SPE 103775

Will Blossom of Unconventional Natural Gas Development in North America Repeat in

China?
Hongjie Xiong, Burlington Resources, Stephen A. Holditch, Texas A&M University

Copyright 2006, Society of Petroleum Engineers

• The technologies available and unavailable in China for
This paper was prepared for presentation at the 2006 SPE International Oil & Gas Conference
and Exhibition in China held in Beijing, China, 5–7 December 2006.
unconventional natural gas development, and how to use
and develop those technologies; and
• The role of foreign operators in developing
This paper was selected for presentation by an SPE Program Committee following review of
information contained in an abstract submitted by the author(s). Contents of the paper, as
presented, have not been reviewed by the Society of Petroleum Engineers and are subject to unconventional natural gas reservoirs in China.
correction by the author(s). The material, as presented, does not necessarily reflect any
position of the Society of Petroleum Engineers, its officers, or members. Papers presented at The paper concludes that an open, competitive, and mature
SPE meetings are subject to publication review by Editorial Committees of the Society of
Petroleum Engineers. Electronic reproduction, distribution, or storage of any part of this paper service sector is very critical to the future blossom, and that
for commercial purposes without the written consent of the Society of Petroleum Engineers is proper government regulations and policies in pricing, taxes,
prohibited. Permission to reproduce in print is restricted to an abstract of not more than
300 words; illustrations may not be copied. The abstract must contain conspicuous and downstream infrastructure will impact the development of
acknowledgment of where and by whom the paper was presented. Write Librarian, SPE, P.O.
Box 833836, Richardson, TX 75083-3836, U.S.A., fax 01-972-952-9435. unconventional natural gas resources.

Abstract Introduction
There are substantial volumes of unconventional gas resources Unconventional gas resources here refer to natural gas in tight
in China, including tight gas sands and coal bed methane gas sands, shale gas, and coalbed methane (CBM) (see Fig.1)
(CBM). Rapid economic growth in China has increased the
demand for more sources of clean energy, such as natural gas
from unconventional reservoirs. Small Volume
Easy to develop 1,000md
In the 1980’s in North America, the combination of federal High
tax credits and various technical development programs quality

sponsored by private organizations, public companies and

Increased technology
Higher Cost

Medium quality 10md

government agencies fostered the development of technology
for unconventional natural gas exploration and exploitation.
As those technologies in geology, geophysics, drilling, Tight CBM 0.1md
completion, and production have matured, and the price for gas Low quality
Large Volume
natural has increased, the development of unconventional Difficult to develop

natural gas has been blossoming for last decade globally.
Without question, it is certain that the development of
unconventional natural gas in China will be blossoming in the
coming decades. However, there are significant challenges and
hurdles to overcome before that happens.
This paper first analyzes the conditions and environment
required to ensure the development of unconventional natural
gas sources, including price, the service industry, cost, and the
operational environment. We then focus on key technologies
in G&G and engineering, and how they are tied to the success
of unconventional natural gas development. The paper also
discusses the advantages China offers, and the challenges in
China that must be over come to be sure the blossom of the
unconventional natural gas development actually occurs.
On the basis of the authors operational experience both in
China and North America, we will discuss the impact of
different operational environments on unconventional gas
development. The paper also discusses:
• The impact of new technology on unconventional natural
gas development;
Shale Gas 0.001md
Gas Hydrate
Fig. 1 - Unconventional natural gas resources (after
Holditch)1
Fig. 1 illustrates the principle of unconventional gas
resources. Globally, there are large volumes of unconventional
gas resources in many gas prone basins. It has been estimated
that around 32,560 TCF of gas resources are known to exist
worldwide, of which about 3,500 TCF are in China and the
Asia-Pacific area; and about 8,230 TCF known to exist in
North America1.
The development of unconventional gas resources in North
American has been booming for last decade. Fig.2 presents the
annual production rates for selected pays tight gas sands, shale
gas, and CBM in the US2. Since 1990, the annual production
from unconventional gas resources has increased at 40% per
year in the US.
2 SPE 103775

Currently the most active CBM development in the world
is in North America, in which there are about 3,000 CBM
wells in the US. These wells have led to reserves estimates of
17 – 35 TCF in the US. In Canada, there are 3,900 CBM
wells with reserves of about 700 TCF3.
Annual Production from Selected US
Unconventional Gas Plays (after Caldwell)
3,000
2,500
Annual Production (BCF)
Natural Gas Price
Natural gas price in North America (shown in Fig. 4) has been
increased steadily during the last 10 years due to many factors,
such as increased demand, higher oil prices, production
interruption due to weather, and a general convergence of
domestic supply and demand. There is very little, if any,
excess capacity. Recent gas prices and reasonable price
expectations should be sufficient to stimulate additional
activity in natural gas exploration and exploitation, especially
from unconventional natural gas resources.
40% per year

Tight Gas Sands Demand

CBM
2,000
Shale Gas
Total UCG
1,500

1,000
Price Investment
UCG
500
Development
0
Boom
70

73

76

79

82

85

88

91

94

97

00

03

Challenge
19

19

19

19

19

19

19

19

19

19

20

20

Year

Fig. 2 - Annual production from selected US Resource Technology

Cost Efficiency
unconventional gas play (after Caldwell)2
Fig. 3 - Development boom of unconventional natural gas
Currently, the demand for more energy is certainly the
engine for increasing interest by industry in unconventional
gas resource development. Fortunatel in the past, tax credit North America Average Wellhead Natural Gas Price ($/MSCF)
incentive programs, and research sponsored by private (EIA.doe.gov)
organizations, public companies and governmental agencies 10
Well Head Gas Price ($/MSCF)

led to the development of new technology for unconventional $/MSCF

natural gas exploration and exploitation. As those technologies
in geology, geophysics, drilling, completion, and production
were applied by industry, and coupled with increases in
natural gas price, the development of unconventional natural 1
gas resources in the US has been blossoming for several
decades.
This paper discusses the current situation, identifies the
key technologies required to explore and produce 0.1
unconventional gas resources, and then analyzes the current
90
93
96
99
02
05
72
75
78
81
84
87

situation and outlook the in China.

