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Enhanced Assessment Techniques for Unconventional Resources John Lee Texas A&M University

Global Energy Opportunities Require Creative Thinking We need increasing amounts of energy of right type at right place and right time Viability of many alternatives limited by practical considerations Unconventional resources play important role for most forecasters Improved assessment methodology a key to availability of needed unconventional resources

Unconventional U.S. Gas Production Will Increase History Projections 10 US Lower 48 unconventional US Lower 48 conventional onshore Production, Tcf US Lower 48 offshore US Lower 48 associated Alaska 1990 2025 Year EIA 2005

Dependence on Unconventional Resources to Grow in United States ‘As a result of technological improvements and rising natural gas prices, natural gas production from relatively abundant unconventional sources (tight sands, shale, and coalbed methane) is projected to increase … from 35 percent of total lower 48 production in 2003 to 44 percent in 2025’ EIA Energy Outlook 2005

Production From Unconventional Sources Will Increase in U.S. 50 44% Diminished supply of conventional resources Production, % Rising natural gas prices Technological improvements 35% 25 2003 2025 Time

… And Later in the World Diminished supply of conventional resources Production, % Rising natural gas prices Technological improvements Time

How Do Conventional and Unconventional Resources Differ? Massive stimulation treatments Special recovery processes Leading-edge technologies Added Costs

Resource Distribution and Practical Permeability Limit Resources Resource size High Low Reservoir quality High Low Practical limit permeability After USGS, 2003

Resource Distribution and Practical Cost Limit Resources Resource size High Low Reservoir quality High Low Practical limit cost After USGS, 2003

Need to Extend Practical Limits Through Technology Advances Cost Permeability Technology

NPC Forecasts Technology Impact on Gas Production 32 22 2000 2025 Tcf Year With technology advancement With no technology advancement NPC 2003

NPC Model Assumes and Identifies Needed Technology Improvements Technology Area Annual, % 25 years,% Exploration well success Development well success Ultimate per-well recovery Initial production rate 0.53 0.41 0.87 0.74 14 11 24 20 Drilling costs Completion costs Construction costs Fixed operating cost 1.81 1.37 1.18 1.00 37 39 26 22 NPC 2003

Improved Resource Assessment Key to Much Unconventional Resource Development Technology Area Annual, % 25 years,% Exploration well success Development well success Ultimate per-well recovery Initial production rate 0.53 0.41 0.87 0.74 14 11 24 20 Resource Assessment Drilling costs Completion costs Construction costs Fixed operating cost 1.81 1.37 1.18 1.00 37 39 26 22 NPC 2003

Active Projects in Resource Assessment Quantifying uncertainty in unconventional gas resource assessments in North America Estimating unconventional gas resources outside of North America

Quantifying Uncertainty in Unconventional Gas Resources in North America 30 years of data Recent, unanalyzed data on unconventional resources Compile resource inventories and analyses Develop assessment methodology Well-developed, analyzed basins Assess resources Provide methodology to operators

USGS Applied Methodology for Undiscovered Resources in 2003 SAH97.165 Uinta Piceance

Oil and Gas Resources Occur in Vastly Different Settings USGS 2003

Resource Assessment Methodology Identify areas within petroleum province that are ‘total petroleum systems’ Hydrocarbon source rocks Reservoir rocks Hydrocarbon traps

Classify Petroleum Systems as Conventional … USGS 2003

…or Continuous USGS 2003

Characteristics of ‘Conventional’ Accumulations Relatively high matrix permeability Obvious seals and traps High recovery factors

Characteristics of ‘Continuous’ Accumulations Regional in extent Diffuse boundaries Low matrix permeabilities No obvious seals or traps No hydrocarbon/water contacts Abnormally close to source rocks Low recovery factors Includes tight sandstones, coalbed gas, oil and gas in fractured shale and chalk

Some Don’t Accept USGS Model for Unconventional Resources Green River Uinta Piceance Shanley et al. (2004): Some low-permeability gas fields occur in poor-quality rocks in conventional traps SAH97.165

