Exploiting the Shale Oil and Gas Resources in Argentina: A Data Management Perspective

Ugur Algan, Ph.D. Volantice Ltd., United Kingdom (and ReMASA contributors)

 

Preamble

Argentina is one of the major global resource holders of shale gas and shale oil (see Figure 1, and Table 1 below). Effective exploitation of these resources will play a key role in achieving energy independence for the country. There are many challenges that stand in the way of effective exploitation; namely, financial, regulatory, social, environmental, as well as technical and operational challenges. The interdependent nature of these challenges forces us to step outside our traditional focus on technical data management and analyse in a more holistic manner the overall data management needs of the unconventional resource exploitation lifecycle. This paper summarises the various dimensions and challenges of shale gas development, and describes the new data management requirements to meet these challenges. We conclude by defining the foundational components of a proposed data management “platform” to serve the needs and concerns of the diverse set of stakeholders and actors involved.

Figure 1: Map of basins with assessed shale oil and shale gas formations1

Table 1. Top 10 countries with technically recoverable shale gas and shale oil resourcesi

Shale oil

Shale gas

Rank

Country

(billion barrels)

Rank

Country

(trillion cubic feet)

1

Russia

75

1

China

1,115

2

U.S. 1

58

2

Argentina

802

3

China

32

3

Algeria

707

4

Argentina

27

4

U.S.1

665

5

Libya

26

5

Canada

573

6

Australia

18

6

Mexico

545

7

Venezuela

13

7

Australia

437

8

Mexico

13

8

South Africa

390

9

Pakistan

9

9

Russia

285

10

Canada

9

10

Brazil

245

 

World Total

345

 

World Total

7,299


 

Dimensions of Shale Gas Operations and their impact on Data Management

 

Financial Concerns: unlike oil prices, there is no global standard pricing mechanism for gas, and there is no equivalent of an organization like OPEC who can have a strong influence on global pricing. As a result, gas prices tend to fluctuate more over time and between different regions (see Figure 2). When the supply increases, gas alternatives such as coal are used for power generation. However, investors require a steady and attractive return on their investment in order to show interest in shale gas development. As an example, it is estimated that Argentina needs to invest USD$ 300 Billion in developing Vaca Muerte in the next six years to go from its current situation of USD$ 6.1 Billion per annum energy deficit to achieving energy independence by 2020, and sustain this independence for a subsequent 40 yearsii. Hence, it is self-evident that for shale gas ventures to be competitive and provide an attractive rate of return for investors, the overall costs must be strictly controlled. Notwithstanding the regulatory and taxation considerations, cost control can be achieved through increased operational efficiency. This in turn relies heavily on technological advances, automation, standardisation, knowledge management, and most importantly, access to a skilled workforce at competitive cost.

Figure 2: Trends in natural gas spot prices at major global markets

Regulatory concerns: One might be forgiven to think that regulatory concerns for shale gas development would be no different to those of conventional hydrocarbon fields, and as such, from the regulator’s point of view, monitoring and controlling the shale gas contracts would be “business as usual” due to this assumed similarity. The comparison is only true to a certain point, after which the regulatory requirements for shale gas fields become very different to those of conventional fields. We highlight the main differences below.

Operational scale: Whereas a conventional oil and gas field can be produced by means of relatively few wells that are active for longer periods (many years), shale gas operations require drilling of many wells that produce for much shorter periods (in the order of months to a few years). For instance, in the entire history of oil and gas development in Argentina, approximately 68,000 conventional wells have been drilled. In contrast, in the few years since the start of the shale gas revolution in the US, 65,000 new wells have been drillediii. The regulatory impact of this situation is that more wells will need permitting, and monitoring, which will increase regulator’s workload, as well as the expected maturity level of the regulator’s technical skills. The data management impact of managing the torrent of data (as well as the vast variety of data) flowing from this large number of wells is significant. For a start, new reporting standards and reporting processes will have to be put in place. This will require a well-defined governance model that clearly spells out the data management roles and responsibilities national versus provincial regulatory authorities.

Unprecedented collaboration: In conventional oil and gas operations, communication between the regulator and the operator is mostly one-to-one, that is, operators do not tend to share information amongst the operator community since they regard most of the information as proprietary and confidential. However, for shale gas operations to achieve operational efficiency (and as a result, economic efficiency), the regulator must foster a climate of cooperation, collaboration and learning-from-one-another between operators as well as oilfield service providers. This will not only require a significant cultural shift, but also new collaboration and sharing platforms. Again, there will be the attendant need to modify the data management approach to go from managing “data-at-rest” in proprietary platforms to “data-in-motion” in web based, cloud based collaboration and knowledge sharing platforms.

Transparency: Whereas the conventional oil and gas operations were performed away from public scrutiny, the public is very much interested in shale gas operations due to the significant risk of impact on the fresh water resources, environment, natural habitat, agriculture, transport network and land use. One might argue that Vaca Muerte is sparsely populated and away from the public eye and therefore unlikely raise much public scrutiny; however, this stance would be short-sighted and is likely to cause big problems in the future. Hence, a new “platform” is needed to share relevant information with the public in a timely manner.

