The Horn River Basin Producers Group (HRBPG)

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The Horn River Basin Producers Group (HRBPG)

• An Unconventional Approach Applied to an
  Unconventional Reservoir
• CAPL Topical Issues Luncheon April 30, 2009

Robert Spitzer Chair HRBPG VP Exploration Apache
Canada Ltd.
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Agenda

• Shale Gas 101
• The Horn River Basin
• The Producers Group
• Formation
• Mandate
• Members
• Structure
• Defining Success
• Accomplishments
• Summary

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Why the focus on unconventional? it is what
basins have left to offer on a large scale
Unconventional resources driving supply growth

• Large growth companies have exposure to resource
• Plays

Source Williams/ Deutsche Bank Conference 2008
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Shale Gas 101
Conventional Reservoir
Unconventional Reservoir

• lt Grain Size
• lt Permeability
• lt Porosity
• Stimulation
• Free Adsorbed Gas

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Gas Development
Conventional Reservoir
Shale Gas Reservoir
Wells
Plan View
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North American Shale Basins

• Potential for shale gas plays became apparent
  from Barnett in Texas
• Currently many shales being evaluated throughout
  US and Canada
• Horn River Basin is one of these
• Thickness, richness and aerial extent of shale
  makes this a sizeable prize, 100s of TCFs
• Distance from market is a significant disadvantage

Horn River Basin
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Horn River Shale Gas Play

• Shale is up to 600 ft thick
• Depths range from 8,000 to 10,000 ft
• Horizontal wells and multiple frac technology
  required to extract gas

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Regional Distribution of Resource

• Shale is present over a large area
• Best part is in the Horn River Basin
• Prospective area is 3,000 sq mi

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A New Approach

• Recognition very early that there was an
  opportunity to do business differently in this
  area in part because
• Relatively unexplored
• Land was at least 50 held
• It makes sense to work together right from the
  start on a project with this potential
  magnitude!
• Approach to companies well received

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The Shale Gas Producers Group

• The group was formed November 2007 and has
  involvement of the BC Government (MEMPR, OGC),
  the First Nations and major industry players
• Apache ? Nexen ? ConocoPhillips
• Encana ? EOG ? Pengrowth
• Devon ? Quicksilver ? PetroCanada
• Exxon Mobil/ Imperial ? Stone Mountain
• The purpose of the group is to facilitate
  cooperation and communication between companies,
  First Nations, government and other key
  stakeholders
• This group is evolving and still has some major
  work to do

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HRBPG Structure
11 Steering Committee Members (1 from each
member company)
Communications Subcommittee
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Values of Group

• The group will conduct our business with
• Honesty
• Integrity
• Respect for others
• Open communication
• Responsible development

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What Does Success Look Like?

• success of this project means that the main
  concerns for each major group ie. the community
  of Fort Nelson, the government (people of British
  Columbia), the First Nations and industry are
  understood and addressed while responsibly
  developing the asset

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The Road to a Successful Outcome
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Technical/ Economic Evolution
Concept
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Number
10
(4)
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Vertical well refracs
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Two Island Lake 2009 Pad Activity
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11
9
15
7
6
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EnCana Operated
APA Operated

ECA Op. wells drilled APA Op. Muskwa wells APA
Op. Klua wells ECA Op. Muskwa wells Road
Access APA/ECA Lands
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Addressing Stakeholder and First Nations Concerns

• Local Employment/Developing Capacity
• Principles
• Actions
• Environment
• Area operating protocals (AOPs)
• Water sourcing options partnering with government
  for innovative solutions
• Low impact seismic Slim Bin
• Development Planning
• Communications

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HRBPG Employment and Capacity Building Guiding
Principles

• We are willing to employ local businesses and
  individuals as all our member companies do in
  their respective operating areas. Specifically
  this means
• a) necessary safety requirements are met,
• b) necessary qualifications in the required
  skill set exist,
• c) costs are competitive for similar work.
• d) required personnel with the necessary skill
  set are available at the
  required time.
• e) companies will be courteous and provide
  reason(s) for applicants not
  achieving employment for a specific job in
  that circumstance.
• We are willing to contribute to building capacity
  for local businesses and individuals in
  partnership with local and provincial
  governments, First Nations, (Fort Nelson and Fort
  Liard) and the community of Ft. Nelson.
•  We commit to communicating progress of the HRB
  shale gas project in a mutually agreeable manner.

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Employment/Capacity Building Actions to date

• Employment
• Developing a report card showing local/non
  local hiring. Initiated by HRBPG led by BC
  government including Town of Fort Nelson
• Procurement office in Fort Nelson funded in large
  part by HRBPG
• Energy Expo in Fort Nelson with all producers and
  35 service providers!
• Capacity Building
• HRBPG funding 100 of Operator training program
  run by Northern Lights College in Fort Nelson.

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Environment

• Developed Area Operating Protocols, a suite of
  best management practices designed to minimize
  environmental impacts.
• AOPs have been sent to OGC and First Nations
  for review
• Assembled, with government, an inventory of the
  environmental data collected to date. This will
  be used to identify gaps for future study
  efforts.
• Working in collaboration with Geoscience B.C. to
  identify sustainable sources of water in the Horn
  River Basin.
• Priority has been given to the identification,
  mapping and testing of non-potable subsurface
  sources.
• To date over 9.5 MM has been committed by both
  Geoscience B.C. and the HRPG

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Slim Bin Seismic
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Development Plan

• Given the operations work completed since
  September 4, 2008, industry is now in a position
  to begin development planning scenarios to
  government, stakeholders and First Nations
• Three scenarios are being developed to reflect
  the life of the project (which spans decades) at
  different gas prices
• Scenarios will include many assumptions and will
  therefore be constantly adjusted however, they
  will provide an idea of what full-scale
  development may look like
• Anticipated completion
• initial draft for August 1
• final draft October 31

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Communications

• Symposium September 2008
• Energy Expo _at_ May 2009 Chalo School November 2008
• Chamber of Commerce February 2009
• Meeting with Fort Nelson First Nations _at_ Chalo
  School including OGC, MEMPR and HRBPG
• Monthly HRBPG meetings with participation of
  First Nations Town of Fort Nelson, OGC and MEMPR
• HRBPG Communications subcommittee publications
• FAQ
• Newsletter
• Success Stories

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Summary

• Unique approach adopted early to better manage
  a large unconventional opportunity
• Significant cultural diversity amongst 11
  producers has been a positive influence egos
  parked outside the door
• Praise is in order not only for individual
  producers for positive developments, however
  equally our stakeholders (OGC, MEMPR, Town of
  Fort Nelson) and First Nations for their
  significant efforts!
• Much has been accomplished much more to be done
  . . . .