Oil Gas March 13

WaterfloodingA Tried and True Technique for

Secondary Oil Recovery

WilliamM.Cobb&Associates,Inc.

Houston Bar AssociationOil, Gas and Mineral Law Section

March 26, 2013

F. J. Deacon Marek, P.EPresident

William M. Cobb & Associates, Inc.Dallas, Texas

Brian R. Sullivan, P.EAttorney/Petroleum Engineer

McElroy, Sullivan, Miller, Weber & Olmstead, LLPAustin, Texas

General Topics Whatisawaterflood? Howdoesitwork? Whattypesofpropertiesmakebettercandidates? Unitization

Whyisitsometimesneeded? Howdoestheprocesswork? Exampleequityformula

Page 2William M. Cobb & Associates, Inc.

What is a Waterflood? Itistheinjectionofwaterintoawellboretopush,ordriveoiltoanotherwellwhereitcanbeproduced

Recognizedenhancedoilrecoverytechniquesinceearly1900s

Someoilreservoirshavenaturalwaterinflux,whichincreasesoilproduction Calledwaterdrivereservoirs Theyarenaturalwaterfloods


How Does a Waterflood Work?

OilreservoirsandOriginalOilinPlace Oilrecoveryunderprimaryproduction Targetoilforwaterfloodrecovery


Bulk Volume Calculations

Area

Area

Reservoir Area

Reservoir Bulk Volume (BV) :BV = Area x Thickness

h


Calculating Original Oil in Place (OOIP)

BulkVolume Area Thickness

Porosity Porespacewithintherock Generally5%to30%ofthe

bulkvolume




Porosity Fluidsaturations

Water(usually10%to50%ofporespace)

Oil




Porosity Fluidsaturations

Water Oil

Shrinkage(oilformationvolumefactor)


Formation Volume Factor (Bo)

Oilshrinksasitisproducedfromthereservoirtothesurfacedueto gasevolvingfromtheoil Lowertemperatureatthesurface

Thesalesunitforoilisastocktankbarrel,orSTB,whichisequalto42USgallons

UnitsofBoareRB/STB(reservoirbarrelsperstocktankbarrel)

Bointypicalwaterfloodprojectsrangesfromabout1.1to1.5RB/STB



OOIP = 7,758*A*h**(1-Sw)/BoWhere:

OOIP = original oil in place, STB

7,758 = factor converting acre-feet to barrels

A = reservoir area, acres

h = average reservoir thickness, feet

= average reservoir porosity, fraction bulk volumeSw = average water saturation, fraction pore volume

Bo = oil formation volume factor, RB/STB


Example Calculation

Problem - Calculate OOIP oil for a new oil well with the following conditions:

Reservoir area = 40.0 acres

average reservoir thickness = 25 feet

average reservoir porosity = 22%

average water saturation = 30%

oil formation volume factor = 1.32 RB/STB


Example Calculation

OOIP = 7,758*A*h**(1-Sw)/BoOOIP = 7,758*40*25*0.22*(1-.30)/1.32

OOIP = 905,100 STB


So once weve calculated OOIP


So once weve calculated OOIP

How much of that oil is recoverable?


The Amount of Recoverable Oil Depends on the Natural (Primary) Reservoir Drive Mechanism

SolutionGasDrive Recovers5%to15%OOIP Leavingbehind85%to95%oftheOOIP

SolutionGasDrive+GasCapExpansion Recovers15%to25%OOIP Leavingbehind75%to85%oftheOOIP

NaturalWaterDrive Recovers25%to50%OOIP Leavingbehind50%to75%oftheOOIP


Why would you need to waterflood? MANY(majority?)oilreservoirsaresolutiongasdrive WaterfloodingcanrecovermuchoftheoilleftbehindunderPrimaryproduction,especiallyasolutiongasdrivesystem

Sincewaterfloodingusuallyfollowsprimaryproduction,itisoftencalledasecondaryrecoverytechnique


How does a waterflood work?

Certainoilwellsareconvertedtowaterinjectionwells

Otheroilwellsremainasproducers Theinjectedwaterdisplaces,orpushesoiltotheproducingwells


William M. Cobb & Associates, Inc.

Waterflood Example

producing well (21)

water injection well (0)

PRIMARY PRODUCTION


Waterflood Example

producing well (8)


WATERFLOOD OPERATIONS


Waterflood Example

producing well (8)


WATERFLOOD PATTERN5-SPOT


5-Spot Waterflood Pattern

well well

well well

full well

A single 5-Spot pattern has:

One net producer, and one net injector, or twototal wells


Waterflood Progression

Time 1

Early in life of waterflood. Producer making 100% oil.



Time 2

Still relatively early in life of waterflood. Water banks expanding, but producer still making 100% oil.



