1



### MEMORANDUM

DATE: July 28, 2011

TO: Bruce Moore, Office of Air Quality Planning and Standards

FROM: ICF International

SUBJECT: NSPS U nconventional Well Completions Condensate Recovery Analysis

– Recovered Volumes

and Value

This memo provides details on the analysis performed to estimate the volume of condensate recovered on average during an unconventional (i.e. involving hydraulic fracturing) well completion and the value per barrel.
The New Source Performance Standards ( NSPS ) Regulatory Impact Analysis (RIA) u se s a n estimate of the average condensate recovered per well and the value per barrel to determine the total value of the condensate recovered from completions after hydraulic fracture. As discussed in detail below, t he final result is 34 barrels ( bbl ) of c ondensate recovered per r educed e mission c ompletion ( REC ) performed on a natural gas well, and at a cost of $70 per bbl on average in the U.S

.

AVERAGE BARRELS OF CONDENSATE RECOVERED PER REC

This analysis first estimated the average condensate recovered using the HPDI database 1 for tight sand, shale, and coal bed methane completions in 2008 (which is the mo st current year data available in the HPDI database). Since hydraulic fracturing is most common in unconventional formations

, this analysis assumes new successful natural gas wells in shale, tight sand

, and coalbed methane formations are completed with hydraulic fractur ing. The HPDI database records annual condensate production for wells. The number of n ew gas wells in 2008 were estimated by taking the difference between wells existing in 2008 and wells existing in 2007

. ICF has supplemented the HPDI data by creating flags that identify which wells are oil wells and which are gas wells, and that identify which wells are conventional and which wells are unconventional. ICF used only the subset of wells flagged as unconventional gas

. HPDI reports condensate production on an annual basis, but for the NSPS analysis a daily basis is necessary. The new wells determined for 2008 could have been completed at any point in 2008; therefore, ICF assumed all new wells for 2008 were operating for half a year in order to arrive at a daily basis condensate production value for each well.

The next step was to use a ratio of daily gas flowback rate to initial daily gas production rate to represent how the production rate declines as the well transitions from the flowback to normal operation. Exhibit 1 below shows the data collected to develop this ratio.2



### Exhibit 1. Natural Gas STAR Partner Reported Natural Gas Flowba ck and Production

Location Daily Gas Flow back Rate

(thousand cubic meters per

day) 2 Initial Daily Gas Production

Rate (thousand cubic meters per day) 3 Ratio of D aily G as F lowback Rate to Initial Daily Gas
Production Rate

Barnett (Texas, Shale) 52 37 1.41

Piceance (Colorado, tight sand) 100 57 1. 75

Uinta (Utah, tight sand) 65 42 1.55

Denver

- Jules burg (Colorado, tight sand) 15 11 1.36

Average 1.52

The ratio of flowback rate to initial production rate was calculated for each of the four data points in Exhibit 1. The average of the resulting four ratios was 1.52 . This value w as then applied to the condensate production reported in the HPDI database to determine the condensate produced during the comple tion flowback.

Assuming completions last about seven days and using the ratio of daily gas flowback to daily gas production, the condensate production per completion was determined for each completion listed in the HPDI database.
The ICF HPDI database ana lysis estimates about 16,000 tight, shale, and coal bed methane completions occurred
in 2008

. 4 T he average c ondensate production per completion for all new hydraulically fractured wells in 2008 is
34 barrels per completion. We recognize that this is a n ational average to estimate condensate production for new wells, however the actual amount of condensate produced on an individual well basis will vary depending

on the characteristics of each field.

VALUE OF RECOVERED CONDENSATE

An excerpt of the Materi al Safety Data Sheet (MSDS) for natural gas condensate 5 is shown in Exhibit 2 , below. Based on this image, it is clear that the composition of natural gas condensate can vary significantly , and different hydrocarbon mixtures have different value for sales purposes3 

### Exhibit 2

. Natural Gas Condensate MSDS

By obtaining pricing information for Mont Belviue, TX from the Platts Oilgram, it is possible to determine a minimum and maximum price of condensate. Platts Oilgram was selected as a reference since it is a daily publication that tracks hydrocarbon prices at common price points across the U.S. Based on the pricing data obtained, which is summarized in Exhibit 3 , the minimum price would be that of propane and the maximum price would be that of natural gasoline. A value of $70 per barrel of condensate was selected since this is the average of the below data when rounded to the nearest $10

.4 

### Exhibit 3 . Price of Various Hydrocarbons 

### 05/19/11 08/19/10 08/08/08 08/27/07 06/30/06

p ropane ($/bbl) 63 44 71 50 49

n - butane ($/bbl) 78 56 85 60 55

i sobutane ($/bbl) 84 57 85 60 55

n atural gasoline ($/bbl) 105 68 107 69 67

1 HPDI, LLC is a private organization specializing in oil and gas data and statistical analysis. The HPDI database is focused o n historical oil and gas production data and drilling permit data.

2 Barnett: EPA. Green Completions . Natural Gas STAR Producer’s Technology Transfer Workshop. September 21, 2004. Available online at: < http://epa.gov/gasstar/workshops/techtransfer/2004/houston

- 02.html >.

Piceance : EPA. Reducing Methane Emissions During Completion Operations . Natural Gas STAR Pr oducer’s Technology Transfer Workshop. September 11, 2007. Available online at: < http://epa.gov/gasstar/documents/workshops/glenwood

2007/04_recs.pdf >.

Ui n ta: Samuels J. (2010) Emission Reductions Strategies in the Greater Natural Buttes. Anadarko Petrol eum Corporation. EPA Gas STAR, Producers Technology Transfer Workshop. Vernal, UT. March 23, 2010 <www.epa.gov/gasstar/documents/workshops/vernal

- 2010/03_anadarko.pdf>

Denver

- Jules: Bracken K. (2008) Reduced Emission Completions in DJ Basin and Natural But tes. Presentation given at EPA/GasSTAR Producers Technology Transfer Workshop. Rock Springs Wyoming, May 1, 2008. <www.epa.gov/gasstar/documents/workshops/2008

- tech

- transfer/rocksprings5.pdf>

3 Barnett: oilshalegas.com/barnettshale.html; Piceance: Kruusk raa VA (2004) Tight Sands Development

– How to Dramatically Improve Recovery Efficiency. GasTIPS, Winter 2004. and Henke D. (2010)

Piceance : Encana, USA Division Overview. Encana Natural Gas, investors presentation.

< www.encana.com/investors/presentations/investorday/pdfs/usa

- division

- overview.pdf>;

Ui n ta: www.epmag.com/archives/newsComments/6242.htm ;

Denver

- Jules: www.businesswire.com/news/home/20100924005169/en/Synergy

- Resources

- Corporation

- Reports

- Initial

Production

- Rates

4 The HPDI database is the data set being used for this analysis given that it logs condensate production by well which was a level of detail not available in other well data that was readily available.

5 www.marathonpetroleum.com/Products/MSDS