SHALE GAS IN SOUTH AFRICA

Transcription

1 SHALE GAS IN SOUTH AFRICA GasFrac Andrew Rocky Kinghorn Tel: May 2012 An interested and affected party

2 ? Policy adjusted IRP 2010

3 Comparison of scenarios before and after consultation process pressure on renuables Effect of the 2 year nuclear delay? An opportunity for other energy

4 South Africa s electricity prices rise to high end of China and India. NB: This not including a Carbon Tax Area of Industrial Prices China & India Average Industrial Prices (2009 REAL) Area of IRP 2010 Comparative Prices for South Africa ~R0.75/kWh ~R0.50/kWh SA energy gap China and India Prices by Frost and Sullivan RSA historic Price path Eskom IRP Prices by DoEIRP TTT Source: Subject concepts and issue outline, M Rossouw and R Baxter

5 Job creation and protection South Africa needs a transparent affordable price

6 The cost to transition to a new generation mix

7 GasFrac

8 GasFrac - how it Works 1 GasFrac has developed an innovative closed stimulation process, utilizing gelled LPG rather than conventional fracturing fluids. GasFrac operates an advanced sealed system to ensure that the fracturing process is completely controlled and that its patented LPG gel maintains its fluid state, unexposed to the atmosphere and thereby preventing vapour build-up. GasFrac s waterless LPG gel remains in a liquid state throughout the stimulation process and then after the gel breaks it s primary properties include: low surface tension, low viscosity, low density, along with solubility in naturally occurring reservoir hydrocarbons-all of which when added together, create significantly more effective fracture lengths, enabling higher initial and long term production of the well.

9 GasFrac - how it Works 2 One of the keys to more effective fracture lengths is the ability of GasFrac's gel to hold evenly distributed proppant during pumping, thereby decreasing chances of proppant settling or falling out prematurely in the created fracture, and in turn maximizing the fracture lengths for every stage. Another key is after GasFrac maximize the fracture length; GasFrac s gel breaks and becomes soluble with the reservoir hydrocarbons, whether they are oil or gas, and can be returned in the normal flow back and recovery process. Since GasFrac's gel is miscible on first contact with crude oil, nearly 100% of GasFrac's fluid can be recovered in a much shorter time than a traditional treatment. This greatly increases the opportunity to hit peak initial production much sooner than with traditional fracturing fluids.

10 GasFrac - how it Works 3 There is a direct correlation that is recognized in the E&P industry that ties the amount of fracture fluid load recovery with effective fracture volume and GasFrac has proven that it can recover close to 100% of the base fluid, LPG, in 10 to 15 days of stimulation which quantifies and maximizes the effective frac volume in the wells we stimulate. Since GasFrac s waterless LPG gel stimulation process is sustainable and GasFrac are able to recover ALL of GasFrac s fluid through recapturing or recycling processes, GasFrac also greatly reduce the need for any post fracturing clean-up or disposal, creating a back side cost benefit often overlooked in cost considerations of completions.

11 Technology comparison

12 Comparison of water and LPG

13 Viscosity Viscosity is a measurement of the resistance to flow. The lower the viscosity the easier it is to flow (i.e. it s easier to flow milk than honey out of bottle). In the case of propane, it is 8 times less viscous than water making it 8 times easier to flow out of the fracture than water.

14 Specific Gravity Specific Gravity refers to the density of the fluid. Propane is half the density of water. That means for a well at the same vertical depth one filled with Propane will exert half as much pressure on the formation as that of a well full of Water. This is important because obtaining the lowest backpressure on the formation will result in the best cleanup of the formation and long term production rates and recoveries.

15 Surface tension Surface tension is the property of a liquid surface that enables it to resistant an external force or surface like a rock/formation face. The lower the surface tension the easier it is for that fluid to flow past the surface of the rock. Propane takes 10 times less force to move it pass the surface of the rock. This is similar to waxing your car. The wax reduces the surface tension between the water and the paint allowing the water droplet to roll off your car

16 Does LPG fracturing only work in certain gas reservoirs and certain formations? GasFrac have stimulated over 45 different formations. These include shales, sandstones and carbonate formations. Fracgac have found that propane fracturing is applicable to oil, liquid rich gas and dry gas formations as well as gas storage wells. While water sensitive formations that contain clays or under pressured formations that may become or partially depleted wells are the ideal candidates for propane fracturing, no limitations are foreseen with regard to formations in the application of this technology.

17 Is GasFrac more expensive than traditional hydraulic methods? The key metric in determining how LPG fracturing price competes with water fracturing is the ability of GasFrac's customer to realize longer effective frac lengths. Achieving 3-5 times longer effective fracs will offset the incremental cost by delivering lower BOE development costs and higher production and EUR s per well, plus quicker time to market. Other costs that are usually not taken into consideration when comparing LPG fracturing to water are the elimination compared with the need for water, water wells, ponds, handling facilities, frac tanks, additional cartage, disposal costs and the reduced flow back cost due to quick clean up.

18 Conventional fracturing length versus LPG fracturing length

19 The LPG while being pumped during the frac job is viscous (after the frac closes the fluid returns to a low viscosity) and can support sand. These differences explain why 100% of the propane is typically recovered on LPG stimulations and only ~20% of the water is recovered on water based stimulations.

20 LPG By using LPG, we are able to realize a higher yield of oil or gas and we don t take water away from other uses or have the demanding logistics of transporting millions of gallons of water to a well. We re friendlier to the environment, and the flow-back costs- the time and effort of recovering, filtering and reusing the fluid- are drastically reduced. It s exciting to use this technology and have a positive effect on industry Stacey Walker- CHEVRON

21 GasFrac Fracturing site

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30 Closure Discussion The end