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 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. 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 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 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 for commercial purposes without the written consent of the Society of Petroleum Engineers is 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 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.

The technologies available and unavailable in China for unconventional natural gas development, and how to use and develop those technologies; and • The role of foreign operators in developing unconventional natural gas reservoirs in China. The paper concludes that an open, competitive, and mature service sector is very critical to the future blossom, and that proper government regulations and policies in pricing, taxes, and downstream infrastructure will impact the development of unconventional natural gas resources. Introduction Unconventional gas resources here refer to natural gas in tight gas sands, shale gas, and coalbed methane (CBM) (see Fig.1)

Abstract There are substantial volumes of unconventional gas resources in China, including tight gas sands and coal bed methane (CBM). Rapid economic growth in China has increased the demand for more sources of clean energy, such as natural gas from unconventional reservoirs. In the 1980’s in North America, the combination of federal tax credits and various technical development programs sponsored by private organizations, public companies and government agencies fostered the development of technology for unconventional natural gas exploration and exploitation. As those technologies in geology, geophysics, drilling, completion, and production have matured, and the price for natural has increased, the development of unconventional 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;

Small Volume Easy to develop High quality

1,000md

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.

Increased technology

Higher Cost
Large Volume Difficult to develop

Medium quality CBM Tight gas Low quality

10md

0.1md

Shale Gas

0.001md Gas Hydrate

there are 3. tax credit incentive programs. and a general convergence of domestic supply and demand.500 1. Strong demand for natural gas is the engine for the boom. 20 North America Average Wellhead Natural Gas Price ($/MSCF) (EIA. Resource. the “development boom” triangle demonstrates the relationships among three factors behind the blossom: Demand. One benefit was to remove natural gas price controls to stimulation production. Because of the NGPA. 4) has been increased steadily during the last 10 years due to many factors. Better technology allows industry to economically develop unconventional gas resources. and research sponsored by private organizations. The Federal Energy Regulatory Commision (FERC) was assigned the task of administering the NGPA. especially from unconventional natural gas resources. 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.North Americal average wellhead natural gas history (source: EIA) Government Regulations In 1978.doe.900 CBM wells with reserves of about 700 TCF3. Annual Production (BCF) 40% per year Demand Price UCG Development Boom 73 76 79 82 88 85 91 94 97 00 03 Year Investment 70 Challenge Technology Cost Efficiency Fig. the US Congress passed the Natural Gas Policy Act (NGPA).000 1. we have to assess the the availablility of unconventional resource in gas prone basins. Federal and state tax credit program were incentives that definitely let to more development of unconventional natural gas resources.000 500 0 Tight Gas Sands CBM Shale Gas Total UCG Natural Gas Price Natural gas price in North America (shown in Fig. completion.500 2. 2 . in turn stimulate new technology innovations. and production were applied by industry. production interruption due to weather. coalbed methane and gas shales. Recent gas prices and reasonable price expectations should be sufficient to stimulate additional activity in natural gas exploration and exploitation.1 72 75 78 81 84 87 90 93 96 99 19 19 19 19 19 19 19 19 19 19 20 20 02 05 Year The Reasons Behind the Boom in Development As shown in Fig.000 2. Fig. Strong demand puts pressure on natural gas price. in which there are about 3.Development boom of unconventional natural gas Resource 19 19 19 19 19 19 19 19 19 19 20 Fig. and Technology & Services. To know where to apply the technology. In Canada. These wells have led to reserves estimates of 17 – 35 TCF in the US. excess capacity. There is very little. identifies the key technologies required to explore and produce unconventional gas resources. The new technologies enable us improve operation and cost efficiency. Annual Production from Selected US Unconventional Gas Plays (after Caldwell) 3. and then analyzes the current situation and outlook the in China. drilling. higher oil prices. geophysics. 4 .2 SPE 103775 Currently the most active CBM development in the world is in North America. the FERC developed .Annual production from selected US unconventional gas play (after Caldwell)2 Currently. This paper discusses the current situation. the demand for more energy is certainly the engine for increasing interest by industry in unconventional gas resource development. Fortunatel in the past. if any.gov) Well Head Gas Price ($/MSCF) 10 $/MSCF 1 0. These higher natural gas prices coupled with the technical challenges required to develop these unconventional resources. such as increased demand. the development of unconventional natural gas resources in the US has been blossoming for several decades.000 CBM wells in the US. public companies and governmental agencies led to the development of new technology for unconventional natural gas exploration and exploitation. such as tight gas. 3 . As those technologies in geology. and coupled with increases in natural gas price. 3.

