Regulatory Considerations for

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Regulatory Considerations for Unconventional
Resource Development Ron Stefik, AScT Resource
Conservation Branch April 17 2009
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Veteran of Government Service!
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Overview

• Horn River Regional Field Devonian shale gas
• the play
• Experimental Schemes
• OGC Development Order
• water disposal
• Heritage Regional Field Triassic Montney tight
  gas
• the play
• OGC Development Order (proposed)
• Unconventional Gas Regulatory Challenges

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Horn River Basin Simplified Cross-section
SouthEast
NorthWest
T 135 C (275 F) Pi 38 MPa (5500 psi)
T 175 C (347 F) Pi 50 MPa (7250 psi)
Bank edge
higher silica
more calcareous
Slave Point Carbonate
Muskwa/Otter Park Shale
100 m
Depth 2500 m TVD
k 250 nD
0 - 50 m
Middle Devonian Carbonate
Keg River/ Pine Point Carbonate
50 m
Klua/Evie Shale
Carbonate platform (wet)
TOC 5.7 OGIP gt 500 Tcf (including Cordova
Embayment)
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Horn River Basin
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Horn River Experimental Schemes

• Experimental Scheme approval allows
• evaluation of production techniques.
• methods that are untried and unproven in the
  particular
• application.
• OGC will introduce a detailed guide for making
  application.
• approval area limited in size to near-term
  activity.

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Horn River Experimental Schemes

• 3-year confidentiality for all well data,
• including production.
• annual Progress Reports submitted.
• a total of 64 Experimental approvals (many
  inactive)
• 21 Horn River formation -
• (Muskwa/Otter Park and/or Klua/Evie)
  shale.
• 8 Maxhamish Lake/Liard Basin area -
• Exshaw shale.

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Unconventional Gas Resource Development

• Premise
• Central pad locations - multiple horizontal
  wells.
• High well density.
• Reservoir quality variation is gradational over
  long distances.
• Significant core sampling.

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Horn River Basin Development Scheme Approval

• The OGC has worked with the industry Horn River
  Producers Group proposed order that covers
  multiple sub-surface issues.
• minimum data gathering requirements.
• area based on OGC field outline, updated
  quarterly.
• applies to wells with objective of Muskwa/Otter
  Park
• and/or Klua/Evie.
• normal Well Authorization application and
  approval
• process still applies.

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Horn River Basin Development Scheme Approval

• Drilling Samples
• 1st well on pad
• 5 m intervals from 50 m above shallowest
  reservoir,
• usually Debolt - vertical well to TD, or
• - horizontal well to
  KOP.
• 10 m intervals in build and horizontal section.
• Subsequent wells on a pad
• sampling required on one well in each
  stratigraphic unit,
• in each dominant direction.
• exempt from sampling above KOP.
• from KOP to TD at 10 m intervals.
• submit proposed program to OGC,
• contacted only if modification required.

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Horn River Basin Development Scheme Approval

• Logging
• 1st well on pad, full OH logs
• vertical well, to TD.
• horizontal well, to point of resistance ( 60
  degrees).
• neutron log to within 25 m of surface.
• horizontal well, gamma ray log to TD.
• Subsequent wells on a pad exempt, except for
• minimum of gamma ray log (MWD / OH / cased hole)
• from base of surface casing to TD.
• submit proposed program to OGC,
• contacted only if modification required.

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Horn River Basin Development Scheme Approval
Example pad minimum data requirements

• First well on pad
• samples 5 m intervals, 10 m in build hz
• full OH logs (point of resistance if hz)
• neutron to 25m from surface
• GR to TD

• All other wells on pad
• exempt from samples
• full GR logs
• (OH/cased/MWD)

• One well in opposite direction
• samples only below KOP
• full gamma log (OH/cased/MWD)

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Horn River Basin Development Scheme Approval

• Reservoir pressure tests
• Pi - minimum of 1 test per 4 km radius (measured
  from well head).
• Exempt from annual pool testing.
• Gas well deliverability tests
• Exempt from absolute open flow (AOF) potential
  testing.
• Gas analysis
• samples from minimum of 2 wells/pad, during
  initial production year.
• Note any additional tests or analyses require
• report submission.

