Moin_raza_khan Unconventional or Tight Gas Development Challenges and Pricing Issues
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Unconventional/Tight Gas DevelopmentChallenges and Pricing Issues
PIP - Pakistan Energy Conference 2011
April 10 – 12, 2011
Serena Hotel, Islamabad
Moin Raza Khan General Manager Exploration
Dr. Fareed Siddiqui Senior Manager Reservoir Engineering
Saqib Ahmed Chief Accountant
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TALK OUTLINE
Global Energy Overview
Energy Resources Overview - Pakistan
Unconventional Reservoirs? - Resource Potential
Unconventional Reservoirs - Development Challenges
Pricing Issues vis-à-vis Risk, Uncertainty and Cost of Exploration and Development
Conclusions and Recommendations
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Future prediction By year 2030……
By year 2030 totaldemand to be about 100million barrels oil per day
The global energy mixwill look very similar
Resources are adequateto support global demandgrowth. Access alongwith Technology areimportant in all aspects
of our energy challenges
Still considered thesafest resource, vizrecent nuclear disaster inJapan
Source: Exxon Mobil Corporation – 2009 Summary Annual Report
MMboed
350
300
250
200
150
100
50
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Energy Resources Overview - Pakistan
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Country’s Exploration & Production
Hydrocarbon Potential vs. Exploration Total Sedimentary Area = 827,268 Sq. km.
Area under Exploration = 279,618 Sq. km. (34%)
Reserves Prognosticated Discovered
Oil (Billion barrels) 40 1
Gas (Trillion Cu. ft.) 200 54
Wells Drilled:Exploratory (Success Ratio: 1:3.3) 776Discoveries 238
Development and Appraisal 1,048
Average 22 wells per 10,000 Sq. Km. against world average of 100 wells
Oil and Gas Reserves / Production:Product Reserves Production R/P RatioGas 27.59 Tcf 4,208 mmcfd 18.9Oil 306 MMBBL 68,298 bpd 12.9
PPL’s share in Country’s Production: Gas 24%
Oil /NGL/Condensate 09%
2
10
30%
10%
0%
10%
20%
30%
40%
0
2
4
6
8
10
12
Pakistan World
Drilling Density and Success Rate
Drilling Density Success Rate
659 mmbbl
306 mmbbl
Crude Oil Reserves January 2011
Cumulative Production Balance Recoverable
26.40 Tcf
27.60 Tcf
Natural Gas Reserves January2011
Cumulative Production Balance Recoverable
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Pakistan - Future Energy Demand Supply Deficit
Coal lmports
137.6
(demand)
33.5
(local)
88.5(supply)
Nuclear
Local Coal
Projected indigenous gas supply
(Source: Ministry of Petroleum)
Projected naturalgas demand at
4.5% GDPgrowth
(2.5 bcfd)(8 bcfd)
Source: PIP – Energy Outlook April 2011
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Unconventional Reservoirs (UCR)?Resource Potential
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"Future energy resources of the World, particularly gas, will be found in
what we consider today to be unconventional reservoirs. These are not, in
fact, undiscovered resources, since their occurrences are fairly well-known.
However, we do not have adequate geologic data to evaluate the
contribution such reservoirs will make to the World’s energy endowment in
the future.”
(USGS)
Why go for unconventional reservoirs......
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Resource Triangle
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Unconventional Hydrocarbon Resources
Unconventional resources are
o Difficult to develop with available technologyo Expensive to produce
Unconventional hydrocarbon resources include
o Tight Gas (TG) Sand Reservoirs (in situ permeability of less than 0.1 mD and porosity about 10%)
o Shale gas
o Coal bed Methane
o Deep gas
o Methane hydrates
o Tar sands and Oil
shales
Basin-centered Gas
Permeable Ssreservoir
Tight gasplay
Pervasiveprolific source
rock
Region Coalbed Methane(Tcf)
Shale Gas(Tcf)
Tight Sand Gas(Tcf)
Total(Tcf)
World 9,051 16,112 7,406 32,560
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Total Unconventional Gas in Pakistan
Total Known Tight Gas:~34 Tcf
Prognosticated ShaleGas in-place Reserves :65 Tcf
Preliminary Analysis
A Shale Gasassessment study isunderway
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Reservoir Management Challenges
In-place and Reserves Estimation - Difficult to Estimate
Specialized Logging, Reservoir Engineering ConceptsModification required for low rate production, lowpermeability reservoirs
Sharp Decline in Well Productivity
~70% decline in the first year Long Production Tail
Reserves highly sensitive to price because of highCapex/Opex
Limited per well Drainage Area
Per well recovery limited to well drainage area
10-20 acre well spacing as compared to 160 acre for Conventional reservoirs
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How to Initiate UCR Projects
Operator Identify and analyze TGR development project
Define pilot project
Submit development concept to authorities
E&P Service Contractor
Offer latest technologies and equipment,
Experienced people,
Discount for TGR campaign
Government authorities
Provide incentives to the industry for TGR developments
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Specialized Development Strategies –
From Technical Success to Commercial Success
Evaluate and Plan Develop Resource Maps
Core and Core analysis
Logging and Testing
Exploration/Exploitation Plan
Pilot
Select Pilot Area
Pilot well – Confirm Drilling and Completion Strategy
Optimize
More than one Pilot may be required for differentsections of the same Resource
Develop
Modular Development Approach
Similar to Mining Approach
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TG Policy The tight gas policy announced by GoP in 2010 provides the
stepping stone for Pakistan’s unconventional gas industry. The
policy provides 40% - 50% premium over the 2009 Policy Price.
