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Research Institute of Petroleum Exploration & Development, CNPC

May, 2017

Achievements of Shale Gas Development in CNPC

Ailin Jia

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China owns the second largest shale gas resources in the world,only less than USA, and becomes another most successful countryin shale gas development. Especially in the last two years, we havegot our resources potential into rapid production increase.

CNPC is the earliest domestic enterprise engaged in shale gasexploration and development in China. Through internationalcooperation, technology & management innovation, fielddevelopment tests and large-scale practical application, CNPC hasbuilt 5 technology series, 4 operation modes and 8 main operators.

These achievements provide valuable technology & managementexperiences to speed up shale gas development, and shale gas hasbecome one of the most important parts in China gas industry.

Introduction

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Outlines

1. Situation of Shale Gas Development

2. Achievements of Shale Gas Development

3. Discussion

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Resources

Up to now, shale gas resources of China located in two main areas

According to EIA（2013） ,recoverable resources of shalegas in China is 31.6 tcm and74% in marine shale.

Shale gas resource distribution in China

CNPCSinopecYanchangMLR

Beijing

Xi’an

ChengduChongqing

FulingChangning-Weiyuan

Yanchang

Zhaotong

• Marine resources in southern China

• Continental resources in middle China

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Resources

• Three marine shale gas pilots (Changning-Weiyuan in Sichuan,Zhaotong in north Yunnan and Guizhou, and Fuling in Chongqing)

•One continental shale gas pilot (Yanchang in Shaanxi)

Shale gas productivity in China

Block name Productivity in 2014（bcm） Productivity in 2016（bcm）

Fuling 2.50 7.00

Changning-Weiyuan 0.55 4.09

Zhaotong 0.15 1.21

Yanchang 0.02 0.20

Total 3.22 12.50

Productivity of three marine pilots increased rapidly

6Changning and Zhaotong pilots

In the three marine pilots, by the end of 2016, 500 horizontalwells have been drilled, and 400 wells have put into production.The production is 7.9 bcm in 2016 In Yanchang continental pilot, nearly 100 evaluation wells havebeen drilled. But still didn’t get commercial production

Jiaoshiba pilot

Wells being drilled

Drilled wells

Production

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Cooperative evaluation stage (2007-2011)Explored the technologies for shale gas development, and built out shale

gas development strategies.

Development test stage (2012-2015)Developed, tested and determined the major technologies for shale gas

development, and single well production & EUR increased rapidly.

Scale development stage (2016-)Single well production & EUR increased steadily, and development

technologies are optimized continuously. Annual production increased

rapidly.

Development stages

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2012 2013 2014 2015 2016 2017 2018 2019 20200

5

10

15

20

25

30

35

Shal

e ga

s pr

oduc

tion

(bcm

) Shale gas

Shale gas production has increased rapidly in Chinasince 2013, similar to the historic period of tight gasfrom 2005 to 2008.

• Recoverable resources have been proved• Daily production of single well almost doubled• The development costs declined

Annual production and forecast of shale gas in China

Annual production of tight gas in China

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160

5

10

15

20

25

30

35

Tight gas

Tigh

t gas

pro

duct

ion

(bcm

)

9Burial depth of Longmaxi Fm.in Sichuan Basin

ZhaotongChangning

Weiyuan

Fushun-Yongchuan

Favorable areas buried less than 4500m is about 50,000km2, andthe total resources 20 tcm

The operational areas are 30,000km2 with total resources of 15 tcm

Resources in CNPC

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Production blocks are mainly buried less than 3500m

Annual production of shale gas is 2.8 bcm, being themain contributor to the growth of natural gas production

Production in CNPC

0.02 0.06 0.16

1.3

2.8

0

1

2

3

4

2012 2013 2014 2015 2016

Annual production of shale gas in CNPC

（bcm）

Annual production of CNPC in 2020 is estimated to be over 10 bcm.

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More horizontal wells were drilled in the past four years

Lateral length of horizontal well increases with the

technical improvements of horizontal drilling

0

50

100

150

1000

1400

1800

2014 2015 2016 2017

wel

l num

ber

horiz

onta

l wel

l len

gth

(m)

horizontal well length

number of horizontal well

Horizontal well parameters in CNPC

Well length & number

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Technology improvements in hydraulic fracturing through

increasing of pumping rate, proppant and fluid volume

0

1500

3000

0

25000

50000

2014 2015 2016 2017

prop

pant

vol

ume（

t）

frac

turi

ng fl

uid

volu

me（

m3 ）

fracturing fluid volume

Proppant volume

Fracturing fluid & proppant volume

13

0

5

10

15

20

0

4000

8000

12000

2014 2015 2016 2017

test

ing

prod

ucti

oin

rate

（10

4 m3 /

d）

EUR（

104 m

3 ）

EUR

Testing production rate

Single well testing production increases rapidly

Single well EUR have been improved obviously

EUR & Testing rate

14

0

10

20

2014 2015 2016 2017

IRR（

%）

Com

preh

ensi

vve

inve

stm

ent o

f si

ngle

wel

l（m

illio

n）

Integrate cost per well

IRR

Comprehensive costs have been obviously reduced

Economic benefits of shale gas well have been

significantly improved

Low economic High economic

Cost & IRR

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Partnership

CNPC has built 4 operation modes, involving 8 operators,speeding up the shale gas development process in China

International Co-operation

DomesticCo-operation

Risk Operation

Proprietary Development4

Ope

ratio

n M

odes

BP

Changning Co.

Sichuan Co.

Chongqing Co.

Chuanqing Drilling Co.

Great Wall Drilling Co.

