THE FUTURE OF CERAMIC PROPPANTS IN THE UNCONVENTIONAL SHALE MARKET

Jack Larry SAINT-GOBAIN PROPPANTS

SAINT-GOBAIN one of the world’s top 100 leading industrial corporations

1.79

1.28

1.53

53.7

2013

Free cash flow

Capital expenditure

Recurring net income

Sales

$ bn OPERATIONS IN

64 COUNTRIES

SALES

$53.756 bn

Nearly

190,000 EMPLOYEES

www.saint-gobain350years.com

Northboro United States

Cavaillon France

Aubervilliers France

Shanghai China

Research centers

and about 100

development units

worldwide

12 in 4 Saint-Gobain

products sold today

was developed in the

last five years 1

patents

filed in 2013

Nearly

400

Main R&D centers 7 employees 3,700

R&D open to the outside world :

• Partnerships with start-ups: NOVA External Venturing

• University partnerships

Chantereine France

Herzogenrath Germany

SAINT-GOBAIN One of the 100 most innovating companies in the world*

* Thomson Reuters 2013 Top 100 Global Innovator program

Chennai India

An Increasingly International Company

Saint-Gobain in 1904

Saint-Gobain in 1980

Saint-Gobain in 2012

Saint-Gobain Sales/Plant/R&D

Fort Smith, AR,

Est. 1979

Little Rock

Est. 2013

Guanghan, China

Est. 2004

Saint-Gobain Products

• All Saint-Gobain products are crystalline silica free and NORM complaint

0 5000 10000 15000 20000

FFP Sand

Brady Type Sand

Northen White Sand

Economy Light Weight

Light Weight

Intermediate Strength

High Strength

Closure Stress (psi)

Sintered Bauxite/ UltraProp®

InterProp® / VersaProp®

BauxLite® /VersaLite®

Story of shales….

1890 1930 1940 1950 1960 1980 1990 2000 2010

More horizontal than vertical rigs

Optimization

Shale Oil Developments

Barnett shale: first economical shale well

using hydraulic fracturing and

horizontal drilling

HF and HZ combined for the

first time

Commercial HZ Elf Aquitaine European field Horizontal drilling

BP Alaska

First 500,000 lbs job (Pan American,

now BP)

Water as fracturing

fluid

Floyd Farris Stanolind Oil &

Gas “Hydrafrac

First horizontal well

First hydraulic fracturing attempts

First commercial treatments 100-150 lbm of sand

Cost :$ 900-1000

Shale gas Developments

Unconventional Reservoirs

Horizontal Drilling

Vertical Hydraulic Fracturing

0%

20%

40%

60%

80%

100%

0

500

1,000

1,500

2,000

2,500

% o

f To

tal w

ells

Tota

l Rig

Co

un

t

Split between vertical and horizontal rigs TOTAL % HORIZ. % VERT.

Share of horizontal starts increasing

6

Vertical wells

7

Vertical drilling was the norm 10 years ago Main characteristics

Technical

Very shallow (3 000 feet) to very deep (18 000 feet) wells

Wells productivity not sufficient to offset decline

Both Oil & Gas basins High EUR achieved > 75% Relatively low available volume Low number of stages (<8 stages)

Economics

D&C costs: 1.5 m$ Proppant mass: 300 000 lbs Proppants 1 – 10% of D&C costs

Shale Granite Clay

Concrete Brick Building Stone

Mid East Reservoirs

Beach Sand

“Tight Reservoirs”

Hydraulic fracturing

1 nD 1µD 1 mD 1D

“Unconventional Reservoirs” “Conventional Reservoirs”

Vertical Drilling

Vertical wells and proppant selection

Fracture length is the crucial factor… …because it enables to optimize the well

WELLBORE

Optimum enables to calculate needed proppants conductivity…

Formation Permeability 0.03 md 1 md

Fracture Length 1800 ft 700 ft

Calculated Proppant Permeability

172 000 md 252 000 md

Linked to nature of the rocks

Determined given expected revenue from the well

…and so determine proppants selection

Calculated in the model given completion

parameters

Laboratory measured permeability is significantly higher than actual application permeability.