19
19
19
20
20
19
19
19
19
19
19
19

Year

The Reasons Behind the Boom in Development
As shown in Fig. 3, the “development boom” triangle
demonstrates the relationships among three factors behind the
blossom: Demand, Resource, and Technology & Services.
Strong demand for natural gas is the engine for the boom.
Better technology allows industry to economically develop
unconventional gas resources. To know where to apply the
technology, we have to assess the the availablility of
unconventional resource in gas prone basins. Strong demand
puts pressure on natural gas price. These higher natural gas
prices coupled with the technical challenges required to
develop these unconventional resources, in turn stimulate new
technology innovations. The new technologies enable us
improve operation and cost efficiency.
Fig. 4 - North Americal average wellhead natural gas
history (source: EIA)
Government Regulations
In 1978, the US Congress passed the Natural Gas Policy Act
(NGPA). The Federal Energy Regulatory Commision (FERC)
was assigned the task of administering the NGPA. One
benefit was to remove natural gas price controls to stimulation
production. Futher actions by FERC concerning the natural
gas business in the 1980’s and early 1990’s led to more
development in unconventional natural gas resources, such as
tight gas, coalbed methane and gas shales.
Federal and state tax credit program were incentives that
definitely let to more development of unconventional natural
gas resources. Because of the NGPA, the FERC developed
SPE 103775
regulations to encourage operators to produce gas from tight
reservoirs. The US federal government and some states
allowed tax credits or severance tax abatements to companies
who developed tight gas, coalbed methane or shale gas. The
governmental action played two important roles: it stimulated
activity to explore for unconventional gas, and it fostered the
development of new technology needed to assess and develop
the unconventional gas resources. The result is that a
combination of tax incentives, new technology and higher gas
prices has let to rapid development of many unconventional
reservoirs in the US in the past 15-20 years.
The Gas Research Institute (GRI, now it is called GTI), the
US Department of Energy (DOE), and several consortiums
have led the way in the development of new technologies
related to natural gas development and applications. Since the
late 1980’s many technical papers and reports have been
published in respect to technology development for
unconventional gas resources. There have been advancements
in resource assessment, drilling and completion methods, and
advanced hydraulic fracturing technologies. The new
technologies have been used to improve well productivities
and cost efficiency. Technolgy advances have helped to keep
development costs low, which was the key to sustaining the
industry during a period of generally low wellhead gas prices
in 1980’s and 1990’s (See Fig. 4). The impact of those
unconventional gas technologies on production and wellhead
gas price is significant. The EIA has estimated (Fig. 5) that
new technology has the potential to increase annual gas
production about 3 TCF and lower wellhead gas price by 18%
by year 20204.
The Impact of Unconventional Gas Technologies
on Wellhead Gas Price (Source: EIA)
20%
18%
Wellhead Gas Price
Wellhead Price Reduction
16%
Reduction %
14%
Incremental Prod (TCF)
12%
(%)
10%
8%
6%
4%
2%
0%
1998 2000 2005 2010
Year
Fig. 5 - The impact of unconventional gas technologies on
wellhead gas price and production
Efficient Service Sector
One of the biggest challenges we face in our efforts to develop
unconventional gas resources is the control of costs. The
service industry in North America consists of a combination of
large international service companies, and small local
companies, and a few specialized sevice companies. The
competition usually stimulates efficiency and technology
innovations, which should lead to reduced well costs. To
develop unconventional reservoirs, we mush control costs.
3
An alliance between an operator and a service company is
another way to improve operational efficiency. The integration
of technologies, experience, and supply chain is often the key
to overcome practice challenges. A working allicance can be
very beneficial in international operations.
Unique Characters of Unconventional Gas
Resources
Unconvetional gas resources include tight gas sands, CBM,
and shale gas. Each type of resource has unique characteristics
that must be considered in the development plan. One
common characteristic, however, is that the stabilized flow
rates from all unconventional reservoirs is usually quite low
due to low permeability in those reservoirs. The following
briefly summarizes those unique characters:
Tight Gas Sands
Tight gas sand reservoirs can be either continuous or
lenticular sand deposits. Many of the lenticular sands are
either fluvial channel sands, or low quality sands that are
usually deposited in a continental system. Some of the better
tight gas sands are more continuous and were deposited as
shoreline or marine systems, such as longitudinal bar sands.
Low permeability is the defineing feature of tight gas
sands.1 Most of the tight gas sands are tight because of
diagenesis that has filled the pores with clays or quartz
overgrowths. Virtually all wells in low permeability gas
reservoirs require massive hydraulic fracturing treatments to
acheive commercial production rate. After a large fracture
treatment, the gas flow rates can be high, due to formation
linear flow, but the wells usually stabilize as a low gas flow
rate (See Fig. 6). Many times, this low gas flow rate causes
liquid loading problems.
3.5
3 Coalbed Methane
In coalbed methane reservoirs, the gas, which is primarily
Incremental Annual
Production (TCF)
2.5
methane, is stored mostly as adsorbed gas on the internal
2 surfaces of the coal. Because of its large internal surface area,
1.5
coal stores 6 to 7 times more gas than the equivalent rock
volume of a conventional gas reservoir at a similar pressure.
1
Gas content generally increases with coal rank, with depth of
0.5 burial of the coalbed, and with reservoir pressure. Natural
fractures (cleats) that often occur in coal seams create the
0
2015 2020
permeable channels that allow the gas to flow. In many cases,
the cleats are initially filled with water. There is little free gas
in the cleats. The gas in place is mostly the adsorbed gas.
As we begin producing the coal seam reservoirs, by
reducing the pressure, gas will begin to desorb, diffuse
through the coal to the cleats, then flow through the cleats to
the well bore. If the coal cleat system is filled with water, we
have to produce the water from the coal cleat system in order
to reduce the pressure so gas can desorb and begin flowing.
We call this de-watering the coal. To maximize the gas flow
rates, we have to minimize the wellbore and the reservoir
pressure. In most cases, large volumes of water are produced
from coalbed methane wells, especially in the early stages of
production. Therefore, gas production rates from CBM wells
will start off at very small volumes then the flow rate witll
increase during the early production period as the reservoir
4 SPE 103775
pressure decreases. Eventually, the gas flow rate will reach a
maximum before starts declining (See Fig. 6).
Depending on coal type, thickness, porosity, continuity,
and gas permeability, a wide variety of completion techniques
are used. Some wells are completed with cavity completions.
May wells are drilled vertically and fracture treated. In recent
years, horizontal and multi-lateral wells have been
successfully used to develop coal seam reservoirs.
Shale Gas
Gas production from shale reservoirs has occurred for most
of the 20th Century in the Devonian shale in the Appalchian
Basin in the eastern portion of the US. Shale gas reservoirs
are both the source rock and the reservoir rock. As with coal
seams, some of the gas in shale reservoirs is adsorbed in
organic matter in shale and is released by desorbtion when the
pressure is reduced by production. Other layers in the shale
may be silty or sandy or fractured and contains free gas in pore
space or in fractures.
The shale matrix is an ultra low permeability medium. As
such, it requires a conductive natural fracture network and
hydraulic fracturing to connect the flow networks to the well
bore for gas to flow. Many shale gas wells can continue
producing gas at a relatively steady rate for long time after the
