J. David Rushford

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CBM in Alberta

• J. David Rushford
• Vice President, Chinook Business Unit

APEGGA Technical Luncheon May 20, 2004
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(No Transcript)
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North American CBM Resource
Tertiary Tertiary-Cretaceous Cretaceous Cretaceous
-Jurassic Triassic Permian-Pennsylvanian Pennsylva
nian Mississippian-Pennsylvanian
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Canadian CBM Resource

• Estimates vary widely
• 146 Tcf to over 3,000 Tcf
• 2001 Canadian Gas Potential Committee

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Industry Activity - CBM
2003 Activity 2004 Activity
Courtesy Oilweek
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What is Coal Bed Methane (CBM)

• Unconventional gas resource
• Oil sands of gas
• Gas produced from coal seams
• Large volumes of water initially produced
• Low gas rates

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Typical CBM Well Production Profile
Dewatering Stage
Stable Production Stage
Decline Stage
Gas
Production Rate
Water
Time
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What Makes CBM And Gas Shales Special
One gram of kerogen has the surface area of a ½
football field
1 gram
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Natural Gas Storage Capacity in Unconventional
Reservoirs
(modified from Hill, 2001)
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Horseshoe Canyon Coal Zone
Aggregate Coal Thickness
Author, G.S.C. Hughes
W. Palliser
Surface mining operation
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Late Cretaceous Horseshoe Canyon And Bearpaw
Formations (Edmonton Group)
Author Bruce Misanchuk, modified from A.R.C.
McCabe et al 1989
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Swamp to Resource
Current Day AnalogyPanama
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Horseshoe Canyon Coals
Photos courtesy of AGS
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Geological Summary

• Coals targeted in Horseshoe Canyon are Upper
  Cretaceous (Edmonton-Belly River)
• Mean Depth increases to west (150-700 m)
• Total coal thickness varies from 6 21 m
• Up to 53 individual seams over 500 m of vertical
  interval, interbedded in siltstone, sandstones
  and shales
• Coals are low-rank - Sub Bituminous resulting in
  lower gas contents, cleat density.

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Horseshoe Canyon Annualized Type Curve
Decline Rates
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6
4
4
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Characterized by very low declines
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West Palliser Block Status

• Current production 18 MMcf/d
• gt500 wells drilled ( 80 JV Exploration)
• 200 wells producing
• 2004 300 wells (150 YTD)
• Land base 1100 sections (5 of fairway)
• First bcf of CBM gas produced in 2003

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Horseshoe Canyon Rate Distribution
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Entice Integrated Sand/CBM Simulated Curve vs
Actual
Entice 3rd Party Simulation
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Engaging Stakeholders

• Horseshoe Canyon Mannville CBM sits directly
  upon the most populated areas of Alberta
• AEUB G-56 public consultation requirements
• Operational impacts (groundwater, noise,
  flaring, dust, etc.)
• Compensation expectations
• Direct and adverse affects objector standing
• Showing the BIG PICTURE
• Public education
• Public consultation/interaction is a core
  competency

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Minimal Disturbance Drilling
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Low Impact Operations
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Minimal Footprint

• Similar to shallow gas downspacing
• Wellsites lt0.008
• Compression lt0.03

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Minimal Footprint

• Similar to shallow gas downspacing

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Regulatory Issues

• CBM minerals requirements
• Currently 1 well/section, need 4 16
• Spacing requires public consultation and approval
• Coal and CBM rights issues must be resolved with
  split titles
• Sand/coal coal/coal commingling
• Current regulatory framework manages at single
  pool level
• Offset mineral owners must be consulted
• Field operations
• Drilling permits must state that CBM is the
  target
• Completions flaring require public consultation
• Pipeline permitting and environmental approvals
• Ongoing data requirements
• Metering approvals required for group metering
  and sand commingling
• Yearly testing requirements
• Core requirements for EUB and auditor reserves
  reporting

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Fiscal Constraints or Economic Opportunity?

• Largest fiscal hurdle is Rate of Return
• Cost reduction
• Fiscal constraints
• Royalties are already low

200m
Economic ROR
?
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What Matters

• Size Matters
• Reserves distributions need areal significance
  data distributions
• Infrastructure leverage needs critical mass
• Regulatory approval timelines vary considerable,
  flexibility is an asset
• Technical capacity matters
• Reservoir engineering and modeling are critical
• Completions are complex both technically and
  operationally
• Reserves recovery and infrastructure design are
  closely linked
• Public consultation matters
• Downspacing requires public consultation
  approval (G-56)
• Your operational track record matters
• Misinformation about CBM abounds in the public
• Know your field practices have data to back
  them up
• Innovation Matters

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Questions?