the shale energy revolution - uschinaogf.org - vaughn devon-en.pdf · the shale energy revolution:...

The Shale Energy Revolution: New Resources, New Stakeholders, New Responsibilities

Tony Vaughn, Senior Vice President

U.S.-China Oil & Gas Industry Forum

Sept. 12, 2012

NYSE: DVN www.devonenergy.com Slide 2

Devon today

Proved reserves: 3.0 billion BOE

(42% liquids)

Q2 2012 production: 679 MBOED

(37% liquids)

Sales revenue mix: 57% oil

18% NGLs

25% natural gas

(Q2 2012)

Significant midstream business

2011 operating profit: $542 million

Enterprise value: $27.6 billion

Jackfish

Pike

Granite Wash Barnett Shale

Permian Basin

Canadian Oil Potential

Cana Woodford Mississippian

Tuscaloosa Shale

Rockies Oil Utica Ohio

Michigan

Horn River

Deep Basin

Powder River

Washakie

Haynesville/Bossier

Carthage

Groesbeck

Existing operations

New areas covered by Sinopec JV

New technology What has resulted from it?


“New”

• Resources

• Stakeholders

• Responsibilities

www.devonenergy.com NYSE: DVN

Technology’s role

Migrating hydrocarbons Shale

organic rich source layer

Frack Porous and permeable

reservoir layer

Hydrocarbon Trap

Impermeable

sealing layer

Fracture stimulation 5,000’ – 15,000’ below the surface

“New” resources Traps vs. shales


North American shale Plays and basins

Estimated resource

base increased 20%

just since 2008.

New resources, new stakeholders, new responsibilities

Current and prospective

shale plays

Basins

Utica

Eagle Ford

Monterey

Bakken

Mowry

Avalon

Sources: EIA, Potential Gas Committee

Utica

Niobrara

Woodford

Antrim

New Albany

Fayetteville

Marcellus

Tuscaloosa

Haynesville-Bossier

Barnett

Devonian (Ohio)

Worldwide shale basins


Resource Estimate

U.S. — 862 Tcf

Canada — 388 Tcf

China — 1,275 Tfc

Source: EIA, 2011

New stakeholders

NYSE: DVN www.devonenergy.com page 7

• Stakeholders who haven’t seen the size or

scale of what they will see

• Other new stakeholders

– Community leaders

– Royalty owners

– Concerned citizens and/or activists

New responsibilities Addressing concerns/demystifying our work

NYSE: DVN www.devonenergy.com page 8

• Hydraulic fracturing

• Community impacts

• Water management

• Land stewardship

• Seismic activity


Hydraulic fracturing A brief history

Velma Alma, OK

March 17, 1949

• Hydraulic fracturing is a

well-established

technology with a strong

environmental and safety

record

• The technology has been

used to complete more

than 1 million wells over

the past 60 years

slide 9


Fracfocus.org Industry’s effort to demystify the process

• Created by regulators and the

Interstate Oil and Gas Compact

Commission

• Site went live in April 2011

• Industry is responding to this

voluntary disclosure effort

– 207 companies have reported

well information

– Data uploaded for more than

23,000 wells

– Devon: Nearly 900 wells

uploaded

NYSE: DVN www.devonenergy.com

GWPC/IOGCC chemical registry FracFocus

slide 12


Mapped fracture treatments Barnett Shale

Kevin Fisher, “Data Confirm Safety of Well Fracturing” —

American Oil & Gas Reporter, July 2010

slide 13


Groundwater protection Through proper well construction

Cement

Cement

Surface casing

Drilling fluid

Intermediate casing

Conductor casing

Aquifer

2,000 ft.

4,000 ft.

6,000 ft.

8,000 ft.

10,000 ft.

13,500 ft. Im

perv

ious r

ock layers

Production casing

Production tubing


Regulation of well construction States’ role

• States manage the oversight and enforce federal law and

state rules

– Have the on-the-ground personnel and expertise

• State-led enforcement allows fit-to-purpose solutions for

localized issues

• Regulated activities:

– well design

– well location

– well spacing

– well operation

– water management

and disposal

– air emissions

– wildlife impacts

– surface disturbance

– worker health

and safety


Water management Barnett: 500 million gallons recycled

Barnett Shale

• High salinity requires water to be

distilled

• Devon’s process approved by

Texas Railroad Commission in

2005

• System vaporizes flow-back

water and condenses it into

clean, distilled water

• More than 500 million gallons

recycled — enough water to

fracture 100 wells.