we have to produce the water from the coal cleat system in order to reduce the pressure so gas can desorb and begin flowing.5 1 Wellhead Gas Price Reduction % Incremental Prod (TCF) 3. the cleats are initially filled with water. is that the stabilized flow rates from all unconventional reservoirs is usually quite low due to low permeability in those reservoirs. Some of the better tight gas sands are more continuous and were deposited as shoreline or marine systems. but the wells usually stabilize as a low gas flow rate (See Fig. and small local companies. is stored mostly as adsorbed gas on the internal surfaces of the coal. In many cases. The gas in place is mostly the adsorbed gas. After a large fracture treatment. 4).5 0 1. and supply chain is often the key to overcome practice challenges. and shale gas. diffuse through the coal to the cleats. Since the late 1980’s many technical papers and reports have been published in respect to technology development for unconventional gas resources. The impact of those unconventional gas technologies on production and wellhead gas price is significant. The new technologies have been used to improve well productivities and cost efficiency. we mush control costs. this low gas flow rate causes liquid loading problems. with depth of burial of the coalbed. 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 Fig. such as longitudinal bar sands. which is primarily methane.SPE 103775 3 regulations to encourage operators to produce gas from tight reservoirs. One common characteristic. In most cases. The Gas Research Institute (GRI. and several consortiums have led the way in the development of new technologies related to natural gas development and applications. 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. If the coal cleat system is filled with water. and with reservoir pressure. the gas flow rates can be high.5 3 2. Incremental Annual Production (TCF) . The US federal government and some states allowed tax credits or severance tax abatements to companies who developed tight gas. There is little free gas in the cleats. A working allicance can be very beneficial in international operations. The governmental action played two important roles: it stimulated activity to explore for unconventional gas. Technolgy advances have helped to keep development costs low. As we begin producing the coal seam reservoirs. coal stores 6 to 7 times more gas than the equivalent rock volume of a conventional gas reservoir at a similar pressure. Virtually all wells in low permeability gas reservoirs require massive hydraulic fracturing treatments to acheive commercial production rate. The competition usually stimulates efficiency and technology innovations. large volumes of water are produced from coalbed methane wells. which should lead to reduced well costs. Therefore.5 2 An alliance between an operator and a service company is another way to improve operational efficiency. The result is that a combination of tax incentives. drilling and completion methods. CBM. To develop unconventional reservoirs. Because of its large internal surface area. Many of the lenticular sands are either fluvial channel sands. The following briefly summarizes those unique characters: Tight Gas Sands Tight gas sand reservoirs can be either continuous or lenticular sand deposits. The Impact of Unconventional Gas Technologies on Wellhead Gas Price (Source: EIA) 20% 18% Wellhead Price Reduction (%) 16% 14% 12% 10% 8% 6% 4% 2% 0% 1998 2000 2005 Year 2010 2015 2020 0. Low permeability is the defineing feature of tight gas sands. coalbed methane or shale gas. Unique Characters of Unconventional Gas Resources Unconvetional gas resources include tight gas sands. new technology and higher gas prices has let to rapid development of many unconventional reservoirs in the US in the past 15-20 years. Coalbed Methane In coalbed methane reservoirs. by reducing the pressure. now it is called GTI). experience. then flow through the cleats to the well bore. The integration of technologies. Many times. and advanced hydraulic fracturing technologies. and it fostered the development of new technology needed to assess and develop the unconventional gas resources. Gas content generally increases with coal rank. however. There have been advancements in resource assessment. the gas. To maximize the gas flow rates. the US Department of Energy (DOE). and a few specialized sevice companies. We call this de-watering the coal. due to formation linear flow.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. 6). 5 . Each type of resource has unique characteristics that must be considered in the development plan. gas will begin to desorb. The service industry in North America consists of a combination of large international service companies. especially in the early stages of production. or low quality sands that are usually deposited in a continental system. The EIA has estimated (Fig.1 Most of the tight gas sands are tight because of diagenesis that has filled the pores with clays or quartz overgrowths. Natural fractures (cleats) that often occur in coal seams create the permeable channels that allow the gas to flow. we have to minimize the wellbore and the reservoir pressure. 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.

