Drilling Technology - The Emergence of New Risk, From A Loss Adjuster's Perspective Daniel C. Dan Mason International Loss Adjusters www.matdan.com IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 1
Unconventional Gas Development Horizontal Drilling and Hydraulic Fracturing IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 2
Economic Shales Shales that host economic quantities of oil and/or gas have a number of common properties. Rich in organic material Mature petroleum source rocks Brittle and rigid enough to maintain open fractures Intervals with high natural gamma radiation seem to be the most productive Very low porosity and very low permeability Taken in part from http://en.wikipedia.org/wiki/shale_gas IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 3
Basics of Horizontal Drilling Development of shale formations has resulted from improvements in the following technologies: Drilling equipment Monitoring instrumentation Hydraulic fracturing Recent development of shale formations has contributed to the slowdown and subsequent reversal in the decline in U.S. domestic oil and gas production. But, from the shale drilling allegations of damage to fresh water resources have arisen and so have videos My Water s On Fire Tonight http://www.youtube.com/watch?v=timfvngr_q4 And concerns about earthquakes as in April 2011 in Lancashire County, United Kingdom. BBC clip 01Jun11 http://www.bbc.co.uk/news/business-13612482 Taken in part from http://www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 4
Development of U.S. Gas Shale Production o o o o o o Got it s start in the Barnett Shale of north central Texas US shale gas production grew 17 percent per year from 2000 to 2006 By 2006, shale development spread to plays other than Barnett Shale From 2006 to 2010, economic production from shale made possible by horizontal drilling advances hydraulic fracturing advances From 2006 to 2010 U.S. shale gas production grew by an average of 48 percent per year Analysts indicate shale gas production may increase threefold from 2009 to 2035 However, uncertainty does exist regarding technical recoverability. Barnett Shale gas drilling rig onshore near Alvarado, Texas (2008) Taken in part from http://www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 5
United States Shale Gas Basins IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 6
United States Natural Gas Production by Source Shale gas provides the largest source of growth in U.S. natural gas supply Natural gas production by source, 1990-2035 (trillion cubic feet). Reports indicate that shale gas production may increase threefold over the next 25 years. Taken in part from http://www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 7
Worldwide Shale Reserves Prepared April 2011 by a third consultant /paid by US Gov nt. Study does not consider countries where no data obtained. Study does not consider offshore areas. http://www.eia.gov/analysis/studies/worldshalegas IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 8
Worldwide Shale Reserves Technically Recoverable Shale Gas Resources (in units of trillion cubic feet natural gas) China 1,275 United States 862 Argentina 774 Mexico 681 South Africa 485 Australia 396 Canada 388... Brazil 226 Poland 187 France 180 Norway 83 http://www.eia.gov/analysis/studies/worldshalegas IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 9
Vertical vs. Horizontal Drilling Greater length of producing formation exposed to the wellbore in a horizontal well (A) than in a vertical well (B). Source: Energy Information Administration, Office of Oil and Gas. https://www.dmr.nd.gov/ndgs/newsletter/nl0308/pdfs/horizontal.pdf IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 10
Elements of a vertical well are present in horizontal Conductor pipe Surface casing Intermediate casing Production casing Production tubing Perforated interval Image and certain information obtained from http://www.glossary.oilfield.slb.com/ IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 11
Drilling and completion of a horizontal well Excerpt from http://www.api.org/policy/exploration/hydraulicfracturing/hydraulicfracturing.cfm IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 12
Other horizontal drilling tactics Locations designed to drill multiple wells in close proximity saves time and money, employing Use of skid-mounted drilling rig systems Use of water-base drilling mud in upper portion of well Use of oil-base drilling mud in horizontal portion of the well IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 13
Hydraulic fracturing The hydraulic fracturing operation will need large quanties of Water Sand (proppant) Pumping equipment IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 14
Equipment associated with the hydraulic fracture operation Frac pumps throttle up clip. IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 15
Horizontal well benefits The bottom line Horizontal Drilling and Hydraulic Fracturing these wellbores allows operators to develop a reservoir with a significantly fewer number of wells, and significantly enhance oil and gas recovery as well as return on investment and total return. IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 16
Claims We Have Seen Ongoing Claims Wellhead failures during hydraulic fracture treatments Casing ruptures during the fracture treatment Poor cement quality behind casing causing crossflow Other Concerns Earthquake claims? Contamination of water table? Applicability of Policy Wording? IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 17
Thank you for your attention! Please feel free to contact me with any questions. danmason@matdan.com www.matdan.com International Loss Adjusters IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 18
Other Resources: OSPRAG cap video http://www.youtube.com/watch?v=fm-auf1x_0o&feature=related OSPRAG deployment exercise http://www.youtube.com/watch?v=l8d9zcjk45e&feature=related X Challenge: Oil Clean-up http://www.iprizecleanoceans.org/ Houston - London IUMI 2011 Drilling Technology - The Emergence of New Risk From A Loss Adjuster's Perspective Slide No. 19