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Horn River Basin Development Scheme Approval
Example pad minimum data requirements

• Initial reservoir pressure
• 1 test per 4 km radius, each formation

4 km

• Gas analysis
• 2 wells/pad, each formation

• Annual reservoir pressure
• all wells exempt

• AOF test
• all wells exempt

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Horn River Basin Development Scheme Approval

• Production
• Muskwa/Otter Park Klua/Evie formations may be
  commingled.
• written notification to OGC
• intervals (separate UWIs for each formation).
• production allocation factors (may base on h
  value).
• BC-11 form for each UWI, when commence
  production.

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Horn River Basin Development Scheme Approval

• Good Engineering Practice (GEP)
• As development expands beyond Experimental
  Schemes,
• operators are expected to apply for GEP
  approvals.
• removes well spacing and target area
  restrictions for
• a specific area.
• streamlined application requirements -
  ownership or
• consent from registered owner of petroleum
  and
• natural gas rights essential.
• gas target buffer distance of 100 m (normal is
  250 m).
• notice of application posted OGC website for
  3-week period,
• allow possible objections to be filed.

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Horn River Field Water Disposal

• Application required for Produced Water Disposal
  to an
• underground formation.
• Normally for by-product salt water disposal
  (SWD).
• Approvals issued under Section 94 of the
  Drilling and Production
• Regulation include by definition produced
  water or recovered
• fluids from a well completion or workover.
• Slick water fracs, significant volumes of
  flow-back water.
• OGC encourages re-use of this water where
  possible.

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Horn River Field - Water
water disposal ( source?) well
production well
Current water source surface lakes
ground level
Fresh water lt1,000 PPM TDS
Possible Quaternary gravel channel sources?
Debolt formation (water saturated)
400 m depth
20,000 PPM TDS
Deep formation water 30,000 100,000 PPM
TDS (seawater 35,000 PPM)
Horn River shale
2500 m depth
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Horn River Field Water Disposal

• Application required for initial injection test,
  OGC guideline.
• Conditional Injection Test approval (if zone
  favourable)
• specify test injection volume.
• production test, verify no hydrocarbon
  potential.
• OGC posts public notice (web site) to begin
  objection period.
• if injection test successful, and 3 week
  objection
• period concluded without valid concern, final
  approval.

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Heritage Regional Field Montney A Simplified
Cross-section
West (Groundbirch)
East (Swan Lake)
36 miles
Doig ss Doig Phosphate shale
(variable presence and prouctivequality)
increasing pressure gradient to west
Pi 21 MPa
Pi 38 MPa
130 m
Upper Montney
Avg Depth 2400 m TVD
generally poorer quality to west
fine silt / shale
fine sand / silt
(overpressured)
170m
Lower Montney
Belloy carbonate
OGIP 87 Tcf ( 250 Tcf in fairway?)
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Heritage Montney A
875 miles2 OGIP 87 Tcf
Good Engineering Practice (GEP) approvals. - No
inter-well spacing or horizontal drilling
restrictions.
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Heritage Montney Production
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Heritage Montney Development Scheme Approval

• OGC has drafted an area based order, similar to
  Horn River sub-surface issues.
• minimum data gathering requirements.
• defined area Heritage regional field, updated
  quarterly.
• wells with objective of, or completion within,
  Triassic
• Montney formation.
• normal Well Authorization application and
  approval process
• still applies.

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Heritage Montney Development Scheme Approval
Sneak Preview
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Heritage Montney Development Scheme Approval

• Drilling Samples
• 1st well on pad
• 5 m intervals from 50 m above shallowest
• anticipated reservoir - vertical well to TD, or
• - horizontal
  well to KOP.
• 10 m intervals in build and horizontal section.
• Subsequent wells on a pad
• sampling required on one well in each
  stratigraphic unit,
• in each dominant direction.
• exempt from sampling above KOP.
• below KOP at 10 m intervals.
• submit proposed program to OGC,
• contacted only if modification required.

