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UBS Shale Plays

UBS Shale Plays

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Published by: kishoregsp@yahoo.com on May 02, 2011
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04/09/2013

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As illustrated in Figure 2, unconventional gas differs from conventional gas
primarily by the nature of the deposits in which gas is found. Whereas
conventional gas typically targets small discrete stratigraphic or structural plays,
according to the US Department of Energy, two important distinctions that mark
unconventional gas are: 1) continuous accumulations that do not typically occur
above a base of water; and, 2) gas which is not density-stratified within the
reservoir.

Figure 2: Unconventional vs. conventional sources of gas

Source: US Geological Survey

The three main sources of unconventional gas in order of current production
contribution are: 1) tight gas (basin-centred gas); 2) coalbed methane; and, 3)
shale gas. Methane hydrates are also a potential source of unconventional gas,
but they are still far from commerciality.

While the three main types of unconventional gas share some high level
similarities, there are also notable differences. Similarities across these
unconventional sources include the need for stimulated production balanced
with low exploration risk and long producing lives. Key differences include the
way in which methane is sourced and stored, the shape of the production curves,
the levels of gas in place, and recovery factors. It is important to recognize that
there can be substantial differences even within each of these play types, and
what works in one play may not work in another. A prime example is coalbed
methane, where techniques used in the prolific San Juan coals have little
relevance to the dry, low-productivity coals of the Horseshoe Canyon formation.

Q-Series®: North American Oil & Gas 3 September 2008

UBS 9

The following provides a brief overview of each of the three main
unconventional gas types:

Gas shales

Shale gas is natural gas produced from reservoirs predominantly composed of
shale, with lesser amounts of other fine-grained rocks than more conventional
reservoirs. In contrast to conventional deposits, shale deposits are often both the
source rock and the reservoir rock for the natural gas. Gas is stored in shales in
three ways: 1) absorbed onto insoluble organic matter called kerogen; 2) trapped
in the pore spaces of the fine-grained sediments interbedded with the shale; and,
3) confined in fractures within the shale itself.1

The composition of shale gas
varies from play to play (i.e. liquids contents, methane content, etc.). Given the
relative abundance of shales, there is a substantial amount of shale gas in place
within North American deposits.

A typical shale gas well is typified by relatively high initial productivity rates
followed by steep initial declines before settling into a very steady long-term,
low-decline production profile. Recovery rates vary from play to play, but so far,
20-30% have been recorded as average rates.

Coalbed methane

As the name implies, CBM is simply natural gas produced from coalbeds during
the coalification process, wherein organic matter is transformed into coal.
Similar to shale gas, the coals are both the source and the reservoir, which is
very different from conventional sources. Natural gas in coal (NGC, another
name for CBM) is adsorbed on the internal surfaces and also stored in pores and
fissures in coal under pressure from overlying sediments and fluids. Because of
the complex nature of the internal surface structure of coal, coalbeds can store
up to seven times the amount of natural gas stored in a conventional reservoir
rock. Although the composition of CBM varies play by play, one commonality
is that it is typically a dry gas high in methane content.

There is no “typical” production profile for an industry CBM well, as each play
varies substantially. Some CBM plays require de-watering before they reach
peak production rates, while other CBM plays are dry and produce long-life gas
as soon as they are completed.2

Tight gas

Of the three main types of unconventional gas, tight gas is the most similar to
conventional oil and gas. Conventional reservoirs are composed of rock made up
of clastic or carbonate grains arranged in such a manner that they are in contact
with each other, but there is still a network of connected pore spaces between the
grains. Porosity (what stores the natural gas) and permeability (how connected the
pore spaces are) are important reservoir characteristics. Conventional reservoirs
typically have relatively high porosity and permeability and therefore are capable
of producing economically without the need for large-scale stimulation.

1 Centre for Energy

2 Centre for Energy

3 Centre for Energy

Q-Series®: North American Oil & Gas 3 September 2008

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Tight reservoirs are those which have low permeability, often quantified as less
than 0.1 millidarcies. Poor permeability is primarily caused by the fine-grained
nature of the sediments, compaction, or infilling of pore spaces by carbonate or
silicate cements precipitated by water within the reservoir.4

Tight gas can be
found in small discrete accumulations; however, when companies refer to tight
gas, it is usually in the context of a large, continuous resource-style play.

Tight gas typically displays relatively high productivity rates, followed by steep
initial declines, but followed by exceptionally long-life, low long-term declines.

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