tight gas in western canada - forward energy group inc

Tight Gas in Western Canada July 2005

1

1

Tight Gas in Western Canada: An Important and Continuing Component of

Overall Supply

R.K. (Bob) Dixon, P.Eng.

Unconventional Gas Conference, HoustonJuly 26, 2005

www.forwardenergy.ca

2

• Introduction• WCSB Gas Supply Challenge • Unconventional Gas• CBM/Shale• WCSB Tight Gas

– Shallow– Jean Marie– Deep Basin

• Summary

Agenda


2

3

Portfolio

Plays Properties

Prospects Projects

Portfolio

Plays Properties

Prospects Projects

Discovery Recovery

Investments

GOALS

STRATEGIES

TACTICS

GOALS

STRATEGIES

TACTICS

Planning

Better information for strategic decisions

Forward Energy Group Inc

4

Geographic Regions

Large and complex basin

60°N

70

60

80

90

100

110

120

6M

49°N

5M

120

10

1

20

30

40

50

60

70

80

9 0

100

110

4M3M

Swift Current

Medicine Hat

Saskatoon

Lloydminster

Edmonton

Lethbridge

Calgary

Hinton

Grande Prairie

Fort McMurray

Fort Nelson

Fort St. John

10

20

1

30

50

40

60

70

90

80

100

120

110

126

Connected Townships

SW Saskatchewan (137)NW Saskatchewan (254)BC Plains (545)NW Alberta (699)NE Alberta (512)Central Alberta (733)EC Alberta (349)SE Alberta (744)Deep Basin (578)Foothills (227)

Petroleum Services Association of Canada

Natural Gas Supply Trends 1990 - 2002

Geographic Regionsmodified from


3

5

• Introduction• WCSB Gas Supply Challenge• Unconventional Gas• CBM/Shale• WCSB Tight Gas


• Summary

Agenda

6Will production grow again, sustain or decline?

• WCSB production:– Recent peak at 16.9

Bcfd in 2001– Decreased to 16.5

Bcfd in 2003– Rebound to 16.7

Bcfd in 2004

• Alberta: dominant provincial source

• BC: only region with growth trend

WCSB ProductionMarketable Gas Production by Province

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004E

Mar

keta

ble

Gas

Pro

duct

ion,

MM

cfd

Territories Saskatchewan British Columbia Alberta

Source: CAPP

• WCSB ultimate potential for ‘conventional’ natural gas: 290 Tcf (NEB/EUB)

• Unconventional resource potential: 300 – 1000s Tcf


4

7Competing processes of decline and rate additions

• Total WCSB production flat at 16.7 Bcfd ± 0.2 Bcfd

• Decline in production from connected wells

• Rate additions from new wells onstream provide growth

• Wells onstream since 1989 produce 80% of gas

Supply Challenge: Sustain Production

• WCSB supplies 25% of consumption in US and Canada

WCSB Gas Production by Period Onstream

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Cal

enda

r Dai

ly M

arke

tabl

e G

as R

ate,

MM

cfd

Wells Onstream 1990 to 2004

Wells Onstream Pre-1990

source: Forward Energy, CAPP

8Gas price and gas connection activity correlated

• Connection activity reached record levels, above 14,000 connections, by the end of 2004

• Activity, and rate additions, responded to prices, cash flow, acquisition and capital markets, export capacity, etc.

How has industry responded?WCSB: Gas Activity and Gas Prices

0

2000

4000

6000

8000

10000

12000

14000

16000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004E

Even

t Cou

nt

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

($/M

cf)

Event Count

Natural Gas, CAPP Average Wellhead/Plant Gate price


5

9Higher production rates require higher production replacement

• Supply additions were 1.7 Bcfd in 1990, peaking at 3.9 Bcfd in 2001; 3.7 Bcfd in 2004

• Shallow declines in early years; first year decline has increased from less than 30% to 40%

