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SPE DISTINGUISHED LECTURER SERIES is funded principally through a grant of the SPE FOUNDATION The Society gratefully acknowledges those companies that support the program by allowing their professionals to participate as Lecturers. And special thanks to The American Institute of Mining, Metallurgical, and Petroleum Engineers (AIME) for their contribution to the program. Advances in Unconventional Resources Technology: Assessment Methodology John Lee Texas A&M University Global Energy Availability Requires Creative Thinking We need increasing amounts of energy of right type at right place and right time Viability of many alternatives limited by practical considerations Unconventional resources play important role for most forecasters Improved assessment methodology one key to availability of needed unconventional resources Unconventional U.S. Gas Production Will Increase 10 History Projections Lower 48 unconventional Lower 48 conventional— onshore Lower 48 conventional— offshore Lower 48 associated Alaska 0 1990 2004 2030 EIA 2006 Dependence on Unconventional Resources To Grow in United States ‘As a result of technological improvements and rising natural gas prices, natural gas production from relatively abundant unconventional sources (tight sands, shale, and coalbed methane) is projected to increase … from 35 percent of total lower 48 production in 2003 to 44 percent in 2025’ EIA Energy Outlook 2005 Production From Unconventional Sources Will Increase in U.S. 50 44% Diminished supply of conventional resources Production, % Rising natural gas prices Technological improvements 35% 25 2003 Time 2025 … And Later in the World Diminished supply of conventional resources Production, % Rising natural gas prices Technological improvements Time Recent Worldwide Estimates of Unconventional Gas in Place, (Tcf) 7,000 Tight Gas Coalbed Methane Gas Shales 6,000 5,000 4,000 3,000 2,000 1,000 0 North & Eastern & South Western America Europe Former Soviet Union Middle East & North Africa SubSaharan Africa China Rogner 1997 Resource Distribution and Practical Permeability Limit Resources High Reservoir quality Resource size Low Practical permeability limit After USGS, 2003 Low High Resource Distribution and Practical Cost Limit Resources High Reservoir quality Practical After USGS, 2003 Low Resource size cost Low limit High NPC Forecasts Technology Impact on Gas Production 32 With technology advancement Tcf With no technology advancement 22 0 2000 Year 2025 NPC 2003 NPC Model Assumes and Identifies Expected Technology Advances Technology Area Exploration well success Development well success Ultimate per-well recovery Initial production rate Drilling costs Completion costs Construction costs Fixed operating cost Annual, 25 years, % % 0.53 14 0.41 11 0.87 24 0.74 20 37 1.81 39 1.37 26 1.18 22 1.00 NPC 2003 Improved Resource Assessment Key to Much Unconventional Resource Development Technology Area Exploration well success Development well success Ultimate per-well recovery Initial production rate Drilling costs Completion costs Construction costs Fixed operating cost Annual, 25 years, % % 0.53 14 0.41 11 0.87 24 0.74 20 37 1.81 39 1.37 26 1.18 22 1.00 NPC 2003 Active Projects in Resource Assessment Quantifying uncertainty in unconventional gas resource assessments in North America Estimating unconventional gas resources outside of North America USGS Applied Methodology for Undiscovered Resources in 2003 Uinta Piceance SAH97.165 Resource Assessment Methodology Identify areas within petroleum province that are ‘total petroleum systems’ Hydrocarbon source rocks Reservoir rocks Hydrocarbon traps Analyze ‘Assessment Area’ (Play) – About 700 in North America Boundary of assessment area USGS 2003 Classify Petroleum Systems as Conventional … USGS 2003 …or Continuous USGS 2003 Characteristics of ‘Conventional’ Accumulations Relatively high matrix permeability Obvious seals and traps High recovery factors Characteristics of ‘Continuous’ Accumulations Regional in extent Diffuse boundaries Low matrix permeabilities No obvious seals or traps No hydrocarbon/water contacts Abnormally close to source rocks Low recovery factors Includes tight sandstones, coalbed gas, oil and gas in fractured shale and chalk Some Don’t Accept USGS Model for Unconventional Resources Green River Uinta Piceance Shanley et al. (2004): Some low-permeability gas fields occur in poor-quality rocks in conventional traps SAH97.165 Production Decline Curves Used to Predict EUR 10,000 Production Rate, Bcf/month 1,000 Gas 100 Oil 10 1998 Year 2000 USGS 2003 EUR Distribution for Continuous Accumulation 100,000 10,000 EUR, MMcf or 1,000 bbl 1,000 100 0 0 50 Percent of Sample 100 USGS 2003 USGS Undiscovered Oil and Gas Estimates for Uinta-Piceance Province, Utah-Colorado Resource Type Oil, MMSTB Gas, Bscf Conventional P95 P50 Mean P5 7.15 18.47 20.39 40.44 Continuous P95 P50 Mean P5 31.99 37.57 38.78 56.84 P95 P50 Mean P5 P95 P50 Mean P5 63.71 191.12 213.12 436.01 12,145.49 20,121.27 21,211.03 33,978.81 Observations USGS Methodology yields probability distribution of undiscovered resource Virtually all undiscovered resource in USGS model ‘continuous’ gas Previous presentations simply most likely, high, low cases Validity of continuous model critical Range from P5 to P95 quite narrow Analysis indicates narrow, subjective input data North American and Non-NorthAmerican Basins Selected for Further Study North American basins studied will probably include frontier areas in Travis Peak and Barnett Shale Non-North-American basins will include Neuquen and Cuyo basins (Argentina) and Sichuan basin (China) Estimating Non-North American Unconventional Gas Resources Conventional