Potassium Silicate Based Drilling Fluids CAODC January 30th, 2008

Approximate # of Wells Drilled with Silicate Based Fluids since 1998

Use in North America Canada Mexico USA Commonly used in foothills of Alberta and British Columbia using only potassium silicate Mexico steadily used in Southern Mexico only water based system offering inhibition close to oil based systems USA inhibition with HS&E advantages Used in Colorado & Wyoming as well as OK, TX, LA, WA & AR

Sodium/Potassium Silicate Overview

Manufacturing Silicate Heat Energy Raw Material Raw Material steam Spray dried

Soluble Silicate Overview Silicon is the 2nd most abundant element in the earth’s crust ~28% Soluble silicates are among the largest volume of synthetic chemicals World wide volume of sodium silicate is ~4 million tonnes on SiO2 basis Soluble silicates have been manufactured on an industrial scale since the 1830’s Soluble silicates are a major class of chemicals finding a wide range of applications in numerous industry sectors Household detergents Pulp and paper production Water treatment Mining Soil stabilization Paints & binders Cements

Silicate Products for Detergents with Typical Uses Metasilicate (1.0 Ratio) High alkalinity Used extensively in: industrial & institutional laundry, steel cleaning, hard surface cleaners Liquid Silicates (including 2.5 ratio potassium silicate) Milder alkali buffer Frequently used in: liquid laundry, consumer spray-dried powder, auto-dish Spray-dried powder Silicates (2.0 & 2.4 ratio) Frequently used in: consumer powder laundry, auto-dish Valfor 100 Mildly alkali (pH 10) Used primarily in consumer powdered laundry, some carpet freshener and car wash applications.

Silicate Drilling Fluids

Performance Properties of Silicate based Drilling Fluids Shale Inhibition HS & E Corrosion Control Better Cementing

Health, Safety & Environment

Health and Safety Silicates are one of the oldest and most benign industrial chemicals Used in a wide variety of applications including water treatment, soil remediation, agriculture etc…) Silicates are non flammable and contain no VOC’s thus making their use very popular with rig crews Generally Recognized As Safe by USDA and FDA (GRAS List) HMIS rating: health rating -1 (slight) flammability rating -0 (none) reactivity rating - 0 (none) contact rating - 2 (moderate due to pH) Alkalinity of a silicate drilling fluid is very similar to laundry soap ( i.e.. Both use approximately the same ratio and concentration of silicate)

Potassium Silicate Drilling Fluids & Corrosion Control

Silicate Drilling Fluids for Corrosion Control Silicate Corrosion Control: Protective Silicate Layer on Metal Surface Low Electrical Conductivity (vs. KCl System) alkaline pH (~ 11) Buffers Acid Gas Influxes Limits Bacterial Degradation Low Toxicity

Silicate Corrosion Control Alkalinity (pH) Potassium Silicate (1 – 10 %): pH ~ 11.0 Anode: Fe → Fe2+ + 2 e- Cathode: 2 H+ + 2 e- → H2 (acidic environment) Cathode: O2 + 4 H+ + 4 e- → 2 H2O (acidic environment) Cathode: O2 + 2 H2O + 4 e- → 4 OH- (alkaline environment) Neutralization of Acid Gases: Formation of carbonic acid: CO2 + H2O = H2CO3 Neutralization of carbonic acid: H2CO3 + OH- → CO32- + 2 H2O Neutralization of hydrogen sulfide: H2S + 2 OH- → S2- + H2O Prevents Bacterial Degradation of Drilling Fluid Additives

Electrical Conductivity Silicate Corrosion Control Dissolved Salts (Electrical Conductivity) Drilling Fluid Electrical Conductivity Potassium Chloride Potassium Silicate Electrical Conductivity (mS.cm-1) Concentration (%)

Corrosion Coupon Testing Silicate Concentration Field Testing: (British Columbia + Alberta) Steel Corrosion Coupons (AISI 4130)* Location: Drill Pipe (Above Collars) Exposure Time: > 75 h Calculate Corrosion Rate: low: 0 – 5 mpy moderate: 5 – 10 mpy high: > 10 mpy Silicate Concentration Corrosion Rate (mpy) 1 % (volume) 1.3, 1.9 1.9, 3.7 10 % (volume) 1.8 1.2 5 % Potassium Chloride > 25 * API Recommended Practice: 13B-1

Reference Papers

SPE Papers on Silicate Based Drilling Fluids 100599- Use of Silicate-Based Drilling Fluids to Mitigate Metal Corrosion 92769- Silicate-Based Fluid, Mud Recovery System Combine to Stabilize Surface Formations of Azeri Wells 88008- Novel Application of Sodium Silicate Fluids Achieves Significant Improvement of the Drilling Efficiency and Reduces the Overall Well Costs by Resolving Borehole Stability Problems in East Africa Shale 87133- Silicate-Based Drilling Fluids Deliver Optimum Shale Inhibition and Wellbore Stability 86700- Exceeding Drilling Performance and Environmental Requirements with Potassium Silicate Based Drilling Fluid 78148- Silicate/Enhanced Low Shear Rate Viscosity (LSRV) Drilling Fluid System and New Drilling Approach in Rang Dong Field 77447 - Development of Novel Membrane Efficient Water-Based Drilling Fluids Through Fundamental Understanding of Osmotic Membrane Generation in Shales 74557 - Membrane Efficiency in Shale - An Empirical Evaluation of Drilling Fluid Chemistries and Implications for Fluid Design

SPE Papers on Silicate Based Drilling Fluids 74378: Novel Application of Ecological System Drilling Fluid Accomplishes Significant Advances in the Hole Stability Problems 67737: Research into Lubricity, Formation Damage Promises to Expand Applications for Silicate Drilling Fluids 63053: Shale Stabilization by Pressure Propagation Prevention 59751: Use of Silicate Mud to Control Borehole Stability and overpressured Gas Formations in Northeastern British Columbia: 57564: Horizontal Drilling Experience in the Panna Field 39401: New Insight into the Mechanisms of Shale Inhibition using Water Based Silicate Drilling Fluids: 37611: The Use of Silicate-WBM Facilitates Successful Primary Cementation Operations on the BHP Petroleum Liverpool Bay Development: 37266: Silicate Based Muds: Chemical Optimization Based on Field Experience: 35059: Silicate-Based Drilling Fluids: Competent, Cost-effective and Benign Solutions to Wellbore Stability Problems:

Other Papers on Silicate Based Drilling Fluids World Oil, Oct. 1998: Back to the future in silicate drilling fluids World Oil, April 2003: Drilling fluid and cementing improvements reduced per-ft drilling costs by 10% AADE -04-DF-HO-29: Sodium Silicate Fluids Improve Drilling Efficiency and Reduce Costs by Resolving Borehole Stability Problems in Atoka Shale AADE -04-DF-HO-28: Flexible Drilling Formulation and Application AADE -04-DF-HO-29: Silicate based Drilling Fluids: A Highly Inhibitive Mud System Offering HS&E Benefits Over Traditional Oil Based Muds AADE-06—DF-HO-40: Next Generation Silicate Technology Reduces Cost and Improves Performance