JIP TO IMPROVE EAGLE FORD HYDRAULIC FRACTURING TECHNOLOGY

Transcription

1 JIP TO IMPROVE EAGLE FORD HYDRAULIC FRACTURING TECHNOLOGY SUBMITTED TO: Oil Operators Service Companies Drilling Contractors National Oil Companies DR. WILLIAM MAURER MAURER ENGINEERING INC AUSTIN, TX MAY 9, 2011 TP11-1 1

2 TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY.3 PROJECT DESCRIPTON PROJECT GOALS BENEFITS OF IMPROVED FRACTURE DESIGNS.13 FRACTURING ISSUES BENEFITS TO PARTICIPANTS CANDIDATE PARTICIPANTS 16 PROJECT PROPOSAL WORK STATEMENT WORK STATEMENT SLIDES TIME SCHEDULE...43 BUDGET...44 APPENDIX 1 MAURER ENGINEERING QUALIFICATIONS..45 REFERENCES

3 EXECUTIVE SUMMARY EAGLE FORD FRACTURING The Eagle Ford shale has nanodarcy permeability and therefore a large surface area of the shale must be opened up with massive hydraulic fracturing to produce oil and gas economically. These massive fracs are very expensive, costing from $3 to $5 million each since typically four million gallons of water and five million pounds of proppants required in addition to up to 40,000 horsepower of high pressure pumping equipment. Since the Eagle Ford is a new field operators and fracing companies are on the steep slope of the learning curve and major improvements will be made in the next five years that will greatly increase fracturing efficiency and significantly reduce fracing costs. One problem is that there is very little technical interchange between the operators and therefore fracturing technology in the EF is not advancing as fast as it should. This JIP will provide a forum for EF operators to work together and exchange technical information and conduct experiments in their EF wells so that EF fracing technology can advance at a much faster rate for the benefit of all JIP Participants. On April 25, Chesapeake announced that it had a blowout on Pennsylvania shale well due to a wellhead failure where thousands of gallons of frac fluid polluted farmland and a stream. As a result Chesapeake suspended fracing on seven wells. 3

4 This type of failure is detrimental to all operators and can lead to regulations against fracturing since the anti-fracing environmentalists are very strong in that area. One goal of the JIP is to bring all operators up to a high technical level so that these types of failures can be eliminated. Goodrich announced in February, 2011 that EF fracing costs are increasing rapidly due to shortages of sand and gel. One goal of this project is to develop EF fracs that will use fewer materials and less pump horsepower to significantly reduce fracing cost. In November, 2010, Petrohawk Energy announced that it had developed a new fracing techniques that reduced its fracing costs in the Haynesville shale by $1 million per well. Petrohawk is a major player in the Eagle Ford and will be apply new fracturing technology there also. Based on Petrohawk's success and having all JIP Participants work together we are confident that the JIP can reduce the cost of most Eagle Ford wells by $1 to $1.5 million each. APPROACH The approach will be to provide a forum for EF operators to work together and exchange technical information and generate ideas on how to improve EF fracing through technical meetings, forums, frac schools and online chat rooms. The Participants will then conduct experiments in their EF wells in a coordinated way to provide a much bigger data base than any one company can generate on its own, partly because the Participants will be drilling in a wide diversity of areas in the Eagle Ford field. This technique should allow rapid development and implementation of new fracing technology, just as the successful Maurer Engineering DEA 44 project did in the with horizontal drilling. 4

5 Limitations of EF Hydraulic Fracturing The major limitations to EF hydraulic fracturing are 1. High frac costs - $3 to $5 million each 2. Large amount of frac materials (4 million gallons water & 5 million pounds of proppants) 3. Large amount of pump horsepower (30,000 to 40,000 horsepower) 4. Near wellbore flow restrictions that reduce flow rates by up to 50 percent 5. Degradation of fracture conductivity on all wells due to plugging 6. High decline rates 7. Damage to fracs due to gel 8. Improper placement of proppants in fracture 9. Screenouts and flowback problems 10. Difficulty in initiating fracs in with cemented casing 11. Downhole equipment failures BENEFITS OF IMPROVED EF HYDRAULIC FRACTURES 1. Reduce frac costs by $1 to $1.5 million 2. Increase flow rates and EUR by 20 to 40 percent 3. Reduce costly frac failures like blowouts and loss of wells 4. Reduce environmental and regulatory problems 5. Create good public relations with 6. Improved technology applicable to other shale fields 7. Will help non USA operators develop their indigenous shale fields PROJECT MANAGEMENT The JIP will be run by Maurer Engineering Inc in Austin, Texas and will be managed by Dr. William Maurer CEO who has extensive experience in managing JIPs including the successful DEA 44 project which had over 100 Participants and was instrumental in implementing horizontal drilling worldwide in the 1980 s. 5

6 PHASE I PROJECT PLAN with EF fracing: TASK This Phase I project will consist of the following 29 tasks which tackle all of the major problems MONTHS FROM START 1 EF HORIZONTAL DRILLING TECHNIQUES EF COMPLETION TECHNIQUES EF HYDRAULIC FRACING TECHNIQUES ANALYZE EF FIELD FRAC DATA ANALYZE EF PRODUCTION DATA OPEN-HOLE AND CEMENTED CASING FRACS EF WELL PRODUCTITVITY VS NUMBER FRAC STAGES EF SCREENOUTS AND FLOWBACK HOLD HYDRAULIC FRACTURING SCHOOL PARTICIPANT EF FIELD TESTS IMPROVE EF FRAC DESIGNS IMPROVE EF FRAC PROCEDURES WELLBORE CONNECTIVITY PROBLEMS FRACTURE CONDUCTIVITY PROBLEMS EF SURFACE FRAC EQUIPMENT EF DOWNHOLE FRAC EQUIPMENT EF FRAC INTRUMENTATION EF FRAC PROPPANTS EF FRAC FLUIDS EF RESERVOIR CHARACTERIZATION EF FRAC INITIATION AND PROPAGATION EF ACIDIZING TECHNIQUES EF WATER RECLAIMATION AND DISPOSAL EVALUATE EF REFRACTURING POTENTIAL MICROSEISMIC FRACTURE ANALYSIS EF TECHNICAL CHAT ROOM HOLD MEETINGS WRITE REPORTS