flush production period (See Fig. 6).
Horizontal and multi-lateral drilling with modern hydraulic
fracturing methods are currently being used to develop many
of the new shale gas plays.
Different Production Decline Features
Tight gas sands
Gas Rate
Shale gas
CBM
Time
Fig. 6 - Unique production behavoirs of three
unconventional gas wells
Key Technologies
There are many technology innovations that have occurred
during the past 10-20 years that has spurred development of
unconventional reservoirs. Better resource assessment
strategies can let us find the right places to drill. Other
technologies in the geosciences, reservoir engineering,
drilling, well completions, stimulation and production have
also been very important.
The following briefly describes some key technologies that
we use to find and develop unconventional gas resources.
Resource Assessment
Resource assessment for emerging, high risk-high
potential unconventional gas plays need to be updated every
two to three years, not once a decade. Those good reasons to
update the resource assessment for a reservoir, a field, and
even a basin include one new technology, re-inovated old
technique, new knowledge emerged in geology and geophisics
for the reservoir, adjacent field, and/or the basin, and/or
natural gas price changes.
To discovery the resources, we need to perform at least
• Basin assessments;
• Play-specific, extended reservoir characterizations;
• Natural fracture detection.
Unconventional gas plays require frequent assessments.
Some reservoirs, where resource depletion exceeds technology
progress, are in decline; Some reservoirs, where technology
progress exceeds resource depletion, are improving in
performance and size; and the reservoirs are prone to rapid and
large changes in outlook, performance and costs.
Natural fracture detection and characterization are
extremely important to shale gas reserouce assessment.
To assess shale gas resource, one must know the
percentage of total organic carbon within the rock. With
current special wireline logging technology, one can quantify
the amount of gas in shale, including free gas occupying pores
and gas adsored onto organic matter in shale. Porosity is the
key to quantify free gas amount. Though gas desorption and
flow mechanisms in shale are being investigated, both porosity
and natural fracture are used to estimate shale permeability.
Continuity of a tight gas reservoir may be the most
difficult parameter that needs to be continuously evaluated. A
series of data from a new well, including logs, possible core
data, drilling cutting, and production will help us understand
better about the play. Thus, those new acquired knowledge
will be feeded back to resource re-assessment. New
assessment technologies and software tools make this process
much more effective and efficient.
At the very beginning of a unconventional gas field
development, the field development plan (FDP) was
constrainted with limited data and other uncertainities. As the
development continues, and more data and better technologies
are available, it is necessary to continueously assess the
resource. The following figure (Fig. 7) demonstrates a good
example. As shown in the left side of Fig. 7, we may only
place four wells following a traditional approach and think the
four wells will draine the whole area as in orange color
pattern. However, due to deposition channel orientation and/or
hydraulic fracturing growth orientation, the four wells may
only draine a very limited area as in light blue pattern, which
leaves significant reserve behind. Thus, it may need many
more wells to effectively recovery the reserve in the area as
shown in the right hand side of Fig. 7.
SPE 103775
Traditional approach may leave Drainage pattern might be decided
significant reserve behind. by geological setting and hydraulic
fracturing treatments
Fig. 7 - Traditional and extensive development
Geophysics
Geophyiscal technologies to identify the main pays are
very crtical to tight gas sand development. Seismic inversion
technology is very important tool to identify better sand
channels in fluvial glogical deposition area. Except in mature
basin, most of us experienced hit-or-miss situation: a well
could be super if it is drilled in the middle of good sand
channel; or the well could be a dog if it just misses the center
of sand body.
A series of techniques in seimic interpretation,
visuatlization, horizon attribures, seismic velocity, inversion,
and seis-facies are being used to target well locations.
It is our experience in Sichuan Basin, before applying
seismic inversion technology to identify main sand channels,
we experienced hit-or-miss wells. By applying the technology,
we have been able to place wells in the good sand bodies,
which results in much better wells. Though it is not gurantted
that every single well would be a good well by applying the
technology, it is certain help one to identify the main pays
when it is applied properly.
Seismic data has proven very valuable for detecting and
imaging reservoir rocks, however there is currently no viable
tool for discriminating economic from non-economic gas
saturation in gas sands. The sensitivity of electromagnetic
methods to water saturation offers the potential to address this
issue if electromagnetic data can be successfully combined
with higher-resolution seismic data. A new algorithm was
developed for directly imaging reservoir gas saturation from a
combination of seismic and electromagnetic geophysical data.
3D seismic data may greatly help fractured reservoir
characterization, which requires an accurate delineation of
fracture corridors, as well as an estimate of the fracture
intensity12. Analysis of the seismic attribute distributions
within each seismic facies allows a preliminary interpretation
of these seismic facies in terms of fracture occurrence. The
validation of this interpretation with well data (BHI, core and
dynamic data) delivers a reliable map of fracture intensity.
Geological Modeling
Recently developed fast geological modeling technology
also can help us speed us unconventional gas development,
especially in reservoir management area.
5
Current geological modeling technology may be
summarized as
• All tools from seismic interpretation to simulation are
integrated in one application, eliminating import and
export problems and promoting collaboration.
• Various and robust geostatical simulation techniques
enable us study different possibilities of depositions
and reservoir property distributions.
• Strong visualization capabilities give us instant QC of
all data in 3D or 4D.
• Models can be updated instantly when new data
arrives to make quicker and more reliable decisions,
which makes dynamic characterization with time
possible and feasible.
The latest emerging geostatistical model technologies
enable geoscientists and engineers characterize and model
reservoirs with certain amount of uncertainities, which
dramatically speed-up geomodeling process. Geomodeling
used to scare people away since it was very time consuming,
very expensive, and it required specialists to run special
software tools to build up a geological model. Current
technologies make the task much easier and faster. Repeatable
working-flows built within a model enable that updating the
model becomes more and more like a few mouse clicks away.
Reservoir Engineering
Most of technologies and techniques in conventional
reservoir engineering can be used in unconventional gas
resource development. However, there are some exceptions. A
good example is to use the material balance method to
estimate untimate gas recovery (EUR). One should be very
cautious to apply this method to estimate EURs for
unconventional gas reservoirs. It is pretty difficult to accurate
estimate average reservoir pressure in tigh gas reservoirs
where gas flows most of times under transient flow period due
to low permeability. Some research projects are on-going to
study unique character in shale gas and CBM reservoirs.
Geological model Reservoir simulation model
upscaling
Fig. 8 - From a geological model to a simulation model
Perforation Infow Diagnosis (PID)
Permeability is one of key reservoir properties. Since
reservoirs of unconventional gas resources are very tight (low
to untra-low permeability), it is very time consuming and non
operation effective to run a conventional well test to evaluate
formation permeability either after perforation or after
hydraulic fracturing in the tigh gas reservoirs.
6 SPE 103775