8

Unconventional Wells

Horizontal drilling Main characteristics

Technical

Always deeper than sandstone formations in the same area

Both Oil & Gas basins Low EUR achieved < 20% Large available volume Higher number of stages: >20 stages

and increasing rapidly

Economics

D&C costs: 5 - 10 m$ Proppant mass: 8 – 12 Mlbs Proppants 10 – 40% of D&C costs

9

Shale Granite Clay

Concrete Brick Building Stone

Mid East Reservoirs

Beach Sand

“Tight Reservoirs”

Hydraulic fracturing

Horizontal Drilling

1 nD 1µD 1 mD 1D

“Unconventional Reservoirs” “Conventional Reservoirs”

Natural fractures Low porosity

Old correlations are not valid anymore…

Vertical Model Horizontal Model

≠

10

? $ Revenue

Less

$ Cost

SRV

Conductivity

PROPPANTS

• Prop the fracture open

• Create a conductivity contrast at application

conditions!

What are they supposed to do?

Natural fractures

Low formation porosity

PACK

PACK

MONOLAYER

Proppants pack performance

Conductivity (Pack)

Conductivity (Monolayer)

Proppant with highest measured permeability and conductivity ensures maximum near wellbore performance

ISO 13503-2:2006 / API RP 19C Proppant Pack Crush Resistance

ISO 13503-5 API RP 19 D Proppant Pack Conductivity and Permeability

Proppants in a monolayer

Conductivity (Pack)

Conductivity (Monolayer)

Preferred mode of failure

Glass Clay based Bauxite based

In monolayer conditions stress on a single proppant grain is extremely high: material strength and mode of failure are key selection features

CONFIDENTIAL- Disclosure or reproduction without written permission of Saint-Gobain Proppants is prohibited

Material Always about Choice

Low Quality Chinese Proppants

South America Proppant

mag

net

proppants

• What Materials can do depends on what we choose to do with Materials

Saint Gobain Proppant

Low Quality Kaolin Proppant Uniform and Strong Matrix

Porosity and Phase Engineering

Process Control and Optimization

Bakken proppant performance Which completions are more successful?

0

10,000

20,000

30,000

40,000

50,000

60,000

0-90 90-180 180-270 270-360 360-450 450-540 540-600

Ave

rage

BO

E/w

ell

Bakken (+600 days production)

Ceramic Only Sand + Ceramic Sand Only

0

10,000

20,000

30,000

40,000

50,000

60,000

0-90 90-180 180-270 270-360 360-450

Ave

rage

BO

E/w

ell

Bakken (+450 days production)

Ceramic Only Sand + Ceramic Sand Only

Sand + Ceramic,

1,270

Sand Only, 1,106

100% Ceramic,

252

Sand + Resin, 189

Unknown, 149

Sand + Resin +

Ceramic, 57

Resin Only, 38 Propless,

36 Resin + Ceramic,

12

Performance of Sand vs Ceramics

• Williams County ND

Being called ceramic is not good enough..

New world order…

• Pack and monolayer performance is important

• While all ceramics in the lab preform better than sand, same is not true for the application

• Application Performance of different proppant types can now be analyzed on statistical basic

• Low quality ceramics create wells that cannot be differentiated from sand wells.

• Better than sand” is no longer good enough to justify ceramic use

> Only top performing products can survive against the high volume sand completion economics

Environmental regulations impacting proppant selection

In the long term, only environmentally sustainable solutions are economically

feasible

Conclusions

• Unconventional resource development is here to stay > High proppant volume horizontal wells are a key technology

• Ceramic proppants have a key role in the future as well performance is optimized > Do more with less

• Ceramic proppants must be highly differentiated versus sand

• Bauxite based proppants outperform all other proppants

• Ceramic processing and technology play a key role in delivering optimum performance

THANK YOU!