7 COST AND DURATION The cost for this 12 month Phase I project is $1 million. The Participation fee is $200,000 per company. The projected initiation date is August 1, Once this system is commercialized, Participants will receive a 20 percent discount on this system until they receive back double their $200,000 Phase I fee. PHASE I BUDGET JIP BUDGET NUMBER OF PARTICIPANTS PROJECT DURATION MONTHS MAURER ENGINEERING MANAGEMENT 200, , , ENGINEERING SECRETARIAL 35,000 40,000 60, OVERHEAD 25,000 30,000 60, SUBTOTAL 340, , , THIRD PARTY COSTS 0 CONSULTANTS 700, ,000 1,400, FIELD OPERATIONS FRAC SIMULATIONS 20,000 30,000 40, FRAC SCHOOL 20,000 25,000 30, TRAVEL MEETINGS REPORTS MISCELLANEOUS SUBTOTAL 875,000 1,200,000 1,800, TOTAL 1,215,000 1,600,000 2,400, TRAVEL COSTS - COST PLUS 15 PERCENT THE SCOPE AND DURATION OF THE JIP WILL BE INCREASED AS ADDITIONAL PARTICIPANTS JOIN The project will be initiated when the funding level reaches $1.2 million (6 Participants) at a reduced level and at a full scale level with eight Participants ($1.6 million). As more than Participants join the JIP, the amount of work done on the initial 29 tasks will be increased and new tasks added with the majority approval of the Participants. 7

8 With twelve Participants ($2.4 million), the project duration will be increased to twelve months and with twenty Participants it will be extended to 24 months. Detailed project reports will be written at the end of twelve months and at the end of the JIP if longer than twelve months. CONSULTANTS Most of the technical work on this JIP will be conducted by world class fracturing consultants including: DR HARRY MCLEOD SPE LEGEND OF PRODUCTION AND OPERATIONS DR RANDY CRAWFORD SPE LEGEND OF PRODUCTON AND OPERATIONS DR MICHAEL PRATS LEGEND OF HYDRAULIC FRACTURING JACQUES L. (JACK) ELBEL LEGEND OF HYDRAULIC FRACTURING DR WILLIAM MAURER SPE LEGEND OF DRILLING CECIL PARKER HYDRAULIC FRACTURING CONSULANT DR CHING YEW UN OF TEXAS HALLIBURTON PROF OF ENGINEERING MECHANICS DR WILLIAM MCDONALD PHD PHYSICIST AND PETROLEUM CONSULTANT Benefits to Participants The JIP will allow Participants to work with other EF operators to exchange technical information, obtain data from their wells, work together to improve well performance and reduce fracing costs and to improve their well economics. CANDIDATE PARTICIPANTS EAGLE FORD OPERATORS: ANADARKO PETROLEUM CRIMSON EXPLORATION HESS RELIANCE PETROLEUM DEVELOPMENT APACHE CORP DEVON (BARNETT) HILCORP ROSETTA RESOURCES RAM RESOURCES BHP BILLITON LEWIS PETRO (FAYETTE) E V ENERGY PARTNERS PROPERTIES SHARON ENERGY RANGE RESOURCES BP EL PASO MARATHON OIL ROYAL DUTCH SHELL WILLIAM COMPANY CABOT O&G ENCANA (BARNETT) MURPHY OIL SM ENERGY NEWFIELD CARRIZO O&G EOG RESOURCES EXPLORATION ST MARY LAND & EXPLORAT CHESAPEAKE ENERGY EXXON - XTO OCCIDENTAL SWIFT ENERGY CNOOC (CHINA) FOREST OIL PENN VIRGINIA TALISMAN ENERGY COMPANY GASTOR EXPLORATION PETROHAWK TXCO RESOURCES COMSTOCK RESOURCES GEO RESOURCES PIONEER RESOURCES DENBURY RESOURCES CONOCOPHILLIPS GOODRICH PETROLEUM PLAINS E&P PARALLEL RESOURCES 8

9 OILFIELD SERVICE COMPANIES 1. BAKER HUGHES 2. CNOOC 3. HALLIBURTON 4. PACKERS PLUS 5. PETROFRAC 6. SCHLUMBERGER 7. WEATHERFORD NON USA OIL COMPANIES Non USA oil companies buying shale acreage in the USA or developing their own shale resources are prime candidates for this JIP since most of horizontal well technology in the EF field applies equally well in other shale fields around the world. GOVERNMENT AGENCIES Government agencies worldwide can benefit from belonging to this JIP since it will allow them to better develop and manage their indigenous shale resources and ensure that this is done economically and in an environmentally safe manner. SMALL OPERATORS AND SERVICE COMPANIES The JIP will benefit small operators and small service companies because it will allow them to interface with larger JIP Participants and help put them on an equal technical level with the large companies. Several large operators interested in joining the JIP have expressed interest in working with smaller service companies because they would be more amenable to testing new fracturing technology. NATIONAL OIL COMPANIES Most of the NOC countries have shale resources that can be developed. The JIP will provide technical information and training that will help them develop these resources. In addition, many of them will be developing shale resources outside of their countries and this JIP will provide fracing technology to them that will allow them to better interface and communicate with their foreign partners. CONTACT INFORMATION Dr. William Maurer Maurer Engineering Inc Indigo Broom Loop Austin, TX