it requires a conductive natural fracture network and hydraulic fracturing to connect the flow networks to the well bore for gas to flow. With current special wireline logging technology. and even a basin include one new technology. Other layers in the shale may be silty or sandy or fractured and contains free gas in pore space or in fractures. porosity. a field. high risk-high potential unconventional gas plays need to be updated every two to three years. it is necessary to continueously assess the resource. well completions. Continuity of a tight gas reservoir may be the most difficult parameter that needs to be continuously evaluated. and/or natural gas price changes. The shale matrix is an ultra low permeability medium. At the very beginning of a unconventional gas field development.4 SPE 103775 pressure decreases. the gas flow rate will reach a maximum before starts declining (See Fig. extended reservoir characterizations. we need to perform at least • Basin assessments. Many shale gas wells can continue producing gas at a relatively steady rate for long time after the flush production period (See Fig. drilling cutting. possible core data. 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. Those good reasons to update the resource assessment for a reservoir. which leaves significant reserve behind. 7. those new acquired knowledge will be feeded back to resource re-assessment. Thus. performance and costs. • Play-specific. the four wells may only draine a very limited area as in light blue pattern. Better resource assessment strategies can let us find the right places to drill. and/or the basin. and production will help us understand better about the play. Porosity is the key to quantify free gas amount. 6). re-inovated old technique. including logs. reservoir engineering. one can quantify the amount of gas in shale. are in decline.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. As with coal seams. Though gas desorption and flow mechanisms in shale are being investigated. 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. 7. To assess shale gas resource. Horizontal and multi-lateral drilling with modern hydraulic fracturing methods are currently being used to develop many of the new shale gas plays. both porosity and natural fracture are used to estimate shale permeability. where technology progress exceeds resource depletion. As shown in the left side of Fig. Some reservoirs. The following briefly describes some key technologies that we use to find and develop unconventional gas resources. and more data and better technologies are available. the field development plan (FDP) was constrainted with limited data and other uncertainities. 6 . May wells are drilled vertically and fracture treated. 6). where resource depletion exceeds technology progress. Different Production Decline Features Tight gas sands Gas Rate Shale gas CBM Time Fig. Shale gas reservoirs are both the source rock and the reservoir rock. Natural fracture detection and characterization are extremely important to shale gas reserouce assessment. As the development continues. are improving in performance and size. including free gas occupying pores and gas adsored onto organic matter in shale. and the reservoirs are prone to rapid and large changes in outlook. To discovery the resources. not once a decade. Some wells are completed with cavity completions. The following figure (Fig. new knowledge emerged in geology and geophisics for the reservoir. . 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. a wide variety of completion techniques are used. Eventually. • Natural fracture detection. due to deposition channel orientation and/or hydraulic fracturing growth orientation. Depending on coal type. drilling. 7) demonstrates a good example. New assessment technologies and software tools make this process much more effective and efficient. Other technologies in the geosciences. stimulation and production have also been very important. Resource Assessment Resource assessment for emerging. adjacent field. Thus. As such. In recent years. one must know the percentage of total organic carbon within the rock. and gas permeability. Some reservoirs. it may need many more wells to effectively recovery the reserve in the area as shown in the right hand side of Fig. However. thickness. continuity. horizontal and multi-lateral wells have been successfully used to develop coal seam reservoirs. Unconventional gas plays require frequent assessments. A series of data from a new well.

inversion. which results in much better wells. which requires an accurate delineation of fracture corridors. 8 . however there is currently no viable tool for discriminating economic from non-economic gas saturation in gas sands. there are some exceptions. visuatlization. very expensive. Perforation Infow Diagnosis (PID) Permeability is one of key reservoir properties. Seismic inversion technology is very important tool to identify better sand channels in fluvial glogical deposition area. 3D seismic data may greatly help fractured reservoir characterization. However. Since reservoirs of unconventional gas resources are very tight (low to untra-low permeability). Drainage pattern might be decided by geological setting and hydraulic fracturing treatments Fig. Seismic data has proven very valuable for detecting and imaging reservoir rocks.From a geological model to a simulation model Geological Modeling Recently developed fast geological modeling technology also can help us speed us unconventional gas development. A good example is to use the material balance method to estimate untimate gas recovery (EUR). Current geological modeling technology may be summarized as • All tools from seismic interpretation to simulation are integrated in one application. Analysis of the seismic attribute distributions within each seismic facies allows a preliminary interpretation of these seismic facies in terms of fracture occurrence. it is certain help one to identify the main pays when it is applied properly. horizon attribures. especially in reservoir management area. A series of techniques in seimic interpretation. and it required specialists to run special software tools to build up a geological model. Repeatable working-flows built within a model enable that updating the model becomes more and more like a few mouse clicks away. 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. A new algorithm was developed for directly imaging reservoir gas saturation from a combination of seismic and electromagnetic geophysical data. as well as an estimate of the fracture intensity12. . By applying the technology. Reservoir Engineering Most of technologies and techniques in conventional reservoir engineering can be used in unconventional gas resource development. The validation of this interpretation with well data (BHI. Though it is not gurantted that every single well would be a good well by applying the technology. 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. The latest emerging geostatistical model technologies enable geoscientists and engineers characterize and model reservoirs with certain amount of uncertainities. Geological model Reservoir simulation model upscaling Fig. • Strong visualization capabilities give us instant QC of all data in 3D or 4D. Some research projects are on-going to study unique character in shale gas and CBM reservoirs. which makes dynamic characterization with time possible and feasible. Geomodeling used to scare people away since it was very time consuming. before applying seismic inversion technology to identify main sand channels. It is our experience in Sichuan Basin. or the well could be a dog if it just misses the center of sand body. most of us experienced hit-or-miss situation: a well could be super if it is drilled in the middle of good sand channel. seismic velocity. core and dynamic data) delivers a reliable map of fracture intensity. eliminating import and export problems and promoting collaboration. • Models can be updated instantly when new data arrives to make quicker and more reliable decisions. • Various and robust geostatical simulation techniques enable us study different possibilities of depositions and reservoir property distributions. we experienced hit-or-miss wells. Except in mature basin. 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. which dramatically speed-up geomodeling process.SPE 103775 5 Traditional approach may leave significant reserve behind. 7 . we have been able to place wells in the good sand bodies. and seis-facies are being used to target well locations. Current technologies make the task much easier and faster.Traditional and extensive development Geophysics Geophyiscal technologies to identify the main pays are very crtical to tight gas sand development. One should be very cautious to apply this method to estimate EURs for unconventional gas reservoirs.