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Heritage Montney Development Scheme Approval

• Logging
• 1st well on pad, full OH logs
• vertical well, to TD.
• horizontal well, to point of resistance ( 60
  degrees).
• this may be waived where adequate logged
  wells
• within 250 m!
• neutron log to within 25 m of surface.
• horizontal well, gamma ray log to TD.
• Subsequent wells on a pad exempt, except for
• minimum of gamma ray log (MWD / OH / cased hole)
• from base of surface casing to TD.
• submit proposed program to OGC,
• contacted only if modification required.

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Heritage Montney Development Scheme Approval

• Reservoir pressure tests
• Pi - minimum of 1 test per 4 km radius (measured
  from well head).
• Exempt from annual pool testing.
• Gas well deliverability tests
• Exempt from absolute open flow (AOF) potential
  testing.
• Gas analysis
• sample from minimum of 2 wells/pad, during
  initial production year.
• Note any additional tests or analyses performed
  
• require report submission.

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Heritage Montney Development Scheme Approval

• Production
• Montney is treated as a single formation for the
  purpose
• of production reporting.
• commingling approval/notification not required
• for Upper/Middle/Lower Montney zones.
• not separate UWIs for each completion event.
• single BC-11 form when commence production.

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Heritage Montney Development Scheme Approval

• Good Engineering Practice (GEP)
• Numerous GEP approvals have been granted,
• to multiple operators.
• removes well spacing and target area
  restrictions for
• a specific area.
• streamlined application requirements -
  ownership or
• consent from registered owner of petroleum
  and
• natural gas rights essential.

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Heritage Montney Development Scheme Approval

• Good Engineering Practice (GEP)
• gas target buffer distance of 150 m (normal is
  250 m).
• buffer distance may be reduced lt 150 m where
• consent from off-setting rights owners
  submitted.
• where GEP has not yet been approved, 150 m
• target area buffer applies to individual gas
• spacing areas.
• Notice of application posted OGC website for
  3-week
• period, to allow possible objections to be
  filed.

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Regulatory Challenges Optimal Well Spacing

• Impact of well spacing and sequence of
  stimulation/production on ultimate recovery.
• Ideal distance (lateral and vertical) between
  horizontal
• well bores for drainage?
• In-fill drilling and stimulation possible if
  intersect fractures
• from off-setting producing well?
• Regulator to require specific density and
• order of operations?

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Regulatory Challenges Acid Gas Disposal

• Horn River gas C02 10
• Montney gas H2S 0.0 - 0.3
  
• Large production volumes large disposal
  requirements!
• Acid gas disposal wells
• Heritage Montney gt Belloy aquifer
• 1 approved
• max rate of 62 103m3/d.
• observation well required.
• 2 other applications received.
• Horn River gt Devonian aquifer?

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Regulatory Challenges - Trespass

• Fracture stimulation consideration?
• Regulation currently addresses horizontal
  trespass of
• a wellbore (spacing areas).
• Large frac treatments, possible to connect to
  formations
• above or below title interest.
• Regulator to limit horizontal well placement?
• X meters from top or base of zone?
• formula limiting frac size, based on distance
  from
• top or base of zone?
• Off-target production penalty formula is based
  on
• interpretation of pay section.
• In unconventional gas, what is pay?

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Regulatory Challenges Microseismic Data

• Seismic data, or enhanced completion data?
• Not seismic data/reports for land tenure
  purposes.
• If completion data,
• must submit to regulator,
• released 3 months to 3 years from rig release
• date, depending on well classification.
• File data with the well being observed/fraced,
• not the well in which signals are received.

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Summary

• Two proposed Development Approvals for
  unconventional resources
• capture the right amount of data for
• evaluation and development
• streamlining for industry and the regulator
• challenges/opportunities remain

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