Shale Fracking What are the Risks? Control of Well Coverage Issues

Transcription

1 Willis North America Energy Conference Shale Fracking What are the Risks? Control of Well Coverage Issues Daniel C. Dan Mason Houston - London Willis North America Energy Conference Shale Fracking: What are the Risks? May 17, 2012 Slide No. 1

2 Personal Background Daniel C. Dan Mason, Senior Vice President, MatDan - Houston Bachelor of Science in Petroleum Engineering, The University of Texas, years of oil & gas experience 12+ years of oil & gas well operations experience in Drilling planning and execution; Production management and well workover; and, Facility maintenance and construction. 13+ years of onshore and offshore energy claims adjusting experience Well control / underground crossflow; Offshore structures, Onshore Property / Oilfield equipment; and, Upstream facilities. Expertise with OEE, Physical Damage, and Upstream Liability claims both Onshore and Off. Willis North America Energy Conference Shale Fracking: What are the Risks? May 17, 2012 Slide No. 2

3 Horizontal Drilling and Fracking Development of shale formations has been result of improvements in the following technologies: Drilling equipment; Monitoring instrumentation; and, Hydraulic fracturing. Exploration & Development of shale formations has contributed to the reversal in the decline in U.S. domestic oil and gas production. But, from the shale drilling, allegations of damage to fresh water resources have arisen and so have videos My Water s On Fire Tonight Taken in part from Willis North America Energy Conference Shale Fracking: What are the Risks? May 17, 2012 Slide No. 3

4 Wells drilled in the United States Total Rig Count: 1974 (as of 11-May-2012) only 45 offshore Of that, some 70% are drilling for oil, 30% are drilling for gas And of that 60% are being drilled horizontally, while 28% vertically & 12% directionally. US Onshore only: Total Rigs: 1929 on 11-MAY-2012 Up 8 or 0.4% compared to previous week. Up 132 or 7.3% year-over-year. Baker Hughes Interactive Rig Count: Willis North America Energy Conference Shale Fracking: What are the Risks? May 17, 2012 Slide No. 4

5 Wells drilled in the United States Energy Information Administration Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 5

6 Horizontal Shale Well Characteristics Drill multiple wells on a wellsite to decrease wellsite pad preparation costs per well; and, minimize environmental impact / footprint. Drill longer horizontal laterals to expose more formation to the wellbore; which will, enhance the estimated ultimate recovery (EUR) from the well (i.e. better economics). Drilling Horizontally and Hydraulic Fracturing these wells allows operators to develop a reservoir area with a significantly fewer number of wells; and, significantly enhance oil and gas recovery & return on investment. Note: The hydraulic fracture ( frack ) is performed AFTER the drilling operation. Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 6

7 Horizontal Drilling Locations designed to drill multiple wells in close proximity saves time and money, employing easily movable / skid-mounted drilling rig systems; water-base drilling mud in upper portion of well; and, oil-base drilling mud in horizontal portion of the well. Do so many wells in close proximity pose a risk? Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 7

8 Hydraulic fracturing - Shales The hydraulic fracturing operation will need large quanties of: Water (with certain additives); Sand (proppant); and. Pumping equipment. Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 8

9 Equipment associated with the hydraulic fracture operation Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 9

10 The Oil / Gas Operator s Objective To conduct operations in an environmentally responsible yet economic fashion. Statutes and regulations have been implemented in every oil and gas producing state of the United States. Operators respect these rules to ensure that oil and natural gas operations are conducted in an environmentally responsible fashion. Operators protect groundwater from the contents of the well during drilling, hydraulic fracturing, and production operations by installing a combination of steel casing and cement sheaths. The subsurface zone or formation containing hydrocarbons produces into the well, and that production is contained within the well all the way to the surface. Maintain well integrity: Operators regularly monitor the well during drilling and production operations to ensure that these operations proceed within established parameters and in accordance with the well design, well plan, and permit requirements. In the successful organization, no detail is too small to escape close attention. Lou Holtz Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 10

11 Shale Horizontal Drilling Incidents with Shale Wells Houston - London Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 11

12 Case #1: Wellhead leaking during hydraulic fracture treatments A leak developed between flanges of the tubinghead and lower master valve during the hydraulic fracture treatment. Once the leak started, there was no way to shut off the flow with surface equipment. Actions Tighten the leaking flange bolts. Pump gunk squeezes. Stop the well flow to change-out wellhead equipment, using Mechanical plug; and / or, Kill mud / cement plug. Environmental Frac water leaked from the well and flowed from the wellsite pad. Frac water crossed a cattle pasture, then to a creek and river. Potential Gross Cost US$ 8,000,000 (100%), of that US$ 3,800,000 (100%) is environmental related. Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 12