and economic and risk assessment. So far. formation flow capacity. permeability characterization. natural fracture identification. 10 . Part of reservoir management includs budget and planning. Combining with multi-stage fracturing treatments. targeting multiple zones. Open hole completed horizontal wellbores are more sensitivie to formation damages caused by drilling process. reserve booking. The directional drilling enables us to reach a target reservoir from a physically limited surface well location. drilling filtration and fines invade formation along high perm channels. is a modern testing technique designed to deliver in costeffective manner valuable reservoir information such as: reservoir pressure. referred as PID11 testing. phase trapping or chemical reactivity between invading fluids and the formation matrix or in-situ fluids. Drilling Directional drilling is one of recently advanced technologies.Reservoir Management Workflow Horizontal wells can increase production rates by maximizing reservoir exposure. notably in artificial fracturing of formations. Drilling induced damage may include fines mobilization. improve ROP and reduce drilling and stuck pipe problems in severe lost circulation zones. exploit thin pay zones etc. which results in very disappointed production rate and ultimate recovery (EUR). Overbalanced drilling Fracturing Treatment Production Higher perm Lower perm Geological structure Logging Data Facies Modeling Properties Modeling OOIP Max stress orientation Geological Modeling model Geophysical data and model Upscale Min stress orientation Reservoir modeling Initializati on OOIP Production Data Hi t M t h New production data model Channel sand Orientation Drilling Damage Zone Drilling and Frac Damage Zone Un-stimulated Damage Zone ? Economic Limit Potential investigation ? Production monitoring Production Forecast Budget & planning New drilling and completion schedule Fig. invasion of mud solids. mechanical glazing. As shown in Fig. Many wells in Barnet Shale are horizontal wellbores with multimillion pounds of proppant placed in the single wellbore with several stage fracturing treatments. it can benefit reservoir characterization.6 SPE 103775 Perforation Inflow Diagnostic. reducing drawdowm. unstimulated gas inflow rate potential and near wellbore damage conditions prior to the fracture treatment. New pilot New development Based upon a well-estabilied reservoir geological model. The workflow makes routine reservoir management work easy and quick (Fig. PID testing procedure is (1) the interval is perforated under extreme underbalanced conditions. well-calibrated 3-D seismic interpretation results. lower damage well completion and stimulation technology is critical to develop unconventional gas resources. 9 . . Current modeling technologies make contineous geological and reservoir modeling easy and quick. (3) The transient pressure data is analyzed with the closed chamber theory. Those formation damages can be permenant and more serious in under-pressured reservoirs. candidate selection for in-fill drilling and workover. 10. A lot of times. Underbalanced drilling is a technology to reduce formation damage. New facility capacity Reserves Fig. Multilateral wells are also being utilized to develop CBM and tight gas sands. Continueous Reservoir Modeling and Management The following chart outlines a basic workflow that one can employ to continue updating geological models and reservoir dynamic simulation models. horizontal wells and multilateral wells etc. than strictly by price4. and production Underblanced drilling may also improve well ultimate recovery since UBD process will not affect absolute and relative permeability (where initial water saturation is higher than connate/critical water saturation). the method is effective for tight gas sands. 9). including advanced targeted hydraulic fracturing technology. Underbalaced drilling can enhance productivity in tight channel gas sand reservoirs. Tight gas and shale gas development will be more the result of technical advances. Advanced Well Stimulation Technologies More effective. Since UBD process may keep reservoir untouched. horizontal well is very effective way to produce unconventional gas reservoirs. fracturing. including deviated wells. geo-steering and LWD technologies. it is more attractive and more feasible to chase sand channels with horizontal wellbores. hydraulic fracture growth orientation may deviate from the damaged high perm direction. and productivity evaluation.Drilling damage. well performance evaluation. Studes6 illustrate how the permeability of horizontal wells can be reduced dramatically by high near wellbore skins and how this damage effect is attenuated as horizontal to vertical permeability ratio is increased (such as in highly laminated sands). (2) the pressure response monitored to evaluate the gas inflow rate potential.