Schematic of Assessment Area and Petroleum-Charged Cells Boundary of assessment area USGS 2003

Three Resource-Assessment Categories Depicted Assessment area boundary Areas of untested cells Cells tested by drilling Untested cells with potential to add to reserves in next 30 years USGS 2003

Petroleum-Charged Cells Only ‘untested cells with potential’ contribute to resource-base additions Assessment of these cells proceeds on basis of geologic understanding and petroleum engineering principles What we are looking for is untested sweet spots

Production Decline Curves Used to Predict EUR 10,000 Gas 1,000 Production Rate, Bcf/month Oil Water 100 10 1998 2000 Year USGS 2003

EUR Distribution for Continuous Accumulation 100,000 0 50 100 EUR, MMcf or 1,000 bbl Percent of Sample 1,000 10,000 100 USGS 2003

USGS Undiscovered Oil and Gas Estimates for Uinta-Piceance Province, Utah-Colorado Resource Type Oil, MMSTB Gas, Bscf Conventional Continuous P95 7.15 P50 18.47 Mean 20.39 P5 40.44 P95 63.71 P50 191.12 Mean 213.12 P5 436.01 P95 12,145.49 P50 20,121.27 Mean 21,211.03 P5 33,978.81 P95 31.99 P50 37.57 Mean 38.78 P5 56.84

U.S. and Non-U.S. Basins Selected for Further Study U.S. basins studied will probably include frontier areas in Travis Peak and Barnett Shale Non-U.S. basins will include Neuquen and Cuyo basins (Argentina) and Sichuan basin (China)

Estimating Non-U.S. Unconventional Gas Resources Basin Analogs U.S. Basin Conventional Unconventional Conventional Unconventional Known Known Unknown Known International Basin

Objectives and Challenges Develop methodology for identifying analogous basins Estimate potential resources in selected basins Challenges No public literature available General lack of data availability Large number of basins in North America Which parameter to use? What criteria?

Data Collection Build database of reservoir properties Define criteria to find analog basins Include characteristics of international basins Enhance with VBA to compare L48 basins with international basins Analog basin progress Final Analog Basins All NA basins: NA basins with unconventional gas potential 60 - 70 basins Analog rank (%) 31 basins

Data Analysis General basin information Source rock information Reservoir characteristics

Point Calculation Nearness of match, not relative values 1 × WF1 1 × WF1 1 × WF1 1 × WF2 0.1 × WF2 0.8 × WF2 1 × WF3 0.1 × WF3 0.75 × WF3 1 × WF4 0.7 × WF4 0.7 × WF4 1 × WF5 0.8 × WF5 1 × WF5 1 × WF6 1 × WF6 0 × WF6 Total Pts Basin 1 Basin 2 Nearness of match, not relative values Highest scores most likely analogs

Rank Result Sheet

Summary Comments Unconventional resources, especially gas, to play leading role in U.S. energy supply in next 25 years 10 1990 2025 Production, Tcf Year History Projections US Lower 48 conventional onshore US Lower 48 offshore US Lower 48 associated Alaska US Lower 48 unconventional

Summary Comments Unconventional resources also to play increasingly important role in world energy supply in coming decades

With no technology advancement Summary Comments Advances in technology key to developing potential of unconventional resources With no technology advancement With technology advancement 32 22 2000 2025 Tcf Year

Summary Comments Ability to access resources better, identify potential ‘sweet spots,’ quantify uncertainty important part of technology development

Summary Comments USGS methodology for resource assessment good starting point

Summary Comments Widespread applicability of continuous gas accumulation model questioned x

Summary Comments Final modified model to be applied in U.S., other countries to identify broad potential, specific target areas

Enhanced Assessment Techniques for Unconventional Resources John Lee Texas A&M University

Fall 2005 UG Enrollment Class College Station Qatar Fish 99 10 Freshman 44 8 Sophomore 75 Junior 69 Senior 50 Total 337 18

Fall 2005 Graduate Enrollment Degree Total Distance Learning PhD 50 2 MS 93 ME 34 22 Non-Degree 14 191 40