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TAG Shale Report 08-31-08
TAG Shale Report 08-31-08
in response to the charge that easy oil is gone, the exploration and production industry is increasingly turning to shaleand the technology of hydraulic fracturingto transform uncertain reservoirs into commercially viable operations. Technology-driven, unconventional resource playsparticularly projects in search of gas or oil production from fractured shaleare sprouting up across the United States and around the world. As extraction technology improves, areas once thought to contain resources that would never see the light of day are today considered to be some of the most prolific and popular in the industry. Why have these unconventional reservoirs remained undeveloped, and whats changing? Shale, which consists mainly of consolidated clay-sized particles, is the Earths most common sedimentary rock. It looks like the slate of a chalkboard and generally has ultra-low permeability. In many oil fields, shale forms the geologic seal that retains the oil and gas within conventional producing reservoirs, preventing hydrocarbons from escaping to the surface. In a handful of basins, however, layers of shalesometimes hundreds of feet thick and covering millions of acres are both the source rock and a reservoir sequence for oil and gas. These shales have one thing in common: they are rich in organic carbon.
taG oils unconventional efforts are aimed at tapping the potentially vast oil and gas resources locked in fractured shales. Recent completion technologies and success in comparable formations in the U.S. suggest that extraction and recovery of this very major resource may lie within reach.
Dave Francis and Alexandra Johansen ignite an East Coast Basin gas seep.
cast, production from unconventional sources are anticipated to grow to 5.7 million barrels of oil per day in 2025, up from 1.8 million barrels of oil per day in 2003.
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Advanced drilling and completion technology is responsible for the dramatic production increase in East Texas Barnett Shale and other developing fractured shale plays which share similarities to New Zealands Waipawa-Whangai shales.
Fractured Shale Opportunities in Australasia
are added to these estimates, the future of gas in homes and industry suddenly becomes a vast investment opportunity. In a 2005 presentation, IHS Energy estimated untapped unconventional gas reserves alone at 90,000 trillionthat is 90,000,000,000,000,000 cubic feet.1
the east coast shale play, where the Waipawa-Whangai shale system is most widely and thickly developed, represents one of the most
TAG Oil holds two permits in New Zealands East Coast Basin, covering 2.2 million acres.
formations together have always been viewed as high-quality source rock, though they were never considered to be producible until the success of the Barnett Shale in Texas. Extraction success there, where reserves are estimated by the U.S. Geological Survey to be in excess of 25 trillion cubic feet, has provided a model for shale exploration throughout the world. And continuing developments in drilling capabilities and hydraulic fracturing technology support the premise that unlocking a major reserve in the Waipawa-Whangai shale is well within reach.
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Ken Chew, VP of Industry Performance and Strategy, IHS Energy: World Oil and Gas Resource and Production Outlook, 28 June 2005.
Depth (m) Net Thick (m) BI-I Temp C TOC % Vit Refl R Total Porosity % Reserves (mmcf / well)
Barnett data: GNS NZ Govt, Field, Brad (2006), Curtis (2002), Hollis et al (2005) - Bakken Data: Flannery, Jack; Kraus, Jeff; 2006 Search and Discovery Article #10105; Integrated Analysis of the Bakken Petroleum System, US Williston Basin - Waipawa, Whangai Data; GNS, NZ Govt; Francis, David; 2007 Reservoir Analysis of Whangai Formation and Waipawa Black Shale, PEPs 34348 & 38349, onshore East Coast Basin, Core Labs report 2007-12-18
The Waipawa Black Shale is a fractured, poorly bedded, organic-rich siltstone. Outcrop sampling indicates an average total organic carbon (TOC) values of 5% and average Hydrogen Index (HI) of 245 with maxima of 12% TOC and 550 HI, respectively. The formation occurs throughout TAGOils East Coast Basin acreage and has
also been identified in other areas of New Zealand. The Waipawa Black Shale is normally 30m or more thick and achieves a maximum thickness of 70m in Southern Hawkes Bay. The organic carbon is primarily of marine origin, although significant terrestrial organic matter is evident in some samples.
Potential reservoirs include sandstones of various ages and porosities up to 20% or more in
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This oil-rich Waipawa Black Shale in outcrop demonstrates the profuse internal fracturing within the formation.
