Unconventional Oil and Gas Definition

– Call with EPA and USGS 11/5/2015

1 Unconventional Oil and Gas Definition

– Call with EPA and USGS (ERG Notes) 11/5/2015
Participants: EPA, OW: Karen Milam, Jesse Pritts, Tom Born, Pooja Parikh, Scott Wilson EPA, OC: Dan Chadwick USGS: Chris Schenk ERG: Sarah Yates

Shorthand used throughout notes: UOG

– unconventional oil and gas; COG

– conventional oil and gas

Chris Schenk, USGS Overview

- 35 years in Oil and Gas (now, Energy) Program

- Oil and gas assessments focused on “UOG” over last 20 years

- EPCA 2000 law requires these assessmen ts

Chris’s initial reactions to API comment:

- In 1977 there was a tax incentive for tight gas (FERC) that defined <0.1 mD permeability as tight gas; it took a while for people to get passed that definition. There were a lot of issues with defining if this permeability was in

- situ vs. on surface vs. other.

- USGS does not use permeability as a defining characteristic because there is a large range in permeability even within a formation.

o USGS would NOT support 0.1 mD permeability classification.

- Chris has neve r seen 0.001 mD permeability used (as is referred to in API’s comment).

USGS’s Oil and Gas Assessments:

- Completed on a rolling schedule (not annually), with focus on the biggest formations first (e.g., Barnett, Bakken, Eagle Ford).

- EIA is required to prep are annual reports, so they use some USGS data (where available for the past year) plus their own EIA data that they develop to supplement the USGS data.

- USGS takes a geologic and engineering approach to assessments. They try to determine where production is headed in future.

- USGS uses 18 characteristics/checks to try to determine if a formation is conventional or unconventional (i.e., continuous).

o Some of 18 Characteristics Associated with COG:

 Oil/gas is buoyant upon water column

 Well

- defined gas /oil cont act 1

 Water production increases as petroleum production decreases

 Source rocks can be far away (hundreds of kilometers)

1 Schlumberger Oilfield Glossary definition of “Gas Oil Contact”: A bounding surface in a reservoir above which predominantly gas occurs and below which predominantly oil occurs. Gas and oil are miscible , so the contact between gas and oil is transitional, forming a zone containing a mix of gas and oil.Unconventional Oil and Gas Definition

– Call with EPA and USGS 11/5/2015

2 o 18 Characteristics Associated with UOG (i.e., “Continuous” Accumulations) :

 Regional extent

– may occur across basins

 No well

- defined gas /oil contact

 Accumulations can be shale ga s , shale oil, tight oil, coalbed methane, gas hydrates, etc

.

 Not held in place by water

a. Water up dip from UOG formations (opposite of COG) b. Not buoyant upon water column

 Normal formation pressures ; sometimes under pressure, sometimes over pressure ( although under pressure is common)

 Low matrix permeability ( no numeric limit)

 Reservoirs are in close proximity to source rocks (can be one in the same)

 Few truly dry holes ; most have production

 Variable water production

– can have water prod uction from zero to significant volumes depending on proximity to faults

 Geologic sweet spots where prod uction is better

 No obvious seal/trap

 Existing fields merge into single, regional accumulation (e.g., Rockies)

 Large in

- place resource numbers, but low recovery factors

 Use stimulation for production (e.g., f racturing is common )

 Prod uction occurs regardless of structure ( e.g., don’t need to be on Anticline)

 No natural reservoir drive

 Mean estimated ultimate recoveries (EURs) can be low compared to av era g e well in COG formation.

- USGS evaluates a formation to determine if it is considered “conventional” ( COG ) or “continuous” ( UOG ) using the above mentioned characteristics. There are transition zones and boundaries between COG and U OG that make this a very difficult distinction in some instances

.

- USGS tries to determine conventional vs. continuous to determine the correct assessment methodology, which differs greatly between c onventional and continuous accumulations

.

- Original p urpose : how much gas is under federal lands; how much restricted from drilling?

- Industry is not allowed to be involved in the assessment process.

- Horizontal well does not indicate UOG because COG wells are drilled horizontally now too.

- CBM excluded from rulemaki ng, but is considered UOG.

- Is the term “continuous accumulation ” being used widely in US and overseas?

o Chris: No. For a while, folks wanted to get away from using the term “unconventional” because it is hard to define , but more recently, folks are switching back to using the term “unconventional”.

- Shale oil, shale gas, tight oil, tight gas

– are these words mor e accepted than unconventional?

o Chris

– Y es, everyone now knows these terms, but these are equally hard to define.

- Do operators know if they’ re drilling into conventional or unconventional?

o Chris: Yes, they know what they’re after. Some horizontal wells can cost millions of dollars, so they know where they’re drilling.