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EME 580: Integrative Design of Energy & Mineral Engineering Systems. Economic Comparison of Multi-Lateral Drilling over Horizontal Drilling for Marcellus Shale Field Development. By, Taha , Chew, Aditya , Ugur , Sarath , Amey , Hadi. Date : 26’th April 2011. Index. Problem Statement

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slide1

EME 580: Integrative Design of Energy & Mineral Engineering Systems

Economic Comparison of Multi-Lateral Drilling over Horizontal Drilling for Marcellus Shale Field Development

By,

Taha,

Chew,

Aditya,

Ugur,

Sarath,

Amey,

Hadi

Date : 26’th April 2011

index
Index
  • Problem Statement
  • Concept Map
  • Geology
  • Reservoir Simulation
  • Stimulation/Hydraulic Fracturing
  • Well Design
  • Water Management
  • Economics
  • Conclusion
problem statement
Problem Statement
  • Economic Comparison of Multi-Lateral Drilling over Horizontal Drilling for Marcellus Shale Field Development
  • Compare Performance of Multilateral Well Completion over Horizontal Well Completion
slide4

Concept Map

Choice of Proppant

Pad Fluid

# of Stages

Multi Stage Fracking

Reservoir Properties

Horizontal Well

Selection of Location

Stimulation

Geology

Multilateral Well

Reservoir Simulation

CMG Simulations

Economical Comparison of Multi lateral wells over Horizontal Wells

Water Supply

Well Integrity

Well Design

Water Management

Drill Bit

Cementing/Casing Design

Economic Analysis

Waste Water Treatment

marcellus shale formation
Marcellus Shale Formation

Properties:

  • Permeability : 1*10-5mD
  • Porosity: 9%
  • TOC( Total Organic Carbon) : 0.64 – 1.8
  • Ro( Vitrinile Reflectance) : ~4.5 ( Dry Gas)
  • Fracture Spacing : 0.9 ft
  • Reservoir Temperature : 1500F
  • Initial Reservoir Pressure : 4500 Psia
advantages of the stimulation job
Advantages of the Stimulation job
  • Lower Cost for Stimulation
  • Less time required to complete Stimulation job
  • Increasing sweep efficiency by increasing the area in direct contact with the wellbore
well design

Well Design

Drilling Procedure

Drill Bits Selection

Mud Design

Casing Design

Multilateral Junction

Open Hole lateral

drill bit selection
Drill Bit Selection
  • PDC Bits with Optimized Torque Management Technology, Cutting Structure Aggressiveness and Unique Roller Cone Steel Tooth
  • Higher ROP, WOB and better Torque management.
  • Although the capital cost is 1.5 higher than Tungsten Carbide Bit, it shows higher cost saving in overall drilling process
mud design
Mud Design
  • Similar log close to well site that contains similar strata
  • incorporated safety factor of 1.2

Mud selection: water based mud or potassium-chloride based mud (11.5- 12 ppg)

casing design
Casing Design
  • Three design factors:
  • Options: J-55, C-75, N-80, C-90 and P-110
  • All casing grades are check first to so that is can withstand the axial tension, burst pressure and collapse pressure at respective depth and cost effective.
casing design1

- 30 ft

Casing Design

- 1200 ft

  • Conductor (30ft): J55, 13-3/8”
  • Surface (1200ft): P110, 9-5/8” [21.85 lb/ft]
  • Intermediate (5200ft) : P110, 7-5/8” [15.52lb/ft]
  • Production (7250/7600 ft): P110 ½ ft, [14lb/ft]
  • Multilateral Tieback Seal

