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Scope of Tight Gas Reservoir In Pakistan By, Salah Heikal (Eni Pakistan) Islamabad November - 2008
Scope of Tight Gas ReservoirIn Pakistan
By, Salah Heikal (Eni Pakistan)
Islamabad
November - 2008
Agenda
Definition of Tight Gas Reservoir
Required Technology to Develop TGR
Tight Gas in Pakistan
Tight Gas USA Experience
2Eni Pakistan Limited
Conceptual Development of TGR in Pakistan
Economic Modeling of TGR
Conclusion
Definition of Tight Gas Reservoir
i. Reservoir is designated as tight if:
1. The effective permeability is less than 1 md and generally the un-
stimulated gas flow rates is less than 1.0 mmscfd
ii. In the TGR’s, there are lots of uncertainty regarding:
1. Irreducible water saturation and the connate gas saturation,
2. Overburden correction factor that has a big impact on the low
3Eni Pakistan Limited
2. Overburden correction factor that has a big impact on the low
permeability range value
3. Net pay of the formation
4. Presence or absence of natural fractures
Required Technology for TGR Development
i. Wells productivity pre-stimulation is less than 1.0 MMscf/d.
ii. To improve the wells productivity, stimulation technique should be applied
1. hydraulic fracture, (there are some examples in Pakistan)
2. multi-fractured horizontal wellbore (No application to date in Pakistan)
3. multi-lateral wellbores, (No application to date in Pakistan)
4Eni Pakistan Limited
Vertical WellHydraulic fracture
Horizontal WellMulti fractured
Multi Lateral Well
Tight Gas in Middle Indus Pakistan
5Eni Pakistan Limited
Block No. of Prospects Reservoir GIIP(bcf)
8 11 7 7,400
With the courtesy of Eni, OMV
Tight Gas in Sulaiman FB of Pakistan
6Eni Pakistan Limited
Block No. of Prospects Reservoir GIIP(bcf)
9 14 3 19,000
With the courtesy of Eni, OGDCL
Tight Gas in Kirthar FB of Pakistan
7Eni Pakistan Limited
Block No. of Prospects Reservoir GIIP(bcf)
7 8 2 7,300
With the courtesy of Eni, OGDCL
Total Known Tight Gas in Pakistan
8Eni Pakistan Limited
Block No. of Prospects Reservoir GIIP (bcf)
19 26 8 33,700
With the courtesy of Eni, OGDCL, OMV
Tight Gas in other parts of Pakistan ?
Potwar
9Eni Pakistan Limited
L- Indus Basin
Offshore
US Gas Resources and Tight Gas Production
Technical Recoverable U.S. Natural GasResources as of Jan. 1, 2000. The largestcategory is unconventional resources with370 Tcf, with most of that from TightSandstone at 69 %.
Res
ou
rce
10Eni Pakistan Limited
EIA: Energy Information AdministrationNPC: National Petroleum Council
Annual Natural Gas production in the UnitedStates since 1949, showing the majorcomponents of the natural gas productioncurve (Sources: EIA from 1949-1990 andNPC from 1991-2015).P
rod
uct
ion
US Gas Production in 2000 Vs 2004
U.S Unconventional Gas Production,2000-2004
U.S Natural Gas Production,2000-2004
40%US production
11Eni Pakistan Limited
Advanced Resources International, Inc
Unconventional Gas accounts, in 2004, 40% of the U.S. Natural Gas Production. Allthree unconventional gas resources have experienced increased production.
Unconventional Gas Resources in US (Case Histories)
12Eni Pakistan Limited
Tight Gas Sands Development– How to Dramatically Improve Recovery Efficiency, by Vello A. Kuuskraa, Advanced Resources International, Inc. and James Ammer, NETLWinter 2004 • GasTIPS
Evaluation of well completion practices, Jonah Field, Great Green River Basin(GGRB) is the dominant natural gas-producing basin in the Rocky Mountains (Colorado).
i. Pilot well have been selected to determine the expected production profile from tight gas
reservoir in Pakistan using 3D numerical simulator.
i. Well will be tied into existing facility
ii. Well can’t produce without hydraulic fracturing
iii. Expected Fracture parameters
i. Half length, xf=164 ft , Height ~ 118 ft
ii. Fracture conductivity, 2417 mD.ft , Fracture width, w= 0.15 in
iv. Initial gas rate after the hydraulic fracturing is around 2 mmscf/d
Tight Gas Reservoir (Pilot Well) Production
13Eni Pakistan Limited
v. Well decline from 2 to 1 MMscf/d in the initial 8 years.
vi. Estimated Well cumulative sales gas is ~ 6 bcf.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10 Y-11 Y-12 Y-13 Y-14 Y-15 Y-16
Dai
ly S
ales
Gas
(M
Msc
fd)
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Cu
mm
Sal
es G
as (
MM
scf)
Avg. Daily Sales Cum_Sales
Conceptual development for a Tight Gas Reservoir:
i. Pilot well production profile is the base of total field (Initial rate is 2 MMscf/d and cum
production is ~ 6 BCF / Well)
ii. No of wells Estimated to produce around 300 bcf (50 Wells with hydraulic fracture)
iii. 10 Wells will be drilled every year.
iv. 1st gas after 1 year from approved FDP
v. Duration of the field production is 20 years.