• Rate additions for all wells onstream in year is the peak monthly rate

How big is the annual challenge?Gas Production by Year Onstream

Events Onstream 1990-2002

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream

Cal

enda

r Dai

ly S

ales

Gas

, MM

cfd

2002200120001999199819971996199519941993199219911990Solution Gas

1 year

3.2Bcfd

3.0Bcfd

1 year

Gas Rate Additions by Year Onstream

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year

Cal

enda

r Dai

ly S

ales

Gas

, MM

cfd

1990199119921993199419951996199719981999200020012002

1,724 1,732

1,160

2,214

3,361

2,702

2,961

3,220

3,428

3,257

3,617

3,882

3,220

3.5 Bcfd 5 year average

10

60°N

60

70

80

90

100

110

120

6M

10

49°N

120

5M

30

40

50

60

70

80

90

1

20

100

110

4M3M

Fort St. John

Fort Nelson

Swift Current

Medicine Hat

Saskatoon

Lloydminster

Edmonton

Lethbridge

Calgary

Hinton

Grande Prairie

Fort McMurray

10

20

1

30

50

40

60

70

90

80

100

120

110

126

Rate Added per TownshipMMcfd

128 to 494 (3)64 to 128 (6)32 to 64 (38)16 to 32 (159)8 to 16 (410)4 to 8 (657)2 to 4 (785)1 to 2 (725)0 to 1 (1305)

Events Onstream 1998-2002, MMcfd


Rate Added per Township

WCSB Supply Additions

WCSB: Very large area, many producing plays, very active

Rate Added and Event Count

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream

Rat

e A

dded

, MM

cfd

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Even

t Cou

nt

First Year Rate AddedEvent Count


6

11More, but lower productivity, opportunities at the

economic margin

• Rate added by new connections declined to 250 Mcfd per zone (2004)

• Threshold size of an economic well decreased as gas price and netback increased

• Expanded opportunity set: smaller, higher cost, lower quality, higher risk or more remote prospects

Rate Additions per Zone ConnectedWell Connection Activity and Average Rate

Additions per Well

0

100

200

300

400

500

600

700

800

900

1,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year Onstream

Rat

e A

dditi

ons

per W

ell,

Mcf

d/w

ell

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Even

t Con

nect

ion

Cou

nt

Rate Additions per WellWell Connection Count

12

Extrapolated recovery

Deliverability

Rate added• the primary measure • allocated by load factor-

adjusted first 12 month rate

Discounted productionPlant gate marketable

Supply Measures

Supply measures calculated from decline functions

Decline Analysis Example: Rate - CumINVERNESS GILBY 6-17-40-1W5 Gilby Basal Mannville BBB

0

500

1,000

1,500

2,000

2,500

3,000

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000Cumulative Production, MMcf

Cal

enda

r Dai

ly R

ate,

Mcf

d R

aw

Actual Production ProfileDecline FunctionDeliverabilityDecline Function at 77% Load FactorFirst 12 Month Rate

Extrapolated Recovery4.297 Bcf

@ 1.0 Mcfd

Initial Rate2,305 Mcf/d

Constant % Decline Rate 17.8% per year

Deliverability2,093 Mcf/d

First 12 Month Rate(Rate Added)1,602 Mcf/d

Deliverability

Rate Added

Extrapolated Recovery(or EUR)


7

13



• Summary

Agenda

14

To provide a comparison to the US production, we have adopted the US Energy Information Administration (EIA) definition of unconventional gas:

“Natural gas extracted from coalbeds (coalbed methane) and from low permeability sandstone and shaleformations (tight sands and gas shales) is commonly referred to as unconventional gas. Most of these resources must be subjected to a significant degree of stimulation (e.g., hydraulic fracturing) or other “unconventional” production techniques to attain sufficiently economic levels of production.”

What is Unconventional Gas?


8

15

Resource Quality

Low

High

Technology Requirement

High

Low

-Ultra Tight Gas Plays

-Deep CBM-Shale Gas

-Gas Hydrates

-Tight Gas-CBM

-Undiscovered Conventional

-RemainingReserves

-ProducedVolumes

Resource Triangle

-Tight Gas

16

Identification Issues• U.S. agencies currently report natural gas production in

the Lower 48 states from conventional and “unconventional” sources

• Canadian agencies do not (yet) distinguish production from tight sand or shale reservoirs from conventional gas production

• The Alberta EUB only recently began to identify production from coalbed methane wells separately

• Confidentiality provisions delay some information release, thus potentially obscuring more recent trends


