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8/2/2019 Penn State Economic Comparison of Multi-Lateral Drilling Over Horizontal Drilling for Marchellus - 4-26-2011

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4/26/2011

Economic Comparison of Multi-Lateral Drilling over Horizontal

Drilling for Marcellus Shale Field

DevelopmentBy,Taha,Chew,Aditya,Ugur,Sarath,Amey,Hadi

EME 580: Integrative Design of Energy & MineralEngineering Systems

Date : 26thApril 2011


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IndexProblem Statement

Concept Map

Geology

Reservoir Simulation

Stimulation/Hydraulic Fracturing

Well Design

Water Management

Economics

Conclusion4/26/2011 22
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Problem StatementEconomic Comparison of Multi-Lateral Drilling

over Horizontal Drilling for Marcellus ShaleField Development

Compare Performance of Multilateral WellCompletion over Horizontal Well Completion

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WellDesign

ReservoirSimulatio

n

EconomicAnalysis

WaterManagemen

t

Geology

Stimulation

Selectio

n ofLocation

ReservoirProperties

WaterSupply

Waste WaterTreatment

Horizontal Well

MultilateralWell

CMGSimulations

Multi Stage

Fracking

Choice ofProppant

WellIntegrity

Cementing/Casing Design

Drill

Bit

Economical

Comparison ofMulti lateralwells over

Horizontal Wells

PadFluid

# ofStages

Concept Map


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Geology

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Shale Gas Plays


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StratigraphyFormation Depth to the Top( in Feet)

Depth to the Bottom (in Feet)

Thickness (in Feet)

CATSKILL 0 2945 2945

TRIMMERS ROCK 2945 5314 2369

TULLY 5314 5366 52

MAHANTANGO 5366 7046 1680

MARCELLUS 7046 7748 702

BUTTERMILK FALLS LIMESTONE 7748 8055 307

ESOPUS 8055 8510 455

RIDGELEY 8510 8527 17

SHRIVER CHERT 8527 8580 53PORT EWEN SHALE 8580 8710 130

MINISINK LIMESTONE 8710 8725 15

NEW SCOTLAND 8725 8948 223

COEYMANS 8948 9085 137

RONDOUT 9085 9142 57

DECKER 9142 9224 82

BOSSARDVILLE LIMESTONE 9224 9322 98

POXONO ISLAND 9322 10254 932BLOOMSBURG 10254 11148 894

SHAWANGUNK 11148 12560 1412

MARTINSBURG 12560 13178 618

UTICA SHALE 13178 13286 108

POINT PLEASANT 13286 13523 237

TRENTON LIMESTONE 13523 13724 201

BLACK RIVER LIMESTONE 13724 13763 39

BEEKMANTOWN 13763


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Marcellus Shale

FormationProperties:

Permeability : 1*10-5mD

Porosity: 9%

TOC( Total Organic Carbon) : 0.64 1.8

Ro( Vitrinile Reflectance) : ~4.5 ( Dry Gas)

Fracture Spacing : 0.9 ft

Reservoir Temperature : 1500F

Initial Reservoir Pressure : 4500 Psia4/26/2011 1111


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Lithology of Formation


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Reservoir Simulation

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Physical Attributes of

CMG Model


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Horizontal Wells


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Gas Rate Case 2 (without Hydraulic Fracture)


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Multilateral wells


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Gas Rate Case 3 (Without HydraulicFracture)


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Comparative Study (Without HydraulicFracture)


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C i f diff


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Comparison of differentProppants


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Comparison of different Proppant and FluidCombinations

S.

No. Fluid and Proppant used

Pumping Rate +

No. of Stages

ProppedHalf Length

(ft)

Propped

Height (ft)

Fracture

Width (in) FcD

Formation

Permeability (mD)

1Micropolymer (min. gel loading) +

Brady (20/40)30 bpm for 10

stages 211 421 0.61 400 1 * 10^-5

2Purgel (max. gel loading) + Brady

(20/40)30 bpm for 10

stages 210 420 0.58 400 1 * 10^-5


(20/40)100 bpm for 10

stages 215 430 0.82 400 1 * 10^-5


(20/40)200 bpm for 10

stages 213 425 0.93 400 1 * 10^-5


Carbolite (20/40)300 bpm for 4

stages 292 664 1.26 400 1 * 10^-5



stages 293 672 1.22 400 1 * 10^-5



stages 295 692 1.3 400 1 * 10^-5

8

Slick Water + WaterFrac +Carbolite(20/40) +CarboProp(30/60)