Water management A few Devon examples

• West-Central Oklahoma

– Exceptional flowback and produced water quality allows for reuse

– Built pipeline system and 500,000-barrel storage pond

– 600,000 barrels reused in first three months

• Texas Panhandle

– Already reusing water for

hydraulic fracturing

– New pipeline will reduce truck

traffic for hauling reusable

water


Water management A few Devon examples

• Canada — SAGD oil production using brackish water

— Similar plan for other Jackfish phases and for Pike

• Ohio — Purchased treated wastewater from town of Savannah

— Temporary pipeline connects town lagoon to Devon’s first hydraulic

fracturing job

• Louisiana — Cooperative agreement with state for running surface water

— Devon pays 15 cents per 1,000 gallons


Freshwater users

In the Barnett Shale region

(Source: Texerra; L. Peter Galusky, Jr. Ph.D., P.E., www.texerra.com)

slide 19


Water sustainability principles

• Devon is committed to the principles of conservation and re-use of water

where feasible through the following:

– Educating and working closely with governmental authorities and

members of the public concerning water usage needs and the necessity

of water management

– Identifying usage needs, determining resource availability and

monitoring water use

– Applying conservation practices and identifying opportunities to

improve water use efficiency

– Employing economically and operationally feasible alternatives to fresh

water usage

– Advocating for appropriate regulations on water use and re-use

– Continuing to employ prudent operating practices to ensure the

protection of surface and groundwater

– Planning for operations to continue if water availability becomes

constrained


Demystifying seismic events Purported connection to E&P activity

• Experts’ consensus: Low risk managed through good practices

• “We don't see any connection between fracking and earthquakes of any

concern to society.” — Bill Ellsworth, senior U.S. Geological Survey

geophysicist, to E&E News, April 23, 2012.

• Fewer than 30 out of 150,000 U.S. disposal wells have had any alleged

connection to seismic activity

• Generally no damage from those events

• Devon uses advanced seismic imaging technology and interpretation

methods to identify and avoid faults.

• Industry expanding water recycling/reuse programs to reduce need for

disposal wells


Seismic risk in context Seismic array monitoring example

Total array areal coverage is 3 square miles.

Source: Spectraseis Array location map

Horizontal

Well Paths Seismic stations

that form the

seismic array

Frank 11 100 – Station layout

.

East-West dimension is

12,000 feet (2.3 miles)

Nort

h-S

outh

dim

ensi

on is

7,0

00 f

eet

(1.3

miles)


Seismic risk in context Comparison of frack and trains

0.8

80

0

10

20

30

40

50

60

70

80

90

1

Relative Seismic Amplitudes

Hydraulic FractureEvent

Freight TrainVibrations


Land matters Maximizing value while earning trust

Lake Benbrook, Texas

• Two pads

• 56 wells

• On-site disposal well

reduced truck traffic

• BLM calls project

“spectacular”


API standards for hydraulic fracturing

• Well construction and integrity guidelines

• Water management associated with HF

• Practices for mitigating surface impacts

• Environmental protection for onshore production

• Isolating potential flow zones during construction

• More information: EnergyFromShale.org


API’s public workshops Explaining hydraulic fracturing

Completed

Little Rock, AR

Raleigh, NC

Annapolis, MD

Trenton, NJ

Charleston, WV

Denver, CO

Completed

Columbus, OH

Albany, NY

Bismarck, ND

Lafayette, LA

Lansing, MI

Washington, D.C.

Dates TBD

Baton Rouge, LA

Oklahoma City, OK

Santa Fe, NM

San Antonio, TX


Partners in the effort


In summary

• New technology has created:

– New resources

– New stakeholders

– New responsibilities

• One major responsibility is educating the public, especially these new

stakeholders, about:

– Water consumption and management efforts

– Hydraulic fracturing

– Truck traffic

– Land impact

– Seismic activity

Water recycling in North Texas

Thank you.

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