real time monitoring and optimization. provide excellent envrionment to share knowledge and experience. 12 .Real-time production optimization Production Technologies Compression . 11 .9 indicates the gas recovery rate increases from 7% in traditional 80 acre well placing to 48% in an intensive development approach of 20 acre well spacing. 7. we can intensively develop tight gas sands by placing wells in much smaller spacing. since the low well drawdown pressure can enhance EUR. such as annual conferences. and material and pumping cost. study group lunchneon meetings. then. As shown in Fig. thus.Maintaining low back pressure on wellheads is very important for unconventional gas wells. proper flow-back is also a part of the technology. Local study group meetings are great place to share some ideas and/or best practice to improve operation cost efficiency. a series of diagnosis analyses can be performed. The real-time production optimization technology is based upon a set of databases of production data. and reservoir properties. Fig. One of operation approaches to maintain low wellhead pressure can be reached by multi-stage compression. 11 illustrates the current design workflow for hydraulic fracturing treatments.Many technical meetings. Non-damaging fracture-stimulation fluids and innovative hydraulic fracture designs are being used to improve gas and water flow to the wellbore. there has been challenges for artificial lift tools in CBM wells.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. but often it is injected into rock at a depth where the quality of the injected water is less than that of the host rock. and from from process plants to trunck lines. Knowledge. . Concentration Time Data Frac analysis Fig. technical workshop. Rulison Field study7. 12. it can help us optimize well spacing and fracturing treatments13. Frac Design Methodology Estimate C os Lf 0 0 Lf Estimate cost Reservoir & wellbore data Estimate Rock Mechanical Properties Optimize treatment size Frac Job Re-design Optimize fluid chemical schedule Optimize perforation and pumping schedule Breakers X-linker Production water treatment – While economic quantities of methane in CBM wells can be produced. in turn. which may result in dramatical imropvement in gas recovery rate. software tools and other IT technologies. organized by SPE and other professional orgnizations. Since solids present in the fluid. from gathering stations to process plants. possible fracture initiation positions (perforation position). Recently developed fracturing microseismic diagnosis technology can be used to analyze fracture growth orientation.SPE 103775 7 Fig. Water may be discharged on the surface if it is relatively fresh. Real-time production optimization – As shown in Fig. de-watering and water disposal options that are environmentally acceptable and yet economically feasible. well-logging. A series of QA/QC. regional meetings. Those professional gatherings also provide golden opportunities for operators and service companies to communicate with each other on new challenges and new study/research ideas. Another alternative. A preliminary treatment is designed based upon wellbore. such as from wellheads to gathering stations. compression equipment and related operation expense must be considered in an overall development plan. and Information Sharing Technical gathering . one can identify underperformance wells and reservoir sections. specific topics meetings. equiping with the drainage pattern knowledge and the latest fracturing technologies. are a concern. To develop an unconventional gas reservoir. The treatment will be further optimized by redesigning after a data-frac. this scheme might be feasible in regions having high evaporation rates. well completion data. Experience. not yet attempted. is to evaporate the water and collect the potentially solid residues. thus an optimal remediation solution(s) may be prvided to enhance well production and reservoir performance. by monitoring daily production data. As unconventional gas resource market has matured. plus a team of multi-decinpine consultants. more robust and more artificial options are available3.