150 bpm for 4stages 203 626 1.09 400 1 * 10^-5

9

Slick Water + WaterFrac +Carbolite(20/40) +CarboProp(30/60)

65 bpm for 10stages 194 391 0.92 400 1 * 10^-5

10

Slick Water + WaterrFrac +

CarboLite(20/40) +CarbolProp(30/60)

65 bpm for 10stages 182 466 0.94 400 1 * 10^-5


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Model ParametersCharacteristics Value

PAD fluid Slick Water

Fracturing Fluid Slick Water

Proppant CarboLite + CarboPropMatrix Permeability

(mD) 1 * 10-5

Fracture Type Infinite Acting

Porosity 9%Initial Reservoir

Pressure 4500 psiaReservoir

Temperature 1500F


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Lithology of Reservoir

Layer # Top of

zone

(ft)

Stress

(psi)

Stress

Gradien

t(psi/ft)

Young's

modulus

(psi)

Poisson'

s ratio

Total Ct

(ft/min)

Pore Fluid

Perm.

(mD)

1 0.0 1826 0.620 5.0e+06 0.20 6.726e-03 1.00e+002 2945.0 3097 0.750 6.0e+06 0.25 2.127e-03 1.00e-013 5314.0 3631 0.680 1.0e+06 0.30 3.008e-03 2.00e-014 5366.0 4220 0.680 1.0e+06 0.30 6.726e-03 1.00e+005 7046.0 5548 0.750 6.0e+06 0.25 2.127e-05 1.00e-05

6 7748.0 5269 0.680 1.0e+06 0.30 2.127e-03 1.00e-01

Layer # Top of zone

(ft)

Lithology Fracture

Toughness(psiin)

Composite

Layering Effect

1 0.0 Catskill 1000 1.00

2 2945.0 Trimmer Rock 2000 1.00

3 5314.0 Tully 500 1.00

4 5366.0 Mahantango 500 1.00

5 7046.0 Marcellus 2000 1.00

6 7748.0 Buttermilk F 500 1.00


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Treatment Schedule


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Fracture Profile


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Results for StimulationParameter Value

Height of Fracture (ft) 476

Propped Height (ft) 466

Top Depth of Propped Fracture (ft) 6931Bottom Depth of Propped Fracture (ft) 7397

Fracture Half Length (ft) 186

Propped Fracture Half Length (ft) 182

Average Fracture Width (ft) 0.94

Initial Fracturing Pressure (psia) 6390

Volume of Fluid for single job (gallon) 180,000

Total Volume of fluid required (gallon) 1,440,000


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Advantages of the

Stimulation jobLower Cost for Stimulation

Less time required to complete Stimulationjob

Increasing sweep efficiency by increasing thearea in direct contact with the wellbore


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Structural Representation ofHorizontal Well

Case 1


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Production Values Case

1


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Horizontal Well Case 2


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2


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Structural Representation of MultilateralWell

Case 3


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CMG Model Grid

Representation


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3


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Comparision of

Production Rates


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Well Design Drilling Procedure Drill Bits

Selection Mud Design Casing Design Multilateral

Junction Open Hole lateral


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Basic Multi-lateral

Drilling


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Drill Bit SelectionPDC Bits with OptimizedTorque ManagementTechnology, CuttingStructure Aggressiveness

and Unique Roller ConeSteel Tooth

Higher ROP, WOB and

better Torquemanagement.

Although the capital costis 1.5 higher than

Tungsten Carbide Bit, it


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Mud DesignSimilar log close to well site that contains

similar strata

incorporated safety factor of 1.2

0 2 4 6 8 10 120

2

4

6

8

10

12

Pressure vs Depth

Pressure (psi)

Depth

0 2 4 6 8 10 12

0

2

4

6

8

10

12

EMW vs Depth

Equvalent Mud Weight

Depth

Mud selection: water based mud or potassium-chloride based mud 11.5- 12


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Casing Design

Three design factors:

Options: J-55, C-75, N-80, C-90 and P-110All casing grades are check first to so that is

can withstand the axial tension, burstpressure and collapse pressure at respective

depth and cost effective.

