Requirements for drilling grade barite: now and tomorrow The case for adopting an alternative specification for drilling grade barite in normal applications.

Requirements for drilling grade barite: now and

tomorrowThe case for adopting an alternative

specification for drilling grade barite in normal applications

Drilling fluids

- Clean cuttings from well bottom- Flush cuttings to the surface- Cool and lubricate the drill bit- Deposit a “filter cake” layer on well bore wall to

prevent loss of the circulating fluid itself- Prevent formation fluids from entering the borehole

and mixing with circulating fluids- Support the “walls” of the well (wellbore) without

damaging the formation- Control pressures under the surface

Drilling fluids types

- Barite is used in all types of fluid systems• Water-based muds (WBM’s)• Oil-based muds (OBM’s)• Synthetic-based muds (SBM’s)

Barite’s purpose in drilling fluid

- Provide density to drilling muds• major factor in controlling pressures downhole• up to 22 lbs/gallon of mud

- Remain chemically neutral (inert)- Avoid abrasive damage to drilling string, bits, and

circulating system- Do all the above at a low enough cost to be

disposable

Specifications

- API, Spec 13A, Section 2, and Appendix B• density = 4.20 g/cm, minimum• water-soluble alkaline earth metals as calcium = 250

mg/kg, maximum• residue greater than 75 micrometers = 3.0%, maximum

(wt.)• particles less than 6 micrometers = 30.0%, maximum

(wt.)- Typical Non-API customer specifications

• caustic soluble carbonates = 1,500 Mg/Kg, maximum- Typical environmental regulatory specifications

• Mercury = 1 ppm, maximum• Cadmium = 3 ppm, maximum• Others

Top producers

• China = 2.70 MMMT (46%) Mostly lumps to USGOM

• India = .78 MMT (13%) Lumps/powder to GOM, LA, ME

• Morocco = .45 MMMT (7%) Lumps to NS, US, powder to WA

• USA = .42 MMMT (7%) Powder to non-GOM US/Canada

• Iran = .22 MMMT (4%) Internal and regional

• Turkey = .16 MMMT (3%) Mostly powder to Med., Caspian

• Top 6 = 4.73 MMMT (80%)

• World = 5.8 MMMT (100%)

Key Issues – Global Availability – from Nevada

• USA- Nevada is ONLY US source- Nevada ore is environmentally very “clean” due to a

unique geology- Nevada, US produces <10% of the world’s production- Nevada able to supply less than 20% of USA/NA

demand of 2.5MM tons per typical year- USA/NA demand not expected to decline soon- No new Nevada or other US sources of mine-able

4.20 density- Reserves are depleting rapidly, especially given

current demand in Rockies/Mid-Cont/Western Canada/Alaska

• Given these factors- Balance must come from China/India/Others

Key Issues – Global Availability – from Nevada

• Nevada reserves depleting

BARITE ORE RESERES - NEVADA

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

YEARS

TONS

$100,000,000 INVESTMENT

4.20 SPECIFIC GRAVITY

$7,500,000 INVESTMENT

4.10 SPECIFIC GRAVITY

CURRENT

4.20

11 YEARS RESERVESCAP COST = $1.15/ton

20 YEARS RESERVESCAP COST = $8.06/TON

Key Issues – Global Availability – from China

• China - Approximately half of the world’s drilling grade supply- Not all environmentally acceptable in all areas of demand- Currently satisfying 80% of US demand and all GOM

• Reserves - Guangxi Province of China reserves are on a similar

pattern as Nevada even though the scale of annual production is more like 4x or 5x Nevada

• Long lead supply chain vulnerabilities- Each cargo planning cycle is ~4 months- Industry brings +/- 30 cargoes across each year

• Political vulnerabilities - Possible future actions of both governments

• Growing indigenous demand

• Environmental vulnerabilities- Assurance of offshore specification requires high degree of

vigilance

Key Issues – Global Availability – from India/Others

• India is grossly/notoriously undependable in recent years- State government bureaucracy controls the ONLY mine- Flooding problems- Strikes- 500,000 MT exports in the best of years- Growing indigenous demand

• India – environmentally clean but shrinking as a viable producer- Currently seeking Chinese to supplement indigenous!

• Even small players are problematic- Spain – heavy metals and limited production- Morocco – limited production- Turkey – distance to market and logistics constraints- Mexico – virtually tapped out and what’s there is domestic

• Mexico is importing Chinese, Indian, Other- Peru – heavy metals and logistics constraints

• No new deposits in the world since the late ’70’s early ’80’s boom period

A solution if acted upon soon

• Offer an alternate specification 4.10 density in addition to API 13A Section 7- Specifications to coexist- Grind specifications, soluble alkaline earths

expressed as calcium, packaging requirements will remain unchanged

• Use alternative specification wherever appropriate

• Allow customers to decide

• Foster a responsible use of available world reserves

Technology

Solids volume increase in weighting up a 10.0 lb/gal mud by 1.0 lb/gal is only 0.14%, specifically 3.98% for 4.20 density barite and 4.12% for 4.10.

Additional Solids required to Weight-up from 10.0 ppg Fluid Using 4.10 and 4.00 density instead of 4.20

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

11 12 13 14 15 16 17 18

Final Fluid Weight in #/gallon

Pe

rce

nt

Ad

ded

So

lids

fro

m B

ari

te

Additonal Solids Percent using 4.10 density Barite

Additonal Solids Percent using 4.00 density Barite

Technology

Weight-up from 10.0 ppg using4.20, 4.10, and 4.00 density Barite

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

11 12 13 14 15 16 17 18

Final Fluid Weight in #/gallon

Per

cen

t S

olid

s fr

om

Bar

ite

Percent Solids Added 4.20 density Barite

Percent Solids Added 4.10 density Barite

Percent Solids Added 4.00 density Barite

Even on a highly weighted mud of 18 lb/gal, the percent solids introduced by 4.20 density (current API) barite are 31.88% versus 32.98% using 4.10 density barite. The net effect is a 1.1% addition of solids. At the extreme only ~1% more barite needs to be added

Technology

• Performance of the system Plastic Viscosity Comparison

Dispersed Lignosulfonate MudsHeat aged 16 hrs @ 150 deg. F

10

15

20

25

30

35

40

45

50

55

60

12.0 ppg 17.0 ppg

Density, lb/gal

PV

, cen

tip

ois

e

4.2 sg

4.1 sg

Yield Point ComparisonDispesed Lignosulfonate MudsHeat aged 16 hrs @150 deg. F

4

6

8

10

12

14

16

18

20

12.0 ppg 17.0 ppg

Density, lbm/gal

Yie

ld P

oin

t, lb

/100

sq

. ft

sq.

4.2 sg

4.1 sg

Introduction challenges/benefits

• Will require suppliers to offer both grades perhaps indefinitely- Some logistical challenges- Some additional QA challenges

• The new alternate must never be below the 4.10 minimum density- Transitional mill production <4.20 will be included

even though much higher than 4.10 minimum

American Petroleum Institute (API)

• Considering- Adding an API specification for the alternative density

barite- Customer assurance factor- One alternative instead of many- Using the same testing and auditing protocols as Section 7- Maintaining same grind specifications, soluble alkaline

earths expressed as calcium, and packaging requirements

• Next actions - Opening a dialog on the subject- Looking at technical details- Raised in January 2006 – Savannah, Georgia- To be reviewed starting in June/July 2006

• The result- Supporting responsible use of available world reserves for

the future good of the energy industry