10 1. PROJECT DESCRIPTION This Joint Industry Project (JIP) will focus on hydraulic fracturing in the Eagle Ford s field since operators are still on the steep part of the learning curve in this new field and frac costs range from $3 to $6 million. The cost of joining this 12 month JIP is $200,000 per Participant and the initial goal is to have eight Participants with a $1.6 million budget. If more than eight Participants join the JIP, the additional funds will be used to expand the scope of the JIP. The goals of this project are to increase production rates by 25 percent and reduce fracturing costs by 35 percent without reducing well productivity. These are high goals, but we believe they are achievable. Operators are doing an excellent job of reducing EF horizontal drilling costs because they have extensive in-house expertise on drilling. They are making much less progress on EF fracing costs because most of the fracturing technology resides with the service companies providing the fracing services. The goal of this JIP is to help Operators take a greater role in developing improved fracing techniques that will improve frac performance and significantly reduce fracing costs. These goals can be obtained by eliminating wellbore connectivity and other wellbore problems that hinder production rates and by using Intelligent instead of Brute Force frac designs to reduce the $3 to $6 million fracturing costs. Although the focus is on the Eagle Ford, most of the technology developed during this JIP is applicable to the other 20 or 30 shale fields in the USA and in shale fields around the world. This project contains 28 tasks focused on improving fracing technology with open hole and cemented casing and eliminating wellbore-to fracture connectivity problems that reduce production rates by up to 30 to 50 percent and contribute to the fast decline of EF shale wells. Participants will be encouraged to exchange technology and to jointly conduct field tests that will allow Participants to evaluate new fracing systems and implement the best systems into their operations. Participants will also be encouraged to test new fracturing technology in their EF wells and to make the results available to all JIP Participants so that the JIP can advance fracturing technology much faster than individual companies can do on their own. Technical meetings, frac schools, technical reports, and an internet chat room will allow good technical interchange between Participants so they can quickly implement new fracturing technology into their operations. 10

11 The payout from this JIP could be very large because the $200,000 Participation fee constitutes only seven percent of the cost of one $3 million Eagle Ford frac job. By combining the knowhow and test well data from 10 to 20 Participants, this JIP should have a major impact on shale well technology, just as Maurer Engineering s DEA 44 Horizontal Well Technology JIP did with horizontal drilling in the 1980s. A JIP legal agreement can be obtained from wcmaurer@aol.com 2. 11

12 The goals of this project are as follows: 2. PROJECT GOALS 1. Provide a forum where EF operators can work together to improve EF fracturing technology 2. Have Participants share well data to create large data base 3. Implement latest and best fracturing technology into the Eagle Ford field 4. Reduce EF fracturing costs by $1 to $1.5 million 5. Reduce drilling and completion costs 6. Improve EF well productivity by 20 to 30 percent 7. Reduce the amount of materials used on fracs 8. Eliminate near wellbore flow restrictions which reduce production rates by 30 to 50 percent 9. Reduce fracture degradation which occurs on all EF wells 10. Determine if cemented casing or open-hole fracs better 11. Determine the optimum number of EF frac stages 12. Learn how to better utilize and enhance natural fractures and microcracks 13. Better utilize microseismic analysis for real time control of hydraulic fracturing process 14. Improve frac designs 15. Improve fracing field operations 16. Utilize intelligent fracs instead of brute force fracs 17. Develop competitive frac bidding 18. Assist Participants in jointly testing new fracing concepts 19. Change EF emphasis from IP to EUR and well economics due to rapid decline curves 20. Conduct fracture economic trade-off studies 21. Analyze Participant field frac data and production data to better understand EF fractures 22. Stimulate development of improved downhole fracing tools and procedures 23. Share shale characterization data from different parts of the Eagle Ford field 24. Share drilling and well completion information 25. Combine the know-how of all Participants into improved fracturing procedures and designs 26. Provide chat room for Participants to exchange information 27. Hold meetings where Participants give presentations on their EF fracturing technology 28. Hold school for Participant engineers to learn latest EF fracturing technology 12

13 3. BENEFITS OF IMPROVED EF FRACTURE DESIGNS 1. Reduce frac costs by $1 to $1.5 million 2. Increase IR and EUR by 20 to 40 percent 3. Reduce costly frac failures like blowouts and loss of wells 4. Reduce environmental and regulatory problems 5. Create good public relations with 6. Improved technology applicable to other shale fields 7. Will help non USA operators develop their indigenous shale fields Hydraulic frac jobs in the Eagle Ford wells typically cost from $3 to $6 million compared to $2 million drilling costs, so there is major incentive to reduce fracturing costs With cemented casing, connectivity problems between the wellbore and the hydraulic fractures can reduce flow rates in EF wells by 30 to 50 percent. Open hole fracs overcome many of these problems so one goal of this JIP is to have Participants test different open hole fracing techniques so that this technology can be advanced in the Eagle Ford wells. Frac designs will be optimized for the three different types of wells in the Eagle Ford, oil, dry gas, and gas with high liquid content. Shale wells typically decline 60 to 80 percent in the first 2 to 3 years so more emphasis needs to be placed on Expected Ultimate Recovery (EUR) than on Initial Production Rates (IP). I n some wells it may be advantageous to use smaller and lower cost fracs and spread the recovery over a longer time and still recover the same amount of oil or gas. Refracing of EF wells will be studied in detail because refracing will likely become a common practice in the Eagle Ford due to the rapid decline of these wells. The proppants used in shale wells can have a major affect on well productivity so sand and ceramic proppants will be studied to determine where the extra cost of ceramic proppants may pay out. Focus will be placed on the effect of increased number of fracture stages since there are indications that in some EF well the extra stages increase Initial Production IP but not Estimated Ultimate Recovery EUR. There is a major opportunity to significantly increase EF well production rates and reduce EF fracturing costs due to the large number of wells Participants will be drilling in the Eagle Ford. 13

