Unconventional Natural Gas Development

Robert Fisher, PG

April 16, 2013

Discussion TopicsUnconventional GasBarnett Shale/EconomicsExample PlaysHow Fracking WorksProduction of Natural GasIssues and Concerns

What is “Unconventional Gas”?Definition: Natural gas reserves that are more difficult or

less economical to extract than conventional reserves

Types todayDeep Natural Gas (>15,000 feet deep)Shale Gas (and associated

condensate/crude)Tight GasCoal Bed MethaneMethane Hydrates

Why is Unconventional Gas Development so important?US & global reserves are hugeEnergy will come largely from fossil fuels for the rest of our lifetimesDepressed natural gas prices ($3/Mcf) are currently boosting the economy.

US Unconventional Shale Gas Development

750+ trillion cf of gas Annual US demand = 23 tcf

20+ billion boe (crude) Annual US demand = 7.3 bboe

46% of US gas by 203520 known shale plays in US

Marcellus Bakken Barnett Eagle Ford

Unique Features of Unconventional Oil & Gas DevelopmentUses new techniques (including horizontal drilling) to access oil & gas reserves in “tight” formations

Requires a significant volume of water for hydraulic fracturing during well development to release the oil and/or gas

Requires treatment of returned frac water prior to reuse or disposal (similar to produced water)

Often occurs in areas that never experienced oil & gas development in the past, leading to new challenges

Barnett Shale First Barnett well drilled in 1981 Mitchell Energy pioneered development techniques in Barnett Major development began in 2003 with horizontal drilling

combined with hydraulic fracturing Numerous wells in urban areas of DFW Metroplex including DFW

Airport

Barnett ShaleProduction from Barnett Shale in 13 North Texas CountiesCurrent drilling activity is about 1/3 of the peak rig count in 2008

(approximately 50 active rigs)

Barnett Shale Statistics

Average reserves: ~25 Mcf/acre Average lifetime of each well: 7.5 years (some lasting 15 years) Drilling depths: up to 6,000 feet Horizontal drilling lengths: 1 to 2 miles Completion costs: $2MM to $3MM per well Well yields: 1 to 2Mcf/day (highest recorded yield – 17Mcf/day over 30 day

period) Average lifetime well yield: 0.84Bcf

Opportunity for Mineral Rights Holders Sign-on bonuses and royalty payments $2,500 to $3,000 per acre, with possibilities up to $5000 to $7000/acre

(Note: historic highs were $25,000/acre in 2007 or so) Royalty rates are 20 to 25% Access to off-property gas development Develop your own gas resources

DFW Example

Hydraulic Fracturing “Fracking” - Hydraulic fracturing of a subsurface geologic unit by high-

pressure water, proppant (sand), and chemicals to improve permeability in the shale, tight sand, or other formation that hold gas or oil

Hydraulic Fracturing

Fracking has been used in oil and gas wells since the 1940s

Fracking combined with horizontal drilling began in the 1980s

Hydraulic Fracturing

•Typically deep: 4,000 to 9,000 feet.

•Usually well below production aquifers.

Fracking Fluid CompositionChemical Additives,

0.5%Dilute acidsSodium chloridePolyacrylamideEthylene glycolBorate saltsSodium/

potassium carbonate

GlutaraldehydeGuar gumCitric acidIsopropanol

Sand; 9.5%

Water; 90.0%

Why Fracking Fluids Contain these Chemical Additives

Hydraulic Fracturing Layout

Hydraulic Fracturing

Production of Unconventional Gas

Same for either gas type:

Well Heads Separators Condensate Tanks Produced Water tanks Compressors Gas Metering Gathering Lines

Nearly identical to production of conventional gas once fracking is completed• Primary difference is

fracking fluid flowback early in well’s life with unconventional gas

Main Issues of Concern

Special ChallengesAir permitting/impactsNuisance concerns

(light, noise, dust, etc.)Water withdrawalGroundwater protectionWater disposalWaste disposalPipelines, compressor

stations & storageHabitat and endangered

species protectionDaily

people/equipment/truck ingress/egress

The Future• 750+ trillion cubic feet (tcf)

• 23 tcf annual US demand

• 46% of US gas production by 2035

• 20 known shale plays in the US

- Marcellus

- Bakken

- Barnett

- Eagle Ford