Southwest Oil&Gas Field

Zhejiang Oil Field

8 O

pera

tors

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Outlines

1. Situation of Shale Gas Development

2. Achievements of Shale Gas Development

3. Discussion

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Five development technology series for shale gasburied less than 3500m have been developed.

1

5 2

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Shale gas development technologies

Technologies

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inline1950

Geological map Inline1950 seismic migration

3D stratigraphic surface Natural fracture prediction

Seismic survey

A integrated technique of 3D seismic acquisition, process andinterpretation• 2D seismic for structure evaluation and reservoir parameters prediction• 3D seismic for well trajectory design of horizontal drilling• The consistency of parameters prediction is up to 80% in 3D seismic

acquisition areas

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Reservoir Evaluation

Stratigraphy structure and OGIP evaluation for producing layers in Changning area

Lower unit

Wufeng Fm,

4

3

1

2

Baota Fm.

15~20m

27%

15%

17%

8%

9%

PercentageUnit reserve factor

66m

0.5

0.8

0.6

1

0.8

0.2 24%upper unit

Geological evaluation on basis of flow unit appraisal

• The gas bearing layer is the lower part of the Longmaxi Formation with thicknessof 30m. The development target has been optimization to the lower unit withthickness of 15m. The drilling target is the first zone with thickness of 2m

• Reserve abundance is reevaluated: the development zone has averageabundance of 0.45 bcm/km2, the lower unit is 1.2 bcm/km2

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Horizontal wells drilling

• Through optimization on casing program and PDC bitsbased on factory drilling management, drilling cycle ofsingle well shortened from 140 days to 70 days

• Water-based drilling fluid being tested, much cheaper andmore environment friendly

Drilling cycle of different period Drilling cycle using different drilling fluid

150

70

196

67.5 55.583.5

0

50

100

150

200

250

Well block N201

Aver

age

drilli

ngcy

cle/

day

Evaluation Period Productivity Construction Period

Well block W202 Well block W2040

5

10

15

20

Oil-based Water-based

18.7

12.3

Hor

izon

tal s

ectio

n dr

illing

cyc

le/d

ay

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Multiply Fracturing Treatment

Proppant density,1.0g/cm3

H6-3 H6-5 H6-7

Zipper-style fracturing

zipper-style fracturing: forming network of fractures

• Successful techniques including low-viscosity slick water, low-density proppant, soluble bridge plug and zipper-style fracturing

• 6-10 wells in one pad, fracturing operation cycle shortened toabout 60 days

• Average single well production increased from 100,000 m3/d tomore than 200,000 m3/d in Changning pilot

High displacement: from couples of cubic meters to dozens of cubic meters

Low-density proppant: reducing pollution

Soluble bridge plug: no need for grinding, increasing wellbore diameter

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• Probabilistic method was developed to evaluate EUR

• Average single well EUR(P50) amounts to 81 MMcm, the largestover 100 MMcm

• Average single well production rate in the 1st year reaches 70~110Mcm/d, annual decline rate is 40%-60% for the 1st year and about25% for the 3rd year

Horizontal well model with multi-scale fractures based on fractal geometry

(a)

(c)

(b)

Productivity Evaluation

EUR risk quantification

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

累积

概率

概率

密度

EUR 106m3

概率密度

累积概率

置信域（80%）：1.42~1.65亿方confidence interval(80%):142~165 MMcm

prob

abilit

y de

nsity

Cum

ulat

ive

prob

abilit

y

probability densitycumulative probability

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Well spacing optimization

• In 2012-2015, Well spacing is 400-500m

• In 2016-2017, Well spacing reduced to 300-400m

• Recovery factor enhanced by 10%

427m213m

213m

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• Compared with tight sands, Stress sensitivity inshale is much serious

Stress sensitivity

Shale gas reservoir model

Thin bedded shale layer

Fracture

Formation deformation

Pressure drop

Tight gas sand reservoir

Non-permeable layer

Lenticular sands

fracture

Pressure drop

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• According to stress sensitivity, drawdownmanagement helps enhancing EUR by more than 30%

Production management

Optimal production management:

• Initial rate: 1/4~1/5 QAOF drawdown or ½ test production rate

• Pressure drawdown: drawdown rate less than 0.15MPa/d for the

first 3 months, and less than 0.05MPa/d for the first year

• Ground boosting: 1~1.5 year(s) after producing

• Annual decline rate : about 40%~45% for the 1st year

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Outlines

1. Situation of Shale Gas Development

2. Achievements of Shale Gas Development

3. Discussion

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1. Uncertainty of shale gas resource evaluation?

Discussion

Total reserves= Free gas reserve + Adsorbed gas reserve= f( thickness, porosity, gas saturation, 𝐞𝐞tc.)+ f ( TOC,

etc.)• Adsorbed gas portion: 20%~80%?

• Effective porosity: 2%~8%?

• Gas saturation: 50%~60%

ChangNing Barnett Marcellus Cutbank

Gas saturation（%）

56.8% 75% 70% 95%

Comparison of gas saturation

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2. Uncertainty of predicting the degree of depletedresource after hydraulic fracturing

Wufeng

4

3

1

2

Baota

B lack shale

B lack shale

S iliceous shale

LowerLongmaxi

平台Dynamic controlling rage Well pattern controlling range

• Unbalance in the magnitude of resource depletion for vertically-fractured layers

• Uncertainty in the magnitude of interwell resource depletion

Fractured formation unit Reserves depleted in a multiwell pad

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• Uncertainty in the magnitude of matrix resource depletion within fracture network

H o r iz o n ta l w e llb o r e

M ainfracture

pf

pi

rmax?

Schematic diagram showing matrix in SRV

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Thanks for your attention!