Perforation Inflow Diagnostic, referred as PID11 testing, is Based upon a well-estabilied reservoir geological model,
a modern testing technique designed to deliver in cost- well-calibrated 3-D seismic interpretation results, geo-steering
effective manner valuable reservoir information such as: and LWD technologies, it is more attractive and more feasible
reservoir pressure, formation flow capacity, unstimulated gas to chase sand channels with horizontal wellbores.
inflow rate potential and near wellbore damage conditions Multilateral wells are also being utilized to develop CBM
prior to the fracture treatment. So far, the method is effective and tight gas sands.
for tight gas sands. PID testing procedure is Underbalanced drilling is a technology to reduce formation
(1) the interval is perforated under extreme damage, improve ROP and reduce drilling and stuck pipe
underbalanced conditions; problems in severe lost circulation zones. Drilling induced
(2) the pressure response monitored to evaluate the gas damage may include fines mobilization, invasion of mud
inflow rate potential; solids, mechanical glazing, phase trapping or chemical
(3) The transient pressure data is analyzed with the reactivity between invading fluids and the formation matrix or
closed chamber theory. in-situ fluids. Open hole completed horizontal wellbores are
more sensitivie to formation damages caused by drilling
Continueous Reservoir Modeling and Management process. Studes6 illustrate how the permeability of horizontal
The following chart outlines a basic workflow that one can wells can be reduced dramatically by high near wellbore skins
employ to continue updating geological models and reservoir and how this damage effect is attenuated as horizontal to
dynamic simulation models. The workflow makes routine vertical permeability ratio is increased (such as in highly
reservoir management work easy and quick (Fig. 9). laminated sands).
Part of reservoir management includs budget and planning, Underbalaced drilling can enhance productivity in tight
reserve booking, well performance evaluation, candidate channel gas sand reservoirs. As shown in Fig. 10, drilling
selection for in-fill drilling and workover, and economic and filtration and fines invade formation along high perm channels.
risk assessment. Current modeling technologies make Those formation damages can be permenant and more serious in
contineous geological and reservoir modeling easy and quick. under-pressured reservoirs. A lot of times, hydraulic fracture
growth orientation may deviate from the damaged high perm
Drilling direction, which results in very disappointed production rate and
Directional drilling is one of recently advanced technologies, ultimate recovery (EUR).
including deviated wells, horizontal wells and multilateral Overbalanced drilling Fracturing Treatment Production
wells etc. The directional drilling enables us to reach a target
reservoir from a physically limited surface well location. Higher perm

