13 - Baker Hughes - Kennedy En

Shale Gas Challenges / Technologies Over the Asset Life Cycle U.S.–China Oil and Gas Industry Forum Robert ‘Bobby’ Kennedy – Baker Hughes inc September, 2010

1 © 2009 Baker Hughes Incorporated. All Rights Reserved.

AGENDA • Shale Gas Reservoir and U.S. Shale Gas Basics

• Challenges / Technologies Over the Shale Gas Asset Life Cycle

 EXPLORATION  APPRAISAL  DEVELOPMENT  PRODUCTION

 REJUVENATION

2 © 2009 Baker Hughes Incorporated. All Rights Reserved.

The Shale Gas ‘Reservoir’ • Shale Gas - Unconventional natural gas ‘reservoir’ contained

in fine-grained sedimentary rocks, dominated by shale containing clay and other minerals like quartz, calcite • Continuous Formation - No Trap - Not a true ‘Reservoir’ Gas Sourced and Remains in Same formation • Total Organic Carbon, Thermal Maturity, Mineralogy, and Natural Fractures are Key - Porosity & micro/nanoDarcy-Permeability, secondary • Gas stored in three ways: 1. Free Gas a. In Rock Matrix Porosity b. In Natural Fractures

2. Sorbed Gas

Source: EIA

a. Adsorbed on organic and mineral surfaces w/in Nat Fractures b. Absorbed on organic and mineral surfaces w/in Matrix

3. Dissolved - In HC liquids present (bitumen) Total Gas = Free + Sorbed + Dissolved 3 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Key Reservoir Parameters • Brittle Rock – Helps maximize extent of induced fracture network (Brittle Rock will Frac like Glass = better SRV)

• Stress Regime – Relates to pattern orientation and well spacing • Over-pressure – May require high strength Frac proppants • Local Lithology Variations • Faults, Karsts, Water • Organic Content

Relates to well productivity

Total Porosity increases at higher TOC Relates to gas in place TOC decreases at higher Ro

• Micro-porosity • Thermal Maturity (Ro) - >Mature = Dry Gas

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<Mature = Wet Gas

Gas Shale Basics (U.S. Basins) • Formation Thickness, 20 – 600 ft (net) • Depth, 6,500 – 13,500 ft • Well IP’s, 2 – 10+ MMcfd • Primarily Dry Gas • Some produce small amounts of water • Typical Decline:

- Initial Flush Flow - 1st Yr Steep Decline (65-80 %) - Produces slowly over time, 25+ Yrs Production, MMCFD

Shale Gas Type Curves 12

Haynesville

10

Woodford

8

Barnett

6 4

Marcellus

2

Fayetteville

0 1 3 5 7 9 11 13 15 17 19 21 23 25

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All Shales Are Not the Same (Geology Varies Even in the Same Basin)

Developing Shale Gas • Gas Shales must be Fracture stimulated to produce commercially

– Artificial Reservoir is achieved by: 1. Multi-Stage Fracturing 2. Horizontal Wells

• Effectiveness of Hydraulic Fracturing determines: - Production rates

- Drainage area - Recovery • Vertical Wells to define play and collect reservoir data • Horizontal Wells to develop – Laterals 3,000 - 6,000 ft • Well Spacing Avg. 80 acres

‘All Shale Gas Reservoirs are Not the Same’ 6 © 2009 Baker Hughes Incorporated. All Rights Reserved.

How Many Wells for 1TCF (30 BCM) of Shale Gas? 1400 1200

Barnett-Fayetteville-Woodford-Marcellus-Haynesville-Horn River Total TCF 44 42 11 262 251 100

Well Count

1000 800

Typical Scenarios

200 - 250 Wells/TCF

600 400 200 0 0.9

1.8

3.5

5.3

7.1

8.8

10.6

BCF/Well

0.025

0.05

0.1

0.15

0.2

0.25

0.3

BCM/Well

Ultimate Gas Recovery Per Well, BCF (BCM)

Ultimate Gas Recovery Per Well

Shale Gas Development Requires Large Number of Wells 7 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Shale Gas Asset Life Cycle

8 © 2009 Baker Hughes Incorporated. All Rights Reserved.

