SPE DISTINGUISHED LECTURER SERIES is funded principally through a grant of the SPE FOUNDATION

1. SPE DISTINGUISHED LECTURER SERIES is funded principally through a grant of the SPE FOUNDATION The Society gratefully acknowledges those companies that support the program by allowing their professionals to participate as Lecturers. And special thanks to The American Institute of Mining, Metallurgical, and Petroleum Engineers (AIME) for their contribution to the program.

2. Enhanced Assessment Techniques for Unconventional Resources John Lee Texas A&M University

3. Global Energy Opportunities Require Creative Thinking • We need increasing amounts of energy of right type at right place and right time • Viability of many alternatives limited by practical considerations • Unconventional resources play important role for most forecasters • Improved assessment methodology a key to availability of needed unconventional resources

4. US Lower 48 unconventional US Lower 48 conventionalonshore US Lower 48 offshore US Lower 48 associated Alaska Unconventional U.S. Gas Production Will Increase History Projections 10 Production, Tcf 0 1990 2025 Year EIA 2005

5. Dependence on Unconventional Resources to Grow in United States ‘As a result of technological improvements and rising natural gas prices, natural gas production from relatively abundant unconventional sources (tight sands, shale, and coalbed methane) is projected to increase … • from 35 percent of total lower 48 production in 2003 • to 44 percent in 2025’ EIA Energy Outlook 2005

6. Production From Unconventional Sources Will Increase in U.S. 50 44% Diminished supply of conventional resources Production, % Rising natural gas prices Technological improvements 35% 25 2003 2025 Time

7. … And Later in the World Diminished supply of conventional resources Production, % Rising natural gas prices Technological improvements Time

8. How Do Conventional and Unconventional Resources Differ? Conventional Unconventional • Massive stimulation treatments • Special recovery processes • Leading-edge technologies Added Costs

9. Low Resource size High Reservoir quality High Low Resource Distribution and Practical Permeability Limit Resources Practical limit permeability After USGS, 2003

10. Low Resource size High Reservoir quality High Low Resource Distribution and Practical Cost Limit Resources Practical limit cost After USGS, 2003

11. Need to Extend Practical Limits Through Technology Advances Cost Permeability Technology

12. 32 With technology advancement Tcf With no technology advancement 22 0 2000 2025 Year NPC Forecasts Technology Impact on Gas Production NPC 2003

13. NPC Model Assumes and Identifies Needed Technology Improvements Drilling costs Completion costs Construction costs Fixed operating cost 37 39 26 22 1.81 1.37 1.18 1.00 NPC 2003

14. Assessment Resource Improved Resource Assessment Key to Much Unconventional Resource Development Drilling costs Completion costs Construction costs Fixed operating cost 37 39 26 22 1.81 1.37 1.18 1.00 NPC 2003

15. Active Projects in Resource Assessment • Quantifying uncertainty in unconventional gas resource assessments in North America • Estimating unconventional gas resources outside of North America

16. 30 years of data Recent, unanalyzed data on unconventional resources Well-developed, analyzed basins Develop assessment methodology Assess resources Quantifying Uncertainty in Unconventional Gas Resources in North America Compile resource inventories and analyses Provide methodology to operators

17. Uinta Piceance SAH97.165 USGS Applied Methodology for Undiscovered Resources in 2003

18. Oil and Gas Resources Occur in Vastly Different Settings USGS 2003

19. Resource Assessment Methodology • Identify areas within petroleum province that are ‘total petroleum systems’ • Hydrocarbon source rocks • Reservoir rocks • Hydrocarbon traps

20. Classify Petroleum Systems as Conventional … USGS 2003

21. …or Continuous USGS 2003

22. Characteristics of ‘Conventional’ Accumulations • Relatively high matrix permeability • Obvious seals and traps • High recovery factors

23. Characteristics of ‘Continuous’ Accumulations • Regional in extent • Diffuse boundaries • Low matrix permeabilities • No obvious seals or traps • No hydrocarbon/water contacts • Abnormally close to source rocks • Low recovery factors • Includes tight sandstones, coalbed gas, oil and gas in fractured shale and chalk