Time 3

Mid-life of the waterflood. Water has reached the producing well. Producer now makes oil and water.



Time 4

Late in the life of the waterflood. Producer now making large volume of water compared to the oil volume.



Time 4

Late in the life of the waterflood. Producer now making large volume of water compared to the oil volume.

The effectiveness of the water sweeping the area of the pattern is called the areal sweep efficiency, or Ea .


A waterflood also works in the vertical dimension..


Permeability

Permeability,measuredinmilidarcys(md.),isameasurementofarocksabilitytotransmitfluid

Waterinjectionratewillbeafunctionofpermeability

Mostoilreservoirshavemultiplelayerswithvaryingpermeabilityvalues


Injection Well Producing Well

Layer 1

Layer 2

Layer 3

Layer 4

Layer 5

Layer 6

Layer 7

Layer 8

Oil reservoir with eight layers . . . . .



Layer 1

Layer 2

Layer 3

Layer 4

Layer 5

Layer 6

Layer 7

Layer 8

200 md.

400 md.

50 md.

500 md.

75 md.

100 md.

10 md.

300 md.

. . . . . with variable permeability.



Layer 1

Layer 2

Layer 3

Layer 4

Layer 5

Layer 6

Layer 7

Layer 8

200 md.

400 md.

50 md.

500 md.

75 md.

100 md.

10 md.

300 md.

Waterflood early time

producing 100% oil



Layer 1

Layer 2

Layer 3

Layer 4

Layer 5

Layer 6

Layer 7

Layer 8

200 md.

400 md.

50 md.

500 md.

75 md.

100 md.

10 md.

300 md.

Waterflood at water breakthrough

Starts to make some water



Layer 1

Layer 2

Layer 3

Layer 4

Layer 5

Layer 6

Layer 7

Layer 8

200 md.

400 md.

50 md.

500 md.

75 md.

100 md.

10 md.

300 md.

Waterflood late life, near abandonment

producing at a high water to oil ratio (WOR)



Layer 1

Layer 2

Layer 3

Layer 4

Layer 5

Layer 6

Layer 7

Layer 8

200 md.

400 md.

50 md.

500 md.

75 md.

100 md.

10 md.

300 md.

producing at a high water to oil ratio (WOR)

The effectiveness of the water sweeping the layers of the reservoir is called the vertical sweep efficiency, or Ev .


Factors Affecting Waterflood Success

Timingofflood earlierisbetter Higherprimarydepletion(lowerpressure)increasesgassaturation

Highgassaturationdecreasesoilrecovery Wellspacing

Tighterwellspacingisbetter IncreasesEa andEv accelerateswaterfloodrecovery

Patternselection BalancedpatternsimproveEa andWORperformance


Waterflood Recovery Potential

Shouldrecoveranadditional10%to40%ofthereservoirOOIP

Atermcommonlyusedisthesecondarytoprimaryratio(S/P) Primaryistheexpectedultimateprimaryoilrecovery

Secondaryistheincrementalwaterfloodrecovery S/Pratioof1+isgenerallyexpected


Types of Oil Reservoirs More Favorable for Waterflood

Shallowerisbetter Cheaperdrillingandoperatingcosts Typicallylowerprimaryrecovery

Lowenergyoil(lowBo) Lowerprimaryoilrecovery Lowergassaturation

Higherpermeabilityisbetter Processthewaterfloodfaster Mayutilizewiderwellspacing(cheaper)


Unitization for Waterflooding Maybeneededwhenreservoirunderliesdifferentleaseswithdifferentownership

Awaterfloodunitcombinestheleasesintoacommonentityforwaterfloodoperations Allowsformoreefficientdevelopmentandoperation

Maximizesoilrecovery Requiresanequityformulatoproperlycompensateallowners


Unitization Example

producing well (8)


Lease A Lease B Lease C


Unitization in TexasLegal Perspective


Unitization in Texas AtermfrequentlyusedinterchangeablywithPooling,butmoreproperlyusedtodenominatethejointoperationofallorsomeportionofaproducingreservoir asdistinguishedfrompooling,whichtermisusedtodescribethebringingtogetherofsmalltractssufficientforthegrantingofawellpermitunderapplicablespacingrules.

Williams&Meyers,ManualofOilandGasTerms


Unitization in Texas

UnitizationDOESNOTrequireapprovaloftheTexasRailroadCommission.

PrivateUnits SayNoBoundaries



CommissionapprovedunitsmustcomplywithTexasNaturalResourcesCodeChapter101titledCooperativeDevelopment

Statutefirstpassedin1949 NotUpdated



UnitAgreement NegotiatingtheEquityFormula

blueeyedgrandchildren

UnitOperatingAgreement


William M. Cobb & Associates, Inc.