9

17

WCSB Gas Production, by Resource Type

0

2

4

6

8

10

12

14

16

18

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Bcf

d

ShaleCoalbed MethaneTight (3 plays)Conventional

Tight gas is significant for both USA and Canada

US-Canada Gas Production Profiles

• Lower 48 gas production flat at 50-52 Bcfd; WCSB plateau at 16-17 Bcfd• CBM and shale gas in WCSB not yet on radar• 3 major plays for Tight* gas in WCSB • Tight gas in lower 48 at 20% of total 2004 production vs 28%

contribution in WCSB• Conventional* gas in decline

Lower 48 Natural Gas Production by Resource Type

0

10

20

30

40

50

60

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003E 2004E

Bcf

d

Gas ShalesCoalbed MethaneTight SandsConventional

Source:EIA

CBM: 60 MMcfd in ’04Shale: nil

18

Unconventional Gas, as % of Total WCSB

0%

5%

10%

15%

20%

25%

30%

35%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Tight gas – currently 30% of WCSB output

WCSB Unconventional Gas

• Tight* gas: Selected three plays as examples where tight gas dominates• With decline in conventional, tight gas becoming greater share of the mix


0

2

4

6

8

10

12

14

16

18

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Bcf

d


2004 gas rates• Shale: nil• CBM: 60 MMcfd• Tight*: 5.0 Bcfd• Conventional*: 11.6

Bcfd

CBM: 60 MMcfd in ’04Shale: nil


10

19



• Summary

Agenda

20

Coalbed Methane in WCSB

• Resource potential: 300-400 Tcf gas in place; 10-20 Tcf recoverable (various sources)

• Recent startup – WCSB production at 170 MMcfd

• Only commercial production to date from the Horseshoe Canyon coals, in Alberta

• Experimental pilots operating in BC and in Alberta –production levels not yet material


11

21

CBM plays in Alberta• Horseshoe Canyon and Belly

River coals– Upper Cretaceous– Typically dry gas production– Focus of most of current activity

• Ardley (Scollard) – Upper Cretaceous– Limited activity to date

• Mannville Group– Lower Cretaceous– Often with associated water– Experimental pilots, results often

confidential

22

Coalbed Methane Production• Production rate

increasing dramatically– 60 MMcfd annual

average in 2004– 110 MMcfd exit rate

– Dec04– 170 MMcfd est. rate

– Jun05• CBM now

contributing 1% of total WCSB

Coalbed Methane Production: Alberta

0

20

40

60

80

100

120

140

2002

-01

2002

-03

2002

-05

2002

-07

2002

-09

2002

-11

2003

-01

2003

-03

2003

-05

2003

-07

2003

-09

2003

-11

2004

-01

2004

-03

2004

-05

2004

-07

2004

-09

2004

-11

2005

-01

2005

-03

Gas

Rat

e, M

Mcf

d

0

200

400

600

800

1000

1200

1400

Cum

ulat

ive

Wel

l Cou

nt

Gas RateWell Count

• Recent start; high growth rates• 3000+ wells drilled to date; 1000 wells onstream by end Dec04 (EUB

designation)


12

23

Coalbed Methane Opportunities and Challenges

• Significant resource potential

• Value drivers increasing with strengthening of commodity prices and technology improvements

• Due to their location, CBM properties often have the benefit of existing infrastructure and stakeholder familiarity

• Surface land and land user impacts

• Major challenges– sufficient resources of permeability-thickness – (the cost of) water handling

24

• No current recognized gas production from shale zones

• Values for resource estimates large numbers

• Experimental work being undertaken – results are confidential

• Some production occurring as commingled production with sand stringers, whether inadvertent or planned

Shale Gas in WCSB


13

25



• Summary

Agenda

26

• In the US, “tight gas reservoirs generally are defined as gas-bearing rocks with an in-situ permeability to gas of less than 0.1 md” (Spencer, 1989)

• Since in-situ permeability data is not publicly reported for gas zones in the WCSB, we have estimated tight gas production on the basis of a number of criteria, including stratigraphic group, geographic region, the occurrence of fracture stimulation or horizontal drilling and depth

What is Tight Gas?