EXPLORATION Challenges / Technologies  Determine the Economic Value and Reservoir Potential  Understand Field Wide Well Placement and Architecture  Reservoir Characterization TECHNOLOGIES • Reservoir Analysis • Geomechanics • Formation Evaluation • Economic Evaluation

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Reservoir Analysis • Conventional reservoir modeling/analyses Not effective for Shale Gas

- Complex reservoir characteristics and gas flow regime introduce difficulty in predicting GIP, recovery, production profiles, well placement, and design fracturing programs/completions • An Integrated Multidicipline Approach is required to forecast

production, recovery, design fracture stimulations, and well placement for use in Economic Evaluations

• BHI through Reservoir Development Services currently provides

Integrated Approach and employs Shale Engineering to analyze/design optimized completions and stimulation for maximum Producing Rates and Recovery used in determining Shale Reservoir Potential

10

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BHI Integrated Approach - Workflow Petrophysics: •Mineralogy •Rock Mechanics

Disciplines: Geomechanics, Geochemistry, Petrophysics, Rock Properties, Seismology, Reservoir, Well, Stimulation Modeling

Better stimulation •Where •Number of stages •Frac design

Geomechanical Model

Monitoring

Calibration

(Microseismic)

“Shale Engineering”

Better drilling and completion design

C. Jenkins,2010

Optimized Production 11

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Improved Predictions

APPRAISAL Challenges / Technologies  Validate the Economics of the Reservoir  Generate a Field Development Plan  Refine and Optimize Completion Design

TECHNOLOGIES • Reservoir Analysis • Geomechanics • Formation Evaluation • Economic Evaluation 12 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Geomechanics Important in Exploration, Appraisal, and Development Phases of Life Cycle  Pre-Drill Modeling and Analysis for:  Wellbore Stability Management  Pore Pressure Prediction  Determining In-Situ Stress  Comprehensive Well Planning

 Geomechanics Models for Hydraulic Fracturing Design

(propagation, stages, perfs), Well Placement, and Completion Design

13

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Reservoir Characterization Challenge • No single Log or Core provides all the Answers • Conventional Log Suites can Not provide all characterization data required for Shale Gas Solution - BHI Shale Gas Evaluation Suite Provides: Porosity

Fracture Characterization

Permeability

Dynamic and Static

Water Saturation Mineralogy Shale Lithofacies Total Organic Content Maturity Level (Thermal) GIP (adsorbed and free)

• Run in Vertical Wells 14 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Geomechanical Rock Properties Pressure Gradient Stress Regime Siliceous Index SWC Analysis

BHI Shale Gas Evaluation Suite An Integrated Petrophysical Approach Using Logs and Analyses to Characterize Highly Complex Shale Gas Reservoirs

Log & Analyses Identifies: Optimum “Fracturable” Intervals  Formations to Drill Horizontal Laterals  Potential Barriers for Frac Containment 

Lithology Mineralogy Th/U for Carbon classification

IntelliFrac Micro-seismic

300+ Evaluation Suites run in US Shale Gas, 40+ in Canada 15

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DEVELOPMENT Challenges / Technologies  Minimize Drilling Costs  Optimize Completion and Fracturing

Design  Minimize Environmental Impact

TECHNOLOGIES • Well Design / Drilling • Hydraulic Fracturing • Well Completion • Environmental 16 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Reducing Days on Well by Drilling Optimization Offset Well and Dull Bit Analysis

Downhole Tools, Analytical Tools and Modeling BHA Modeling

Friable Formation

Friable Formation

Torque, Drag, Hydraulics Modeling

Stabilizer in this section at RPM change

RPM change

RPM near critical speed, then BHA enters hard formation

Appears to result from stabilizers hanging on ledges and allowing bit to side cut

Downhole dynamics measurement

AXIAL

LATERAL

TORSIONAL

DF Designs & ECD 17 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Structured Processes & Engineering Training

Reducing Risk/Cost (Additional Trips) • Drill Bits – Quantec™ PDC & Tricone Bits specifically designed for Shale Gas - Vertical, Curve, and Laterals Goal – Drill the Curve & Lateral with Single Bit and BHA Trip

18 © 2009 Baker Hughes Incorporated. All Rights Reserved.

