Natural gas development and hydraulic fracturing

Natural Gas Development and Hydraulic Fracturing

Sheri Somerville

Natural Gas Advisor, CAPP

Superport Days 2013

Guysborough, NS

July 4, 2013

● Represents large and small producer member companies

● Members explore for, develop and produce natural gas, natural gas liquids, crude oil and oil sands throughout Canada

● Produce about 90 per cent of Canada’s natural gas and crude oil

● Part of a national industry with revenues of about $100 billion per year

● Associate members provide a wide range of services that support the upstream crude oil and natural gas industry

Canadian Association of Petroleum Producers

Advancing the 3Es the 3Es

● Generating Economic Benefits

Jobs and revenues across North America

● Providing Energy Security

Safe, secure and reliable energy

Large energy resource potential

● Providing Environmental Stewardship

Strong regulations

Technology advances

Global Primary Energy Demand IEA New Policies Scenario

● Significant energy demand growth:

Population, standards of living

● Need all forms of energy:

Increasing role for renewables

Continuing reliance on hydrocarbons

Increasing role for non- conventional crude oil & natural gas

● Environmental challenges

● Technology is a key lever for

sustainable growth

Source: International Energy Agency World Energy Outlook 2012

How will demand be met?

Technological advances have unlocked vast unconventional gas resources. Resource assessments are ongoing (GSC, NEB and others) in many new areas, and new opportunities continue to emerge (Eastern Canadian shale gas, etc.)

*Estimated Recoverable Marketable Gas

North American Shale Gas Plays

Source: DNR NB

NB Proven and Potential Resources

NS Resource Agreements

Geology of Natural Gas Resources

Source: U.S. Energy Information Administration

Stages of Exploration and Production for Unconventional Resources

Nova Scotia Duvernay Horn River Marcellus New Brunswick

Geophysical Exploration (Seismic):

Vibroseis truck Seismic charge

Drilling Operations

● Shale gas formations are deep in NB (1,500m to >2,000m)

● Water aquifers are typically 100-250m deep

● Shale zone accessed through vertical, then directional or horizontal drilling

● 3 layers of steel casing and cement:

Surface casing Intermediate casing Production casing

Drilling & Well Construction

Wellbores: • Constructed to recover gas while

protecting surrounding environment, particularly underground drinking water.

• Narrow pipe sunk deep into

ground, surrounded by cement in the bore hole to ensure both pipe and underground area it travels through are completely separated.

At production site (reservoir), the production pipe is perforated to allow the natural gas to flow into the pipe and rise to the surface.

How does hydraulic fracturing stimulation work?

● Approximately 4,000 cubic metres (4 million litres) of water used to fracture each stage of a well

Water amounts may vary depending on type and location of reservoir.

Total water used at the 4 major shale plays in the USA is less than 1% of total water usage in each state

● Fracture stimulation fluid consists of 98.5% water/sand and 1.5% chemical additives

● All chemical additives are disclosed by industry to regulators before hydraulic fracturing occurs

Fracture Fluid

1.5 % Additives Gelling Agents Cross Linkers Clay Control

Breakers Surfactants

Biocides Energizers

www.fracfocus.ca

98.5% Water & Sand

The water, sand, and additives used to convey pressure from the surface to the reservoir to create fractures to be created

Fracture Fluids

TYPE Source Purpose Common Use

Gelling Agent Guar Gum Polyacrylamide

Increase viscosity, helps support and carry proppant better than straight water

Food grade product (ice cream, condiments, canned soup, etc.) Found in disposable diapers

Clay Control Potassium Chloride Prevents clay from swelling

Potash, fertilizer, and table salt substitute

Surfactants Naphthalene Lowers surface tension and helps used fracture fluid return to the surface

Found in moth balls Windex

Biocide Glutaraldehyde (can also be derived from plants or bacteria)

Eliminates bacteria from water that can produce corrosive by products

Disinfectants, sterilizer for medical and dental equipment

Energizers CO2 Nitrogen

Improves stimulation or recovery of fluids

Odorless, non toxic.

Multi-Well Pads

Vertical Well Pad Horizontal Well Pad

Advantages of Multi-Well Pads: • Reduction of land use for the pad, access roads & pipelines. • Easier monitoring of site and enforcement of regulations. • Conducive to establishing and enforce traffic/trucking corridors. • Optimization of location. • Establish and enforce noise, light, air emission and water plans.

Source: ERCB 2011

● Jobs (Upstream from Western Canada Natural Gas)

Natural Gas industry employment:

317,000 – jobs (direct, indirect and induced) across Canada by 2035

9,693,000 – person years of employment between now and 2035

$339 billion – natural gas employees will earn over next 25 years

● Revenue, Royalties, Taxes (To all Canada from Western Can. NG)

Natural Gas industry will:

contribute $1.5 trillion to Canadian GDP over next 25 years

generate $199 billion in royalties

generate $170 billion in federal taxes

generate $130 billion in provincial taxes

What does this mean for Canada?