13 Case #2: Casing failure during hydraulic fracture treatments The intermediate casing burst near the surface of the well during the hydraulic fracture treatment. Treating pressure increased unexpectedly during the fracking operation. The flow from the intermediate casing eroded a hole through the surface casing, then the flow came to the surface near the well. Actions Shut down pumps; mobilize coiled tubing to the location. Circulate kill mud within the wellbore; set mechanical or cement plug(s). Evaluate the casing condition; repair or plug and abandon the wellbore. Environmental Underground breech transpired at a depth near potable water formations. Soil samples were evaluated; contaminated soil removed to remediation. Water monitoring wells were drilled, per agreement with the regulatory authorities; the sampling regimen was decided and implemented. Potential Gross Cost US$ 4,000,000 (100%), of that US$ 750,000 (100%) is environmental related. Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 13

14 Case #3: Casing failure during production / flowback The production casing in a well was installed and a multi-stage hydraulic fracture treatment was completed. During flowback operations, the production casing burst within the well and flow traveled to surface between intermediate and production casings, then, through a casinghead valve. Well control specialists were dispatched to assist. The well flow eventually bridged. Actions Identify depth of damaged casing; evaluate condition, then Repair damaged casing by back-off and install new from surface, or install patch, or, plug and abandon the well. Environmental Spray / mist of light hydrocarbons ejected from well; liquids contained to the well pad site / reserve pit. Water/oil mixture collected on the wellsite for disposal. Potential Gross Cost US$ 13,000,000 (100%), of that US$ 250,000 (100%) is environmental related. Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 14

15 Case #4: Behind-pipe crossflow discovered during drilling operation The production casing in a well was installed but the hydraulic fracture treatment had not been performed. The drilling rig was skidded-over to commence a new well. While drilling in the new well at a very shallow depth, the new well began to flow fresh water and gas. Well control specialists were dispatched. Diagnostics indicated flow from the other completed well. Wireline operations indicated flow from a potentially productive interval behind the intermediate casing. Actions Identify depths from where crossflow is transpiring; pump mud & cement to control: Repair damaged casing by back-off and install new from surface, install patch, or, plug and abandon the well / redrill. Environmental Fresh water with gas ejected from well. Water collected on the wellsite; fluid vacuumed; new rock added. Potential Gross Cost US$ 13,500,000 (100%), of that US$ 850,000 (100%) environmental related. Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 15

16 Common OEE Incident Characteristics? Each incident is different, with different cost combinations coming into play. Well control. Restoration, redrill, or possibly both. Environmental clean-up and monitoring operations. Care, custody & control. Evacuation of nearby residents? Other costs? Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 16

17 Preventative Measures Prevent wellhead failures during hydraulic fracture treatments Attention to new/used wellhead equipment condition / testing regimen Prevent casing ruptures during the fracture treatment or production Attention to casing condition prior to performing fracture treatments, then Attention to casing condition prior to flowback / production operations. Monitor casing condition by use of multifinger caliper or ultrasonic or electromagnetic logs? (Casing Inspection Logs) Inspect cement sheath quality behind casing to prevent behind-pipe flow Attention to cement condition prior to performing fracture treatments Attained by use of cement bond log? or noise/temperature log? Just be prepared! Remember Murphy s Law! Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 17

18 Other Concerns & Considerations Green completions? Can they be done effectively? Earthquake claims? Are they really a concern? Contamination of potable water table? Have you performed baselines? Availability of equipment and supplies? Sometimes equipment can be hard to find Project economics? Is all this going to make me money? Applicability of the incident to OEE Policy wording / provisions / intent? Wellsite / pad size? Sufficient for possible well control needs? Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 18

19 Headlines and References for self study Other Shale Fracking Resources Making Sense of the Overnight Shale Gas Revolution; JPT Online; 16Feb12 Hydraulic Fracturing 101; Journal of Petroleum Technology April 2012; SPE Shale Gas: Promising Prospects Worldwide; JPT Special Section Shale; Jul11; pp Hydraulic Fracturing Operations Well Construction and Integrity Guidelines (API Document HF1) First Edition, October 2009 DOI / BLM Proposed Rules regarding Well Stimulation on Federal & Indian Lands May 4, 2012 CNG & LNG Fuel for thought Shale's Transport Revolution: U.S. Trucks Shift To Cheap Natural Gas; 06Mar12 LNG-fuelled ships take root in Europe; 02May12 Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 19

20 Thank you for your attention! Dan Mason Houston - London Willis North America Energy Conference Shale Fracking: : What are the Risks? May 17, 2012 Slide No. 20