14 4. FRACTURING ISSUES Following are fracing issues that have not yet been resolved in the Eagle Ford since this field is very new and is still on the steep part of the learning curve. These issues will be addressed on the JIP: 1. Open hole vs. cemented liners 2. Production vs. number frac stages 3. Slick water vs. viscous fluids 4. Sliding sleeves vs. perforating 5. $3 million vs. $6 million fracs 6. 20,000 vs. 40,000 horsepower fracs 7. Abrasive jet vs. shaped charge perforating 8. Sand vs. ceramic proppants 9. Acid soluble cements 10. Coiled tubing fracing 11. Wellbore connectivity problems 12. Acidizing applications 13. Microseismic real time uses 14. Frac equipment and instrumentation 15. Ball drop techniques 16. Screen outs and flow back problems 17. Fracture initiation and propagation 18. Fracing problems and solutions 19. Guiding wellbores through sweet spots 20. Fracing into water zones and overlying Austin Chalk 21. Effect of wellbore orientation and vertical placement on well performance 22. Enhancement and propping of natural fractures 23. Permeable horizontal layers in eagle ford 24. Improved horizontal drilling procedures 25. Improved completions 26. Improved and lower cost frac designs 27. Intelligent vs. Brute Force fracs 28. Overall well economics 29. Shortage of fracing equipment 30. Excessive frac costs This information will be used to improve drilling, completion and fracing operations and improve well performance and well economics. The jip can more effectively study these issues than an individual company because of the much larger fracing data base from 10 to 20 jip Participants. Eagle Ford fracing is still on the steep part of the learning curve so frac experts believe that EF fracing techniques will change considerably during the next five years. We are confident that this jip will be a major factor in implementing these changes 14

15 5. BENEFITS TO PARTICIPANTS 1. Interface with world leading frac experts 2. Interface with frac experts with other Participants 3. Technical interchange between Participants 4. Obtain data from a. large pool of Participant wells b. different types of fracs c. Participant fracturing experiments d. In-house fracturing experts. 5. Provide data to Participant engineers 6. Detailed post-well analyses on participant wells 7. Compare techniques, capabilities and costs of many service companies 8. Rapid implementation of new fracturing technology 9. Utilize capabilities of jip fracturing chat room 10. Get participant assistance on real time fracing problems 11. Identify fracing problems and solutions 12. Attend jip eagle ford fracing school 13. Increase R&D funds 10 to 20 fold 14. Royalty free use of technology developed on jip 15. Improved frac designs 16. Reduced fracing costs 17. Increased well performance 18. Service companies that join the jip will have the benefit of working with jip Participants to optimize frac designs for their EF applications 6. 15

16 EAGLE FORD OPERATORS 6. CANDIDATE JIP PARTICIPANTS ANADARKO CRIMSON EXPL HESS RELIANCE PETROLEUM DEVEL APACHE CORP DEVON (BARNETT) HILCORP ROSETTA RESOURCES RAM RESOURCES BHP BILLITON EV ENERGY PARTNERS LEWIS PETRO PROP SHARON ENERGY RANGE RESOURCES BP EL PASO MARATHON OIL ROYAL DUTCH SHELL WILLIAM CO CABOT O&G ENCANA MURPHY OIL SM ENERGY CARRIZO O&G EOG RESOURCES NEWFIELD EXP ST MARY L&E CHESAPEAKE EXXON - XTO OCCIDENTAL SWIFT ENERGY CNOOC (CHINA) FOREST OIL PENN VIRGINIA TALISMAN ENERGY COMPANY GASTOR EXPL PETROHAWK TXCO RESOURCES COMSTOCK RES GEO RESOURCES PIONEER RES DENBURY RESOURCES CONOCOPHILLIPS GOODRICH PETROLEUM PLAINS E&P PARALLEL RESOURCES OILFIELD SERVICE COMPANIES 8. BAKER HUGHES 9. CNOOC 10. HALLIBURTON 11. PACKERS PLUS 12. PETROFRAC 13. SCHLUMBERGER 14. WEATHERFORD NON USA OIL COMPANIES Non USA oil companies buying shale acreage in the USA or developing their own shale resources are prime candidates for this JIP since most of horizontal well technology in the EF field applies equally well in other shale fields around the world. Belonging to the JIP will allow them to communicate better with USA partners and to develop their own shale resources better and at lower cost. Interfacing with other JIP Participants is another plus for all Participants since each company has in-house knowhow that will be useful to other Participants. 16

17 GOVERNMENT AGENCIES Government agencies worldwide can benefit from belonging to this JIP since it will allow them to better develop and manage their indigenous shale resources and ensure that this is done economically and in an environmentally safe manner. SMALL OPERATORS AND SERVICE COMPANIES The JIP will benefit small operators and small service companies because it will allow them to interface with larger JIP Participants and help put them on an equal technical level with the large companies. Several large operators planning to join the JIP have expressed interest in working with smaller service companies because they consider them more amenable to testing new technology. NATIONAL OIL COMPANIES 17