- 5200 ft

- 7250 ft

- 7600 ft

cont d
Cont’d
  • Rate of build angle: 50/50ft
  • 2 pseudo-zone targets:
  • L1 – 7572.5 ft
  • L2 – 7221.5 ft
  • KOP(Kick off Point):
  • L1 – 6750 ft
  • L2 – 6350 ft
multilateral junction
Multilateral Junction
  • Shale formation:
    • unexpected plugging of the lower lateral
    • Implement Tieback junction sleeve(TBJS)
cementing
Cementing
  • Class H cement
  • from surface to 8000 ft
  • can be used with typical accelerator and retarder
  • Additive:
  • GAS CHECK ® -Halliburton
  • Specially for gas drilling operation
  • Avoid gas flow into the annulus after cement has been placed
  • Bentonite 6% - Extenders
    • Reduction in slurry density
    • Increase slurry yield
    • Reduction in cost
    • *Reduce thickening time
  • Sodium Chloride 5% - Accelerators
    • Increase thickening time
    • Increase early strength development of cement
open hole multi stage fracturing ohms
Open Hole, Multi-stage Fracturing (OHMS)
  • Instead of cemented liner “plug and perf”, OHMS is applied
  • No cement is required
  • Increased the drainage area of the well
  • Increase production by 30% [Barnett Shale]
  • New to Marcellus Shale
  • Availability: Packer Plus Inc.
water and wastewater management
Water and Wastewater management
  • Location of the reservoir : Hawley borough (border between Pike county and Wayne county)
  • Nearest City : Milford, Pike County, PA (distance – approx 34 miles)
  • Major watersheds
    • Delaware River which flows beside Milford Township
    • Milford springs – serves the Borough of Milford and adjoining areas (average water demand – 185,000 to 195,000 gallons per day)
    • Sawkill Creek and Vandermark Creek which empty into the Delaware river are also major watersheds
regulations pertaining to water withdrawal
Regulations pertaining to water withdrawal
  • The Delaware River Basin Commission (DRBC) is the primary agency overseeing water-related activities in the Delaware River Basin.
  • The responsibilities of the commission include water quality protection, water supply allocation, regulatory review/permitting, water conservation initiatives, watershed planning
  • The DRBC requires approval for surface water withdrawals exceeding 100,000 gallons per day (gpd), based on a 30-day average.
  • They also require approval for a withdrawal from groundwater wells in the DRB exceeding 100,000 gpd, based on a 30-day average, outside of the Southeastern Pennsylvania Groundwater Protection Area.
slide52

Water trucks and trailers from the DRB to provide water to be used for different purposes.

  • Water would then be pumped into lined storage impoundments(pits) and stored until it is transported by temporary ground piping to the well pad locations for a fracture treatment.(Example of such a pit is given below)
water reuse
Water reuse

Considering the fact that the figures presented before, for subsequent fracture jobs huge amount of fresh water supplies would be required.

This compels us to use the option of recycling the water and treat it so that it can be blended with less fresh water for fracing new wells instead of using the same amount of fresh water.

But there are some issues related to water treatment and reuse:

  • The main mechanism is water/salt separation process called as demineralization
  • Demineralization can be achieved with thermal systems or with membranes.
  • Prevention of fouling of heat exchangers and membranes is critical
  • Pretreatment is used to protect the demineralization processing stage.
drilling fluids disposal
Drilling fluids disposal
  • Drilling fluids are an important part of the drilling process as they circulate the rock cuttings to the surface to clear the borehole, cool and lubricate the drill bit as well as maintain downhole pressure.
  • The drilling fluids are also stored in steel storage tanks to prevent infiltration to the surrounding land or groundwater sources.
  • This also helps in containing to some extent the spread of Naturally Occurring Radioactive Materials (NORMs) such as Ra-226 and Ra-228 which are usually found in low concentrations in most of the drilling fluid wastes as they are brought to the surface.
  • These have to be disposed off in licensed disposal pits around PA which are equipped with radiation monitors
technical capabilities of ro
Technical Capabilities of RO
  • In general, RO can treat water TDS concentrations up to 50,000 mg/L. Latest RO technologies can treat up to 60,000 mg/LTDS, at a rate of approximately 6,300 BPD.
  • RO treatment can be effective in removing sand, silt, clay, algae, protozoa (5 to 15 microns), bacteria (0.4 to 30 microns), viruses (0.004 to 6 microns), humic acids, organic/inorganic chemicals, and metal/nonmetal ions.
  • In a pilot test with Newfield in the Woodford shale, analysis of flowback water( 20,000 mg/L to 30,000 mg/L TDS ) treated using RO technology indicated key constituents were effectively reduced.
technical limitations
Technical Limitations
  • RO membranes are subject to fouling if proper pre treatments are not in place and can have low water recovery efficiencies.( Approximately 40% and 65%)
  • When high TDS concentration ( >50,000 mg/L) the result is a higher brine stream, which will increase the disposal costs. However, high recovery rates ( 75%-90%) can be obtained when TDS concentration is below 25,000 mg/L.
  • Pre treatment can include media filters to remove suspended particles: ion exchange softening or anti-scalant to remove hardness; temperature and PH adjustments to lower chemical solubilities etc.
water requirement
Water Requirement

Amount of water required for fracking = 1,500,000 gallons

Total amount of water (drilling + fracking) = 2,000,000 gallons

From the literature, 30% to 50% of flowbackreturns to the surface (over a period of time)

Amount of fracwater generated = 750,000 gallons (approximate average)

During drilling, water is used to cool the drill bit and to create a slurry that carries the rock cuttings up to the surface (approx 250,000 gallons)

So,

Total amount of wastewater generated which needs treatment = 1,000,000 gallons

slide60
Cost
  • RO water treatment systems require less energy compared to other systems such as, thermal treatment process and other membrane technologies.
  • In RO treatment, the capital cost ranges from approximately $3 to $7/gpd depending on the size, location, construction cost etc. The operation cost is about $2.50 per 1,000 gallons.
  • According to the approximate cost range the capital cost of RO system would be $3,750,000 and the operation cost would be $37,500.
economics
Economics

Income

Tangible Cost

Intangible Cost

Discount Cash Flow Analysis

recap 4 categories of economic viewpoints
Recap :4 categories of economic viewpoints
  • Development economics / Heads up
  • Carried interest/ Overriding Royalty
  • Farm-out
  • Farm-in
estimated tangible cost
Estimated Tangible Cost
  • Casing
    • 24’ conductor casing
    • 0.5’ thickness
    • $64 per foot (6/1/10) [30ft] - $1920
    • 20’ intermediate casing
    • 0.5’ thickness
    • $48 per foot (6/1/10) [1200 ft] - $57600
    • 9.625’ production tubing
    • 0.472’ thickness
    • $29 per foot (6/1/10) [5200 ft] - $150800
  • Wellhead, Surface - $20k
  • Drilling Costs
    • Horizontal Well ~= $ 5 000 000
    • Multilateral Well ~= $11 000 000
estimated intangible costs
Estimated Intangible Costs
  • Site Preparation ~ $100k
  • Drilling Contractor Services ~ $120k
  • Materials & Supplies ~ $50k
  • Logging, Stimulation, Perforations ~ 400k
  • Power, Water disposal ~ $3700k
  • Installation, Completion, Labor ~ $40k
  • TOTAL = $4000k
total income
Total Income
  • () * Future Price
npv vs discount rate
NPV vs Discount Rate

