A Report on Operation in Unconventional Play with special reference to OIL’s Niobrara JV

Shale plays first come to mind when one considers unconventional resources. These unconventional

resource plays may yield natural gas, gas condensates, and crude oil. Some of the more noteworthy

shale plays in North America include the Bakken, Eagle Ford, Marcellus, Fayetteville, Woodford,

Niobrara, Haynesville, Horn River, and Utica formations. Tight gas, coalbed methane, oil sands, and

heavy oil are non-shale unconventional resources……………………………………………………………….OIL USA Team

Introduction

This Report has been prepared to give an idea about the amount of activities that has been undergoing

in a typical unconventional play in US.

Also we have discussed here on different aspects of drilling in unconventional plays and methods

adopted for gathering information from a drilled well giving

special reference to operation in Denver basin, where, Oil India

Ltd. (OIL) has formed a JV with Carrizo Oil & Gas (Carrizo), a

Houston based company, to explore and develop an

unconventional play known as Niobrara Formation in the state of

Colorado. USA.

Presently, main activities are concentrated in Weld County. The

targeted formation is Niobrara ‘B’ Bench, however, ‘A’ and ‘C’

Benches are also tested and initial results are encouraging.

Niobrara Formation

The Niobrara shale formation is situated in northeastern

Colorado and parts of adjacent Wyoming, Nebraska, and Kansas.

Primarily an oil play, it is in the Denver (Denver-Julesburg) Basin,

which has long been a major oil and gas province.

Companies have been producing resources from Niobrara for

more than 100 years, but the formation is considered a young play because much of the oil and gas was

inaccessible until very recently. Like many other recent oil and gas plays, horizontal drilling techniques

and hydraulic fracturing have opened up the Niobrara formation to new production possibilities.

Exploration History in Colorado & neighboring States

Oil and gas have been produced from the Denver Basin since the discovery in 1901 of oil in fractured

Pierre Shale at the McKenzie Well, part of the Boulder oil field in Boulder County, Colorado.

The great majority of Denver Basin oil and gas fields produce from Cretaceous sandstones, although the

Permian Lyons Sandstone is also a producer. Oil has also been produced from Permian sandstones and

dolomites and Pennsylvanian limestone in the Nebraska part of the basin.

Weld County

The Wattenberg Gas Field, one of the largest natural gas deposits in the United States, is a basin-

centered gas field just north of the Denver metropolitan area.

The field has produced more than 4.0 TCF

of natural gas from the J Sandstone, Codell

Sandstone, Niobrara Formation, Hygiene

Sandstone, and Terry Sandstone (all

Cretaceous). In 2007, the field made 11

million barrels of oil and 170 BCF of gas

from more than 14,000 wells, making it

the 9th largest source of natural gas in the

United States.

Biogenic natural gas is recovered from

shallow gas fields (less than 3,000 feet) of

the Niobrara Formation in Yuma, Phillips,

and Washington counties of northeastern

Colorado and Cheyenne and Sherman

counties of northwestern Kansas. To date,

2,900 wells have produced 470 BCF of gas.

Drilling is currently very active, and the

play is expanding into Perkins, Chase, and

Dundy counties, Nebraska.

Colorado has 52,768 (Oct’14) active wells, out of which

21,731 wells are in Weld County. Total area of Weld

County is 4,022 sq miles (10,417 km²), hence, average

density is 2 wells/km² (approx.). Colorado Oil & Gas

Conservation Commission has permitted 2468 and 1842

wells for drilling during 2013 and 2014 respectively in

Weld County alone. All these permitted wells are

unconventional. In May’14, oil production in Weld County

is 6.2 million barrels (monthly cumulative production).

The success story of Shale Oil/Gas in Colorado

More than 1,500 barrels of crude oil per day gushed from

the “Jake” oil well when EOG Resources drilled and

fracked the well into the Niobrara shale in northern

Colorado in the fall of 2009. That gusher marked the

beginning of one of the biggest oil booms in the state’s

history.

These booming shale oil and gas plays are all successful

because of advances in fracking and horizontal drilling

technology and the speed with which companies are drilling new wells.

Hydraulic Fracturing

Hydraulic fracturing is a method used to increase the production of oil or natural gas from a reservoir.

In many unconventional plays, the

oil or gas is trapped within low

porosity or permeability rock such

as shale or tight sands. Hydraulic

fracturing uses high pressure fluid

(i.e. water) and a Proppant (i.e. sand

or ceramics) to create fractures in

the rock and prop them open,

enabling the trapped oil or gas to

flow towards the production well.

Micro-seismic Frac’ Mapping:

Micro-seismic monitoring is

increasingly accepted as the best

method to observe and track the

creation of fractures in a reservoir.

By locating micro-seismic events

associated with the fractures, it is

possible to determine the geometry of a fracture and the effective production volume, observe any

interactions with existing faults and monitor for

events locating out of zone.

