Discussion on Horizontal drilling of Shale gas – Its benefits and Challenges

Introduction

Unconventional resources are those that have been bypassed by conventional oil and gas recovery technologies for decades, because they were not considered economically feasible to produce. The improvements in geophysical and geochemical exploration, and drilling and completion technologies since the early 1990s have opened up vast new resources, both onshore and offshore. Unconventional gas reservoirs are found worldwide, including onshore US, Canada, Australia, Europe, Nigeria, Russia, China, and India. Unconventional resources encompass tight oil and gas formations, shale gas, coal-bed methane, heavy oil, oil shale, deep and ultra deep water plays, and gas hydrates. Each of these types of play requires unique strategies to develop and must meet increasing challenges and competition for the water availability and infrastructure to exploit the resources.

Natural gas production from hydrocarbon rich shale formations, known as “shale gas,” is one of the most rapidly expanding trends in onshore domestic oil and gas exploration and production today. Over the past decade, a wave of drilling around the world has uncovered giant supplies of natural gas in shale rock. By some estimates, there's 1,000 trillion cubic feet recoverable in North America alone—enough to supply the nation's natural-gas needs for the next 45 years. Europe may have nearly 200 trillion cubic feet of its own. As companies like Devon Energy, Chesapeake Energy, EOG Resources and XTO Energy reported record natural gas recovery in the Barnett; exploration for similar plays in other basins began in the period from 2002 to 2010.

How Shale is Formed

Shale is a fine-grained, sedimentary rock composed of mud that is a mix of flakes of clay minerals and tiny fragments (silt-sized particles) of other minerals, especially quartz and calcite. These minerals become shale by a process of compaction. As the fine particles that compose shale can remain suspended in water long after all other material has been deposited Shale therefore, are typically deposited in very slow moving water and are often found in lakes and lagoon deposits, in river deltas, on floodplains and offshore from beach sands. They can also be deposited on the continental shelf, in relatively deep, quiet water.

The shale of interest, for shale gas, tends to be black in color. The dark color is the result of the presence of carbon (organic material) and indicates an oxygen free (reducing) sedimentary environment.

Drilling for Shale

Current methods of producing shale gas depend on multi-stage hydraulic fracturing or hydrofracs in horizontal wellbores. Individual wells may require from 5 to 12 or more hydrofrac stages and the horizontal length may extend up to 10,000 ft. The hydrofracs require large volumes of fresh water, ranging from 2 to 10 million gallons per well. One of the important characteristics of shale gas plays is the degree of brittleness in the shale. Shales with the desired degree of brittleness can be artificially fractured to create induced permeability which allows gas to flow. Since the distance a single hydraulically induced fracture can extend is limited, multi-stage fractures are required throughout the length of the horizontal borehole to access the maximum formation surface. Some shales are too plastic or ductile to allow hydrofracing and can’t accommodate induced fractures to increase permeability.

There are two key well design features which differentiate a shale well from a normal well. The horizontal drilling through the shale interval to maximize the amount of rock to be completed and the hydraulic fracturing process which is required to get economic gas rates from the well. Development wells are typically horizontal through the target shale; the length of the horizontal section can be 4000' or greater, this allows for several sequential fracture stimulation treatments to be run to enhance productivity. The hydraulic fracturing process is a critical component in making a shale well successful. This is done by pumping water into the well bore, at pressure, to create and propagate a fracture in the surrounding rock formation down hole. This is crucial in low permeability rock as it exposes more of the formation to the well bore and greater volumes of gas can be produced by the increased surface area. Without hydraulic fracturing the wells would not produce at an economically feasible rate.

Horizontal Drilling

Horizontal drilling is the process of drilling a well from the surface to a subsurface location just above the target oil or gas reservoir called the “kickoff point”, then deviating the well bore from the vertical plane around a curve to intersect the reservoir at the “entry point” with a near-horizontal inclination, and remaining within the reservoir until the desired bottom hole location is reached.

Most oil and gas reservoirs are much more extensive in their horizontal dimensions than in their vertical (thickness) dimension. By drilling a well which intersects such a reservoir parallel to its plane of more extensive dimension, horizontal drilling exposes significantly more reservoir rock to the well bore than would be the case with a conventional vertical well penetrating the reservoir perpendicular to its plane of more extensive dimension.

Figure 1: Greater length of producing formation exposed to the wellbore in a horizontal well (A) than in a vertical well (B).