Since strong economic growth and the awarence of envoriment protection. 13 . natural gas consumption in Chian is only about 3% of all energy consumption (Fig. China Basins – West\Internal SO NG BAS LIAO IN JUNGGAR BASIN Urumqi TUHA BASIN XINJIANG UYGUR TARIM BASIN QA BA IDA SIN M Beijing NINGXIA GA NS U BO H BA AI BA S IN Y SHAANXI ORDOS BASIN QINGHAI Lanzhou Zhenzhou Xian Wuhan SICHUAN Chengdu BASIN Chongqing SICHUAN Zunyi Nanjing Shanghai EAS TC H BA INA S SIN EA 1. including open more blocks to attract foreign operators to bring more specified technologies and management experience for unconventional gas development.9 TCF in year 2000 to 1. 1997 Lhasa Nanchang Taipei YUNNAN Hong Kong PEARL R.8% (PetroChina) per year10. flexible. China energy sector has started intensifying the exploration of unconventional natural gas resources. Conf. China Sea 88 TCF 5. Thus. Ordos 148 TCF 4. Pearl River 46 TCF 9.170 TCF 8. There is little information published on shale gas resources in China. 13). and intensifying the international corporation. The natural gas consumption increased from 0.10 in China.3 TCF in year 200410. and cost. Qiongdongnan 58 TCF 8. and zhong-wu pipeline. building national-wide truck lines such as west-toeast gas pipeline.10 . 1998. partners.9% Natural Gas Nuclear 3. The significant advances of information technologies make arichiaving and accessing the information very easy and efficient. and • Alighned with company competencies Rapid access to the information – In North America. China oil industry had put more efforts and focused on explore oil resource until recently. which will be about 8-10% of total energy consumption. Qaidam 10 TCF Source: Quan and Keun-Wook. the booming of unconventional gas resource development also requires an effective service sector to provide qualified and efficient services.5% Oil 27.There are numerous of consulting companies for oil and gas E&P in North America. with about 35-80 TCF of proven reserve8.. and suppers.10 with consideration of about 105 TCF in CBM. The total resource could be as high as 240-1700 TCF8.6% Coal 62. the future demanding on natural gas is expected to be very strong.0% 0. Junggar 43 TCF 10. BASIN 5 7 0 500 1000 1500km Fig. undoubltedly. Schlumberger 2nd Well Eval. 3. Sichuan 260 TCF 3. Technical Consulting . Burlington Resources summaried the successful experience as Basin Excellence. 14). Fig. Yinggehai 79 TCF 6. Bohai Bay 75 TCF 7.China basins Hydro 6. including • Critical mass of projects. many data related to fields and wells are publishcally available. there will be more reserve found soon in those mature basins and several unexplored basins spreaded in China (see Fig. As natural gas demand increases. which improves cost efficiency.8% (EIA) to 11. • Access to infracsturcture. • Integrated approach to thoroughly understand the subsurface. Tarim 296 TCF 2. as shown in Fig. • Excellent relationships with host govements.0% Source: PetroChina China Natural Gas Resources and Consumption Plenty Resources A conservative estimation of proven-probable-possible gas reserve is at 60 . In addition to plenty resources and strong demand. Those consultants had gained experience and knowledge from over decades of working in different basins and different reservoirs in the world. E.effective services to E&P companies. and some of them have great experience and specialties in unconventional gas reservoirs. Shan-Jing gas pipeline. Thousands of very experienced geoscientist and engineers work in consulting business to provide much needed. With the forecast10. those consultants can also provide more independent opinions especially in resource assessment and solving tough technical problems. The estimated gas consumption growth is from 6. constructing gas storage facilities.China energy consumption distribution Strong Demand Currently. such as well records.8 SPE 103775 Basin Excellence – Based upon many years operation practice in different basins in North America. . 14 . Songliao 35 TCF 11. The main idea behind Basin Excellence is operation efficiency. • Continuous operational process improvement. drilling and completion. and production data.