Tight Gas Sand Conceptual Development 1/2
80 400,000
14Eni Pakistan Limited
0
10
20
30
40
50
60
70
80
Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10 Y-11 Y-12 Y-13 Y-14 Y-15 Y-16 Y-17 Y-18 Y-19 Y-20
Dai
ly S
ales
Gas
(M
Msc
fd)
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Cu
mm
Sal
es G
as (
MM
scf)
Avg. Daily Sales Cum_Sales
i. Wells will be tied into an existing facility.ii. 50 wells with hydraulic fracture stimulation are required to produce ~ 300 Bcf in 20 years.iii. Well Drilling, completion and fracturing estimated cost is 13 M$/Welliv. Tie-in cost is 3 M$/Well and abandonment cost is 1 M$/Wellv. Cost will be escalated 5% every year.vi. OPEX is estimated at 3.5$/BOE
i. Total CAPEX ~ 884 M$
Tight Gas Sand Conceptual Development 2/2
No of Wells OPEX
Year MMscf/d MMscf/d MMscf Drilling Facilities KUS$Y-1 10 - 130,000 30,000 - Y-2 10 20 18 6,574 136,500 31,500 4,007 Y-3 10 38 34 12,424 143,325 33,075 7,573
ProductionWH Sales ANNUAL Sales Capex (KUS$)
15Eni Pakistan Limited
i. Total CAPEX ~ 884 M$
ii. Total OPEX ~ 183 M$
iii. Potential CAPEX Saving:
i. Multi-lateral drilling
ii. Clustered drilling
10 38 34 12,424 143,325 33,075 7,573 Y-4 10 54 49 17,748 150,491 34,729 10,818 Y-5 10 69 62 22,540 158,016 36,465 13,739 Y-6 82 74 26,948 16,426 Y-7 75 67 24,562 14,972 Y-8 69 62 22,690 13,831 Y-9 64 58 21,146 12,889 Y-10 61 55 19,945 12,157 Y-11 58 52 18,947 11,549 Y-12 55 49 18,000 10,972 Y-13 52 47 17,100 10,423 Y-14 49 44 16,245 9,902 Y-15 47 42 15,433 9,407 Y-16 43 39 14,158 8,630 Y-17 33 30 10,918 6,655 Y-18 24 21 7,839 4,778 Y-19 15 13 4,915 2,996 Y-20 7 6 2,136 1,302 Y-21 0 0 - - Total 50 300,267 718,332 165,769 183,026
TGR Conceptual Development Project, Economic Evaluation Using 2008 Draft Policy and Pricing (Zone-3)
Total CAPEX (MUS $) 884
Total OPEX (MUS $) 183
No. of Wells 50
Total Cost per well 17.7
Project NPV (MUS$) - 410
PV Government Take (MUS$) 62
Project IRR - 6.33 %
Reserves (BCF) 300
16Eni Pakistan Limited
Reserves (BCF) 300
Total Cost ($/boe) @ 12.5 % Discount Rate $ 14.21
CAPEX $/boe @ 12.5 % Discount Rate $ 12.71
OPEX $/boe @ 12.5 % Discount Rate $ 1.5
The Project is not economic
To make it Economic other policy/pricing scenario is required
TGR Conceptual Development Project, Economic EvaluationAssumed Economic Model
• Type of Contract: Petroleum Concessions Agreement
• Location: On-shore fields.