Basin Analogs Conventional Known Known Known Unknown Unconventional NA Basin Unconventional International Basin Objectives and Challenges Objectives Develop methodology for identifying analogous basins Estimate potential resources in selected basins Challenges No public literature available General lack of data availability Large number of basins in North America Which parameter to use? What criteria? Data Collection Analog basin progress All NA basins: 60 - 70 basins NA basins with unconventional gas potential 31 basins Define criteria to find analog basins Include characteristics of international basins Build expert system to compare NA basins to international basins Final Analog Basins Build database of reservoir properties Analog score Data Analysis General basin information Source rock information Reservoir characteristics Point Calculation Nearness of match, not relative values Highest scores most likely analogs 1 × WF1 1 × WF2 1 × WF3 1 × WF4 1 × WF5 1 × WF6 Total Pts 1 × WF1 1 × WF1 0.1 × WF2 0.8 × WF2 0.1 × WF3 0.75 × WF3 0.7 × WF4 0.7 × WF4 0.8 × WF5 1 × WF5 1 × WF6 0 × WF6 Basin 1 Basin 2 Rank Result Sheet Summary Comments Unconventional resources, especially gas, to play leading role in North American energy supply in next 25 years 10 History Projections Lower 48 unconventional Lower 48 conventional— onshore L 48 C—offshore Lower 48-Associated 0 1990 Alaska 2030 EIA 2006 Summary Comments Unconventional resources also to play increasingly important role in world energy supply in coming decades Summary Comments Advances in technology key to developing potential of unconventional resources 32 With technology advancement Tcf With no technology advancement 22 0 2000 Year 2025 Summary Comments Ability to access resources better, quantify uncertainty important part of technology development Summary Comments USGS methodology for resource assessment good starting point Summary Comments Widespread applicability of continuous gas accumulation model questioned Summary Comments Final modified model to be applied in North America, other continents to identify broad potential, specific target areas Advances in Unconventional Resources Technology: Assessment Methodology John Lee Texas A&M University Fall 2005 UG Enrollment Class College Station Qatar Fish 99 10 Freshman 44 8 Sophomore 75 Junior 69 Senior 50 Total 337 18 Fall 2005 Graduate Enrollment Degree Distance Learning Total PhD 50 2 MS 93 2 ME 34 22 Non-Degree 14 14 Total 191 40 Need to Extend Practical Limits Through Technology Advances Three Resource-Assessment Categories Depicted Assessment area boundary Cells tested by drilling Areas of untested cells Untested cells with potential to add to reserves in next 30 years USGS 2003 Petroleum-Charged Cells Only ‘untested cells with potential’ contribute to resource-base additions Assessment of these cells proceeds on basis of geologic understanding and petroleum engineering principles What we are looking for is untested sweet spots Unconventional Gas Production Will Increase In Lower 48 States 10 History Projections Lower 48 NA unconventional Lower 48 NA unconventional—onshore Lower 48 NA unconventional—offshore Lower 48 AD Alaska 0 1990 2004 2030 EIA 2006 LNG Imports Will Become Increasingly Important 5 History Projections Overseas LNG Canada Mexico 0 -1 1990 2004 2030 EIA 2006 Gas Wellhead Prices Will Likely Stabilize 10 0 History 1990 Projections 2004 2030 EIA 2006 Rate of Technology Advance Will Influence Gas Prices 10 History Projections Slow technology Reference Rapid technology 0 1990 2004 2030 EIA 2006 Rate of Technology Advance Will Influence Gas Supply History 25 Projections Rapid technology Production Slow technology Reference Slow technology Net Imports 0 1990 Rapid technology Reference 2004 2030 EIA 2006 Gas Price Forecasts Cover Wide Range of Outcomes 10 History Projections High price Reference Low price 0 1990 2004 2030 EIA 2006 LNG Import Rate Will Depend on Prices 10 History Projections Low price Reference High price 0 1990 2004 2030 EIA 2006 Canadian Gas Will Augment US Supplies Non-Arctic Canada U.S. Lower 48 NPC 2003 Unconventional Gas Will Play Increasingly Important Role Unconventional Conventional Associated NPC 2003 Most Future Gas Supply Yet To Be Discovered Undiscovered unconventional Undiscovered conventional Proved Growth NPC 2003 Lower-48 Production Will Remain Broad-Based Eastern interior Rockies Gulf of Mexico Deepwater Shelf Gulf Coast Onshore Midcontinent Permian Basin NPC 2003 Unconventional Gas Production Will Increase in Canada Shale Coalbed methane Conventional NPC 2003 North American Gas Well Count Will Level Off U.S. Lower 48 Canada NPC 2003 Shale, CBM, Tight Gas Well Count Will Increase Shale Coalbed methane Tight Conventional Conventional NPC 2003 Shale, CBM Gas Well Count Will Climb in Canada Shale Conventional Coalbed methane NPC 2003 North American Reserves Will Dwindle Reserves-to-Production Ratio Gas Production Lower 48 Reserves Addition NPC 2003 Most Future Gas Undiscovered Growth 17% Proved 14% Undiscovered 69% NPC 2003 Unconventional Gas Reserves To Be Significant Nonconventional 28% Conventional 72% NPC 2003 Conventional Reserves Span Continent NPC 2003 Rockies Hold Most New Unconventional Gas NPC 2003 How Do Conventional and Unconventional Resources Differ? Conventional Unconventional Massive stimulation treatments Special recovery processes Leading-edge technologies Quantifying Uncertainty in Unconventional Gas Resources in North America Compile resource inventories and analyses Develop assessment methodology Recent, unanalyzed data on unconventional resources Assess resources Provide methodology to operators Well-developed, analyzed basins Oil and Gas Resources Occur in Vastly Different Settings USGS 2003