Tight Gas Price on the Card!
Compared to price of imported petroleum products of aroundUS$ 13 /mmtbu *
* Source: Pakistan Energy Yearbook 2010
40% premium(USD / mmbtu)
50% premium(USD / mmbtu)
PP '09 (Z III) 6.13 6.57
PP '09 (Z II) 6.59 7.06
PP '09 (Z I) 7.04 7.55
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Economic Scenario
Input Assumptions Normal BTU Case Medium BTU Case
Gas Initially In Place 750 BCF 750 BCF
Recovery / Shrinkage 59% / 85% 59% / 85%
BTU Factor 920 850
TG Price for Zone II II
Well productivity 5 MMscfd 5 MMscfd
No. of wells 25 25
Production cycle 20 year 20 year
Opex / boe $3.5 $3.5
Capex $421m $511m
Escalation 3.5% 3.5%
Discount Factor 14% 14%
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IRR Sensitivities at Different Crude Prices
Results of Economics (2of 3)
18.4920.1
20.5
22.43 22.43
11.98
13.29
13.62
15.2 15.2
0
5
10
15
20
25
0 20 40 60 80 100 120 140
Inen ReoRun
Oil Price (US $/Barrel)
Base Case - Medium BTU Value (920) Low BTU Case (850)Normal BTU (920) Medium BTU (850)
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NPV Sensitivities with variation in CAPEX & OPEX (@ CrudePrice 75 $/bbl)
Results of Economics (3 of 3)
62.84
41.4930.39
-4.59
-24.7-35.02
-70.00
-20.00
30.00
80.00
130.00
180.00
Base 10% 15%
Na1% D(UMio
CAPEX + OPEX Sensitivities
Base Case - Medium BTU (920) Low BTU Case (850)ormal BTU (920) Medium BTU (850)
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Thanks
& Questions?
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Conventional sandstone reservoir
Tight gas sandstone
Tight Gas Reservoir
Gas bearing sandstones and carbonateshaving in-situ permeability to gas of lessthan 1 mD
Many ‘ultra tight’ gas reservoirs may havein-situ permeability down to 0.001 mD
Typically, un-stimulated gas flow rates ina well less than 1 mmscfd
USA: ~ 300 Tcf (Recoverable reserves)
Pakistan: ~ 34 Tcf (Estimated recoverable resource)
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The term “Shale Gas” refers to
unconventional, continuous-type, self-sourced resources contained in finegrained organic-rich, low permeabilityclay rich rocks
Shale permeability restricted utilization of a rich resource in the past
Horizontal drilling and Hydraulic fracturingresulted shale gas boom in recent years
Shale gas accounts for major gas supplyin North America – Expected to rise more
USA: ~ 742 Tcf (Recoverable reserves)
Pakistan: Not estimated, could be up to ~65Tcf
What are shale gas?
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Basinwise Prognosticated Reserves
of Shale Gas in Pakistan
Prognosticated ShaleGas in-place Reserves :65 Tcf
Preliminary Analysis
PPL-Eni undertakinga joint Shale Gasassessment study for Pakistan
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Hydraulic multi-fracture simulationUnder balance Drilling
Coil Tubing
Enhance Perforation
Acid Stimulation
Tight Gas Development Technologies
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Drilling for Unconventional Resources requires to leverage on
Fit-for-purpose Rigs, portable, fast moving, multiple workstrings with minimal footprint
Managed pressure-drilling with adaptive fluids
Requires industrialized drilling environment in the country
Development of Unconventional Resources:
Drilling & Production Technology
Production
Sand jet perforation followed by annular coiled tubing (CT) fracture stimulation => excellent
production results in targeted thin-sands
Completion: Fraccing with Microseismic Monitoring technology. Directional frac. Dewatering.