Informative bulletin of the Mineração Curimbaba - June 2013

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1 news Mineração Curimbaba Process Improvement through Quality Assurance and Control to produce a very high standard Proppant

2 Mineração Curimbaba - Process Improvement through Quality Assurance and Control to produce a very high standard Proppant Mineração Curimbaba is a proppant manufacturer that is focused on quality from raw material identification and classification in the mines through all the mining, manufacturing and logistics processes until the final product is used in oil and gas well stimulations worldwide. The guideline for testing and test procedures is the ISO standard measurement of properties of proppants used in hydraulic fracturing and gravel-packing operations. Mineração Curimbaba was first certified in ISO 9001in A strict environmental and mineral research program determines where samples of bauxite are taken from the mine. A three dimensional grid 25 meters width and length with consecutive 1 meter depths is developed to identify mineralogy, a grid map is generated and referenced to surface markers at the mine to guide the mineral extraction. After extraction, the material is delivered to the manufacturing facility. The homogenization process at the facility begins as the bauxite is reanalyzed to confirm chemical composition. It is then blended with other grades of bauxite to achieve the exact chemical composition of the raw material for each kind of proppant produced by the company. Representative samples of the homogenized mineral are submitted to the laboratory for quality control checks and composition verification prior to the initiation of the manufacturing process. The multi-stage manufacturing process begins with the drying process, followed by milling, pelletizing, sintering and sieving. At each stage, the Quality Control department is responsible for collecting samples and checking bench mark parameters that contribute to the quality of the final product. After sieving, which is the final manufacturing step, the proppant is packaged in super sacks and sampled for final evaluation. From each super sack a produced sample is first analyzed at one of the Quality Control Labs strategically built at each rotary kiln. In these labs, the technicians check the bulk density, the crush resistance and the sieve distribution of the material against the specifications. After QC lab approval the samples are sent to the Central Lab located on the manufacturing facility complex. Trained specialists analyze apparent and absolute density, acid solubility, turbidity, sphericity and roundness of our proppants. Further capability includes evaluation of specific chemical composition, conductivity and permeability tests. Internal and external audits are performed on a semester base assure continuous improvement the system and manufacturing process. The flow chart below diagrams the work processes and quality control sampling points employed to assure mining, testing and manufacturing processes. Regular process reviews using internal initiatives modify and improve processes as they are identified.

3 FIELD RESEARCH (25m x 25m) EXPLOITATION ORE RECEIVE BLENDING A A MILL ORE MILED GROSS ORE DRY INTERMEDIATE SIEVING GROSS ORE B PROPPANT A B SINTERING FINAL SIEVING CLASSIFICATION PROPPANT B PROPPANT C LEGEND: PROCESS SAMPLING POINTS 06/2103 PRODUCTION / QUALITY CONTROL Image 1: Summary of Curimbaba s Manufacture Process Ceramic proppant, Sinterlock and its role in controlling post job proppant flow back issues The first frac job in the United States was performed in the 1860 s utilizing liquid and solid nitroglycerin. This was a very dangerous operation and a non-specific application for well stimulation and frac placement. However, the result when utilized, in many cases, was a slight increase in production. Operators noted these results and the nitroglycerin based frac jobs became more common. The process of frac ing was rudimentary in the early years of well stimulation and advances in techniques and methods were very slow in the industry. One of the recognized advances in frac stimulation was the implementation of acid as a fracturing fluid when the first acid frac job was performed in the 1930 s. Stanolind Oil and Gas Corporation, absorbed through many mergers into the current day British Petroleum, patented the Hydafrac process in 1948 and pumped the first experimental job in the Hugoton field in Kansas using napalm and Arkansas River sand. In 1949 HOWCO (Halliburton) received the exclusive rights to the process and in the first year performed 332 treatments and documented production increases of 75%. As the industry matured, traditional materials utilized for proppant have included natural sand, resin coated sand and in 1979 the first ceramic proppant was pumped by the Exxon Production Research group.