18 7. PROJECT PROPOSAL PARTICIPATION COST The Phase 1 participation cost is $200,000.This is equal to only 7 percent of the cost of one $3 million EF frac job. PROJECT DURATION The Phase 1 project will last for 12 months NUMBER OF PARTICIPANTS The JIP will be initiated at a reduced level with 5 Participants, and run at full scale with 8 Participants. If more than 8 companies join the JIP, the extra funds will be used to expand the scope of the JIP. MANAGEMENT Dr. William Maurer will manage the JIP. He has extensive experience in managing JIPs including THE DEA- 44 HORIZONTAL WELL TECHNOLOGY project which helped spread horizontal drilling worldwide. DELIVERABLES Deliverables will include: 1. Detailed technical reports and power point presentations 2. Technical meetings 3. Technical interchange between Participants 4. Analysis of Participant frac jobs 5. Fracing school PARTICIPANT RIGHTS Participants will have the non-exclusive royalty-free right to use all information developed on this Phase I project in their shale well EF SHALE FOCUS The focus of the project will be the EAGLE FORD (EF) shale since this is a significant liquids-rich discovery, with many active operators and few established best practices. Companies operating in the EF are still on the steep part of the learning curve, and can leverage some of the recent learnings from other liquids-rich plays developed with multistage horizontal wells. GROUP PARTICIPATION 18

19 Participant input is needed on planning the program, providing field frac data, conducting frac experiments, providing production data.. TECHNICAL ADVISORY COMMITTEE A Technical Advisory Committee will be set up that consists of two members from each Participant company. MEETINGS Meetings will be help periodically to plan JIP tasks and to review progress being made on the JIP. BENEFITS TO PARTICIPANTS This project will allow Participants to obtain up-to-date information on EF shale fracturing, pool their fracing knowhow, develop improved fracturing techniques, and reduce fracturing costs. CANDIDATE PARTICIPANTS Operators to improve their Eagle Ford shale wells. Service companies to help operators optimize their EF frac designs. Foreign and National Oil Companies to help them develop their shale resources... Government agencies involved with the energy development. JIP STRATEGY This JIP will be a hands on project aimed at utilizing the latest fracing technology being developed around the world in Eagle Ford shale wells. TECHNICAL PERSONNEL The technical work on this project will be conducted primarily by world class frac consultants including: DR WILLIAM MAURER SPE LEGEND OF DRILLING DR HARRY MCLEOD SPE LEGEND OF PRODUCTION AND OPERATIONS DR RANDY CRAWFORD SPE LEGEND OF PRODUCTON AND OPERATIONS DR MICHAEL PRATS LEGEND OF HYDRAULIC FRACTURING JACQUES L. (JACK) ELBEL LEGEND OF HYDRAULIC FRACTURING CECIL PARKER HYDRAULIC FRACTURING CONSULANT DR CHING YEW UN OF TEXAS HALLIBURTON PROF OF ENGINEERING MECHANICS DR WILLIAM MCDONALD PHD PHYSICIST AND PETROLEUM 19

20 They will provide technical input on drilling, completing and fracing shale wells. TECHNIQUES FOR OBTAINING EF TECHNICAL INFORMATION Frac data will be obtained on this JIP from 1. Technical publications 2. Fracturing experts 3. Technical meetings 4. Participant engineers 5. Data from Participant wells GEORGE KING PAPER ON SHALE FRACS George King recently wrote an outstanding 50 page technical paper entitled THIRTY YEARS OF GAS SHALE FRACTURING: WHAT HAVE WE LEARNED? (SPE ) that we plan to apply to the Eagle Ford shale. 20

21 8. WORK STATEMENT TASK 1 ANALYZE EF HORIZONTAL DRILLING TECHNIQUES Drilling technology related to EF horizontal wells will be studied in detail because drilling affects fracturing in many ways including: 1. Formation damage around wellbores 2. Fracture initiation pressures 3. Fracture quality 4. Ability to stay in sweet spots in the reservoir 5. Connectivity problems around wellbore 6. Drilling time 7. Well costs 8. Cementing TASK 2 ANALYZE EF COMPLETION TECHNIQUES Although the completion program is in a large part dictated by the frac design, there are ways to reduce fracturing problems by improving completion designs by use of better equipment and better fracturing procedures. EF completion s will be studies in detail since the type of completion equipment needed including casing; packers, sliding sleeves, cementing, perforating, straddle packers etc. strongly affect the success of frac jobs. Failures being encountered EF wells with completion equipment and techniques will be studied in detail and attempts made to overcome these problems. New shale completion designs developed in other areas than the Eagle Ford will be studied and improvement made in those areas applied to the Eagle Ford field. TASK 3 STUDY EF HYDRAULIC FRACTURING TECHNIQUES Fracturing techniques currently used in EF wells and other shale fields will be studied in detail and attempts made to improve frac performance and reduce fracing costs which typically range from $3 to $6 million. The effect of the number of frac stages on well production will be studied in an attempt to determine if 15 to 20 stages are needed since the number of stages is a major factor on the high cost of these EF fracs. Facing data will be analyzed to determine if 40,000 pump horsepower is actually needed on these fracs since this also contributes to the excessive cost of these EF fracs. Surface and downhole equipment failures which contribute to high costs and reduced frac performance will also be studied and attempts made to reduce these failure equipment failures. Problems that arise with these large EF frac jobs include equipment failures, excessive breakdown 21

