight Gas Rate Additions• 5000+ new wells
connected each year
• Supply additions increasing to 350 MMcfd/year, above the annual loss due to decline (~150 MMcfd)
Resource play: continuous activity to keep production rate going
Tight Gas in Western Canada July 2005
17
33
Shallow: Operators• EnCana largest
operator, by far; 1.0 Bcfd (42% of total play)
• EOG second largest, but only 8% of volume
• Nearly 200 other operators share the activity
• Variance in average rate per well reflects internal play diversity
EnCana largest Shallow Tight Gas operator
Shallow SE AB/SW SK - Operators
0
200
400
600
800
1000
EnCana EOG Anadarko Nexen Husky Apache CNRL ARC Enerplus Others
Gas
Rat
e (1
2 m
onth
s en
ded
Apr
04),
mm
cfd
0
5000
10000
15000
20000
Cum
ulat
ive
Wel
l Cou
nt
Gas RateWell Count
34
• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
Tight Gas in Western Canada July 2005
18
35
• Gas-charged, under-pressured shelf carbonates of the Devonian Jean Marie Formation in NE British Columbia, typically drained by horizontal wells
• Well depth: 4000-4500 ft – TVD:• Horizontal leg length: average 2900 ft, up to 5000 ft
• Jean Marie sources produced about 0.5 Bcfd, 3% of 2004 WCSB production
Jean Marie
36
60°N
70
60
80
90
100
110
120
6M
49°N
5M
120
10
1
20
30
40
50
60
70
80
90
100
110
4M3M
Swift Current
Medicine Hat
Saskatoon
Lloydminster
Edmonton
Lethbridge
Calgary
Hinton
Grande Prairie
Fort McMurray
Fort Nelson
Fort St. John
10
20
1
30
50
40
60
70
90
80
100
120
110
126
Connected Townships
SW Saskatchewan (137)NW Saskatchewan (254)BC Plains (545)NW Alberta (699)NE Alberta (512)Central Alberta (733)EC Alberta (349)SE Alberta (744)Deep Basin (578)Foothills (227)
Petroleum Services Association of Canada
Natural Gas Supply Trends 1990 - 2002
Geographic Regionsmodified from
Jean MarieTight Gas
R12R13
94-I-5
94-I-5
94-I-6
94-I-6
94-I-7
94-I-7
94-I-8
94-I-8
94-I-994-I-1094-I-1194-I-12
94-I-13 94-I-14 94-I-15 94-I-16
9
-16
-O-1
4-O-8
94-O-9
94-O-16
94-P-194-P-294-P-394-P-4
94-P-5 94-P-6 94-P-7 94-P-8
94-P-994-P-1094-P-1194-P-12
94-P-13 94-P-14 94-P-15 94-P-16
T106
T107
T108
T109
T110
T111
T112
T113
T114
T115
T116
T117
T118
T119
T120
T121
T122
T123
T124
T125
T126
R12W694-I-0194-I-0294-I-0394-I-0494-J-01
Forward Energy Group Inc
Jean Marie Trend
Licensed to : Forward EnergyBy : Date : 2005/07/06Scale = 1:785000 Project : jean marie
0 10 20 30 40 50
0 10 20 30
Kilometres
Miles
50 miles
Tight Gas in Western Canada July 2005
19
37
Jean Marie Production
Jean Marie – an emerging play
• 2004: 480 MMcfd from ~1000 wells onstream; average well rate: 480 Mcfd
• Very little base production; recent growth from application of technology
Jean Marie
0
100
200
300
400
500
600
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
mm
cfd
wells onstream 1990-2004wells onstream prior to 1990
Jean Marie
0
100
200
300
400
500
600
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Gas
Rat
e, m
mcf
d
0
200
400
600
800
1000
1200
Cum
ulat
ive
Wel
l Cou
nt
Gas RateWell Count
38
Jean Marie Rate Additions• 250 new wells
connected each year
• Supply additions nearly 200 MMcfd, above the loss due to decline
• Average initial rate decreasing – to 750 Mcfd/well in ’04
Rate Added from Shallow CarbonatesUpper Devonian Jean Marie in NE British Columbia
0
20
40
60
80
100
120
140
160
180
200
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004EYear Onstream
Rat
e A
dded
, MM
cfd
0
50
100
150
200
250
300
350
400
Zone
s C
onne
cted
Rate Added, MMcfdZones Connected
Tight Gas in Western Canada July 2005
20
39
Jean Marie: Horizontal Drilling
• Full scale deployment of horizontal, under balanced drilling technology, commencing in 1999, enhanced play development
• Over 95% of recent wells in Jean Marie play are horizontal• Productivity of horizontal wells 20-100% better than vertical wells
Horizontal technology made this play
Rate Added per Well from Shallow CarbonatesUpper Devonian Jean Marie in NE British Columbia
0.0
0.5
1.0
1.5
2.0
2.5
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year Onstream
Rat
e A
dded
per
Wel
l, M
Mcf
d/w
ell
VerticalDeviatedHorizontal
Connection Activity from Shallow CarbonatesUpper Devonian Jean Marie in NE British Columbia
0
50
100
150
200
250
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year Onstream
Wel
l Con
nect
ions
VerticalDeviatedHorizontal
40
Jean Marie: OperatorsJean Marie - Operators
0
50
100
150
200
250
300
350
400
450
500
EnCana Cdn Natural Devon Penn West Husky Others
Gas
Rat
e (1
2 m
onth
s en
ded
Apr
04),
mm
cfd
0
100
200
300
400
500
600
700
Cum
ulat
ive
Wel
l Cou
nt
Gas RateWell Count
• Jean Marie play characterized by few operators
• EnCana is the largest; nearly 450 MMcfd, or 60% of the total
• CNRL and Devon operated 24% and 7%, respectively
EnCana dominates the Jean Marie play
Tight Gas in Western Canada July 2005
21
41
• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
42
• Definition of the Deep Basin characteristics:– Gas charged area in west-central Alberta (and parts of BC), just
east of the Foothills disturbed belt– Located in recent to Jurassic stratigraphic groups– Deeper than 6000 ft