24. Some Don’t Accept USGS Model for Unconventional Resources Green River Uinta Piceance Shanley et al. (2004): Some low-permeability gas fields occur in poor-quality rocks in conventional traps SAH97.165

25. Boundary of assessment area Schematic of Assessment Area and Petroleum-Charged Cells USGS 2003

26. Assessment area boundary Areas of untested cells Cells tested by drilling Untested cells with potential to add to reserves in next 30 years Three Resource-Assessment Categories Depicted USGS 2003

27. Petroleum-Charged Cells • Only ‘untested cells with potential’ contribute to resource-base additions • Assessment of these cells proceeds on basis of geologic understanding and petroleum engineering principles • What we are looking for is untested sweet spots

28. Gas Oil Water Production Decline Curves Used to Predict EUR 10,000 1,000 Production Rate, Bcf/month 100 10 1998 2000 Year USGS 2003

29. 100,000 10,000 EUR, MMcf or 1,000 bbl 1,000 100 0 0 50 100 Percent of Sample EUR Distribution for Continuous Accumulation USGS 2003

30. USGS Undiscovered Oil and Gas Estimates for Uinta-Piceance Province, Utah-Colorado P95 7.15 P50 18.47 Mean 20.39 P5 40.44 P95 63.71 P50 191.12 Mean 213.12 P5 436.01 P95 12,145.49 P50 20,121.27 Mean 21,211.03 P5 33,978.81 P95 31.99 P50 37.57 Mean 38.78 P5 56.84

31. U.S. and Non-U.S. Basins Selected for Further Study • U.S. basins studied will probably include frontier areas in Travis Peak and Barnett Shale • Non-U.S. basins will include Neuquen and Cuyo basins (Argentina) and Sichuan basin (China)

32. Conventional Conventional Unconventional Unconventional U.S. Basin Estimating Non-U.S. Unconventional Gas Resources Basin Analogs Known Known Unknown Known International Basin

33. Objectives and Challenges • Objectives • Develop methodology for identifying analogous basins • Estimate potential resources in selected basins • Challenges • No public literature available • General lack of data availability • Large number of basins in North America • Which parameter to use? What criteria?

34. Build database of reservoir properties Data Collection • Define criteria to find analog basins • Include characteristics of international basins • Enhance with VBA to compare L48 basins with international basins Analog basin progress Final Analog Basins All NA basins: NA basins with unconventional gas potential Analog rank (%) 60 - 70 basins 31 basins

35. Data Analysis General basin information Source rock information Reservoir characteristics

36. Point Calculation 1 × WF11 × WF11 × WF1 1 × WF20.1 × WF20.8 × WF2 1 × WF30.1 × WF30.75 × WF3 1 × WF40.7 × WF40.7 × WF4 1 × WF50.8 × WF51 × WF5 1 × WF61 × WF60 × WF6 Total Pts Basin 1 Basin 2 Nearness of match, not relative values Highest scores most likely analogs

37. Rank Result Sheet

38. History Projections 10 US Lower 48 unconventional US Lower 48 offshore US Lower 48 conventionalonshore Production, Tcf Alaska US Lower 48 associated 0 1990 2025 Year Summary Comments • Unconventional resources, especially gas, to play leading role in U.S. energy supply in next 25 years

39. Summary Comments • Unconventional resources also to play increasingly important role in world energy supply in coming decades

40. 32 With technology advancement Tcf With no technology advancement 22 0 2000 2025 Year Summary Comments • Advances in technology key to developing potential of unconventional resources

41. Summary Comments • Ability to access resources better, identify potential ‘sweet spots,’ quantify uncertainty important part of technology development

42. Summary Comments • USGS methodology for resource assessment good starting point

43. Summary Comments • Widespread applicability of continuous gas accumulation model questioned x

44. Summary Comments • Final modified model to be applied in U.S., other countries to identify broad potential, specific target areas

45. Enhanced Assessment Techniques for Unconventional Resources John Lee Texas A&M University

46. Fall 2005 UG Enrollment

47. Fall 2005 Graduate Enrollment