The achievement of desired technical objectives via horizontal drilling comes at a price. A horizontal well can cost up to 300 percent more to drill and complete for production than a vertical well directed to the same target horizon. Due to its higher cost, horizontal drilling is currently restricted to situations where vertical wells would not be as financially successful. In an oil reservoir which has good matrix permeability in all directions, no gas cap and no water drive, drilling of horizontal wells would likely be financial folly, since a vertical well program could achieve a similar recovery of oil at lower cost. But when low matrix permeability exists in the reservoir rock (especially in the horizontal plane), or when coning of gas or water can be expected to interfere with full recovery, horizontal drilling becomes a financially viable or even preferred option producing 2.5 to 7 times the rate and reserves of vertical wells. The higher producing rate translates financially to a higher rate of return on investment for the horizontal project than would be achieved by a vertical project.

Comparison between vertical drilling and horizontal drilling

Shale is a very fine grained rock, and though gas can gather in the small pores of its structure, if the gas is to flow to a well, then it has to migrate through passages that are very narrow, and thus very resistive to that flow. However, as

the shale has been formed under geological pressure and over time, the pressures not only compressed it from mud into shale, but they also caused it to fracture. In the Marcellus shale, for example, the cracks that occurred in the shale are roughly vertical, and form two sets that are perpendicular to one another.

The first advantage that a horizontal well has, over a vertical one, is that the well can penetrate a long way through the rock that carries the oil or gas (OG). The amount of OG that comes from the rock is, in part, a function of how long the length of well is in the rock that carries it. So that while a vertical well might produce say 800 bd from a well that goes straight through a 200 ft thick layer of oil-bearing rock, when the well is drilled so that it goes out he equivalent of 4 miles horizontally through the oil-bearing rock, then the production per day may go up to 10,000 barrels.

(Comparative production from a vertical and horizontal natural gas well. Notice the gain in

production, but much shorter life of the horizontal well.)

The second advantage relates to the way in which the fractures lie in the rock. Because they are vertical, a vertical well won’t hit very many of them, and so since these fractures provide an easy flow of OG to the well, rather than the difficult path through just the rock, then the well will not show very much production. (And this was the case with many of these shales when they were tested earlier.) However if the well is horizontal (see figure) then the well will intersect many of these fractures and in drawing the fluid from them will also provide an easy path for fluid to ease out of the rock into the fracture paths, so that the entire rock can be more easily drained.

Ancillary Benefits

First, operators are often able to develop a reservoir with a significantly smaller number of wells, since each horizontal well can drain a larger rock volume than a vertical well could. The aggregate surface “footprint” of an oil or gas operation can be reduced by use of horizontal wells. Second, use of a horizontal well may reverse or significantly delay the onset of production problems that engender low production rates, low recovery efficiencies, and/or premature well abandonment. This can significantly enhance oil and gas recovery as well as return on investment and total return. Third, having the well cased into the producing formation during drilling of the horizontal section allows the operators to use lower density drilling mud. They can even allow the well to produce during drilling operations, preventing much of the formation damage that normally occurs when mud density must be high enough to keep well bore pressure greater than formation pressures.

Procedure for horizontal drilling

After a well is drilled, a fracture stimulation operation is performed to ready the well for production. The following illustrates the process for a horizontal, deep shale gas well. • First, the well is engineered to ensure the casing and cementing program protects fresh water, and the well can reach the intended targets. • A well is then drilled vertically through many thousands of feet of solid rock layers – well below any drinking water aquifers – and then horizontally into the shale formation. • As the wellbore is drilled, state regulations require that it be reinforced with multiple layers of protective steel casing and cement, designed to stabilize the wellbore and to protect groundwater and fresh water aquifers. The casing is pressure tested after cementing to ensure the integrity of the system. • Then, a fracture design tailored to the specific formation’s geology is created using fracture modeling software. • When fluids are used in fracturing, the liquid is composed mostly of water and sand and is then pumped into the formation at a calculated rate and pressure to generate carefully designed millimeter-thick fissures or fractures in the target formation. The fluid is typically comprised of 99 percent water and sand, with less than 1 percent special-purpose additives. These additives are needed to enable the water-sand mixture to transport the sand deep into the fracture and then change its properties to allow the water to be removed while the sand remains, holding the fracture open. During the fracturing operations, injection pressure, volume and rate are carefully monitored to ensure the fracture meets the design parameters. • For the well to produce natural gas, an initial volume of produced water and sediment is removed and collected at the surface to be recycled or disposed of at state-regulated disposal facilities once the operation has been completed. • The newly created fissures are propped open by the sand. This allows the natural gas to flow into the wellbore and be collected at the surface.

