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Summit Petroleum, Inc.

Utica/Point Pleasant Oil & Gas Drilling- Opportunities and Issues with a Focus on Hydraulic Fracturing William G. Kinney May 23, 2012. Summit Petroleum, Inc. World Energy Demands. Future Energy Demands. Shale – Has driven natural gas prices from $8/ Mcf to $2.50/ Mcf. Oil & Gas in Ohio.

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Summit Petroleum, Inc.

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  1. Utica/Point Pleasant Oil & Gas Drilling- Opportunities and Issues with a Focus on Hydraulic Fracturing William G. KinneyMay 23, 2012 Summit Petroleum, Inc.

  2. World Energy Demands

  3. Future Energy Demands

  4. Shale – Has driven natural gas prices from $8/Mcf to $2.50/Mcf

  5. Oil & Gas in Ohio • Over time there have 275,774 wells drilled for oil and gas in Ohio • Today in Ohio, there are 64,378 wells in production • There are approximately 90 Utica wells drilled • Natural gas is $9/Mcf in Europe, $16/Mcf in Japan and $2.50/Mcf in USA

  6. Oil & Gas in Ohio • Ohio historic well spot map • Drilling peaked at 6000 wells per year in 1982 • In 2012 about 500 wells will be drilled, 100 horizontal

  7. Penn State Study • July, 2009, “An Emerging Giant: Prospects and Economic Impacts of Developing the Marcellus Shale Natural Gas Play” • May, 2010, “The Economic Impacts of the Pennsylvania Marcellus Shale Natural Gas Play: An update” • Timothy Considine, Ph.D., M.B.A. • Robert Watson, Ph.D., P.E. • Seth Blumsack, Ph.D

  8. Penn State Study • Fully developed, the Marcellus Shale has the potential to be the second largest natural gas field in the world, behind only the South Pars/Asalouyeh field shared between the nations of Iran and Qatar. • Converted to British Thermal Units (BTUs), the natural gas found in the Marcellus could be equivalent to the energy content of 87 billion barrels of oil, enough to meet the demand of the entire world for nearly three years.

  9. Penn State Study

  10. The Utica – Three Areas of Focus • The Utica has three windows of maturity • Oil • Wet Gas / Condensate • Dry Gas

  11. Utica Shale – Natural Resources

  12. Utica/Point Pleasant Recoverable Reserve Potential Estimate for Ohio IF we assume 1/3 of volume will be gas and 2/3 is oil… %R = 1.2 percent – recoverable from the interval Qt = 1.96 billion barrels equivalent = 3.75 TCF gas and 1.31 Billion barrels oil %R = 5 percent - recoverable from the interval Qt = 8.2 billion barrels equivalent = 15.7 TCF and 5.5 Billion barrels oil

  13. Projected Economic ImpactUtica Shale JOBS AND PERSONAL INCOME—PAGE 23, TABLE 13 Between 2011 and 2015, Ohio’s natural gas and crude oil industry will help create and support more than 204,520 jobs due to the leasing, royalties, exploration, drilling, production and pipeline construction activities for the Utica Shale within Ohio. The industry wages is projected to grow to more than $12 billion in annual salaries and personal income to Ohioans by 2015. Table 13: Combined Economic Impacts of Spending on Utica Gas Formation (From Well Exploration and Development, Midstream, Royalty, and Lease Expenditures)

  14. American Chemical Council • A 25 percent increase in ethane supply generates: • 17,000 new jobs in the U.S. chemical industry • $32 billion increase in U.S. chemical production • $16.2 billion in new capital investment by the chemical industry • 395,000 new jobs outside the chemical industry, including: • 165,000 jobs in supplier industries, as a result of increase in U.S. chemical production • 230,000 jobs from new capital investment by the chemical industry

  15. Yesterday vs. Today Drilling/ Well Construction

  16. Well Types • Vertical • Horizontal • A horizontal well is in reality many wells within one wellbore

  17. Hydraulic Fracturing • Frac not Frack has been the industry short term for Hydraulic FRACturing for over 30 years • If someone spells it with a “k” they have an agenda for the reader to confuse it with another word that does have a “k”…

  18. Hydraulic Fracturing • Conditions needed to complete an economically successful oil an gas well: • Porosity: Oil and gas trapped in the pore spaces of a reservoir rock • Permeability: The connection between pore spaces allowing flow to move through the rock • Most on shore wells have good porosity but poor permeability. Especially in the shales.

  19. Hydraulic Fracturing • A producer “fracs” a well to increase the flow of oil and gas from the rock, known to contain oil and gas, but where the rock’s natural permeability does not allow oil and gas to reach the wellbore in sufficient volumes. • Hydraulic fracturing is “well stimulation” - the process of applying hydraulic force, using water, to induce and extend permeability in a reservoir. • Hydraulic fracturing makes the impossible possible by allowing us to reach oil and gas trapped in rock beds that would not otherwise naturally produce.

  20. Hydraulic Fracturing Fracing is not like breaking a window… Think of it as slicing a cake with a knife – the cake parts because of the porosity in the cake. The cake is actually in tension in front of the blade - as the blade pulls the cake parts and then compresses as the knife passes by creating the cut or fracture. Once the knife stops, the cut stops!