RailroadCommissionRequirements 65%RoyaltyInterestSignUptotheUnitAgreement

85%WorkingInterestSignuptotheUnitAgreement

TheTwentyQuestions Allinterestownersofferedtoparticipateonthesameyardstickbasis


Unitization in Texas1. Personsenteringintoandsubmittingagreementownor

controlproduction,leases,royaltyorotherinterestsinsamefield.

2. Agreementwasvoluntarilyenteredinto(a)toestablishpooledunitsforsecondaryrecoveryoperations,or(b)toestablishpooledunitforconservationandutilizationofgas.

3. AgreementisnecessarytoaccomplishpurposesinNo.2.4. Suchagreementisininterestofpublicwelfareas

reasonablynecessarytopreventwasteandpromoteconservation.

5. Rightsofallownersinfield,whethersigningornot,willbeprotected.


Unitization in Texas6. Estimatedadditionalcostwillnotexceedvalueofadditionaloilandgas.

7. Otheravailablemethodsinadequate.8a.Areacoveredcontainsonlysuchpartoffieldasreasonablydefinedbydevelopment.

8b.Theownersofinterestintheoilandgasundereachtractwithinareareasonablydefinedbydevelopmenthavebeengivenopportunitytoenterintosuchagreementonsameyardstickbasisasownersofinterestsinoilandgasinothertractsintheunit.

9. UnitdescribedinunitagreementsufficienttoaccomplishpurposesofUnitizationAct.


Unitization in Texas10. Suchagreementissubjecttoanyvalidorder,rule,orregulationof

theCommissionrelatingtolocation,spacing,proration,conservationorothermatterswithintheauthorityoftheCommission.

11. Suchagreementdoesnotattempttocontainfieldrulesfortheareaorfield.

12. Suchagreementdoesnotprovidefornorlimittheamountofproductionofoilorgasfromtheunitproperties.

13a.Suchagreementdoesnotbindanylandowner,royaltyowner,lessor,lessee,royaltyinterestowneroranyotherpersonwhodoesnotexecutesame,butbindsonlythepersonswhoexecuteit.

13b.Nopersonhasbeencompelledorrequiredtoenterintosuchagreement.


Unitization in Texas14.Suchagreementdoesnotprovidedirectlyorindirectlyfor

thecooperativerefiningofcrudepetroleum.15. Suchagreementdoesnotprovideforthecooperative

refiningofcrudepetroleum,condensate,distillateorgas,oranybyproducethereof.

16. Suchagreementisnotavoluntaryagreementforthejointdevelopmentandoperationofjointlyownedproperties.

17.Suchagreementdoesnotrestrictanyoftherightswhichpersonsnowhavetomakeandenterintounitizationandpoolingagreements.

18a.Suchagreementdoesordoesnotprovideforthelocationandspacingofinputwellsandfortheextensionofleasescoveringanypartoflandscommittedtotheunit.


Unitization in Texas18b.Nosuchagreementshallrelieveanyoperatorfromtheobligationtodevelopreasonablythelandsandleasesasawholecommittedthereto.

19.Agreementmayprovidethatthedrygasafterextractionofhydrocarbonsmaybereturnedtoaformationunderlyinganylandscommittedtotheagreement.

20.WhenitappearsfromsuchagreementorotherwisethatownershipofanylandsorpropertiesdescribedinsuchagreementisanypartyorpartiesnamedinSections2and3ofsaidAct,therequirementsofsaidSectionsofsaidActshouldbecompliedwith.


Unitization in Texas HouseBill100 Taylor OilandGasMajorityRightsProtectionAct ProposedChapter104ofTNRC CompulsoryUnitization

70%RoyaltyInterestSignUp 70%WorkingInterestSignup Appliesto

Repressuring Waterflooding PressureMaintenance Tertiaryrecoveryoperations AnyothersimilaroperationsCommissionmayinvestigatethesoundnessoftheequityformula(remembertheblueeyedgrandchildren)


Unit Tract Participation Factors - Example

T O T A L > 1.000

Phase I 0.100 0.400 0.400 0.100Tract Surface OOIP current useable

Tract Lease Participation acres MSTB BOPD wells

1 Lease 'A' 0.28149773 200 2,100 31 6

2 Lease 'B' 0.28827399 100 1,600 52 7

3 Lease 'C' 0.43022828 220 2,500 74 8

TOTALS 1.00000000 520 6,200 157 21


NetRev. Tract UnitOwner Interest Participation Ownership

GoodOperating,Inc. 0.750000 0.281498 0.211123

JohnGeologist 0.050000 0.281498 0.014075

JamesFarmer 0.120000 0.281498 0.033780

EdithFarmer 0.080000 0.281498 0.022520

1.000000 0.281498

Lease 'A' Ownership


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Oil Gas March 13