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the east coast Basin is a cretaceouscenozoic fore-arc basin situated across the australian-Pacific plate margin. Basins of this type can be prolific producers of oil and gas, as in indonesia, california and other active plate margins worldwide. the WaipawaWhangai Shale System in particular is comparable in toc and oil and gas maturity levels to fractured shale plays such as the Bakken Shale in Montana and the Barnett Shale in east texas.
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The Whangai Formation is a poorly bedded, siliceous or slightly calcareous mudstone, with localized development of greensand and well bedded calcareous facies. The formation is 300 to 600 m thick throughout much of the East Coast Basin. The basal and main Whangai facies, Rakauroa Member, has an average TOC of 0.8% in the western sub-belt, with maximum TOC values of 1.7% and 336 HI. Although its TOC content is lower than the Waipawa Black Shale, the Whangai Formation is heavily fractured and can be nearly twenty times as thick.
The multiple fracturing systems observed in the Whangai Formation at the Gaddums Hill outcrop.
Fracturing is achieved by using hydraulic pressure created by pumping fluid into open cracks in the shale, and by keeping these cracks open by injecting solid propping materials (proppants) along with the fluid pumped into the formation. The pumped fluid, under pressures of up to 8,000 psi, is enough to crack shale as much as 3,000 feet in each direction from the wellbore. And opening fractures in the shale is the key to good production. Because of shales extremely low permeability, the best fracture treatments are those that expose as much of the shale as possible to the well bore. The greater the exposure, the faster the oil or gas will be produced.
Recent years dramatic changes in technology are making existing energy reserves stretch further while keeping long-term energy costs lower than they otherwise would have been.
Testimony of Chairman Alan Greenspan before the Committee on Energy and Commerce, U.S.House of Representatives June 10, 2003
A simple fracturing job may pump a mixture of water and sand into the well. The water creates the pressure to initiate the fractures, then carries the sand into the cracks as they grow. When the fluid pressure is released, the grains of sand hold the cracks open. Although water and sand are the cheapest fluid and proppant, they are not always the best. High-tech fracturing fluids are more viscous, and better able to maintain the proppant in suspension, allowing it to travel deeper into the fractures and reduce the amount of settling that occurs before the fractures close. Advanced designs for artificial proppants used in addition to sand also do a better job of holding open the cracks.
eastern Montana alone is estimated to reach 200 million to 250 million barrels. To date, over 600 wells have been drilled in the middle member of the Bakken Shale Formation, and 356 producers were pumping oil in Richland County as of August 2006. In the mid-Bakken play, which only began in December 2003, over 200 mid-Bakken wells have been permitted and nearly 100 wells were producing as of February 2007. Because of new horizontal drilling and completion technologies, the potential recoverable resource base for the Bakken Formation is massive. A recently published study by USGS scientist Leigh Price provides estimates from 271 to 503 billion barrels (mean of 413 billion) of oil equivalent in place. If this bears out, it could increase the estimate of technically recoverable crude oil resources in the U.S. by billions of barrels. For perspective, consider that the current estimate of all technically recoverable crude oil resources in the U.S., not including Bakken oil resources, is 174.67 billion barrels.
Pumped fluid is enough to crack shale as much as 3,000 feet in each direction from the wellbore. A 2500 horizontal well with 10 staged fractures contacts over 400 times the amount of reservoir than a conventional vertical well through the same formation.
taG oils strategy centers on new Zealand, Papua new Guinea, and the timor Sea, where our leadership team has extensive
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The middle member of the Bakken Shale formation is responsible for the explosive increase in Williston Basin oil production over the past few years.
taG oil ltd. (Corporate Office) 1050 Burrard Street Suite 2901 Vancouver, BC V6Z 2S3 Canada Tel: 1.604.609.3350 Fax: 1.604.682.1174 taG oil ltd. (Technical Headquarters) 233 Broadway P.O. Box 262 Stratford 4332 Taranaki, New Zealand Tel: 06.765.6643 Fax: 06.765.6654 TSX-V: TAO www.tagoil.com
Forward-looking Statements Certain statements contained in this document constitute forward-looking statements. These statements relate to anticipated future events or TAG Oils future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as seek anticipate plan continue estimate expect may will project predictpotential , , , , , , , , , , , targeting intend could might should believe and similar expressions. These statements involve known and unknown risks, uncertainties and other factors , , , , , that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. TAG Oil believes that the expectations underlying those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and therefore such forward-looking statements included in this document should not be unduly relied upon. These statements speak only as of the date of this document.