Factor Safety Factor (APIStandard)

Collapse 1.4Burst 1.2

Tension 1.8

Casing


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CasingDesignConductor (30ft):J55, 13-3/8

Surface (1200ft):

P110, 9-5/8 [21.85lb/ft]

Intermediate(5200ft) : P110, 7-

5/8 [15.52lb/ft]Production

(7250/7600 ft): P110 ft, [14lb/ft]

- 30ft

-1200ft

- 5200ft

-

7250ft

-

7600ft


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ContdRate of build angle:

50/50ft

2 pseudo-zone

targets:1. L1 7572.5 ft

2. L2 7221.5 ft

. KOP(Kick off Point):1. L1 6750 ft

2. L2 6350 ft

0 2 4 6 8 10 12

5000

5500

6000

6500

7000

7500

8000

8500

9000

9500

10000

Well Profile

Lateral Length (ft)

Depth

(ft)


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Multilateral JunctionShale formation:

unexpected plugging of the lowerlateral

Implement Tieback junction

sleeve (TBJS)


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CementingClass H cement

v from surface to 8000 ft

vcan be used with typical

accelerator and retarder

Additive:

GAS CHECK -Halliburton

v Specially for gas drillingoperation

v Avoid gas flow into the

annulus after cement has


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Open Hole, Multi-stageFracturing (OHMS)

Instead of cemented linerplug and perf, OHMS isapplied

No cement is required Increased the drainage

area of the well Increase production by

30% [Barnett Shale]

New to Marcellus Shale Availability: Packer Plus

Inc.


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Water Management

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Water and Wastewatermanagement

Location of the reservoir : Hawley borough (border betweenPike county and Wayne county)

Nearest City : Milford, Pike County, PA (distance approx 34miles)

Major watersheds

Delaware River which flows beside Milford Township

Milford springs serves the Borough of Milford andadjoining areas (average water demand 185,000 to

195,000 gallons per day)


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Milford Township Pike County


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The Delaware River Basin Commission (DRBC) is the primary agency

overseeing water-related activities in the Delaware River Basin.

The responsibilities of the commission include water qualityprotection, water supply allocation, regulatory review/permitting,water conservation initiatives, watershed planning

The DRBC requires approval for surface water withdrawals exceeding

100,000 gallons per day (gpd), based on a 30-day average.

They also require approval for a withdrawal from groundwater wellsin the DRB exceeding 100,000 gpd, based on a 30-day average,outside of the Southeastern Pennsylvania Groundwater ProtectionArea.

Regulations pertaining to water withdrawal


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Water trucks and trailers from the DRB to provide water tobe used for different purposes.

Water would then be pumped into lined storageimpoundments(pits) and stored until it is transported bytemporary ground piping to the well pad locations for afracture treatment.(Example of such a pit is given below)


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Water reuseConsidering the fact that the figures presented before, forsubsequent fracture jobs huge amount of fresh water supplieswould be required.

This compels us to use the option of recycling the water andtreat it so that it can be blended with less fresh water forfracing new wells instead of using the same amount of freshwater.

But there are some issues related to water treatment andreuse:

The main mechanism is water/salt separation process calledas demineralization

Demineralization can be achieved with thermal systems orwith membranes.


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Drilling fluids disposalDrilling fluids are an important part of the drillingprocess as they circulate the rock cuttings to thesurface to clear the borehole, cool and lubricate thedrill bit as well as maintain downhole pressure.

The drilling fluids are also stored in steel storage tanksto prevent infiltration to the surrounding land orgroundwater sources.

This also helps in containing to some extent the spread

of Naturally Occurring Radioactive Materials (NORMs)such as Ra-226 and Ra-228 which are usually found inlow concentrations in most of the drilling fluid wastes asthey are brought to the surface.

These have to be disposed off in licensed disposal pitsaround PA which are equipped with radiation monitors

T h i l


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Technical

Capabilities of ROIn general, RO can treat water TDS concentrationsup to 50,000 mg/L. Latest RO technologies cantreat up to 60,000 mg/L TDS, at a rate ofapproximately 6,300 BPD.

RO treatment can be effective in removing sand,silt, clay, algae, protozoa (5 to 15 microns),bacteria (0.4 to 30 microns), viruses (0.004 to 6microns), humic acids, organic/inorganic chemicals,and metal/nonmetal ions.


