New Life from Old Plays, New Frontiers Oil and Gas in Texas: New Life from Old Plays, New Frontiers William A. Ambrose May 16, 2017 TCEQ Trade Fair

Acknowledgments

STARR State of Texas Advanced Oil and Gas Resource Recovery Funding from Texas Legislature, and logistical support from the General Land Office 2014-2016 Biennium: 5.5x Revenue Positive Factor Mission: Increase income to the State through working with operators to… Define, characterize, assess, and expand new hydrocarbon plays Recommend drilling deeper untested reservoirs Recommend secondary or tertiary recovery programs Recommend recompletions Help locate new wells (infill, step-outs, wildcats)

Outline Oil and Gas: Future Trends Texas Oil and Gas Plays Unconventional reservoirs: origin and distribution Texas Oil and Gas Plays Major hydrocarbon-producing provinces Permian Basin Wolfcamp & Spraberry Formations, Pennsylvanian Other Texas Oil and Gas Trends East Texas Field, Eagle Ford Shale

Estimates of 21st century World energy supplies Billion barrels oil equivalent Alternatives Billion barrels oil equivalent yr-1 Coal Natural Gas Oil 1900 2000 2100

rocks occur in trapping Conventional Oil System Earth’s surface seal seal Oil is trapped where reservoir rocks occur in trapping configuration Sandstone reservoir rock About 1.5 to 3 mile depth Tens of miles Mudstone Modified from Eric Potter (BEG)

Unconventional Oil System Earth’s surface Source rocks generate oil and gas and remain in place About 1.5 to 3 mile depth Tens of miles Mudstone Modified from Eric Potter (BEG)

Shale Resource Plays Success Factors Thick organic rich layer(s) Organics preserved (anoxic conditions at sea bottom) Buried and heated, organic-rich layers: millions of years Oil (60-120° C), Gas (>120° C) Source rocks actively generating oil and gas Elevated pressures Relatively thick and hydrocarbon-rich target zone Regionally extensive (100’s of square miles) Rock brittle not ductile (limited clay content)

Global Shale Resource Plays Unproved technically recoverable: ~7,580 Tcf & 419 Bbbl Permian Basin Resources Estimated Resources Not Estimated EIA (2017)

Micro planktonic organisms preserved on ancient ocean or lake floor Organic Matter: Source Rock Micro planktonic organisms preserved on ancient ocean or lake floor

Oil Droplet from Source Rock Newly-formed oil droplet Source Rock (being heated)

Orange dots are 20 nm in diameter Organic Matter: Pores 50 µm Human Hair Orange dots are 20 nm in diameter T.P. Sims #2; 7625’ 200 nm 0.2 m Orange dots are 0.02 microns in diameter I showed you the big picture in the previous slide. This is the small nanno picture, and arguably as important or more important as the ‘big picture’. The trick is not the potential resource (there is plenty) but how do we get the resource out of the rocks. This slide shows just how small the pores in the rocks holding hydrocarbons are, and fundamentally why we need long horizontal wells and fraccing to liberate, flow and produce the hydrocarbons. This is also a fundamental point for why we need basic research. These are different rocks than conventional reservoirs and to be able to improve resource estimation, recovery and optimize production, we need to understand the basics of where are the hydrocarbons, how do the HC’s flow out of these rocks, how do these rocks fracture when fracked etc. 0.2 microns Modified from Reed (BEG) 12

U.S. Natural Gas Production and Projections 2015 40 Shale gas and tight oil plays Tcf (trillion cubic ft) 20 Other Tight gas Alaska Lower 48 offshore Coalbed methane 2000 2010 2020 2030 2040 Modified from EIA (2015)

Outline Oil and Gas: Future Trends Texas Oil and Gas Plays Unconventional reservoirs: origin and distribution Texas Oil and Gas Plays Major hydrocarbon-producing provinces Permian Basin Wolfcamp & Spraberry Formations, Pennsylvanian Other Texas Oil and Gas Trends East Texas Field, Eagle Ford Shale

Active gas and oil well areas Oil & Gas Map of Texas Recent peak activity Granite Wash Barnett Shale >120,000 active gas wells Wolfberry Play >293,000 active oil wells Overlapping Active gas and oil well areas Eagle Ford Shale Play 200 miles