~42 % per annum

conclusion
Conclusion
  • Minimum Rate of Return = 42% per annum
  • Breakeven Time for avgROR (10%) = 8/11/2015
  • Multilateral well with hydraulic fracturing is most profitable
references
References
  • Ro and TOC values taken from “http://www.dcnr.state.pa.us/topogeo/oilandgas/display/Pike.pdf”
  • “http://www.dcnr.state.pa.us/topogeo/pub/pageolmag/pdfs/v38n1.pdf”
  • http://www.marcellus.psu.edu/resources/PDFs/DCNR.pdf
  • Isopach data taken from “http://geology.com/articles/marcellus/marcellus-shale-map.gif”
  • Bill Greier and Jim Bray,Halliburton “Identification of Production Potential in Unconventional Reservoirs” SPE 106623 (2007)
  • Appalachian basin maps taken from “http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/maps/maps.htm”
  • (SPE 117751) Uncovering and Exploiting Existing Marcellus Shale Opportunities in the Appalachian Basin T.E. Suhy, BJ Services
  • An Emerging Giant: Prospects and Economic Impacts of Developing the Marcellus Shale Natural Gas Play Timothy Considine, Ph.D., M.B.A. ; Robert Watson, Ph.D., P.E. ; Rebecca Entler; Jeffrey Sparks
  • Economic Evaluation and Investment Decision Mthods - Franklin J. Stermole, John M. Stermole
references1
References
  • Benny Peodjono, John Zabaldano, Irina Shevchenko and ChristpopherJamerson. "Case Studies in the Applicaion of Pad Design in Marcellus Shale." SPE 139045 (2010): 9.
  • Dave allison, Don Folds, David Harless, Mat Howell and Greg Vargus. "Optimizing Open Hole Completion Technique for orizontal Foam-Drilled Wells." SPE 125642 (2009): 17.
  • Dosinmu, E.J Idiodemise and A. "A Model for Completion Selection for Multilateral and Multibranched Well." 2007.
  • Jack Johnson Jr., SPE, Sonat Exploration, et al. "High Efficiency Drilling – A Novel Approach for Improved Horizontal and Multi-Lateral." SPE 52185 (2000): 11.
  • Jonas Lindvall, SPE, PDO, and Bas Hengeveld, SPE, PDO, and Moghrob Al-Asmi, SPE, PDO, and Robert Chadwick,. "Multilateral Tieback Insert Provides a Low-Cost, Sealing Multilateral Junction." SPE/IADC 57540 (2000): 9.
  • Meckfessel, Randy Brown and Brittney. "Improving Marcellus Shale Performance Using PDC Bits with Optimized Torque Management Technology, Cutting Structure Aggressiveness and Unique Roller Cone Steel Tooth." SPE 139102 (2010): 14.
references2
References
  • Pike County: Where People, Land and Water Meet :A Citizen’s Guide to Clean Water : Pike County Conservation District
  • Marcellus Shale Study Guide : League of Women Voters of Pennsylvania
  • Sustainable Water Management for Marcellus Shale Development : Radisav D. Vidic, Ph.D., PEDepartment of Civil and Environmental Engineering Swanson School of Engineering University of Pittsburgh
  • Evaluating the Environmental Implications of Hydraulic Fracturing in Shale Gas Reservoirs : J. Daniel Arthur, P.E., ALL Consulting; Brian Bohm, P.G., ALL Consulting; Bobbi Jo Coughlin, EIT, ALL Consulting; Mark Layne, Ph.D., P.E., ALL Consulting
  • Modern Shale Gas development in the United States : A primer study – Department of Energy
  • Milford Borough and Milford Township Water management Plan
  • Texas A&M Petroleum Engineering. Advanced Membrane Filtration Technology for Cost Effective Recovery of Fresh Water from Oil & Gas Produced Brine. Crimson Institute.
  • Burnett, David. Well Site Produced Water Management in Oil & Gas Production. Environmentally Friendly Drilling. Global Petroleum Research Institute. SPE Water Management ATW.
  • Colorado School of Mines. Produced Water Treatment and Beneficial Use Information Center. Treatment Options. Membrane Separation.
  • National Energy Technology Laboratory (NETL). Produced Water Management Information System (PWMIS). Produced Water Management Descriptions-Membrane Processes.
  • Office Of Industrial Technologies Energy Efficiency and Renewable Energy, U.S. Department of Energy