14

27

• For the purpose of this analysis, we illustrate three types of tight gas plays, as examples: – Shallow (SE Alberta/SW Sask.)– Jean Marie– Deep Basin

Tight Gas Play Examples

Three tight gas plays – all on growth trends


0

2

4

6

8

10

12

14

16

18

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Bcf

d


• The key uncertainty is the proportion of tight gas production from fracture-stimulated Mesozoic zones deeper than 6000 feet

Tight Gas - Three Plays

0

1000

2000

3000

4000

5000

6000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Gas

Rat

e, M

Mcf

dDeep BasinJean MarieShallow - SE AB/SW SK

28



• Summary

Agenda


15

29

• Shallow fracture-stimulated, low-permeability Upper Cretaceous reservoirs in the Sweetgrass Arch area of southeast Alberta and southwest Saskatchewan

• Well depth: 2000-2500 ft, predominantly vertical

• 2004 production: 1.7 Bcfd in 2004, 10% of WCSB production

• 95% of the over 33,000+ events connected since 1990 have been fracture stimulated

Shallow: SE Alberta/SW Saskatchewan

30

100 miles

CanadaUSA

Alberta | Saskatchewan

60°N

70

60

80

90

100

110

120

6M

49°N

5M

120

10

1

20

30

40

50

60

70

80

90

100

110

4M3M

Swift Current

Medicine Hat

Saskatoon

Lloydminster

Edmonton

Lethbridge

Calgary

Hinton

Grande Prairie

Fort McMurray

Fort Nelson

Fort St. John

10

20

1

30

50

40

60

70

90

80

100

120

110

126

Connected Townships





Shallow Tight Gas

• Medicine Hat

Abbey/Lacadena


16

31

Shallow Tight ProductionShallow SE AB/SE SK

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Gas

Rat

e, m

mcf

d

0

10000

20000

30000

40000

50000

60000

70000

Cum

ulat

ive

Wel

l Cou

nt

Gas RateWell Count

Shallow SE AB/SW SK

0

200

400

600

800

1000

1200

1400

1600

1800

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

mm

cfd

wells onstream 1990-2004wells onstream prior to 1990

• Intense activity: 1.8 Bcfd from 66,000+ wells onstream (to Apr05)

• Average well rate: 33 Mcfd

• Steady production to 2000, 9%/year growth rate since

Infills, extensions and new discoveries

32

Rate Added from Shallow Tight Gas SandsUpper Cretaceous in SE Alberta and SW Saskatchewan

0

50

100

150

200

250

300

350

400

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream

Rat

e A

dded

, MM

cfd

0

1000

2000

3000

4000

5000

6000

7000

8000

Zone

s C

onne

cted

Rate Added, MMcfdZones Connected

Shallow Tight Gas Rate Additions• 5000+ new wells

connected each year

• Supply additions increasing to 350 MMcfd/year, above the annual loss due to decline (~150 MMcfd)

Resource play: continuous activity to keep production rate going


17

33

Shallow: Operators• EnCana largest

operator, by far; 1.0 Bcfd (42% of total play)

• EOG second largest, but only 8% of volume

• Nearly 200 other operators share the activity

• Variance in average rate per well reflects internal play diversity

EnCana largest Shallow Tight Gas operator

Shallow SE AB/SW SK - Operators

0

200

400

600

800

1000

EnCana EOG Anadarko Nexen Husky Apache CNRL ARC Enerplus Others

Gas

Rat

e (1

2 m

onth

s en

ded

Apr

04),

mm

cfd

0

5000

10000

15000

20000

Cum

ulat

ive

Wel

l Cou

nt

Gas RateWell Count

34



• Summary

Agenda


18

35

• Gas-charged, under-pressured shelf carbonates of the Devonian Jean Marie Formation in NE British Columbia, typically drained by horizontal wells

• Well depth: 4000-4500 ft – TVD:• Horizontal leg length: average 2900 ft, up to 5000 ft

