North American shale plays have significant potential -- for operators who do their homework.

The shale frenzy in North America has reached such a pitch that taking a slow, studied approach might seem to be the last thing an operator would consider. But to be truly successful in shale development, that is exactly what is needed, according to George King, global technology consultant for Apache Corp.

King believes the fact that a play happens to be a shale is not a good enough reason to jump in head-first. Regardless of the relative maturity of the play, the risk/reward balance must be carefully studied.

For instance, the first company into a play has the potential for great reward but at great risk. A late entry, on the other hand, faces less risk but escalating land costs and should really be asking why the land is for sale to begin with, King said. Every step of the process needs to be subjected to careful evaluation.

If the risk/reward balance looks favorable, operators need to question the amount of knowledge available about the play, understand permitting issues, be familiar with development resources in the basin, be aware of barriers to access (physical, weather, political, theft, etc.), and be sure there is a market for the potential production.

Before You Lease

In addition to knowing about the area of interest -- access, the availability of contiguous acreage and areas to avoid -- operators need to carry out a thorough petrophysical study. This analysis includes gas in place, thickness, areas with natural fractures, stresses, maturity, total organic content, geologic hazards, and water saturation.

It also is important to know the depth limits (too shallow or too deep), surface and subsurface restrictions, and adjacent lease production rates.

“The primary knowledge that we’ve had in the past 10 years working in shales is that there are definite sweet spots,” King said. “That can make all the difference between commercial and noncommercial wells.”

He added that even relatively well-understood shales like the Barnett can have high estimated ultimate recovery (EUR) wells in close proximity to low EUR wells. The difference can be the formation or the completion knowledge of the operator or both.

Also it is important to identify key economic factors that could impact the bottom line. Here, King said, it is necessary to identify local expertise that can help optimize completions.

“You’re looking for the best completions, and you need knowledgeable experts that can help you,” he said.  Add to this local access to water, economic waste transport and disposal capability, pipelines, and higher gas prices close to high-use markets, and “it can make the difference between an economic and a noneconomic situation pretty quickly.”

The next step is to communicate development plans with the local community. “Learn the hot buttons first,” King said. “Usually it’s water and trucks.”

It is important to identify community leaders and activists and discuss potential issues. “One of the best things you can do is know your subject, know your plan, know the people you’re talking to, and then have an idea of what and when you can compromise because this is going to take negotiation,” he noted.

Development Optimization

According to King, the optimal arrangement is to drill a few exploratory wells then move to a pad development scheme. This helps in several ways, since using pads minimizes the footprint and also enables water and waste to be piped in and out rather than trucked.

Additionally, great care should be taken while planning the drilling and well construction phases. In well construction, for instance, it is important to construct effective barriers to protect freshwater, prevent gas kicks during drilling, and ensure a quality cement job that eliminates gas migration. It also is of importance to anticipate life-of-well issues such as the design, strength, and corrosion resistance of the well along with monitoring the well over time.

In terms of fracing the wells, King suggested selecting fluids based on the frac needs and to investigate more environmentally friendly alternatives. For instance, he suggested operators should investigate the option of using salt water rather than freshwater for the fracs.

Also, green chemicals should be used whenever possible.  Most pumping service vendors are marketing much greener chemicals than have been available in even the recent past. The cost of these chemicals is usually only a few percent higher than previously used chemicals.

“One of the things I communicate to anybody who is fracturing is to be able to tell people exactly what chemicals they’re using,” he said. “Some companies are saying, ‘It’s proprietary.’ Actually, no, it’s usually not. We have a list of those chemicals that we do not want to use because of even a small potential spill hazard or because there is a greener chemical available.”

He suggested knowing the chemical abstract service number, which allows concerned citizens to identify the specific material.

When a frac job is performed, King also recommended posting the information on Fracfocus.com. This type of transparency helps keep the community informed.

“I’ve talked to environmentally concerned investors and told them, ‘This is what we’re doing, this is the best way forward that we can see, and this is how we use technology to reduce the risk.  Then, I listen to them. Their reception of Apache’s approach has been very good.”

For Apache’s Horn River operations, implementations of environmentally driven ideas have paid dividends. A new six-acre pad drains 6,000 acres, King said. The number of wells has been reduced from 16 to 12, and the company is using a saltwater zone directly above the shale for frac water.

Apache's operations in the Horn River Basin in Canada drain 6,000 acres from a six-acre pad.  (Images courtesy of George King)

Apache and partner Encana built a water treatment plant to remove H₂S from the saltwater. Treated hot water is sent straight to the frac pumps, where a small amount of friction reducer is added. Returning frac water is treated and sent back to the reservoir.

“It’s a closed-loop system,” he said. “From 2010, when we were using freshwater, to the 2011 season, we reduced freshwater usage in fracturing by about 95%. It’s been a very positive move forward, the formations have responded well, and the serious environmentalists have taken note of that.”

Environmental Advantages

At the end of the day, knowledge of potential problem areas and what causes them has the ability to greatly reduce environmental complaints. King has identified 21 potential fracturing outcomes that merited risk evaluation.

Shown are stimates of potential events and how those can be reduced by technology that lowers the consequence or occurrence of the event.

While potential for pollution was almost nonexistent for actual fracturing events, potential issues with materials transport and well construction issues were small but present. Use of proper technology reduces occurrence potential or impact and sometimes both. If an operator does not use the technology at the appropriate times, the risk potential is higher.  

“An operator that develops a well without using logs, microseismic, geologic study, or 3-D seismic at the right time, will punish itself in the final economics,” he explained.

“Using technology early in the development helps focus the wells into the better parts of the reservoir where the economic returns are best. Technology also can prevent problems. For instance, if we use 3-D seismic to optimize well paths and estimate location of big faults followed by microseismic on the first few jobs to optimize the fracture and reduce unnecessary fracs, then the result is a win on all sides.

“In addressing transport issues, we can use double-wall tanks or approved totes for chemical transport or use greener chemicals, reducing the potential of even a small spill.  Pipelines for water transport or development of onsite saltwater sources for frac fluid can get some trucks off the road and reduce total emissions. The results of small actions can reduce probability of detrimental results,” he emphasized.

King has collated this information into a paper available through the Society of Petroleum Engineers (SPE 152596) to help educate prospective shale players and the general public about some of the potential pitfalls of shale development.

“Just because it’s a shale, investors want to jump into it,” he said. “That’s probably one of the worst approaches they can take if you are jumping in without doing your homework.”

Editor's Note: This is the online expanded version of the article "Cracking Open Shales" that appeared in the February 2012 issue of Hart's E&P magazine.