• Directional Services – Custom BHA’s – Ultra™ Motor Technology – Rotary Steerable – AutoTrak eXpress™ – TeleTrak™ (MWD) & MWD Tools

Optimizing Wellbore Placement – Reservoir Navigation Services (RNS) RNS - Real-time LWD to detect adjacent formations

(AziTrak™ & GR)

- Ensure optimal reservoir entry

- Maintain optimal position within reservoir - Avoid reservoir exit - Steer to ‘sweet spot’

Reservoir Navigation Services Top Bottom Top

Cap Rock Well Path Reservoir

• Reduced Number Wells/ST’s • Reduced overall Costs • Increased Production & EUR

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Deep Resistivity Image

Depth of Detection

Distance to Bed Boundary

High Efficiency Rotary Steerable Systems • Decrease risk – Improves borehole quality for lower risk associated with running casing in long laterals

• Reduce rig time – Eliminates orientation and slide time associated with steerable motor drilling – Improves overall effective ROP

Rotary Steerable

Steerable Motor

Rotate

Slide

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Optimizing Drilling Fluid Programs For Increased ROP and Reduce Environmental Impact • Drilling Fluid – – – –

Barnett: WBM, OBM/Brines (some cases) Haynesville: WBM to KOP, then OBM Marcellus: Air/Mist to KOP, then WBM or SBM Eagle Ford: Fresh Water for Surface, then OBM

• Density – – – –

Barnett: < 10.0 ppg Haynesville: 12.0 – 16.5 ppg Marcellus: 11.5 – 14.0 ppg Eagle Ford: 11.0 – 12,0 ppg

•Environmentally Friendly Fluids - BHI TERRA MAX™ ‘Environmentally Acceptable Alternative to OBM’ - NEXT-DRILL™ ‘Synthetic Invert Emulsion’ 21

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Reduce Cost and Environmental Risk with Centralized Dewatering • Recycle processed water for drill or wash water • More efficient disposal after dewatering • Remove suspended solids in WBM BHI can help make operation Green:. - Reduce fluid waste, disposal costs, transportation fees, environmental impact - Reuse fluid in future well operations

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Shale Gas Drill Pads – Logistics & Environment (Shale Gas Factory)

Eco-Centre™

DRILL PAD

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Developing a “Shale Gas Factory” • 10 + wells from a single pad • Shared rig access, mud pits • Skid-mounted Frac-pumps • Gas conditioning & compression • Gas export • Minimize Environmental Impact - Footprint - Fit for Purpose Eco-Centre™ for Solids and Waste • Alliance with service provider (BHI) to capture learning curve benefits

Hydraulic Fracturing Process 1. Pump Pad

- Causes rock to fracture - Creates fractures to accept Proppant

2. Pump Slurry

Proppant (size-graded particles, spherical white sand / man-made) mixed into fluid Slurry; pumped in to prop open created fractures 3. Flush

Clean fluid to clear surface lines & well tubulars of proppant; pumps shut down 4. Bleed Off well pressure to allow fractures to close on proppant 5. Recover injected fluid by flowing/lifting well

(Typically recover <30% of frac fluid)

24 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Fracturing Fluid Fracturing Fluid = Base Fluid + Additives + Proppant  Base fluid – water or oil  Additives – Gelling Agents, Crosslinkers (polymers), Friction Reducers, Breakers, Surfactants & Non-emulsifiers, Biocides  Proppants – White Sand (for Shales), Brown Sand, Low Density Ceramics, Resin-coated Sand, Sintered Bauxite Typical Shale Frac Basic Materials Per Stage SHALE

STAGES

*Xf

COMPLETION

ft

METHOD

FLUID TYPE

FLUID VOLUME

PROPPANT

PROPPANT

Bbls/Stage

TYPE

Total Lbs.

BARNETT

7-9

300-400

Plug-N-Perf

Acid, SW

14,000

Ottawa/Lite

550,000

FAYETTEVILLE

8-11

250-300

Plug-N-Perf/OH

Acid, SW

6,500

Ottawa

300,000

HAYNESVILLE

8-11

300

Plug-N-Perf/OH

Acid, SW /Poly

11,400

Other

330,000

MARCELLUS

6-8

300-400

Plug-N-Perf/OH

Acid, SW

16,000

Ottawa

785,000

WOODFORD

8-10

250

Plug-N-Perf/OH

Acid, SW

18,500

Bauxite/Other

255,000

EAGLE FORD

8-10

350

Plug-N-Perf

Acid, SW

12,800

Ottawa/DC

300,000

* Fracture half length estimated

SW = Slickwater

25 © 2009 Baker Hughes Incorporated. All Rights Reserved.