22 TASK 4 ANALYZE EF FIELD FRAC DATA During this project, frac experts will study real time frac data from Participant EF wells and analyze 1. Frac design 2. Surface and downhole equipment failures 3. Completion tools 4. Frac fluids and proppants 5. Number of frac stages 6. Breakdown and propagation pressures 7. Problems encountered during frac jobs 8. Improvements needed 9. Frac costs These frac data will be used on other project tasks relating to frac design and frac implementation. TASK 5 ANALYZE EF PRODUCTION DATA Frac experts will analyze EF production data from Participant wells to determine the effects of frac design and other factors on well productivity and frac costs.. If ten Participants each contribute production data from 5 to 10 wells, this will provide a 50 to 100 well data base to analyze. This will be a very important task on this project and should lead to improved frac designs and reduced fracing costs. TASK 6 COMPARE OPENHOLE AND CEMENTED CASING FRACS Most Eagle Ford fracs are currently done with cemented casing. This technique works well but it has two major limitations: 1. The cement seals off the natural factures along the wellbore 2. The cement and perforations create fracture initiation problems 3. Near wellbore connectivity problems can reduce flow rates by 20 to 40 percent 4. Cemented casing fracs are more expensive Service companies prefer cemented casing because it makes their fracing jobs simpler and faster so they make more money with them. Openhole fracs overcome many of these problems and have been used successfully in other shale fields. Because of the potential of openhole OH fracturing, Participants will be encouraged to test openhole fracs in their EF wells. If each Participant conducts one openhole OH frac using information gained from previous Participants OH fracs, the JIP should significantly advance OH fracing technology in the Eagle Ford. TASK 7 STUDY EFFECT OF NUMBER OF FRAC STAGES ON WELL PRODUCTIVITY 22

23 EF frac jobs typically utilize 10 to 20 frac stages and cost from $3 to $6 million. Frac costs can be significantly reduced by reducing the number of frac stages, but the effect of doing this on ultimate recovery in the EF is not well documented. One reason for this is operators focus more on initial production rates than on ultimate recovery. TASK 8 STUDY EF FRACTURE SCREENOUTS AND FLOWBACK Screenouts are major problems with EF fracturing because they can leave the casing full of sand -laden slurries and are expensive and time consuming to clean out. If a screenout occurs, it is necessary to remove the slurry before the next stage can be fraced because of of ball dropping and other problems if the slurry remains in the casing or tubing. One operator spent $500,000 solving screenout problems on a shale well. Screenout and flowback problems will be studied in detail on Participant wells and attempts made to reduce these problems in Participant wells. Screenouts are a major problem in horizontal wells because they that leave the vertical and horizontal wellbores full of slurry fluids containing large concentrations of 20/40 sand. It is not possible to pump the next plug or to drop the next ball or dart during the next stage until the slurry is removed from the well which is an expensive and time consuming. Coiled tubing cleanout costs run as high as $500,000 on EF multistage wells since the laden slurry must be removed from both the horizontal and vertical sections of the well before the next stage can be fraced.. Flowback of sand into the wellbore also creates expensive and time consuming cleanout problems that increase fracing costs and delay fracing operations. Because of these problems this task will focus on ways to reduce EF screenout and flowback problems. TASK 9 HOLD HYDRAULIC FRACTURING SCHOOL FOR PARTICIPANTS We plan to hold a three day frac school for Participant engineers to update them on the latest fracturing technology with a special focus on Eagle Ford fracing procedures. This school will be likely be taught by Mike Vincent, one of the foremost authority on hydraulic fracturing in the world. It will be good for Participant engineers to meet Mike since he may be able to give them overcome problems they encounter in the field and assist them with their EF frac designs on a consulting basis. Participants may have to pay a nominal fee to help offset part of the school costs. Hydraulic fracturing involves so many different disciplines that few or no frac engineers understand all of them in detail. TASK 10 PROMOTE PARTICIPANT EF FIELD TESTS 23

24 A major focus of this JIP will be to encourage Participants to test different completion and facing concepts that have potential to significantly improve performance of Eagle Ford wells. Many factors affecting EF fracturing are not well understood, such as the effect of fracture spacing distance and wellbore connectivity conditions, and tests need to be made to quantify these factors. This will be possible because JIP Participants will be using many different types of fracing procedures in different parts of the EF field and can conduct experiments in these wells. By pooling the information from these tests, it will be possible to jointly advance EF fracturing much faster than one Participant can do alone. TASK 11 IMPROVE EF FRAC DESIGNS Information generated by the JIP will be used to improve EF frac designs and reduce frac costs. Predictions from industry frac simulations will be compared to Participant field production data to determine the accuracy of the simulators and ways to improve them. Because of the high decline rates in EF wells, a focus will be made on Estimated Recovery Rate EUR since adding extra stages may increase Initial Recovery rate IR, and increase fracing costs without improving EUR and thereby reduce the payouts from wells. We believe that too much emphasis is being placed on IR and not enough on EUR since adding frac stages immediately increases flow rates, but it takes much longer to determine the effect on EUR. The JIP will review frac designs for oil, dry gas, and high condensate gas since fracs have to be optimized for each of these regions of the Eagle Ford shale. This frac design task will also focus on improving wellbore-to- frac connection problems which reduce flow rates in many shale wells by 30 to 50 percent, especially with cemented casing. This problem, which is time dependent, is a major factor in the rapid decline of EF wells. The JIP will also focus on the continual reduction in frac conductivity as the well is produced due to plugging of the frac with fines, frac fluid viscosifiers, asphalt precipitation, barite scale, etc. This is also a major contributor to the fast decline of these wells. An attempt will be to significantly reduce fracing costs without affecting fracture performance by reducing the horsepower of the fracs, the 3 to 4 million gallon water requirement and the 4 to 5 million pounds of proppants used. We expect to make major improvements on the EF frac designs and major reductions in fracing costs as a result of this JIP. Petrohawk published that they had reduced fracturing costs by$1 million per well in the Haynesville shale by developing improved frac designs. 24