Underbalance drilling equipment for over-pressured formations is also hardly found in China. 3. PCM is a pumping and blending system that provides gelled fluid to the blender. Compressors .Until recently. fracturing fluid has been batch-mixed in China. There have been some successes of local versions of fracturing fluid systems. one can find some reports on the applications of latest technolgogies. and economicist to successufly develop unconventional gas resources. The large scale of applications in everyday’s operation is rare. In oil and gas E&P sector in China. the operation efficiency and cost-efficiency are still issues. Therefore. are not suitable to every single situation. which significantly limits single well EUR. well logging tools. which is hard to control fluid quality and often waste extra fluid. However. multi-stage compression in the field has not been applied in China. different plugs. It is often needed for a team of G&G. one may find the latest technologies and most of related tools in China. the success of the applications can be discussed. formation fluids. The economics of unconventional gas resource development is very sensitive to well placement. there are still several key tools needed to improve operation efficiency. Thus.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. Though the integration between technology applications and reservoirs can be optimized further. such as.One may find different completion tools in China now. including fracturing pumping equipment. Uptil now. PCOC (a division of PetroChina operated in Ordos Bain) has just started testing the wellhead compression concept. Maturaty of Technologies Fracturing fluids . wellheads. such as horizontal wells. Most of time.One fracturing fluid sytem is a set of complicated combination of several chemicals. especially from wellheads to gathering stations. 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. and concepts as being applied in North America. It has been known that an integrated and systematic approach is necessary to economically efficiently develop any oil/gas field. or some chemical additives. and other liquid additives used in fluids. perforation guns. multple sets of matured fluid systems take time and cost to be developed. which limits operation efficiency. hydraulic fracturing is probably one of the most cruticial technologies to develop unconventional gas resources. Occasionally. such as rock componets. one may find most of the latest technologies. Wellhead compression is very important for those wells in low pressure reservoirs. Low-cost compression equipment may be one of challenges to be overcome. Precision continuous mixer (PCM) is the answer. However. it has been a challenge to find cost-effective fracturing fluids in China. tools. A new technique or technology may be very effective in one field. tubulars. North America Annual change: 7 6 5 4 30 25 20 15 Real 10 5 0 1990 2002 Forecast 3 2 1 0 2003 2010 2015 2020 Year 2025 2030 Fig. PCM . and underbalance drilling etc. PCM can’t be found in China market so far. though a couple of international service companies can provide a couple of fluid systems. drilling and completion. Any fracturing fluid system must be compatible with formation conditions. For unknown reasons. drilling and completion cost. like everything else.As it has been pointed out. production. reservoir engineering. 15 . Service Sector 40 35 US Gas Consumption (TCF) 8 China Gas Consumption (TCF) China. it is almost impossible to pump multi-stage frac treatments in a single well site in a period of several days. UBD Pressure Control . and formation temperature. Snubbing Unit – it is a basic tool to control wellhead pressure for underbalance operations in wellbores. The system simultaneously meters and continuously mixes polymer slurry. since those technologies and techniques. but also be adjustible with treatment sizes – the balance between gel stabilized time and gel broken time. Operation Efficiency . However. techniques. big fracturing treatments. concentrated KCl solution.SPE 103775 9 Though they are tied with national oil companies. and pumps & meters etc. . However. Integration of Technologies One technology and/or technique can’t be applied everywhere. reservoir management. and operation efficiency. Here we list a few of very important tools not existing in China market. It is expected there are some challeges ahead to provide proper and cost-effective fracturing fluids for large scale operations. It is a must for unconventional gas resources. compression equipment. and it may not be effective at all in other fields. and coiled tubing etc. there are many service companies in China. Those companies can provide massive and conventional operation services.

Also. and CBM blocks located in the east range of the basin). the unique feature of gas requires more attentions to HSE. However.10 SPE 103775 An open. and/or provide very limited consulting services and well-site operations. Natural gas price has been low comparing with internation markets. our operation has been greatly impacted by the availability of qualified service. We often found out that gaining access to crucial field data often is either impossible or requires navigating near-impenetrable bureaucracies. and/or leak into air. which causes significantly threat to heath. Though there are some small scale activities cross different basins. . When we studied the UBD feasibility. The well completion cost increased dramatically due to the limited size operation with that equipment. Lack of equipment and special tools makes foreign operators difficult to perform daily drilling. in return. the service market is isolated from the other area in China. Summary It is a big challenge to develop those plenty unconventional natural gas resources to meet the demand of economic Knowledge Sharing and Transfer Though it is very competitive market in North America. safety. However. real-world challenges. technical workshops. they can’t provide a large scale and very efficient operation campagns. which is crucial to the operation of unconventional gas development. it is not hard to conclude it is because of not-fully-open and competive market. Some of those knowledge share ganthering are specially desinated for unconventional gas resource development. In China. logging. it seems that the limited services provided by internaltional service companies have been resulted from the consideration of cost and profit. most majority of local service companies are a part of or are tied with national oil companies. and independent service industry is a must. Though there are a very few and very small independent private service companies existing in China. On surface. Accessing those data in those areas other than the contracted area is almost impossible. Internaltional service companies can privide not only hightech tools and chemicals. It is much easier for natural gas to catch fire. competitive. there are many technical meetings. explode. 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. those service companies limit their activities within local market where their oil company operates. Almost all of international service companies have opened offices in China to provide service in China. competitive. knowledge sharing often happens. independent. and environment. but also plenty experience and expertise from different basins around the world. and mature service sector is very critical to the success of oil and gas E&P industry. routine technical training. HSE awarenace needs to pay more attention. In last a couple of years. a new round of nine-openblock bidding acitivity in Tarim Bain is on-going. In North America. HSE Comparing to oil wells. especially with North America market (5 to 10 $/MSCF in North America vs 2 to 3$/MSCF in China recently). we had to bring a snub unit into China for us to perform necessary well completion acitivities. and the price is set by a local partner. Sometime. Both sweet and sour gas in low or over-pressured reservoir may easily leak into air. both of knowledge sharing. they can only market special tools and chemicals. Since operation and cost efficiency is the key to develop unconventional gas resources. operation efficiency. and new ideas for the future. Since Sichuan Basin is surrounded by big mountains. Two tragic incidents occurred in Sichuan Basin in last couple of years indicate that HSE is a challenge for everyone here in China. almost no field operation in drilling and completion areas. Operation efficiency has also negatively impacted cost efficiency. A couple of international Oil Companies are exploring several blocks in Sichuan Basin (CZ Block and Zitong Block) and Ordos Basin (Changbei Block. 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. We have spent tremendous effort in every single step of enforcing the process due to lack of awarence and experience. Some of those open blocks are expected in tight gas sands. and luncheon learning presentations. 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. and several of them have been providing services for many years in on-shore oil and gas industry in China. and cost efficiency. operation and cost efficiency. 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. Sulige South Block. However. HSE is also a big challenge for us. and completion activity. It has turned out that the biggest challenges were the gas price. it will take more efforts to form such scale and business style as in North America. All of those meetings provide great place to share best practices. Burlington Resources (now ConocoPhillips) had inheritaged CZ block in Sichuan Basin and had been working on the block about a decade. Accessing data is a challenable task. which. and even more important to efficiently and economically develop unconventional gas resources. None of them are independent. a fully open. One can argue that there are advantages for this structure tieing with oil companies. Currently. limit those service companies’ growth and improvement in term of experience. lessons learned. Natural gas price is guided by the government. and consulting business are being developed. most of time.