Outline Oil and Gas: Future Trends Texas Oil and Gas Plays Unconventional reservoirs: origin and distribution Texas Oil and Gas Plays Major hydrocarbon-producing provinces Permian Basin Wolfcamp & Spraberry Formations, Pennsylvanian Other Texas Oil and Gas Trends East Texas Field, Eagle Ford Shale

Permian Basin ~15% of U.S. oil production (EIA, 2017) Permian Basin ~60% of Texas oil production (RRC, 2017) Cumulative production >36 million bbl oil & 100 Tcf gas >2 million bbl oil & 8 Bcf gas per day (EIA, 2017) 200 miles

Schematic Stratigraphy Permian Basin Central Basin Platform Delaware Basin Midland Basin Clearfork Wolfcamp 5/18/2018

Apache’s Alpine High Discovery, Delaware Basin Resources: 3 billion barrels oil, 75 Tcf gas 4,000-5,000 of stacked pay Ward Reeves Pecos Apache Acreage 10 miles

Outline Oil and Gas: Future Trends Texas Oil and Gas Plays Unconventional reservoirs: origin and distribution Texas Oil and Gas Plays Major hydrocarbon-producing provinces Permian Basin Wolfcamp & Spraberry Formations, Pennsylvanian Other Texas Oil and Gas Trends East Texas Field, Eagle Ford Shale

East Texas Field Discovered in 1930 Combination trap Strong water drive Depth ~3,500 ft ~31,000 wells 4.3-acre spacing 7.03 Bbbl oil in place 5.42 Bbbl produced 77% recovery efficiency Base of Austin Chalk 200 ft Sabine Uplift Base of Woodbine ~2 miles

Lowstand Incised-Valley Fill Model Buda Austin Fluvial Deltaic 300 ft 2000 ft

Prominent Stringer Sands Woodbine Cross Section S N 1 2 3 1 mi 2 3 1 Top of Woodbine Prominent Stringer Sands GR SP Res GR SP Res GR SP Res Austin Fluvial Upper WB Lower WB Deltaic Buda

Development Strategies ● Well Deepening Highstand Deltaic Stringers – Untapped Oil ● Redesigned Waterfloods Inject water into poorly connected sand stringers ● Polymer Flooding Divert water into poorly swept sands ● Enhanced Oil Recovery (EOR) CO2 Injection

Well Deepening–North Pilot Area (west half) Net Sandstone Well A Monthly Production (STB) 2000 ft 1992 2008 Well B A: 125 BOPD Monthly Production (STB) 1992 2008 B: 20 BOPD

Eagle Ford Shale Play Oil Condensate Gas 50 miles

Daily Eagle Ford Oil Production 2008 through January 2017 Barrels Modified from the Texas Railroad Commission (2017) 1,000,000 500,000 January 2017 2008 2009 2011 2013 2015 Cumulative: ~1.658 billion barrels

Eagle Ford and Austin Chalk Upper Eagle Ford Clay Mudstone Lower Eagle Ford Carbonate 1 in

Lower Eagle Ford Shale: Thickness Hentz and Ruppel (2010) Outcrop San Marcos Arch 25 mi ≥ 200 ft <25 ft Maverick Basin C.I. = 25 ft 100 mi

Eagle Ford Shale: Estimated Ultimate Recovery EUR 350,000- 1,500,000 bbl EUR <50,000 bbl 20 miles Modified from Ikonnikova et al. (2016)

Expected Oil Production by Price Eagle Ford Shale Expected Oil Production by Price 800 Exp. Total & no. wells at $100/bbl 11.3 Bbbl & 93,000 600 10.9 Bbbl & 83,000 8.2 Bbbl & 47,000 Oil production (MMbbl/yr) at $80/bbl 400 6.5 Bbbl & 32,000 1.9 Bbbl & 9,000 200 2010 2020 2030 2040 Modified from Ikonnikova et al. (2016)

Summary World Oil & Gas: Significant Future Production Unconventional reservoirs Offshore Discoveries Texas Oil and Gas Permian Basin Other Texas Oil and Gas Trends East Texas Field Eagle Ford Shale