  21. Hydraulic Fracturing • This is not new technology • Fracing has been a standard practice for over 60 years. First well fraced – Kelpper # 1, Kansas - 1947 • 1989 SPE – over 1 million frac jobs (SPE) • 600 trillion cubic feet of natural gas and 7 billion barrels of oil have been captured thanks to hydraulic fracturing – energy that would not have been acquired without it. • Fracing is responsible for 60 percent of America’s recoverable oil and natural gas • 90 percent of wells currently operating today have been fractured • American operators now frac 35,000 wells each year • Not a single case of drinking water contamination has ever been recorded. Not one. • Hydraulic fracturing has been aggressively regulated by the states. In that time a staggering record of safety has been amassed.

  22. Hydraulic Fracturing in Ohio • 1953 – First Ohio frac job • 1958 Study - as a result of fracturing, the Clinton dry hole rate of 42% in 1951 decreased to 15% by 1957 and that, “as a result of the success of hydraulic fracturing, many sub-marginal areas which would have been economically undesirable, are now being produced profitably.” •  Today – over 80,000 wells have been fracedin Ohio oil and gas formations ranging from 1,000’ to 10,000’. • “After 25 years of investigating citizens complaints, DMRM (ODNR) geologists have not documented a single incident involving contamination of ground water attributed to hydraulic fracturing” • Scott Kell, deputy chief, ODNR/DMRM in testimony submitted to the Committee on Natural Resources, Energy and Mineral Resources Subcommittee, U.S. House of Representatives, June 4, 2009.

  23. Frac Constituents

  24. Lithostatic Overburden & Frac Gradient

  25. Where does the frac go and how do we know? • Tracer Surveys • Electronic Wireline Temperature Logging • Advanced Micro Seismic Technology • Lithiostatic Overburden - Geology • Frac Gradient - Physics • The fact that producing wells do not water out • Ohio law for management & disposal of flowback All conclusively demonstrate that the frac stays in zone and the environment is protected.

  26. Water Usage

  27. Earthquakes 176 Class II wells Have operated in Ohio for over 30 years Without event After a exhaustive study by several agencies and industry professionals it was found that the seismic activity induced by the North Star #3 well in Youngstown was caused as a result of injecting water into a basement (non sedimentary) zone that was faulted and in a stress regime. This was the first well in Ohio to try injection into these deeper, non-sedimentary zones. As part of new regulation, Injection wells will no longer be permitted through sedimentary rocks.

  28. What is the radical environmentalist agenda in creating fear, uncertainty & doubt-through the misrepresentation of science?

  29. Gasland - What’s real? • NY Times’ Coverage of Pennsylvania Environmental Regulation is a “Fraud” • Gasland: presents a selective, distorted view of gas drilling and the energy choices America faces today. If Gasland were about the airline industry, every flight would crash and all airlines would be irresponsible. In Gasland, the gas industry is unsafe from beginning to end and is one unending environmental nightmare with no benefits. Gasland seeks to inflame public opinion to shutdown the natural gas industry. In pursuing this goal, Gasland treats cavalierly facts both by omitting important ones and getting wrong others • John Hanger, former secretary of the Pennsylvania Department of Environmental Protection

  30. What Regulators Are Saying… • “There is no way that the fracing process is going to affect ground water." Chief, Ohio Geologic Survey Larry Wickstrom • “Though hydraulic fracturing has been used for over 50 years in Texas, our records do not indicate a single documented contamination case associated with hydraulic fracturing.” – Victor Carrillo, Chairman, Texas Railroad Commission • “There have been no instances where the Division of Oil and Gas has verified that harm to groundwater has ever been found to be the result of hydraulic fracturing.” – Indiana Department of Natural Resources • “There is no indication that hydraulic fracturing has ever caused damage to ground water.” – Michigan Department of Environmental Quality • “…we have found no example of contamination of usable water where the cause was claimed to be hydraulic fracturing.” – Mark Fesmire, Director, New Mexico Oil Conservation Division

  31. What Regulators Are Saying… • “He said he has been examining the science of hydrofracturing the shale for three years and has found no cases in which the process has led to groundwater contamination.” “As it turns out hydraulic fracturing itself appears to be safe.” – Taury Smith, New York State’s top geologist • “It’s our experience in Pennsylvania that we have not had one case in which the fluids used to break off the gas from 5,000 to 8,000 feet underground have returned to contaminate ground water.” - Former PA DEP Sec. and Former PennFuture CEO John Hanger • “The [2004 EPA] study determined that fracturing posed ‘little or no threat’” to groundwater. – U.S. EPA • “No Documented Cases of Hydraulic Fracturing Contamination” – The Obama Administration in Testimony before U.S. Senate Environment and Public Works Committee. • “There have been no documented cases of drinking water contamination that have resulted from hydraulic fracturing.” - Association of American State Geologists President

  32. What Really Matters - Well Construction

  33. What really matters: Accountability • ODNR has doubles the number of inspectors • Recent legislation strengthens oversight, penalties and regulation • Severance tax rates have been increased substantially, so that the industry, not the Ohio tax payers are footing the bill for increased ODNR staff • Frac Focus has opened up all well completion process to complete out side industry review – there are no secrete chemicals – no “toxic stew”. • State permitting requirements stipulate full chemical disclosure for any well drilled in Ohio

  34. Consider a Career in Exploration Be part of the solution - rather than part of the problem… A career in oil and gas requires; a technical background, strong in science and math and a willingness to work hard. Most of all however, it’s rewarding, exciting, and Fun!

  35. Contact information William G. Kinney President Summit Petroleum, Inc. Twinsburg, OH 44087 O: 330 487 5494 C: 440 773 7008 summitpetroleum@yahoo.com

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