25 Based on Petrohawk s success, it should be possible to reduce fracing costs in the Eagle Ford field by $1 to $1.5 million per frac while improving fracture performance. The JIP will accelerate development of these improvements by combining the technical expertise of the Participants and conducting coordinated field experiments to test new fracing concepts. TASK 12 IMPROVE EF FIELD FRACTURING PROCEDURES Participant frac jobs will be studied to determine what surface fracing equipment problems occur and what can be done to improve this equipment and eliminate field failures. Real time fracture data will be analyzed to determine if frac designs can be changed to better utilize the fracing equipment and to improve fracing procedures and reduce fracing costs. This task will be integrated with Task 13 to implement these improvements into the frac designs. The high pressure frac pumps will be studied closely because they often fail during EF frac jobs due to excessive wear in the fluid ends due to the abrasive nature of the frac fluids being pumped. Problems with other surface equipment such as blenders, mixers, etc will also be studied and recommendations made on improvements needed to improve fracing operations and reduce fracing costs. This will include better frac design and better use of the frac equipment and frac personnel on location. TASK 13 REDUCE WELLBORE CONNECTIVITY PROBLEMS A major near-wellbore problem is present with shale fracs that can reduce production rates by 20 t0 40 percent in many EF wells. This connectivity problem is present because of problems connecting the wellbore to the hydraulic fracture. This problem arises because the fracture is perpendicular to the wellbore so there is very little contact where the wellbore and fracture come together, and where fluid velocities are very high. Small fractures initiate at the 3 to 6 perforations and then initially propagate parallel to the wellbore because of high stresses around the wellbore. As they propagate, the small cracks go together to form a larger frac which turns and propagates perpendicular to the wellbore (lowest fracture pressure direction). In the area where the small fractures go together, they form small flow paths that create high pressure drops which reduce the drawdown pressures and flow rates from the well. The problem is compounded later as fines migration, asphalt deposition, and barite scale formation plug off more of the flow paths. The good thing about this connectivity problem is that the damage is within about 10 feet of the wellbore, so the connectivity degradation can be removed by small, low-cost fracs that propagate 10 to 15 feet. 25

26 This is a major advantage over frac conductivity degradation with time since much larger and higher costs fracs are required in that case. Due to the small flow area near the wellbore compared to the large flow area in the frac, it is likely that more of the rapid decline with shale wells is due to the connectivity problem and not fracture conductivity degradation. TASK 14 REDUCE FRACTURE CONDUCTIVITY PROBLEMS The second problem is deterioration of the fracture conductivity with time due to fines migrations, asphalt precipitation, barite scale and other factors. Refraced Barnett and other shale wells show that refracing can often increase flow rates to 2 to 4 fold indicating that the rapid decline in shale wells is primarily due to connectivity and frac degradation problems, not due draining the reservoir. This indicates that refracing will become an important tool in the life of EF wells. Tests need to be conducted on Participant wells to determine if the rapid decline is due to restrictions near the wellbore, or degradation of the long hydraulic fracs. If the damage is near the wellbore, it should be possible to restimulate EF wells using small, low cost fracs that propagate only 10 to 20 feet from the wellbores. If the damage is primarily due to conductivity reduction in the hydraulic frac, much larger and more expensive fracs will be required to stimulate the wells and overcome the rapid decline problems. Early time flow tests and evaluation are needed to identify the best frac-to-wellbore connection and suggest improvements in proppant selection and placement near the well bore. Considerable time will be spent on the JIP studying connectivity and fracture degradation problems since they can significantly reduce flow rates and the economic payout of EF wells. TASK 15 STUDY EF SURFACE FRAC EQUIPMENT Surface equipment used during EF frac jobs will be studied to determine if this equipment can be improved or if better fracing procedures can be developed.. The high pressure frac pumps will be studied closely because they often fail during EF frac jobs due to excessive wear in the fluid ends due to the abrasive nature of the frac fluids being pumped. As are result, service companies have extra frac pumps on location to allow replacing failed pumps during frac operations. This contributes to the need for up to 40,000 pump horsepower on EF frac jobs. Problems with other surface equipment such as blenders, mixers, etc will also be studied and recommendations made on improvements needed to improve fracing operations and reduce fracing costs. 26

27 TASK 16 STUDY EF DOWNHOLE FRAC EQUIPMENT Downhole fracing tool failures are a problem packers, sliding sleeves, perforators, millable plugs, etc. because of the abrasive nature of frac fluids, plugging of openings with proppants, high pressures, high temperatures, contaminants, corrosion and other factors. Downhole tool failures on Participant wells will be documented and attempts made to eliminate these failures. The large data base from Participant wells should allow improvements to be made in downhole tools designs and in fracing procedures to reduce these downhole tool failures. TASK 17 STUDY EF FRAC INSTRUMENTATION Surface and downhole fracing instrumentation will be studied to determine equipment reliability and effectiveness. New instruments will be identified that will allow better analysis of fracing operations and lead to improved frac designs. TASK 18 ANALYZE EF FRAC PROPPANTS Proppants are a major cost item in EF frac jobs since up to five million pounds of proppants are used on EF wells. Sand proppants are currently used in most EF fracs due to their lower cost, but they tend to crush more and result in lower frac permeability than more expensive ceramic proppants. Therefore fracing results with both types of proppants to better identify the pros and cons of sand and ceramic proppants and to identify areas where each are superior. The ceramic proppants may have application near the wellbore since they may reduce connectivity problem which can greatly reduce production rates as described in Task 13. TASK 19 STUDY EF FRAC FLUIDS Numerous types of frac fluids are used in fracturing shale wells including foam s, gels, and slick water. In most EF wells, slick water is used to initiate and propagate the fractures and then viscous water is used to carry the proppants into the fracture. Frac experts will study the different frac fluids being used in EF shale wells and determine the pros and cons of each. They will attempt to determine how frac fluids affect well productivity and fracturing costs. TASK 20 STUDY EF RESERVOIR CHARACTERIZATION Reservoir characterization information is the key to optimizing frac designs and field operations. 27

