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Fundamentals

Unconventional Oil & Gas |Fundamentals

In oil and gas industry, the term “Unconventional” refers tohydrocarbon resources that are or could be exploited withprocesses and techniques of drilling and production other thanthose commonly used by the upstream industry all over theworld..

The term unconventional has been subject to differentdefinitions, and various agencies or industry companies mayhave developed their own definition.

The Society of Petroleum Engineers (SPE), for instance,defines “Unconventional Resources” as petroleum accumulationsthat are prevalent throughout a large area and that are notsignificantly affected by pressure exerted by water(hydrodynamic influences); they are also called “continuous-type deposits” or “tight formations.”

An energy industry firm – Schlumberger – uses the term“Unconventional” referring to oil and gas reservoirs whoseporosity, permeability, fluid trapping mechanism, or othercharacteristics differ from conventional sandstone andcarbonate reservoirs.

Another energy industry company, IHS, defines “Unconventional”as a term which refers to hydrocarbon resources that cannot beproduced at economic flow rates or that do not produceeconomic volumes without particular activities and operationssuch as stimulation, special recovery processes and advanced

technologies.

The existence of unconventional resources has been known formany years, but, it is in the last decade that, a combinationof economic and geopolitical factors, together with advancesin directional drilling and well stimulation technologies, hasmade them commercially exploitable on a large scale.

In particular, the last two decades have seen an increase inthe price of crude oil and natural gas, and this aspect hasled companies to focus on developing hydrocarbon resourceswhose production would formerly have been judged to beuneconomic.

The emergence of unconventional oil & gas has had a greatimpact on the global energy system, and their development hasbeen supported by several factors such as a favourableregulatory regime in some countries, the previously citedissue of high prices of conventional resources, thesignificant technological advancements in areas of horizontaldrilling, of thermal EOR processes (TEOR), and of hydraulicfracturing (fundamental for their exploitation).

Resource Triangle (Master & Gray – 1979)

There are many different kind of hydrocarbon unconventionalresources, among them it is useful to mention and brieflydescribe:

Shale oil and shale gasIt is defined as the oil or natural gas thatoccurs in the fined-grained, organic-rich rockswhich are their source rockA part of the generated hydrocarbons, in fact,remains trapped within the source rocks itselfwith no or minimal migrationThe reservoirs have very low porosity andpermeabilityShale oil must not be confused with oil shale,which is a precursor of oil called kerogen, andconstitutes the building blocks of conventionaloilMore than half of the identified shale oilresources outside the United States areconcentrated in four countries

Russia, China, Argentina, and LibyaMore than half of the non-U.S. shale gas resourcesare concentrated in five countries

China, Argentina, Algeria, Canada, andMexico.

Map of basins with assessed shale oil and shale gasformations, as May 2013

Tight Oil & GasIt is defined as the oil or natural gas thatoccurs in very low permeability reservoir rockssuch as fine-grained sandstones, siltstones, siltyshales and, to a much lesser degree, fine-grainedcarbonates and marlsSuch reservoirs are either in the proximity orinterbedded with the source rocks, carbonaceousshales interbedded with coals in a fluvial-deltaicsystems, etc.They typically have a total effective porosityless than 15% (can be higher or lower) and anabsolute permeability ranging between 0.1 mD and0.001 mDThe density and viscosity of the oil areconsidered as critical factors for the

productivity of wells drilled in so lowpermeability environment – oils with stock tankdensity < 25° API are, in fact, too heavy andviscous to be produced.

Oil SandsThey are naturally occurring porous rock layersconsisting of a mixture of sand, clay, water, anda dense and extremely viscous crude oil referredto as Bitumen or Tar (when the lighter fractionsof the oil have escaped, leaving a residualasphalt)The crude oil from these sands typically has stocktank gravity less than 10° API (Extra Heavy OilMining methods and in-situ recovery processes areused to extract the crude oil from the rock: thesurface mining is applied for near-surfacedeposits, i.e. for depths < than 100 m, while thethermal processes such as SAGD, CSS,steamflooding, etc. are used for deeper depthBitumen and tar are very viscous, and have to beheated or diluted with some solvent to make themflow

The separation of oil from sand is done by usinghot water and chemicals; the oil can be sold asraw bitumen or upgraded to a lighter crudeOil sands can be found in several locations aroundthe globe (Venezuela, Canada, United States andRussia). The canadian deposits in the Albertaprovince are considered the largest one all overthe world; they are also the most exploited thanksto technologically advanced production processes.

Oil Sands Sample

Coalbed methane (CBM)CBM is typically methane gas trapped within coaldeposits – natural gas in association with coalbeds/seams

The methane is usually mixed with carbon dioxide,other hydrocarbons and nitrogen and this mixtureof gases will be referred to as the Coal GasDuring the coalification process, large quantitiesof methane-rich gas are generated and storedwithin the coal on internal surfaces.Because coal has such a large internal surfacearea, it can store surprisingly large volumes ofmethane-rich gas (6-7 times as much gas as aconventional natural gas reservoir of equal rockvolumeof rock)The gas generated is adsorbed onto microporesurfaces and stored in cleats, fractures and otheropenings in the coalsGas is held in place by water pressure and doesnot require a sealed trap as do conventional gasaccumulationsMuch of the coal, and methane, can be found atshallow depths, making wells easy to drill andinexpensive to completeExploration costs for coal-bed methane are low,and the wells are cost effective to drill

Typical CBM Production Curve (IEA)

Schematic section of CBM exploitation (IGas)

Natural Gas HydratesThey are solid compounds formed when water andcertain gas molecules are brought together undersuitable conditions of relatively high pressureand low temperatureThey occur naturally and widely in sedimentsassociated with deep permafrost in Arctic, and incontinental margins at water depths generallygreater than 500 meters at mid to low latitudesand greater than 150-200 meters at high latitudes– in such conditions they are rather stable ordissociate very slowlyThey contain vast reserves of methane and other

natural gases, which could be referred to asHydrate Gas.According to the United States Geological Survey,the world’s gas hydrates may contain more organiccarbon than the world’s coal, oil, and other formsof natural gas combinedEstimates of the naturally occurring gas hydrateresources vary from 10,000 trillion cubic feet tomore than 100,000 trillion cubic feet of naturalgas.

Left – Natural gas hydrate burning

Right – The structure of methane hydrate. Molecules of methaneare trapped within a ‘cage’ of water ice molecules

Hydrate Phase Diagram (Oilfield Review)

Map of global hydrate distribution

Red dots show locations where hydrate has been found oncontinental margins (Oilfield Review)

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IHS CERA: Fueling the Future with Natural Gas – January 2014

Exxon Mobil Corporation: Unconventional Resources Development– Managing the Risks – 2014

UK Department of Energy and Climate Change: The UnconventionalHydrocarbon Resources Of Britain’s Onshore Basins – Shale Gas– 2013

IEA: Golden Rules for a Golden Age of Gas – 2012