• Sliding Scale taxation system based on Annual R-Factors
• No production bonuses
• Zonal Index used : 75%
• Pricing Mechanism: Improved gas pricing with higher Reference
17Eni Pakistan Limited
• Pricing Mechanism: Improved gas pricing with higher Reference Crude Price slabs
• Discount Rate: 13%
• Price Floor set at 42 $ / boe
• Evaluation Year : 2009 (Year 1)
Assumption for TGR Gas Pricing
Zonal Index = 75 %
Applicable Marker Price (Pm) Increment
Price Floor: For RCP < = 56; Marker Price = 56 $/bbl
56 RCP < = 60 100%
60 < RCP < = 75 50%
75 < RCP < = 100 25%
100 < RCP < = 150 15%
18Eni Pakistan Limited
Pg = Pm * 0.75 / Cf
Where Pg is the Gas Price in USD per MMBTUPm is the Applicable Marker Price in USD per barrel determined as follows:
• Price Floor set at RCP 56 $/bbl which gives a gas price of $42 / boe • When RCP is between USD 56/barrel and USD 60/barrel, Pm equals RCP;• When RCP is higher than USD 60/barrel and not over USD 75/barrel, Pm equals 60 plus 50% of the incremental RCP above USD 60/barrel;• When RCP is higher than USD 75/barrel and not over USD 100/barrel, Pm equals 67.5 plus 25 % of the incremental RCP above USD 75 /barrel;• When RCP is higher than USD 100 /barrel and not over USD 150 /barrel, Pm equals 73.25 plus 15 % of the incremental RCP above USD 100 /barrel;.
Cf = Conversion Factor from $/boe to $/mmbtu set at 5.6
Reference Crude Price Vs. Gas Price
Calculation of Gas Prices using the proposed pricing mechanism
Gas Price Vs. Reference Crude Price
6789
1011
Ga
s P
ric
e (
$/m
mb
tu)
19Eni Pakistan Limited
-123456
10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100
105110
115120
125130
135140
145150
Reference Crude Price ($/bbl)
Ga
s P
ric
e (
$/m
mb
tu)
Gas Price
Model Price Comparison with Gas and Reference Crude Price
• Current Gas Price as per Draft 2008 policy
• Evaluated commercial Gas Price for this model
• Reference crude price: Low Sulphur Light Crude Oil Price Forecast 2006 – 2030 provided by EIA
Fuel Price Comparison
6065707580
Fu
el
Pri
ce
($
/mb
oe
)
20Eni Pakistan Limited
15202530354045505560
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Year
Fu
el
Pri
ce
($
/mb
oe
)
Proposed Gas Price Crude Price 2008 (Draft) Gas Price
Tax and Royalty Assumptions
R- Factor = Cumulative Earnings / Cumulative Costs
• Tax Rate applied according to the slabs provided below:
R factor Tax Rate
- < R < = 1.50 0%
1.50 < R < = 2.00 15%
21Eni Pakistan Limited
• Royalty Rate applied:
Royalty Rate = 12.5 % of Gross Revenues from the commencement of production
1.50 < R < = 2.00 15%
2.00 < R < = 2.50 30%
R > 2.50 40%
Annual R-Factor
Annual R- Factors
1,000
1,500
2,000
2,500
MU
S $
1.0
1.5
2.0
2.5
Rat
io
22Eni Pakistan Limited
-
500
1,000
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Year
MU
S $
0.0
0.5
1.0
Cumulative Earnings Cumulative Costs R Factor
TGR Conceptial Development Project, Scenario Summary
Using proposed economic model
Total CAPEX (MUS $) 884
Total OPEX (MUS $) 183
No. of Wells 50
Total Cost per well 17.7
Project NPV (MUS$) 46
23Eni Pakistan Limited
Project NPV (MUS$) 46
*NPV Government Take (MUS$) 141
Project IRR 15 %
Reserves (BCF) 300
Total Cost ($/boe) @ 13 % Discount Rate $ 13.45
CAPEX $/boe @ 13 % Discount Rate $ 12.18
OPEX $/boe @ 13 % Discount Rate $ 1.26
* Additional benefit to Government is the reduction in furnace oil consumption not incorporated.
TGR Development Project, NPV Sensitivities
NPV sensitivities by changing Price and CAPEX
NPV Sensitivities
46.2
118.0
187.9166.8
106.9
46.250
100
150
200
MU
S $
24Eni Pakistan Limited
(27.3)
46.246.2
(15.3)
(77.3)
(99.9)
-150
-100
-50
0
50
-20% -10% 0% 10% 20%
Percentage Change
MU
S $
Price Change CAPEX Change
Conclusion
More than 33 TCF (~ 5,700 MMboe) Gas Initial In Place distributed in
different areas of Pakistan, while large area still unknown.
Tight Gas Reservoirs producing in other part of the world.
Tight Gas Reservoir in Pakistan could commercially produce provided
the availability of:
25Eni Pakistan Limited
the availability of:
Required technology at competitive price
Suitable fiscal terms including but not limited to:
i. Improved pricing mechanism
ii. R-Factor based taxation
iii. Minimum price floor
iv. Elimination of production bonuses
Questions/RemarksOpen Discussion
26Eni Pakistan Limited
Open Discussion
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