Special Regulatory Considerations

Permitting and spacing processes use setbacks from the spacing unit boundaries to protect correlative rights and prevent waste. Consideration must be given to the different drainage patterns of horizontal wells and the small tool errors inherent in horizontal drilling that can be magnified over very long distances. Regulatory inspection and oversight must be increased significantly. This is accomplished through more frequent drilling rig visits and requiring certified well bore surveys. The geometry of horizontal well bores greatly impacts collection and dissemination of data such as cores, bottom hole pressures, gas oil ratios, and well logs. The significantly larger well spacing and greater distance between wells impact oil transportation and measurement as well as gas gathering and flaring.

Shale gas scenario: China and India

China and India are both pursuing shale gas development, as it could provide an abundant and cleaner source of energy for economic development. It remains to be seen what sorts of shale gas reserves exist in those countries, but the Chinese government hasn’t let that stop it from announcing ambitious shale gas development goals. Last November, President Barack Obama and President Hu Jintao of China announced a US-China Shale Gas Resource Initiative aimed at promoting "environmentally sustainable development of shale gas resources." In July, the state-owned China National Petroleum Corporation announced that it aims to produce 500 million cubic meters of shale gas by 2015. Conoco Philips, Royal Dutch Shell and BP are all working with China's state-owned oil and gas companies to explore for shale gas there. Many of these big international oil and gas companies, including U.S. companies such as Exxon and Chevron, were late to the shale gas game themselves, and are now playing catch-up by getting in on the early stages of shale gas development in other countries, and by partnering with the smaller, independent companies that pioneered the uses of hydraulic fracturing and horizontal drilling. The drilling technology was seen as risky at first, and the economics weren't yet proven, so it was the independent companies — notably Chesapeake, Range Resources, and Devon Energy — that pioneered the practice.

India is so far lagging behind in the development of its shale gas industry, but is trying to catch up quickly. Like China before it, India is pursuing a partnership with the US Department of Energy to jointly develop shale gas reserves. In July, Reliance Industries, India's largest private company, acquired a 40 percent stake in Atlas Energy's leasehold in a shale gas field in Texas.

Shale gas future: counterview

Many people (including Russian Prime Minister Vladimir Putin and many Wall Street energy analysts) aren't convinced that shale gas has the potential to be such a game changer. Their arguments revolve around two main points: that shale-gas exploration is too expensive and that it carries environmental risks. There is so much cheap and easy conventional gas available overseas that shale gas is not expected to play much of a role in international markets. Maybe China and Europe will increase shale production, but outside those areas there really isn't much of a need. EIA estimates that shale gas has the potential of accounting for up to 7% to total gas supply by 2030. And most of that 7% is due to U.S. development.

The skeptics claim Estimated Ultimate Recovery (EUR) in shales is much lower than stated by industry, analysts and reserve engineers. This is because their decline method is technically flawed and is biased to under-estimate recovery. They suggest that it is appropriate to assume Barnett Shale wells exhibit exponential decline after one year (and not apparent hyperbolic behavior). Skeptics further suggest that it is inappropriate to use type curves because it makes the data look smoother than it really is…and suggest that all wells should be analyzed individually.

Appendix:

REFERENCES

[i] Mark Kurlansky Salt: A World History; naturalgas.org

[ii] http://www.dec.ny.gov/docs/materials_minerals_pdf/nyserda2.pdf

[iii] http://www.epmag.com/Magazine/2008/7/item4266.php ; article was originally published in the journal of the Canadian Society of Exploration Geophysicists RECORDER, June 2004, pp. 34-43

[iv] http://www.epmag.com/Magazine/2008/7/item4266.php ;

[v] Giddens, Paul H., Early Days of Oil, Princeton University Press, 1948.

[vi] http://www.naturalgas.org/naturalgas/extraction_onshore.asp

[vii] http://www.seed.slb.com/en/scictr/watch/mud/char.htm

[viii] https://www.dmr.nd.gov/ndgs/Newsletter/NL0308/pdfs/Horizontal.pdf; Horizontal Drilling, Lynn Helms, DMR Newsletter, V. 35

[ix] http://www.slb.com/content/services/stimulation/fracturing/index.asp?