• A large portion of these reservoir rocks are low permeability, or ‘tight’
• Well depth: 7000-11,000 ft; average 8400 ft; predominantly vertical
• The Deep Basin play produced about 2.6 Bcfd, 15% of 2004 WCSB production
Deep Basin
Tight Gas in Western Canada July 2005
22
43
60°N
70
60
80
90
100
110
120
6M
49°N
5M
120
10
1
20
30
40
50
60
70
80
90
100
110
4M3M
Swift Current
Medicine Hat
Saskatoon
Lloydminster
Edmonton
Lethbridge
Calgary
Hinton
Grande Prairie
Fort McMurray
Fort Nelson
Fort St. John
10
20
1
30
50
40
60
70
90
80
100
120
110
126
Connected Townships
SW Saskatchewan (137)NW Saskatchewan (254)BC Plains (545)NW Alberta (699)NE Alberta (512)Central Alberta (733)EC Alberta (349)SE Alberta (744)Deep Basin (578)Foothills (227)
Petroleum Services Association of Canada
Natural Gas Supply Trends 1990 - 2002
Geographic Regionsmodified from
Deep Basin
Foothills
Calgary
EdmontonFoothills
200 miles
CanadaUSA
BC | Alberta
44
Deep Basin Production
Deep Basin tight gas: significant and growing
Deep Basin
0
500
1000
1500
2000
2500
3000
3500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Gas
Rat
e, m
mcf
d
0
1000
2000
3000
4000
5000
6000
7000
8000
Cum
ulat
ive
Wel
l Cou
nt
Gas RateWell Count
Deep Basin
0
500
1000
1500
2000
2500
3000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
mm
cfd
wells onstream 1990-2004wells onstream prior to 1990
• Increasing activity: 2.9 Bcfd from 7600+ wells onstream (to Apr05)
• Average well rate: 400 Mcfd
• Steady production growth from 1990, 7%/year compound annualized growth rate
Tight Gas in Western Canada July 2005
23
45
Deep Basin Fracture Stimulations• A majority of the
wells in this Deep Basin play are fracture stimulated
• 80-85% of these rate adds from fractured wells
Fracturing technology - a necessary component
Rate Added by Fracture StimulationDeep Basin
0
100
200
300
400
500
600
700
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream
Rat
e A
dded
, MM
cfd
Non-fracture stimulatedFracture stimulated
46
Connection Activity by Deliverability ClassDeep Basin region
0
50
100
150
200
250
300
350
400
450
500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream
Rat
e A
dded
, MM
cfd
0 - 0.5 MMcfd0.5 - 1 MMcfd1 - 2 MMcfd2 - 4 MMcfd4 - 8 MMcfd8+ MMcfd
Deep Basin Deliverability Class
• Extraordinary growth in the number of low rate (<0.5 MMcfd and 1-2 MMcfd) connections since 1995; number of connections in the higher rate classes has remained relatively constant
• Rate additions from lower deliverability wells (<2.0 MMcfd) increased from 30% to 65% of annual rate additions
Pushing the marginal economic limit has lead to growth in overall rate additions from lower deliverability wells
Rate Added by Deliverability ClassDeep Basin region
0
100
200
300
400
500
600
700
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream
Rat
e A
dded
, MM
cfd
8+ MMcfd4 - 8 MMcfd2 - 4 MMcfd1 - 2 MMcfd0.5 - 1 MMcfd0 - 0.5 MMcfd
Tight Gas in Western Canada July 2005
24
47
Deep Basin: Operators
Burlington: largest Deep Basin operator
• Approximately 200 operators share the activity; no single operator dominates
• Burlington largest operator; 1.0 Bcfd (23% of total play)
• BP and CNRL second largest, but only 9% of volume each
Deep Basin - Operators
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Burlington BP CNRL EXM/IOL Talisman Devon EnCana Conoco Others
Gas
Rat
e (1
2 m
onth
s en
ded
Apr
04),
MM
cfd
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Cum
ulat
ive
Wel
l Cou
nt
Gas RateWell Count
48
• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas
– Shallow– Jean Marie– Deep Basin
• Summary
Agenda
Tight Gas in Western Canada July 2005
25
49
• Outstanding issues:
– No clear working definition of tight gas
– Lack of accepted characterization of plays and resources
– Size and scope of resource potential/opportunity is not agreed
– Focus on enabling technologies not as well understood
• Resolution: Forward Energy is embarking on a tight gas characterization project
– Multi-client
– Wide support: industry, government, agency
– Multi-year
Where To From Here?
A solid grounding in the definition and extent of tight gas in the WCSB required - to lead to solid investment decisions
50
• The WCSB is a large, diverse and dynamic basin; many opportunities available to all types and sizes of operators
• Unconventional gas is one of the few components of the WCSB with sustainable growth potential
• CBM is in relative infancy in Canada; tight gas is a continuing program
• Tight gas, developed through the resource play mechanism, is a major focus for selected operators
• Technology developments have been, and will continue to be a major factor in resource development
Key Messages
The sky is not falling - the sky is growingThe challenge is cost-effective rate additions
Tight Gas in Western Canada July 2005
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51
Tight Gas in Western Canada: An Important and Continuing Component of
Overall Supply
R.K. (Bob) Dixon, [email protected]
403-261-1019
Unconventional Gas Conference, HoustonJuly 26, 2005
www.forwardenergy.ca