New pilot New development Lower perm

Max stress
orientation
Geological Logging Facies Properties OOIP
structure Data Modeling Modeling

Geological Modeling

model
Geophysical data
and model
Min stress
Upscale orientation

Reservoir modeling
Channel sand
Initializati OOIP Production Economic Orientation
on Data Limit
Hi t M t h ?
Drilling Drilling and Frac Un-stimulated
Potential investigation Damage Zone Damage Zone Damage Zone
New production data
model
New drilling and
Fig. 10 - Drilling damage, fracturing, and production
Production monitoring completion schedule
? Production
Forecast
New facility Underblanced drilling may also improve well ultimate
capacity
Budget & planning Reserves
recovery since UBD process will not affect absolute and
relative permeability (where initial water saturation is higher
than connate/critical water saturation). Since UBD process
Fig. 9 - Reservoir Management Workflow may keep reservoir untouched, it can benefit reservoir
characterization, natural fracture identification, permeability
characterization, and productivity evaluation.
Horizontal wells can increase production rates by
maximizing reservoir exposure, targeting multiple zones, Advanced Well Stimulation Technologies
reducing drawdowm, exploit thin pay zones etc. Combining More effective, lower damage well completion and
with multi-stage fracturing treatments, horizontal well is very stimulation technology is critical to develop unconventional
effective way to produce unconventional gas reservoirs. Many gas resources, including advanced targeted hydraulic
wells in Barnet Shale are horizontal wellbores with multi- fracturing technology. Tight gas and shale gas development
million pounds of proppant placed in the single wellbore with will be more the result of technical advances, notably in
several stage fracturing treatments. artificial fracturing of formations, than strictly by price4.
SPE 103775 7

Fig. 11 illustrates the current design workflow for
hydraulic fracturing treatments. A preliminary treatment is
designed based upon wellbore, well-logging, possible fracture
initiation positions (perforation position), and material and
pumping cost. The treatment will be further optimized by re-
designing after a data-frac. A series of QA/QC, real time
monitoring and optimization, proper flow-back is also a part of
the technology.
Frac Design Methodology
Estimate
Production water treatment – While economic quantities
of methane in CBM wells can be produced, de-watering and
water disposal options that are environmentally acceptable and
yet economically feasible, are a concern. Since solids present
in the fluid, there has been challenges for artificial lift tools in
CBM wells. As unconventional gas resource market has
matured, more robust and more artificial options are
available3.
Water may be discharged on the surface if it is relatively
fresh, but often it is injected into rock at a depth where the
Estimate cost

C
quality of the injected water is less than that of the host rock.
os

Lf
00
Lf Another alternative, not yet attempted, is to evaporate the
water and collect the potentially solid residues; this scheme
might be feasible in regions having high evaporation rates.
Real-time production optimization – As shown in Fig.
12, by monitoring daily production data, one can identify
Optimize treatment size
Reservoir & wellbore data Estimate Rock
Mechanical
underperformance wells and reservoir sections, then, a series
Properties
of diagnosis analyses can be performed, thus an optimal
Frac Job
Re-design remediation solution(s) may be prvided to enhance well
Optimize fluid chemical schedule
Optimize
perforation and
production and reservoir performance. The real-time
pumping schedule production optimization technology is based upon a set of
X-linker
Breakers
databases of production data, well completion data, and
Concentration

reservoir properties, software tools and other IT technologies,

plus a team of multi-decinpine consultants.
Time
Data Frac analysis

Fig. 11 - Advanced hydraulic fracturing design approach

Mutiple stage fracturing treatments in a single wellbore is

being used to develop those tight gas sands and shale gas
resources.
Recently developed fracturing microseismic diagnosis
technology can be used to analyze fracture growth orientation,
thus, in turn, it can help us optimize well spacing and
fracturing treatments13.
Non-damaging fracture-stimulation fluids and innovative
hydraulic fracture designs are being used to improve gas and
water flow to the wellbore.
As shown in Fig. 7, equiping with the drainage pattern
knowledge and the latest fracturing technologies, we can
intensively develop tight gas sands by placing wells in much
smaller spacing, which may result in dramatical imropvement
in gas recovery rate. Rulison Field study7,9 indicates the gas
recovery rate increases from 7% in traditional 80 acre well
placing to 48% in an intensive development approach of 20 Fig. 12 - Real-time production optimization
acre well spacing.