Each Well:

● Requires 420 individuals working in 150 different occupations to complete and produce gas from one well (directly involved with developing well and placing into production)

● Creates approximately 13 Direct FTE’s per year

● Creates 32 – 58 FTEs per well, if you include direct, indirect and induced jobs (varies by jurisdiction)

Source: Southwest Pennsylvania Marcellus Shale Workforce Needs Assessment Marcellus Shale Education and Training Center / June 2010

Natural Gas Workforce Information

● Construction, manufacturing and transportation

● Drilling, completion and production

● Geological and geophysical

● Pipeline and associated infrastructure

● Environmental & other consulting services

● Legal & land

● Natural gas distribution

● Service industries, logistics & distribution

● Retail, food, health, education & financial services

Supply Chain Opportunities

● Work boots, uniforms & uniform

cleaning

● Well pad cleaning

● Alternate housing – RVs, mini-homes

● Fencing, landscaping & irrigation

● Concrete

● Security, EMTs, engineers, lawyers,

accountants, surveyors, etc.

● Home sales, hotels, restaurants,

entertainment, retail, auto sales (e.g.,

pickup trucks)

● Catering

McCully Field, Sussex

Guiding Principles for Hydraulic Fracturing

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Safeguard the quality and quantity of regional

surface and groundwater resources, through sound

wellbore construction practices, sourcing fresh water

alternatives where appropriate, and recycling water

for reuse as much as practical.

Measure and disclose our water use with the goal of

continuing to reduce our effect on the environment.

Support the development of fracturing fluid additives

with the least environmental risks.

Support the disclosure of fracturing fluid additives.

Continue to advance, collaborate on and

communicate technologies and best practices that

reduce the potential environmental risks of hydraulic

fracturing.

We will:

Who Regulates Oil & Natural Gas Sector

● Federal & Provincial Departments

Environment (Environment & Local Government)

Energy (Energy & Mines)

Natural Resources

Transportation

Fisheries and Oceans (Agriculture, Aquaculture & Fisheries)

Finance

Public Safety

Others may be involved: Aboriginal Affairs, Economic Development

● Federal & Provincial regulatory entities:

National Energy Board (NEB)

Energy and Utilities Board (EUB)

● Federal Programs:

Chemicals management program

New Substances program

The New Rules in NB

Seismic testing procedures (e.g., minimum setbacks 180 m)

Well bore construction, casing, containment, testing, etc. (e.g. double well casings)

Managing wastes and potential contaminants (e.g., closed loop systems for drill fluids)

Monitoring to protect water quality (e.g. water well testing, surface water monitoring)

Sustainable use of water (e.g., water management plan and reporting)

Air Emissions and GHGs (e.g., monitoring, emissions reduction plans)

Public safety and Emergency Planning (e.g., CSA compliant-Emergency Management program)

Communities and the environment (e.g., traffic plans, noise, water supplies)

Reducing financial risks and protecting landowner rights (e.g., financial security for damage)

Sharing information (e.g., disclosure of fracture fluids)

Responsible Environmental Management of Oil and Natural Gas Activities

© Deloitte LLP and affiliated entities.

Regulatory Review: Areas of Difference

Pre -

Drilling

• Well pad design to be submitted and approved by the regulator

• Emergency plans/response

• Traffic restrictions

• Visual restrictions

• Liability Insurance

• Notification and consultation

Drilling

• Pre-fracturing assessment for potential inter-wellbore communication (Alberta’s draft rules would also require this)

• Special requirements for emergency containment of fracture fluid in the case of a spill

• Special requirements for security of chemicals

• Testing of drinking water well quality

• Monitoring of surface water quality

• Water use plan to be submitted and approved by the regulator;

• Assessment of potential for induced seismic events prior to fracturing.

• Setbacks Requirements

• Misfire Protocol

• Surface Gas Vent Flow/Gas Mitigation Testing

• Fracturing Treatment Plan

• Well Completion Report

• Fracturing Monitoring Requirements (stop parameters)

• Post Fracturing Reporting

• Closed Loop fluid system - 250k-350k additional cost

• Waste management plan

• Spill reporting and response plan

• Air emissions

Production • Site restoration and remediation

Areas which are unique to New Brunswick Areas which are more stringent than other jurisdictions

Source: Future NB, Shale Gas Supply Chain Opportunity in New Brunswick May 28, 2013

Responsible Energy Development

● Nova Scotians & Canadians want to know that shale gas can and will be developed safely

● Strong regulation that has worked successfully in Canada can provide framework for emerging provinces

● Companies are committed to:

• Responsible energy development and abide by codes of conduct that further supports strong regulation

• Accountability and transparency

• Strong regulatory frameworks, enforcement policies

• Scientific research and continuous improvement

● Natural gas is a significant opportunity with positive effects on economy and energy supply.

Support the Responsible Exploration and Development of Natural Gas in NB

For More information

CAPP.ca

Follow CAPP on Twitter:

@OilGasCanada

Like CAPP on Facebook:

facebook.com/OilGasCanada

CSUR.com

Morefactslessfriction.ca

Canadiannaturalgas.ca

THANK YOU

QUESTIONS?

Sheri Somerville

Natural Gas Advisor, NB

[email protected]

www.capp.ca