4 The sintered proppant utilized a high alumina content which added strength and a high resistance to formation closure stresses. This stress is the pressure exerted on the proppant by the fractured formation after the treatment which in deep hot wells exceeded the limits of natural proppants to resist crush. When a propping material crushes, the resulting ability to produce through a smaller or completely healed fracture diminishes. This loss of conductivity, or the ability to flow fluid and gas through the formation, is a critical component to reduced production. Inherent to applications where proppant is exposed to high closure stress environment is the necessity to withstand high pressures, the resistance to crush pressures, and stability in high temperatures (HPHT). In cases where the well is in a relaxed stress field (no excessive closure or overburden pressures), encounters an unconsolidated formation or an over-pressured formation it is necessary to use a proppant that will maintain proppant pack integrity under production and flow operations while producing the well. In situations where the proppant is necessary to resist anticipated closure stress later in the life of the well (stress cycling) the mechanism of formation closure can allow the movement of placed proppant from the fracture into the well bore. If proppant flows into the wellbore of a producing well production problems can occur. If the production velocity is high the velocity and viscosity of the produced fluid or gas can move the proppant grains from the proppant pack in the formation into the producing wellbore. This will have the effect of closing a valve by restricting flow rates in the wellbore as more proppant is transported into the wellbore and possibly into the surface production equipment. Removing the produced proppant from the wellbore and surface equipment to restore production is a time consuming and costly operation. Remedial expenses for clean outs can exceed $30,000-$40,000 and many lost days of production to return the well to production. Limiting or eliminating the necessity of SPHERICITY AND ROUNDNESS CHART remedial treatments to return a well to productivity reduces operating and lifting costs considerably. Reducing the number of lost production days due to maintenance or remedial operations adds profitability and reliability as consecutive producing days increase. Limiting the Source: redrawn from Kumbein & Sloss. API recommends sphericity and roundness of 0.6 or larger. proppant flowback has been addressed by many methods such as introducing fibers into the proppant while pumping the frac job, coating the proppant with a resin coating that causes the proppant grains to adhere to each other and limiting the ability of the grains to become mobile during the production phase of the well. Each method has its limitations, especially in HPHT situations. The patented mechanical method that is utilized by the MC SinterLock is a unique solution to mobile proppant packs in HPHT configurations but has also been used in lower stress situations where natural proppants cannot be adapted effectively to restrict the flowback phenomenon that causes the necessity to remove the produced proppant from the wellbore. The patented SinterLock system uses mechanical flow restriction particles interspersed with the produced ceramic proppant to prevent proppant movement once placed in the created fracture. The produced sintered ceramic proppant has a high degree of roundness and sphericity, greater than 0.9 on the Krumbien roundness scale, to achieve high conductivity when placed in the created fracture. This reduces the drag forces on the produced fluid and/or gas and contributes to higher production. Because of high degree of roundness and sphericity, the proppant can move through a proppant pack as discussed previously if the stress and flow conditions allow movement. Restricting this movement can be accomplished with a blend of Sintered proppant and the SinterLock material. SinterLock is a highly angular sintered bauxite material with a Krumbien roundness of less than 0.8 which is blended with the Sintered material. The effect of the contrasting shapes on proppant movement is a locking of the round particles as they come in contact with the irregularly shaped Lock material. Compare this to the action of a wheel block on a truck parked on an incline to stop all the wheels from moving, the ratio of Lock material limits the ability of the more refined proppant grains to move. The most utilized proppant mixture consists of a blend ration of 85:15 (SinterLite or SinterBall: SinterLock) by weight. The patent details effectiveness in ratios of 5-90% of lock material but the most common blends for even severe flowback situations is a ratio of 5-30% blended lock material. Field implementation of the SinterLock material has been documented to reduce and eliminate the need to address proppant flowback in wells. A comprehensive field study has linked the use of this product to the success of increasing production by over 40% and eliminating non- productive time to perform remedial and repair operations. The quality control thread from the initiation of the exploration, development and remediation of the mining operation continuously assures product quality and reliability. This benefit continues throughout the life of the stimulated well in the form of increased production.

5 Quality sustentability Inovation References: SPE MS; Coil Tubing Jet Cutting Multiple Stage Fracture Treating Improves Fracture Treament Techniques to Unlock Bypassed Reserves in Cotton Valley Sand Dorcheat Macedonia Diel, Magnolia, Arkansas; RW Pomrenke, et al,; Presented at the PE/ICOTA Coiled Tubing & Well Intervention Conference & Exhibition, the Woodlands, Texas, USA, March 2013 MODERN FRACTURING, Enhancing Natural Gas Production, Michael J. Economides & Tony Martin, 2007 Hydraulic Fracturing, History of and Enduring Technology, JPT, December 2010, Carl T. Montgomery and Michael B. Smith For further information please contact &

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