Production Technologies Knowledge, Experience, and Information Sharing

Compression - Maintaining low back pressure on Technical gathering - Many technical meetings,
wellheads is very important for unconventional gas wells, organized by SPE and other professional orgnizations, such as
since the low well drawdown pressure can enhance EUR. One annual conferences, regional meetings, specific topics
of operation approaches to maintain low wellhead pressure can meetings, technical workshop, study group lunchneon
be reached by multi-stage compression, such as from meetings, provide excellent envrionment to share knowledge
wellheads to gathering stations, from gathering stations to and experience. Those professional gatherings also provide
process plants, and from from process plants to trunck lines. golden opportunities for operators and service companies to
To develop an unconventional gas reservoir, compression communicate with each other on new challenges and new
equipment and related operation expense must be considered study/research ideas. Local study group meetings are great
in an overall development plan. place to share some ideas and/or best practice to improve
operation cost efficiency.
8 SPE 103775

Basin Excellence – Based upon many years operation

practice in different basins in North America, Burlington
China Basins – West\Internal
Resources summaried the successful experience as Basin

BAS LIAO
Excellence. The main idea behind Basin Excellence is

IN
NG
SO
JUNGGAR
operation efficiency, which improves cost efficiency, BASIN
Urumqi
including TUHA BASIN

• Critical mass of projects;

Beijing
XINJIANG UYGUR NINGXIA
SHAANXI

S IN Y
TARIM BASIN

BA AI BA
• Integrated approach to thoroughly understand the QA GA
NS ORDOS
BA IDA U

H
SIN M BASIN

BO
subsurface; QINGHAI Lanzhou

• Continuous operational process improvement; Xian

Zhenzhou Nanjing
Shanghai

• Access to infracsturcture;

EA
SICHUAN Wuhan

BA INA S
Lhasa
1. Tarim 296 TCF Chengdu BASIN

• Excellent relationships with host govements, partners,

SIN
2. Sichuan 260 TCF Chongqing

H
SICHUAN

TC
3. Ordos 148 TCF Nanchang

EAS
4. E. China Sea 88 TCF Zunyi Taipei
and suppers; and 5. Yinggehai
6. Bohai Bay
79 TCF
75 TCF
• Alighned with company competencies 7. Qiongdongnan 58 TCF
8. Pearl River 46 TCF
YUNNAN

9. Junggar 43 TCF
Rapid access to the information – In North America, 10. Songliao
11. Qaidam
35 TCF
10 TCF
Hong Kong
PEARL R.
0 500 1000 1500km BASIN
many data related to fields and wells are publishcally Source: Quan and Keun-Wook, 1998, Schlumberger 2nd
Well Eval. Conf., 1997
5 7

available, such as well records, drilling and completion, and Fig. 13 - China basins
production data. The significant advances of information
technologies make arichiaving and accessing the information
very easy and efficient.
Technical Consulting - There are numerous of consulting
companies for oil and gas E&P in North America, and some of Natural Gas
Hydro 3.0% Nuclear
them have great experience and specialties in unconventional
6.9% 0.5%
gas reservoirs. Thousands of very experienced geoscientist and
engineers work in consulting business to provide much
needed, flexible, and cost- effective services to E&P
Oil
companies. Those consultants had gained experience and
27.6%
knowledge from over decades of working in different basins
and different reservoirs in the world. Thus, those consultants
can also provide more independent opinions especially in Coal
resource assessment and solving tough technical problems. 62.0%