Micro-seismic activity is measured using arrays of

geophones positioned in a nearby observation

well (Listening Well) or using an array of near-

surface sensors.

Observation in a Carrizo Well

Listening well = Sohio State #1 (Old Vertical Well) Monitored = State 36-24-9-61 (Horizontal Well)

Majority of events within 500’ most within 250’,

indicating half Length is less than 750’

Event tendency is towards east (Event

Shadowing) due to location of the listening well

Significant Stress changes along the wellbore

with event alignments from 44 to 114 deg.

Pumping Truck

Wireline Truck Water Table

Geophone

s

Well

Fractures Micro-seismic Events

(In Color) Shale/Tight Formation

Above is an ELAN process results with PEX-ECS showing log response against main producing zone, i.e.

Niobrara ‘B’ Bench, along with two secondary target zones, Niobrara ‘A’ & ‘C’ Benches. Log suit

recorded in some of the key Carrizo wells are shown below –

• Array Induction-Platform Express

• Caliper

• CBL-VDL

• CNL-Litho Density-Platform Express

• DIL-SP-GR

• ECS

• HNGS

• Microlog-Platform Express

• Triple Combo-Platform Express

• FMI

• Sonic Scanner

Crude Oil Characteristics (Single Well Sample from Carrizo well)

Specification Test Method Units Results

API Gravity API 60/60 33

RVP @100 Deg F D323 PSIG 5.9

Sulfur D2622 WT% 0.490

Visual Appearance - Viscous, Dark Brown

Niobrara ‘B’ bench (Chalk)

Main Producing Zone

Niobrara ‘A’ bench (Chalk)

Secondary Target

Niobrara ‘C’ bench (Chalk)

Secondary Target

Rotary Sidewall Cores in a Carrizo well (50 nos. approx. from different depths) – Cores are used for

Azeotrope Cleaning, Core Photo, X-Ray Diffraction, Thin Section, VR & RockEval, Fluid Sensitivity test,

etc. and collected mainly from Niobrara ‘A’, ‘B’ and ‘C’ Benches.

Above, a typical Mud Log (Log created using Lplot VH Version 3.0) showing sample photographs, Drilled

Depth in TVD & MD, Azimuth, Inclination, GR, Lithology, Formation Tops, Gas Reading, Gas Composition

in ppm, CO2 in ppm, Mud (in/out), ROP (ft/hr), identification of possible faults, etc.

Niobrara ‘B’ Bench Rotary

Sidewall Core Sample

Frac’

stages

AFE (Authorization for

Expenditure) - Planned

(in Million $)

Average MD

(in Feet )

Average TVD

(in Feet)

11 3.22 9093 6015

13 3.46 9966 6015

14 3.78 10750 6190

15 3.83 10571 6211

16 3.83 10932 6329

17 3.86 11044 6300

18 4.21 11634 6375

22 4.67 13168 6324

25 5.07 13814 6430

26 5.25 14042 6344

27 5.32 13673 5900

Above Table shows well cost against Frac’ Stages vis-à-vis Depths in MD & TVD. These are actual data

derived from Carrizo wells drilled in Niobrara JV area. Majority of the wells have been drilled in 14 to 16

stages. As can be seen, the well cost largely depends on number of Frac’ stages and lateral lengths.

Status of the Niobrara JV

As on October’14, Carrizo has completed and brought into production 110 wells. There are other

partners (JV Non-Operators), who are also active in the play. Along with Carrizo, OIL has participated in

57 completed wells of Noble Energy and 16 wells of Whiting Petroleum Corporation and 1 well of

Continental Resources. Further, OIL has given consent for participation in additional 100 wells to be

drilled by above operators.

Various kind of experimentation is in progress to maximize production in Niobrara Play. Main effort is to

optimize lateral length, stages to be fractured, well spacing along with frac’ fluid, Proppant quantity,

pressure to be applied in fracking, etc. Apart from Niobrara ‘B’ Bench, wells in new formation like

Niobrara ‘A’ and ‘C’ Benches have been tested.

At the time of acquisition in 2012, Niobrara wells were having 160 acres well spacing. There is a

continuous effort to downspace the wells and see the production results. Now, the wells are drilled in

40 acres (300 ft) spacing. Individual oil tracers have been run to determine the effect of fracture

stimulation and possible interference in the adjacent wells.

Not necessarily in every well, but in key wells advanced wireline logs have been recorded for evaluation

of different properties of targeted formation.

Carrizo has identified several discreet areas (prospectivity-wise) within Niobrara JV and evaluated

development potential and economics separately. Areas are ranked based on geologic/petrophysical

quality, activity level and production results. So-Phi-H (oil saturation-porosity-thickness) maps have been

generated for determination of hydrocarbon pore volume to identify future focus areas.

As per Carrizo’s estimate, with 80 acres spacing, there are 355 future net wells available for drilling

within ‘B’ Bench in Niobrara JV area. If wells completed in ‘A’ and ‘C’ Benches become successful, then,

about 100 more wells can be added for future drilling.