28 On a microscopic scale, shale reservoirs permeabilities on the order of 100 nanodarcies. Very little oil or gas could be produced if these fluids had to flow through 100 nanodarcy formations. Therefore the permeability of these shale formations must be higher due to natural fractures or thin permeable layers in the shale that can transport the oil and gas to the hydraulic fractures. This must be true of oil production since oil will not flow through nanodarcy formations at commercial rates. Drill cuttings can provide characterization data which can used to calibrate the electric logs run for depth correlation and porosity evaluation. The high calcium content (50% to 70%) makes the EF shale more brittle and easier to frac than other shale reservoirs which may allow the development of lower cost and more effective fracturing techniques. If funding permits, properties of other shales will be compiled, especially from shale fields where Participants are drilling wells. TASK 21 STUDY EF FRAC INITIATION AND PROPAGATION Dr. Ching Yew, the author of the book MECHANICS OF HYDRAULIC FRACTURING, is a world leader on hydraulic fracture initiation and propagation. Dr. Yew will apply these mathematical principles and concepts to EF shale wells to provide a better understanding of shale fracturing and to identify ways to improve frac designs. His insights into fracturing have the potential to change the way EF shale wells are fraced in the future. Dr. Ali Daneshy recently published a paper that shows that longitudinal fractures initially form parallel to the wellbore and then grow together and rotate to become perpendicular to the wellbore to the minimum horizontal stress. This mechanism contributes to the near-wellbore connectivity problem that will be studied in TASK 15. TASK 22 ANALYZE EF ACIDIZING PROCEDURES Perforations are often acidized to reduce breakdown pressures and to provide better connection of the hydraulic fracture to the wellbore. Different shale formations respond differently to acid. Carbonate shales are easily stimulated by acid, but plugging particles can be released when the insoluble content is high. The effect of acid on different shale mineralogies needs to be studied. Various diverting agents are used to effectively acidize all perforations. These diverters need to be reviewed to determine those which are most effective. TASK 23 STUDY EF FRAC FLUID RECLAMATION AND DISPOSAL Water reclamation and disposal may become an increasing problem since up to four million gallons of water are use on EF frac jobs. 28

29 Two types of frac fluid reclamation systems are being tested in shale fields; heating & distillation and membrane technology. Water costs may increase in the future in the Eagle Ford because of water shortage problems in the Barnett and other Texas shale fields. They are considering pipelining water long distances to these shale fields. For these reasons, water reclamation and disposal will be addressed during the JIP. TASK 24 EVALUATE EF REFRACTURING POTENTIAL Refracs have been attempted in hundreds of fields around the world and it is likely that refracing will become important in the Eagle Ford wells since they decline so rapidly. Typically shale wells require refracing after 4 or 5 years since they decline so rapidly. If flow meters show that certain stages of the multistage frac wells are not producing, it may be possible to refrac those stages at a later time using smaller fracs. This task should allow Participants to improve the effectiveness and durability of fracs plus design completions to allow more cost-effective refracing. TASK 25 REVIEW MICROSEISMIC FRACTURE APPLICATIONS Real time microseismic logging is proving to be a valuable tool for monitoring and controlling fracture initiation and propagation in EF wells. Microseismic measurements are made by putting 5 to 7 seismic receivers at the same depth in an offset well and then locating seismic events as the fractures propagate. This technology shows the direction factures are propagating and what stages are being more effectively fractured. This allows the fracturing process to be modified in real time to enhance the production from EF wells. Because of its importance, microseismic logging will be studied in detail so that Participants can better utilize this technology in their EF wells. TASK 26 SET UP EF TECHNICAL CHAT ROOM A technical chat room or blog will be set up where Participant engineers can communicate with each other about their fracing operations. This will allow them to exchange fracing information and ideas on how to improve their frac designs and field implementation operations. This chat room will be important when Participants need help on frac designs or when they encounter field problems that they cannot solve. TASK 27 HOLD MEETINGS 29

30 Meetings will be held throughout the JIP to keep Participants informed of progress being made on the JIP and to allow them to implement new technology into their frac designs and field operations.. If we have more than 10 Participants from outside of North America, consideration will be given to also holding meetings in London or Paris. TASK 28 WRITE REPORTS Detailed progress and final reports will be written periodically during the JIP and a detailed final report will be written at the end of the JIP. 30

31 9. WORK STATEMENT SLIDES These slides are presented to show the types of things that will be studied in each task. They have been put into this separate section so that they can be quickly updated. The references for these figures are included in the Reference section at the back of the report. Readers are encouraged to buy the papers from the SPE. TASK 1 DRILLING 31

32 TASK 2 COMPLETIONS TASK 3 HYDRAULIC FRACING TECHNIQUES 32

33 TASK 4 ANALYZE FIELD FRACTURING TASK 5 PRODUCTION DATA 33

34 TASK 6 OPEN HOLE AND CEMENTED CASING TASK 7 NUMBER OF FRAC STAGES 34

35 TASKS 8 TO 10 NO SLIDES TASK 11 IMPROVED FRAC DESIGN TASK 12 FIELD FRAC PROCEDURES 35

36 TASK 13 WELLBORE CONNECTIVITY PROBLEMS TASK 14 FRACTURE CONDUCTIVITY PROBLEMS 36

37 TASK 15 SURFACE FRAC EQUIPMENT TASK 16 DOWN HOLE FRAC EQUIPMENT 37

38 TASK 17 FRAC INSTRUMENTATION TASK 18 FRAC PROPPANTS 38

39 TASK 19 EF FRAC FLUIDS TASK 20 RESERVOIR CHARACTERIZATION 39

40 TASK 21 FRAC INTITIATION AND PROPAGATION 40

41 TASK 22 ACIDIZING 23 NO SLIDE TASK 24 REFRACING 41