Source: PetroChina

China Natural Gas Resources and Consumption
Plenty Resources
A conservative estimation of proven-probable-possible gas
reserve is at 60 - 170 TCF 8,10 in China, with about 35-80 TCF
of proven reserve8,10 . The total resource could be as high as
240-1700 TCF8,10 with consideration of about 105 TCF in
CBM. There is little information published on shale gas
resources in China.
China oil industry had put more efforts and focused on
explore oil resource until recently. As natural gas demand
increases, undoubltedly, there will be more reserve found soon
in those mature basins and several unexplored basins spreaded
in China (see Fig. 13).
Fig. 14 - China energy consumption distribution
Strong Demand
Currently, natural gas consumption in Chian is only about
3% of all energy consumption (Fig. 14). The natural gas
consumption increased from 0.9 TCF in year 2000 to 1.3 TCF
in year 200410.
Since strong economic growth and the awarence of
envoriment protection, the future demanding on natural gas is
expected to be very strong. The estimated gas consumption
growth is from 6.8% (EIA) to 11.8% (PetroChina) per year10,
which will be about 8-10% of total energy consumption.
With the forecast10, China energy sector has started
intensifying the exploration of unconventional natural gas
resources; building national-wide truck lines such as west-to-
east gas pipeline, Shan-Jing gas pipeline, and zhong-wu
pipeline; constructing gas storage facilities; and intensifying
the international corporation, including open more blocks to
attract foreign operators to bring more specified technologies
and management experience for unconventional gas
development.
In addition to plenty resources and strong demand, as
shown in Fig. 3, the booming of unconventional gas resource
development also requires an effective service sector to
provide qualified and efficient services.
SPE 103775
Though they are tied with national oil companies, there are
many service companies in China. Those companies can
provide massive and conventional operation services.
Though the integration between technology applications
and reservoirs can be optimized further, one may find the
latest technologies and most of related tools in China. Thus,
the blossom of unconventional gas resource development can
be expected in China based upon the trangle relationship
among Demand-Resources-Technology as illustrated in Fig. 3.
40
China.
35 North America
US Gas Consumption (TCF)
30
Annual change:
25
20
15
Real
10
5 1
0 0
1990 2002 2003 2010 2015 2020
Year
Fig. 15 - Comparison of gas consumtion between USA and
China (EIA)
The Challenges Ahead
Equpment and Tools
Chinese service companies have been importing a lot of
equipment for last couple of decades, including fracturing
pumping equipment, well logging tools, wellheads, tubulars,
compression equipment, and pumps & meters etc. However,
there are still several key tools needed to improve operation
efficiency. Here we list a few of very important tools not
existing in China market.
PCM - As it has been pointed out, hydraulic fracturing is
probably one of the most cruticial technologies to develop
unconventional gas resources. Uptil now, fracturing fluid has
been batch-mixed in China, which is hard to control fluid
quality and often waste extra fluid. Most of time, it is almost
impossible to pump multi-stage frac treatments in a single well
site in a period of several days. Precision continuous mixer
(PCM) is the answer. PCM is a pumping and blending system
that provides gelled fluid to the blender. The system
simultaneously meters and continuously mixes polymer slurry,
concentrated KCl solution, and other liquid additives used in
fluids. For unknown reasons, PCM can’t be found in China
market so far, which limits operation efficiency.
9
Snubbing Unit – it is a basic tool to control wellhead
pressure for underbalance operations in wellbores.
UBD Pressure Control - Underbalance drilling equipment
for over-pressured formations is also hardly found in China.
Compressors - Until recently, multi-stage compression in
the field has not been applied in China, especially from
wellheads to gathering stations, which significantly limits
single well EUR. Wellhead compression is very important for
those wells in low pressure reservoirs. PCOC (a division of
PetroChina operated in Ordos Bain) has just started testing the
wellhead compression concept. Low-cost compression
equipment may be one of challenges to be overcome.
8
Maturaty of Technologies
7 Fracturing fluids - One fracturing fluid sytem is a set of
China Gas Consumption (TCF)
complicated combination of several chemicals. Any fracturing
6
fluid system must be compatible with formation conditions,
5 such as rock componets, formation fluids, and formation
4 temperature, but also be adjustible with treatment sizes – the
balance between gel stabilized time and gel broken time.
3 Therefore, multple sets of matured fluid systems take time and
Forecast
2 cost to be developed.
There have been some successes of local versions of
fracturing fluid systems. However, it has been a challenge to
find cost-effective fracturing fluids in China, though a couple
2025 2030 of international service companies can provide a couple of
fluid systems, or some chemical additives. It is expected there
are some challeges ahead to provide proper and cost-effective
fracturing fluids for large scale operations.
Operation Efficiency - One may find different completion
tools in China now, such as, different plugs, perforation guns,
and coiled tubing etc. However, the operation efficiency and
cost-efficiency are still issues.
Integration of Technologies
One technology and/or technique can’t be applied
everywhere. A new technique or technology may be very
effective in one field, and it may not be effective at all in other
fields. It has been known that an integrated and systematic
approach is necessary to economically efficiently develop any
oil/gas field. It is a must for unconventional gas resources. The
economics of unconventional gas resource development is
very sensitive to well placement, drilling and completion cost,
and operation efficiency.
It is often needed for a team of G&G, reservoir
engineering, drilling and completion, production, reservoir
management, and economicist to successufly develop
unconventional gas resources.
In oil and gas E&P sector in China, one may find most of
the latest technologies, tools, techniques, and concepts as
being applied in North America. Occasionally, one can find
some reports on the applications of latest technolgogies, such
as horizontal wells, big fracturing treatments, and
underbalance drilling etc. However, since those technologies
and techniques, like everything else, are not suitable to every
single situation, the success of the applications can be
discussed. The large scale of applications in everyday’s
operation is rare.
Service Sector
10
An open, independent, competitive, and mature service
sector is very critical to the success of oil and gas E&P
industry, and even more important to efficiently and
economically develop unconventional gas resources.
Though there are a very few and very small independent
private service companies existing in China, they can’t
provide a large scale and very efficient operation campagns,
which is crucial to the operation of unconventional gas
development.
Internaltional service companies can privide not only high-
tech tools and chemicals, but also plenty experience and
expertise from different basins around the world. Almost all
of international service companies have opened offices in
China to provide service in China, and several of them have
been providing services for many years in on-shore oil and gas
industry in China. However, most of time, they can only
market special tools and chemicals, and/or provide very
limited consulting services and well-site operations, almost no
field operation in drilling and completion areas. On surface, it
seems that the limited services provided by internaltional
service companies have been resulted from the consideration
of cost and profit. However, it is not hard to conclude it is
because of not-fully-open and competive market.
Currently, most majority of local service companies are a
part of or are tied with national oil companies. None of them
are independent. One can argue that there are advantages for
this structure tieing with oil companies. Though there are
some small scale activities cross different basins, those service
companies limit their activities within local market where their
oil company operates, which, in return, limit those service
companies’ growth and improvement in term of experience,
operation efficiency, and cost efficiency.
Since operation and cost efficiency is the key to develop
unconventional gas resources, a fully open, competitive, and
independent service industry is a must.
Knowledge Sharing and Transfer
Though it is very competitive market in North America,
knowledge sharing often happens. In North America, there are
many technical meetings, technical workshops, and luncheon
learning presentations. Some of those knowledge share
ganthering are specially desinated for unconventional gas
resource development. All of those meetings provide great
place to share best practices, lessons learned, real-world
challenges, and new ideas for the future.
In China, both of knowledge sharing, routine technical
training, and consulting business are being developed.
However, it will take more efforts to form such scale and
business style as in North America.
HSE
Comparing to oil wells, the unique feature of gas requires
more attentions to HSE. It is much easier for natural gas to
catch fire, explode, and/or leak into air. Both sweet and sour
gas in low or over-pressured reservoir may easily leak into air,
which causes significantly threat to heath, safety, and
environment.
SPE 103775
Two tragic incidents occurred in Sichuan Basin in last
couple of years indicate that HSE is a challenge for everyone
here in China.
The challenges for foreign operators to develop UCG in
China
China on-shore unconventional gas resource has been open
to foreign operators for a long time. A couple of international
Oil Companies are exploring several blocks in Sichuan Basin
(CZ Block and Zitong Block) and Ordos Basin (Changbei
Block, Sulige South Block, and CBM blocks located in the
east range of the basin). Also, a new round of nine-open-
block bidding acitivity in Tarim Bain is on-going. Some of
those open blocks are expected in tight gas sands.
Burlington Resources (now ConocoPhillips) had
inheritaged CZ block in Sichuan Basin and had been working
on the block about a decade. It has turned out that the biggest
challenges were the gas price, operation and cost efficiency.
Natural gas price is guided by the government, and the
price is set by a local partner. Natural gas price has been low
comparing with internation markets, especially with North
America market (5 to 10 $/MSCF in North America vs 2 to
3$/MSCF in China recently). At such low natural gas price,
the inability to cover well and production costs discourages
foreign exploration acitivites and make foreign operators very
hard to develop unconventional gas resources in China.
Lack of equipment and special tools makes foreign
operators difficult to perform daily drilling, logging, and
completion activity. In last a couple of years, we had to bring a
snub unit into China for us to perform necessary well
completion acitivities. The well completion cost increased
dramatically due to the limited size operation with that
equipment. When we studied the UBD feasibility, we found
out that the biggest hurdle was to find proper pressure control
equipment: bringing it from North America was too expensive
and there was not proper equipment available locally for UBD
in that reservoir.
Since Sichuan Basin is surrounded by big mountains, the
service market is isolated from the other area in China.
Sometime, our operation has been greatly impacted by the
availability of qualified service. Operation efficiency has also
negatively impacted cost efficiency.
Accessing data is a challenable task. We often found out
that gaining access to crucial field data often is either
impossible or requires navigating near-impenetrable
bureaucracies. Data from seismic and well logs and well test
and production reports often are managed by a number of
different subsidaries within the national oil companies that do
not routinely communicate with one another and can be
possessive of their data. Accessing those data in those areas
other than the contracted area is almost impossible.
HSE is also a big challenge for us. HSE awarenace needs
to pay more attention. We have spent tremendous effort in
every single step of enforcing the process due to lack of
awarence and experience.
Summary
It is a big challenge to develop those plenty unconventional
natural gas resources to meet the demand of economic
SPE 103775 11