OH = Openhole

Fracture Treatment Monitoring Methods • Conventional Temperature and Tracer Surveys

- Data near well-bore vicinity - Fluids & proppants ‘traced’ • Distributed Temperature Sensing (DTS) - Fiber Optic • Production Logging - Spinner surveys - Flow & Temperature • Microseismic Monitoring - During fracture treatment / Near real-time - Managing treatment and post-treatment analysis

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Typical Shale Gas Completion Options – (For Hydraulic Fracturing the Well) • Cemented Liner – Plug-N-Perf Method

• Openhole Completion Systems – BHI FracPoint™ – Others (Frac Sleeves & Isolation Packers)

27

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Plug-N-Perf Method

• Cased Hole - Perforate & Produce Multiple pay zones • Hydraulic Fracture each individual zone • Set Plugs for zonal isolation • Drill Out Plugs and Produce 8,000+ Composite Plugs run by BHI in Barnett 28

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FracPoint™ Completion System • One-trip system – Up to 24 stages • Continuous Multi-zone Frac (Shortest overall Time) • Drop a Ball To:

- Shift sleeve

- Isolate previous Frac - Open new zone

• Versatile system

- Eliminates perforating & liner cementing operations

- Primary and Re-fracturing applications - Reduced Cost vs Plug-N-Perf

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450+ Installations Shale Gas & Bakken (oil)

PRODUCTION Challenges / Technologies Reduce Environmental Risk  Maintain Production Rates  Reduce Scaling, Corrosion, and Microbial Contamination  Meet Gas Pipeline Specifications 

TECHNOLOGIES • Frac Chemicals • Production Chemicals • Environmental 30 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Shale Fracturing (Fluid) Challenges • Large Slickwater Fracs: Water stored in lined/unlined earthen pits open to atmosphere for days/months

• Frac Water Sources:

– Fresh water supply wells, chlorinated city water, rain – Ponds, rivers, streams, lakes – Re-used frac flow back water

• Frac Process & Slurry allows Bacteria to form downhole • Different waters mixed - Scale formed & severe Bacteria/Algae • Frac water Not Treated, Problems: - Microbial Influenced Corrosion - Generation of Hydrogen Sulfide - Scale deposits (Radioactive)

31

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BHI AddFRAC™ Fracturing Chemical Program 1. Survey 2. Chemical Selection - Biocides - Scale Inhibitors - Corrosion Inhibitors - Oxygen Scavengers - Flow Stimulators & Friction Reducers - Surfactants - Clay Stabilizers

3. Implementation AddFRAC™ Program - Monitoring - Testing - Reporting - Optimization 3,000+ AddFRAC Programs in Shale Gas 32 © 2009 Baker Hughes Incorporated. All Rights Reserved.

Production – Chemical Management • During Production - Effective corrosion, scale, and bacteria

monitoring and treatment are required • Water Management and gas deliquification Necessary - BHI F.O.A.M.™ production stimulation / deliquification - BHI Continuous Optimization (Automation) of chemical injection rates through effective Monitoring and Reporting - Chemicals for water treatment

33 © 2009 Baker Hughes Incorporated. All Rights Reserved.

REJUVENATION Challenges / Technologies Reduce Production Decline  Remediate Sub-Economic Wells  Determine Recompletion and Workover Strategy 

TECHNOLOGIES • Remediation • Restimulation • Recompletion

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Rejuvenation Solutions • Chemical and Mechanical Remediation • Coil Tubing Intervention and Recompletions • Restimulation/Re-Frac “Fracs Do Not last Forever” Fractures Close, Proppants Fail, Stress Regime Changes w/Production

• Revised Field Development Plan • Re-entry and InFill Drilling, Multilaterals

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Shale Gas Challenges/Technologies Over the Asset Life Cycle

THANK YOU 谢谢

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