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Before

Treatment

After

Treatment

Efficiency

TDSconcentratio

n (mg/L)

13,833 128 99.1 %

Chloride(mg/L)

8393 27 99.7 %

TSS (mg/L) 64,5 0 100 %

Barium(mg/L)

34,9 0 100 %


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Technical Limitations

RO membranes are subject to fouling ifproper pre treatments are not in place andcan have low water recovery efficiencies.

( Approximately 40% and 65%)

When high TDS concentration ( >50,000

mg/L) the result is a higher brine stream,which will increase the disposal costs.However, high recovery rates ( 75%-90%)can be obtained when TDS concentration isbelow 25,000 m /L.


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Commercial RO Systems for Shale GasReservoirs


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Water RequirementAmount of water required for fracking = 1,500,000gallons

Total amount of water (drilling + fracking) = 2,000,000gallons

From the literature, 30% to 50% of flowback returns to the

surface (over a period of time)

Amount of fracwater generated = 750,000 gallons(approximate average)


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Cost

RO water treatment systems require less energy comparedto other systems such as, thermal treatment process andother membrane technologies.

In RO treatment, the capital cost ranges from approximately$3 to $7/gpd depending on the size, location, constructioncost etc. The operation cost is about $2.50 per 1,000gallons.

According to the approximate cost range the capital cost ofRO system would be $3,750,000 and the operation costwould be $37,500.


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Economics

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Income

Tangible CostIntangible Cost

Discount Cash FlowAnalysis


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Recap :

4 categories of economicviewpoints

Development economics / Heads up

Carried interest/ Overriding Royalty

Farm-out

Farm-in

E ti t d T ibl C t


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Estimated Tangible CostCasing

24 conductor casing

0.5 thickness

$64 per foot (6/1/10) [30ft] - $1920

20 intermediate casing

0.5 thickness$48 per foot (6/1/10) [1200 ft] - $57600

Estimated Intangible


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Estimated IntangibleCosts

Site Preparation ~ $100k

Drilling Contractor Services ~$120k

Materials & Supplies ~ $50kLogging, Stimulation,

Perforations ~ 400k

Power, Water disposal ~

$3700k

Installation, Completion,Labor ~ $40k


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Total Income


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Linear Regression Model

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Future Price Prediction


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Future Price Prediction


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Discount Cash FlowAnalysis

Feasible if NPV >0

v u v u


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v u v uRate

NPV vs Discount Rate


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NPV vs Discount Rate

~42 %per

annum


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ConclusionMinimum Rate of Return = 42% per annum

Breakeven Time for avg ROR (10%) =8/11/2015

Multilateral well with hydraulic fracturing ismost profitable

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ReferencesRo and TOC values taken from

http://www.dcnr.state.pa.us/topogeo/oilandgas/display/Pike.pdf

http://www.dcnr.state.pa.us/topogeo/pub/pag

eolmag/pdfs/v38n1.pdf

http://www.marcellus.psu.edu/resources/PDFs/DCNR.pdf

Isopach data taken fromhttp://geology.com/articles/marcellus/marcellus-shale-map.gif

Bill Greier and Jim Bray,Halliburton

Identification of Production Potential in4/26/2011 7272


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References

Benny Peodjono, John Zabaldano, IrinaShevchenko and Christpopher Jamerson."Case Studies in the Applicaion of Pad Designin Marcellus Shale." SPE 139045 (2010): 9.

Dave allison, Don Folds, David Harless, MatHowell and Greg Vargus. "Optimizing OpenHole Completion Technique for orizontal Foam-Drilled Wells." SPE 125642 (2009): 17.

Dosinmu, E.J Idiodemise and A. "A Model forCompletion Selection for Multilateral andMultibranched Well." 2007.

Jack Johnson Jr., SPE, Sonat Exploration, et al." 4/26/2011 7373


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References

Pike County: Where

People, Land andWater Meet :A

Citizens Guide toClean Water : Pike

County Conservation4/26/2011 7474


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Appendix

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Well Casing designLength

(ft)

Segment

Type

Casing ID

(in)

Casing OD

(in)

Weight

(lb/ft)

Grade

2945 Cemented

Casing

11.514 12.000 30.510 J-55

2369 Cemented

Casing

9.582 10.000 21.850 J-55

52 Cemented

Casing

7.628 8.000 15.520 P-110

1856 Cemented

Casing

5.620 6.000 12.000 P-110

1542 Cemented

Casing

5.290 5.750 14.000 P-110

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