booming growth in China. The paper discusses various topics
related to speed up the development of unconventional natural
gas resources, which, in turn, the authors hope will help the
success.
• The impact of unconventional natural gas development
technology;
• The technologies available and unavailable in China for
unconventional natural gas development, and how to
utilize and develop those technologies; and
• The foreign operators to develop unconventional natural
gas reservoirs in China.
Conclusions
Economic growth in China demands significant growth in
energy supply. There are plenty of unconventional natural
resources in China. Thus, it is certainly that the
unconventional gas development will boom soon, though there
maybe some tough challenges down the road ahead. It is
critical to have an open, competitive, and mature service
sector to the future blossom; and those proper government
regulations in pricing, tax, and downstream infrastructure will
speed up the mature of unconventional natural gas
development. It is necessary to integrate cost effective
technologies to improve operation efficiency.
10. S. Su: “The development of China’s natural gas
market”, 6th US-China Oil and Gas Industry Forum,
June 2005, New Orleans, LA
11. R.V. Hawkes and F. Hategan: ” Modern Concepts
in Perforation Inflow Diagnostic (PID) Testing: A
Safe, Green, and Cost-Effective Technique for
Evaluating Pre-Frac Reservoir Parameters”, SPE
90827, the SPE Annual Technical Conference and
Exhibition held in Houston, Texas, U.S.A., 26–29
September 2004
12. G. Bloch, M.E. Deeb, and A. Meunier etc:
“Seismic Facies Analysis for Fracture Detection : a
Powerful Technique”, prepared for presentation at
the SPE 13th Middle East Oil Show & Conference
held in Bahrain 5-8 April 2003.
13. K. Fisher: “Barnett Shale Fracture Faireways Aid
E&P”, World Oil, August 2006, pp83-86

References

1. S.A. Holditch: “ Tight Gas Sands”, SPE

Distingushed Author Series, JPT, June 2006, pp86-
94
2. R. Caldwell: “Are unconventional resources for
real”, E&P, Jan. 2006, pp68-69
3. M. Findley and K. Shirley: “Options for CBM
production”, E&P, Jan. 2006, pp 70-74
4. T. McCallister: “Impact of unconventional gas
technology in the annual energy outlook 2000”,
Energy Information Administration, 2000
5. J. Logan and W. Chandler: “Natural Gas Gains
Momentum”, US-China Business Council, 1998
6. D. Brant Bennion, F. Brent Thomas,Ronald F.
Bietz, “Formation Damage and Horizontal Wells -
A Productivity Killer?”, SPE 37138, Presented in
International Conference on Horizontal Well
Technology held in Calgary, Canada, Nov, 1996.
7. Vello A. Kuuskraa: “Unconventional natural gas
industry savoir or bridge?”, 2006 EIA Energy
Outlook and Modeling Conference, March 27,
2006, Washington, DC
8. D. Pietz: “China’s natural gas sector generating
great expectations”, Oil&Gas Journal, Vol.99,
Issue 23, June, 2000.
9. Vello A. Kuuskraa: “Tight gas sand development –
How to dramatically improve recovery
efficiency?”, GTI, GasTIP, Winter 2004