• Jean Marie sources produced about 0.5 Bcfd, 3% of 2004 WCSB production

Jean Marie

36

60°N

70

60

80

90

100

110

120

6M

49°N

5M

120

10

1

20

30

40

50

60

70

80

90

100

110

4M3M

Swift Current

Medicine Hat

Saskatoon

Lloydminster

Edmonton

Lethbridge

Calgary

Hinton

Grande Prairie

Fort McMurray

Fort Nelson

Fort St. John

10

20

1

30

50

40

60

70

90

80

100

120

110

126

Connected Townships





Jean MarieTight Gas

R12R13

94-I-5

94-I-5

94-I-6

94-I-6

94-I-7

94-I-7

94-I-8

94-I-8

94-I-994-I-1094-I-1194-I-12

94-I-13 94-I-14 94-I-15 94-I-16

9

-16

-O-1

4-O-8

94-O-9

94-O-16

94-P-194-P-294-P-394-P-4

94-P-5 94-P-6 94-P-7 94-P-8

94-P-994-P-1094-P-1194-P-12

94-P-13 94-P-14 94-P-15 94-P-16

T106

T107

T108

T109

T110

T111

T112

T113

T114

T115

T116

T117

T118

T119

T120

T121

T122

T123

T124

T125

T126

R12W694-I-0194-I-0294-I-0394-I-0494-J-01

Forward Energy Group Inc

Jean Marie Trend

Licensed to : Forward EnergyBy : Date : 2005/07/06Scale = 1:785000 Project : jean marie

0 10 20 30 40 50

0 10 20 30

Kilometres

Miles

50 miles


19

37

Jean Marie Production

Jean Marie – an emerging play

• 2004: 480 MMcfd from ~1000 wells onstream; average well rate: 480 Mcfd

• Very little base production; recent growth from application of technology

Jean Marie

0

100

200

300

400

500

600

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

mm

cfd


Jean Marie

0

100

200

300

400

500

600

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Gas

Rat

e, m

mcf

d

0

200

400

600

800

1000

1200

Cum

ulat

ive

Wel

l Cou

nt

Gas RateWell Count

38

Jean Marie Rate Additions• 250 new wells

connected each year

• Supply additions nearly 200 MMcfd, above the loss due to decline

• Average initial rate decreasing – to 750 Mcfd/well in ’04

Rate Added from Shallow CarbonatesUpper Devonian Jean Marie in NE British Columbia

0

20

40

60

80

100

120

140

160

180

200

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004EYear Onstream

Rat

e A

dded

, MM

cfd

0

50

100

150

200

250

300

350

400

Zone

s C

onne

cted

Rate Added, MMcfdZones Connected


20

39

Jean Marie: Horizontal Drilling

• Full scale deployment of horizontal, under balanced drilling technology, commencing in 1999, enhanced play development

• Over 95% of recent wells in Jean Marie play are horizontal• Productivity of horizontal wells 20-100% better than vertical wells

Horizontal technology made this play

Rate Added per Well from Shallow CarbonatesUpper Devonian Jean Marie in NE British Columbia

0.0

0.5

1.0

1.5

2.0

2.5

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year Onstream

Rat

e A

dded

per

Wel

l, M

Mcf

d/w

ell

VerticalDeviatedHorizontal

Connection Activity from Shallow CarbonatesUpper Devonian Jean Marie in NE British Columbia

0

50

100

150

200

250

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year Onstream

Wel

l Con

nect

ions

VerticalDeviatedHorizontal

40

Jean Marie: OperatorsJean Marie - Operators

0

50

100

150

200

250

300

350

400

450

500

EnCana Cdn Natural Devon Penn West Husky Others

Gas

Rat

e (1

2 m

onth

s en

ded

Apr

04),

mm

cfd

0

100

200

300

400

500

600

700

Cum

ulat

ive

Wel

l Cou

nt

Gas RateWell Count

• Jean Marie play characterized by few operators

• EnCana is the largest; nearly 450 MMcfd, or 60% of the total

• CNRL and Devon operated 24% and 7%, respectively

EnCana dominates the Jean Marie play


21

41



• Summary

Agenda

42

• Definition of the Deep Basin characteristics:– Gas charged area in west-central Alberta (and parts of BC), just

east of the Foothills disturbed belt– Located in recent to Jurassic stratigraphic groups– Deeper than 6000 ft

• A large portion of these reservoir rocks are low permeability, or ‘tight’

