HYDRAULIC FRACTURING: Supply Blessing or Environmental Curse?

(An elephant in everybody’s room)

CAMPUT 2017May 9, 2017

Kevin Heffernanheffernank2@shaw.ca

ABUNDANCE

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US DRY SHALE GAS PRODUCTION (BCF/D)

Antrim (MI, IN, & OH) Bakken (ND & MT) Woodford (OK)

Barnett (TX) Fayetteville (AR) Eagle Ford (TX)

Haynesville (LA & TX) Rest of US 'shale' Utica (OH, PA & WV)

Marcellus (PA,WV,OH & NY)

Data from EIA Apr 7 2017

ABUNDANCE - US

Natural Gas Weekly, March 22, 2017, US EIA

- Since 2008, in spite of a collapse in active drilling rig count of 80% and gas price (from about $7 to $2.5 to 3) US gas production surged from 53 BCF/d to 73 BCF/d in 2016

- Almost entirely horizontal drilling today

Marcellus and Utica

MAJOR SHALE AND TIGHT GAS RESOURCES

Natural gas, liquids, oil

Montney, Horn River and Liard estimated to have marketablegas resources of 746 TCF

Duvernay is very significant with in place resource estimate of:Natural gas 350 – 540 TCF Liquids 7 – 16 Billion barrels Oil 44-81 Billion barrels

Formations shown cover an area greater than entirety of New Brunswick, Nova Scotia and PEI combined

Many other smaller but similar resources are also being evaluated and developed using horizontal wells and multistage hydraulic fracturing

ABUNDANCE – Western Canada

ABUNDANCE: NATURAL GAS SUPPLY FROM HORIZONTAL WELLS (CANADA)

Source: BC MNGD, March 2017

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Alberta and BC Marketed Production

MONTNEY

CONVENTIONAL

ALBERTA

BRITISH COLUMBIA

Source: NEB

BC Raw Natural Gas Production (BCF/D) 2006-2016Alberta and BC Marketed Production (BCF/D) 2007 - 2016

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HYDRAULIC FRACTURING

• Horizontal wells access more reservoir

• Well construction is strictly regulated to ensure isolation of groundwater

• Fluids pumped into the reservoir create fractures

• Chemical additives modify the fluid to make it slippery and so it can transport sand long distances

• Sand holds the fractures open so gas (and water) can flow to the well

• Fluid volumes, sand. and all additives used are reported to the regulator and posted on FracFocuswebsite

• Well construction is strictly regulated to ensure isolation of groundwater

WHAT IS HYDRAULIC FRACTURING?

HYDRAULIC PUMPS

WELLBLENDER

PROPPANT (SAND)

FLUID SUPPLY

ADDITIVES

Fluid storage(fresh)

FLOWBACK AND PRODUCED

WATER

Flowback/Produced

Water Storage

Disposal

FILTER

SEPARATOR

Gas to sales (development) or flare (exploration)

Hydraulic fracturing is the process of transmitting sufficient pressure by fluid or gas into rock in

the subsurface to cause existing fractures to open or new fractures to be created

Calfrac June 12 2013

WaterBlender

Sand Delivery/Transfer

Sand Feed

Chemical/Additive Van

Data Van

Fuel

Flowback

Separator Facilities

WHAT IS HYDRAULIC FRACTURING?

STAGES OF DEVELOPMENT AND TIMELINES

• Very important in terms of understanding what’s possible and what’s not possible, and how operations change over time

• Pace can vary dramatically • “Exit”, decommissioning and reclamation is a possibility at any stage

Evaluation and Exploration

- Acquire tenure- Seismic- Individual wells (typically)- Rock and Reservoir

characterization- Early engagement- Initial permits and approvals

Piloting

- More seismic- Multi-well pad(s) with

production operations- Evaluate production

technologies- Local fluid re-use- Pipeline construction- Feasibility assessment- Long term planning and design- Expanded engagement

Commercial Development

- Detailed seismic- Centralized water management- Re-use and recycle- Logistics hubs established- Multi-well pads as per

development plan- Ongoing engagement

0 3 to 5 years 6 to 20+ years Decommission

WATER MANAGEMENT

Maximum depth of groundwater

Maximum vertical effect of hydraulic fracture

• Fracture growth

• Waste water disposal

• Wellbore construction and integrity

• Fluid volume has grown

• Variety of fluid sources has expanded

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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Average Fluid Pumped per Well

Avg Fluid Pumped Well Count

Source: geoLOGIC Systems

Average number of fracturing stages has grown from 6 to 24 during the same 10 year period

- Average fluid volume per stage has also grown

FRAGMENTATION

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Average Lateral Length

Avg Lateral Length Well CountSource: geoLOGIC Systems

• Reduced footprint (stakeholders)

• Better resource recovery (regulators and governments)

• Lower unit cost, higher productivity (operators)

Source: geoLOGIC Systems

• Although wells are longer, drilling and hydraulic fracturing times have been dramatically reduced

• Multiple stratigraphic horizons accessed from a single surface location

• Fewer pads to develop an area

INDUCED SEISMICITY

• Local and mainly minor- Anomalous induced seismicity is the concern- Basement structures, local geology are key influence- Not everywhere

• Number of monitoring stations increased, including local and operator specific monitoring arrays deployed

• Research escalated and accelerated

• Regulatory requirements increased, including “stop work” protocols in Alberta and British Columbia

• Operating practices developed (CAPP)

• All kinds of industrial activity causes it- Hydroelectric impoundments- Geothermal developments- Mining- Construction- Hydraulic fracturing

>4.0 ML

<2.0 ML

STAKEHOLDERS AND COMMUNITIES

• Planning for projects, not wells- mitigate land use conflict- address cumulative impacts

• Regional/multi-stakeholder planning for land and water

• Emissions reduction initiatives underway

• Community disturbance (dust, noise, traffic)- Joint community and industry synergy groups

• CAPP Hydraulic Fracturing Operating Practices

• PSAC Working Energy Commitment

• Industry Recommended Practices (IRP’s)

Operators, service companies, governments and regulators actively working to reduce impacts and address community concerns across many areas

Fracturing, Flow-back and

Testing

Commercial Development

Underway

Drilling

The process … in time lapse

Disturbance peaks during

drilling and fracturing

operations

During production operations

surface leases are partially

reclaimed

At the end of production

operations all disturbances are

reclaimed

Source: Encana

It’s the journey that’s the concern

Thank you!

Balance and collaboration

TechnologyCommunities

Governments

Companies

Environment

Economy

Source: CSUR