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Ministry of Energy, Mines and Petroleum Resources. Looking to the Future: Development in the Horn River Basin B. Kerr. Overview. INTRODUCTION – Horn River Basin CONCEPT DATA SOURCES GAS IN PLACE MAPPING LAND POSITIONS RELATING OGIP MAPPING TO POTENTIAL RESERVE STATEMENTS
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Ministry of Energy, Mines and Petroleum Resources Looking to the Future: Development in the Horn River Basin B. Kerr
Overview INTRODUCTION – Horn River Basin CONCEPT DATA SOURCES GAS IN PLACE MAPPING LAND POSITIONS RELATING OGIP MAPPING TO POTENTIAL RESERVE STATEMENTS DEVELOPMENT SCENARIOS - ACCESS AND RECOVERY - PACE AND PRODUCTION - VALIDATION SERVICE REQUIRMENTS SUMMARY
Introduction • Horn River Basin in Northeast British Columbia • Between Liard Basin to West and • Slave Point Carbonate Platform to East • Over 14,000 sq.km • 60% tenured (rights vary) • Access to basin from Liard Hwy (77) • in the west and Sierra Yoyo Desan Rd • in the east. • World class shale basin
Concept Use public information and OGIP mapping to approximate scale of future development
Data Sources Apache Press Release April 8, 2008 http://investor.apachecorp.com/releasedetail.cfm?ReleaseID=303676 - Apache net 207,000 acres. - Apache Encana JV on >400,000 acres. - Apache net gas resource 9-16 tcf. Apache Analysts Review, October 23, 2008. http://www.apachecorp.com/Resources/Upload/PrevArticleFiles/files/Apache_2008_Analyst_Review_08_Canada.pdf - Majors Land positions. - Production Profiles. EOG Investor Presentation, March 2009. http://www.eogresources.com/media/slides/InvPres_0309.pdf - 157,500 net acres. - ~ 6 tcfe (60% drillable, 25% recovery) Nexen Q1 2008 Earnings Conference Call, October 29, 2008. http://www.nexeninc.com/files/Conference_Calls/q1_2008_cc_script.pdf - 3 – 6 tcf potential reserves. - 123,000 net acres. - assuming 20% recovery. Ross, D.J.K. and R.M. Bustin. Characterizing the shale gas resource potential of Devonian-Mississippian strata in the Western Canada sedimentary basin: Application of an integrated formation evaluation. AAPG Bulletin 2008 92: 87-125. http://aapgbull.geoscienceworld.org/cgi/content/full/92/1/87 Walsh, W. Unpublished internal maps of Devonian shale gas potential in the Horn River Basin, October 2008.
Gas In Place Mapping • GAS IN PLACE MAPPING – • Walsh (EMPR Internal) • Based on isopachs of Muskwa/Otter Pk and Klua/Evie fms • Considered Muskwa / Otter Park and Klua / Evie to be separate and distinct. • Assumed constant shale densities • Varied gas contents through iterations to produce high and low cases • Ross & Bustin (AAPG Bulletin Jan 2008) • Based on isopachs, geochemical analyses of core and estimates derived from calibrated geophysical logs. • Considered free and adsorbed gas capacities • Limited data within Horn River Basin
Gas In Place Mapping • Potential OGIP calculated and iso-areas generated and contoured. • Large volumes of gas predicted based on • thick packages of shale. • OGIP values applied to Gas DSUs across Horn River Basin for • Walsh low case: 332 TCF • mean 53 bcf/dsu, range 0-113 bcf/dsu • Walsh high case: 820 TCF • mean 131 bcf/dsu, range 1-287 bcf/dsu • Ross: 782 TCF • mean 126 bcf/dsu, range 20-300 bcf/dsu
Land Positions • Much of the Horn River Basin has been tenured over the last 5 years • Record land sales in B.C. - price per hectare and total sales • For the purpose of analysis of potential future activity subdivide the basin into three areas: • Major operators (as identified by Apache presentation October 23 2008) • Unknown operators (all other tenure in basin as of March 2009) • Untenured land
Land Positions • “Major Operators” • Operators identified in the • Horn River Basin • Devon • Nexen • EOG • Imperial / Exxon • Apache / Encana JV
Land Positions Unknown Operators Untenured Land
Relating OGIP Mapping to Potential Reserve Statements • Calculate the OGIP on the lands attributed to companies and compare these values to volumes from press releases. • Walsh estimates for OGIP resource “bookend” company statements and Ross values.
Relating OGIP Mapping to Potential Reserve Statements • Calculate the OGIP on categories of lands • Major Operators • Unknown Operators • Untenured Land
Development Scenarios Access and Recovery • Two scenarios – Walsh Low / High Case OGIP • Consider availability of land for drilling • Exclude 10-30% of land from development as inaccessible on land holdings of major companies • Exclude 30-50% of land from development for unknown companies for time frame of analysis. • Exclude 70% of untenured land from development as unprospective* • - Consider recoveries on land that is drilled • 20-30% recovery • Consider potential production profiles and EUR per well • IP 4.9 mmcf/d, EUR 5.5 bcf • IP 3.3 mmcf/d, EUR 4.1 bcf • * >95% of the basin is interpreted to have more than 30 bcf OGIP per DSU
Development Scenarios Pace and Production Drilling Activity Major Operators Lands – 20 year full development Unknown Operators Lands – 30 year full development Untenured Lands – 40 year development
Development Scenarios Pace and Production Annual Drilling – Pessimistic OGIP, Limited Accessibility, 20% recovery, 4.1bcf/well Untenured Unknown Majors Conventional
Development Scenarios Pace and Production Annual Drilling – Optimistic OGIP, Good Accessibility, 30% recovery, 5.5 bcf/well Untenured Unknown Majors Conventional
Development Scenarios Pace and Production Optimistic Shale Forecast BC’s Current Production Pessimistic Shale Forecast
Development Scenarios Validation - If these development scenarios were applied on company lands, how would they compare to potential reserves as announced?
Service Requirements • Resources needed to support drilling and completions • Frac Sand • Water Max Annual Water – 25% of Annual Water Use in CRD (Greater Victoria) Max Annual Frac Sand – 150+ truck loads of sand per day.
Summary • Large volumes of gas in place • Significant reserve expectations • Successful development of play will require 10’s of thousands of wells • Development over 20 years will require unprecedented activity levels • Peaking at 3 wells rig released every day of the year • Optimistic case as presented (16,000 wells) is development of 62% of the sections in the basin.