• Well depth: 7000-11,000 ft; average 8400 ft; predominantly vertical

• The Deep Basin play produced about 2.6 Bcfd, 15% of 2004 WCSB production

Deep Basin


22

43

60°N

70

60

80

90

100

110

120

6M

49°N

5M

120

10

1

20

30

40

50

60

70

80

90

100

110

4M3M

Swift Current

Medicine Hat

Saskatoon

Lloydminster

Edmonton

Lethbridge

Calgary

Hinton

Grande Prairie

Fort McMurray

Fort Nelson

Fort St. John

10

20

1

30

50

40

60

70

90

80

100

120

110

126

Connected Townships





Deep Basin

Foothills

Calgary

EdmontonFoothills

200 miles

CanadaUSA

BC | Alberta

44

Deep Basin Production

Deep Basin tight gas: significant and growing

Deep Basin

0

500

1000

1500

2000

2500

3000

3500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Gas

Rat

e, m

mcf

d

0

1000

2000

3000

4000

5000

6000

7000

8000

Cum

ulat

ive

Wel

l Cou

nt

Gas RateWell Count

Deep Basin

0

500

1000

1500

2000

2500

3000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

mm

cfd


• Increasing activity: 2.9 Bcfd from 7600+ wells onstream (to Apr05)

• Average well rate: 400 Mcfd

• Steady production growth from 1990, 7%/year compound annualized growth rate


23

45

Deep Basin Fracture Stimulations• A majority of the

wells in this Deep Basin play are fracture stimulated

• 80-85% of these rate adds from fractured wells

Fracturing technology - a necessary component

Rate Added by Fracture StimulationDeep Basin

0

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream

Rat

e A

dded

, MM

cfd

Non-fracture stimulatedFracture stimulated

46

Connection Activity by Deliverability ClassDeep Basin region

0

50

100

150

200

250

300

350

400

450

500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream

Rat

e A

dded

, MM

cfd

0 - 0.5 MMcfd0.5 - 1 MMcfd1 - 2 MMcfd2 - 4 MMcfd4 - 8 MMcfd8+ MMcfd

Deep Basin Deliverability Class

• Extraordinary growth in the number of low rate (<0.5 MMcfd and 1-2 MMcfd) connections since 1995; number of connections in the higher rate classes has remained relatively constant

• Rate additions from lower deliverability wells (<2.0 MMcfd) increased from 30% to 65% of annual rate additions

Pushing the marginal economic limit has lead to growth in overall rate additions from lower deliverability wells

Rate Added by Deliverability ClassDeep Basin region

0

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year Onstream

Rat

e A

dded

, MM

cfd

8+ MMcfd4 - 8 MMcfd2 - 4 MMcfd1 - 2 MMcfd0.5 - 1 MMcfd0 - 0.5 MMcfd


24

47

Deep Basin: Operators

Burlington: largest Deep Basin operator

• Approximately 200 operators share the activity; no single operator dominates

• Burlington largest operator; 1.0 Bcfd (23% of total play)

• BP and CNRL second largest, but only 9% of volume each

Deep Basin - Operators

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Burlington BP CNRL EXM/IOL Talisman Devon EnCana Conoco Others

Gas

Rat

e (1

2 m

onth

s en

ded

Apr

04),

MM

cfd

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Cum

ulat

ive

Wel

l Cou

nt

Gas RateWell Count

48



• Summary

Agenda


25

49

• Outstanding issues:

– No clear working definition of tight gas

– Lack of accepted characterization of plays and resources

– Size and scope of resource potential/opportunity is not agreed

– Focus on enabling technologies not as well understood

• Resolution: Forward Energy is embarking on a tight gas characterization project

– Multi-client

– Wide support: industry, government, agency

– Multi-year

Where To From Here?

A solid grounding in the definition and extent of tight gas in the WCSB required - to lead to solid investment decisions

50

• The WCSB is a large, diverse and dynamic basin; many opportunities available to all types and sizes of operators

• Unconventional gas is one of the few components of the WCSB with sustainable growth potential

• CBM is in relative infancy in Canada; tight gas is a continuing program

• Tight gas, developed through the resource play mechanism, is a major focus for selected operators

• Technology developments have been, and will continue to be a major factor in resource development

Key Messages

The sky is not falling - the sky is growingThe challenge is cost-effective rate additions


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51

Tight Gas in Western Canada: An Important and Continuing Component of

Overall Supply

R.K. (Bob) Dixon, [email protected]

403-261-1019

Unconventional Gas Conference, HoustonJuly 26, 2005

www.forwardenergy.ca

tight gas in western canada - forward energy group inc

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