E. Bietz. 2000. it is certainly that the unconventional gas development will boom soon. Conclusions Economic growth in China demands significant growth in energy supply. 1996. “Formation Damage and Horizontal Wells A Productivity Killer?”. 9. Chandler: “Natural Gas Gains Momentum”. Vello A. U. World Oil. and • The foreign operators to develop unconventional natural gas reservoirs in China. and mature service sector to the future blossom. Presented in International Conference on Horizontal Well Technology held in Calgary. • The impact of unconventional natural gas development technology. August 2006. McCallister: “Impact of unconventional gas technology in the annual energy outlook 2000”. SPE Distingushed Author Series. 13. E&P. pp83-86 References 1.. Kuuskraa: “Tight gas sand development – How to dramatically improve recovery efficiency?”. Issue 23. 2006. though there maybe some tough challenges down the road ahead. Su: “The development of China’s natural gas market”. SPE 37138. US-China Business Council.99. and downstream infrastructure will speed up the mature of unconventional natural gas development. prepared for presentation at the SPE 13th Middle East Oil Show & Conference held in Bahrain 5-8 April 2003. 6th US-China Oil and Gas Industry Forum. M. Nov. There are plenty of unconventional natural resources in China. which. and A. Green.Ronald F. 7. • The technologies available and unavailable in China for unconventional natural gas development. 5. 6. Brent Thomas. pp68-69 M. 8. Vol. . S. 10. competitive. 4. It is critical to have an open. Shirley: “Options for CBM production”. Holditch: “ Tight Gas Sands”. in turn. Hategan: ” Modern Concepts in Perforation Inflow Diagnostic (PID) Testing: A Safe.S. K. 11. and how to utilize and develop those technologies. Caldwell: “Are unconventional resources for real”. The paper discusses various topics related to speed up the development of unconventional natural gas resources. GTI. 12. Findley and K. Washington. and those proper government regulations in pricing. the SPE Annual Technical Conference and Exhibition held in Houston. and Cost-Effective Technique for Evaluating Pre-Frac Reservoir Parameters”.A. June. June 2006. Jan. JPT. Energy Information Administration. LA R. GasTIP. 3. S. Brant Bennion.V. Bloch. 2000 J. F. It is necessary to integrate cost effective technologies to improve operation efficiency. the authors hope will help the success.A. Fisher: “Barnett Shale Fracture Faireways Aid E&P”. Pietz: “China’s natural gas sector generating great expectations”. Vello A. pp8694 R. Texas. 2006 EIA Energy Outlook and Modeling Conference. Jan. Kuuskraa: “Unconventional natural gas industry savoir or bridge?”. 2006. New Orleans. Hawkes and F. pp 70-74 T. Deeb. E&P. Canada. Oil&Gas Journal. June 2005. 1998 D. Thus.SPE 103775 11 booming growth in China. Meunier etc: “Seismic Facies Analysis for Fracture Detection : a Powerful Technique”. DC D. Logan and W. tax. Winter 2004 2. SPE 90827. 26–29 September 2004 G. March 27. 2006.

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