Social and Environmental Concerns: Whilst shale gas has the potential to fulfil the energy needs of the society, the public is concerned about the shale gas operations for a variety of reasons. Because of this concern, shale gas developments (particularly fraccing) have been banned in some countries (e.g., France, Germany) until it can be proven to be safe and environmentally acceptable. Below are some (but not all) the public concerns:

Pollution: By now, everyone has seen the YouTube video showing flames in tap water due to methane (https://www.youtube.com/watch?v=4LBjSXWQRV8 ) . However strenuously one might argue that shale gas operations do not cause pollution, the public does not believe it. Surface spills, air quality issues and blowouts are all significant concerns for the public. Chemical pollution is also of great concern since a large quantity of various chemicals are used in fraccing operations. Oil companies and service companies are reluctant to disclose both the composition and the concentration of these chemicals, regarding them as proprietary information that gives them a competitive advantage. Some regulators (e.g., Texas) require that operators disclose the chemicals used in a public server named FracFocus chemical disclosure registry ( http://fracfocus.org ), However, the public is not convinced about the sincerity of these steps from the regulators because it is alleged that the regulations are written essentially by the service companies, and “rubber-stamped” by the regulatory authorities (http://greenpeaceblogs.org/2014/05/15/fracking-north-carolina-industry-chemical-disclosure/ ). In addition to on-going pollution, one-off pollution concerns related to wellbore failure and loss of integrity, and the potential deficiencies in emergency hazard containment and response operations come on top of all these other concerns.

Impact on fresh water resources: A typical shale gas well requires between 5 and 10 million gallons of fresh water for drilling and fracturing. This puts a huge burden on the fresh water resources which could otherwise be used for agriculture and domestic needs. In recent years, the industry has taken steps to treat and recycle/reuse the water to reduce the impact. However, the public still needs to be convinced that shale gas will not place unacceptable demands on fresh water resources.

Impact on transport network: Owing to the vast quantities of water, chemicals, other material and equipment required to drill for and produce shale gas, it is inevitable that there is a significant impact on the road transport network which is normally shared with the public at large. Some of the larger operations can involve up to 300 truck movements per dayiv, which strains the road network and causes urban disturbance in populated areas (see Table 4).

Impact on land use: a typical shale gas drilling pad hosting up to 12 wells from a single location, takes up approximately 3.5 acresv (14161 square meters, roughly the size of two football pitches). One might argue that this is not such a big deal, until one realises that the countryside will be dotted with hundreds, if not thousands of these pads over the years (see Figure 3). For instance, since 2006 in Pennsylvania alone, over 1,553 Marcellus well pads have been developed to support 3,279 Marcellus wellsvi. These statistics also indicate that although multi-well pads are technically possible, this approach has not yet been widely adopted, given that so far, there see, to be on average only 2 wells per pad (although this may change when existing pads are revisited for re-fracturing and new drilling operations).

 

Figure 3: Conceptual diagram of a pad7

Noise: the main operations on a given pad take anywhere between 500 and 1500 days, during which time significant noise is likely to be emitted due to various aspects of the operation.

Air pollutant emissions: Although natural gas production related activities result in emissions (e.g., methane, smog-forming volatile organic compounds and NOx, as well as air toxics including BTEX group, formaldehyde, and hydrogen sulfide), effective technologies now exist, which can capture natural gas that would otherwise escape to the atmosphere. Emissions come from normal operations, routine maintenance, system upsets and fugitive leaks.vii

Induced Seismicity: Induced seismicity is understood to be earth-quake like seismic events (tremors) which results from human activity, such as mining, construction and for our purposes, fluid injections for stimulation of fluid flow (hydraulic fracturing). These activities involve changes in stress, pore pressure, volume and load in underground rock formations which can result in sudden shear failures in the subsurface, releasing pre-existing shear stress on weakness zones, such as fault structures or fractures8. As an example, in 2011, a small earthquake caused by hydraulic fracturing caused significant public concern in the UKviii. Whilst earthquakes caused by the fracturing operations make the headlines, in fact an issue of potentially far greater concern is the long term delayed (latent) evolution of the fracture network within the shale, and subsequent encroachment of pollutants to groundwater aquifers. The latent creeping of fractures occur due to a) the permanently modified stress/strain regime of the subsurface during the fracturing stages, and b) changes in the stress regime due to the production operations. This could potentially happen and even go undetected until it is too late. Depending on the vertical extent and the formation characteristics of the overburden, the risk may be negligible, or unacceptably high.

Table 2 below summarises some of the relevant statistics of environmental impact in a typical Marcellus shale drilling pad. When refracturing operations are added on top, the impact is even larger than what is shown in the table.

 

Table 2: Summary of resources (no refracturing; rows where a range of numbers is given correspond to high and low estimates)ix

Table 2: Summary of resources (no refracturing)

 

Activity

Six well pad drilled vertically to 2000m and laterally to 1,200m

Construction

Well pad area - ha

1.5

2

Drilling

Wells

6

 

 

 

Cuttings volume - m3

827

Hydraulic Fracturing

Water volume - m3

54,000

174,000

 

Fracturing chemicals volume (@2%) - m3

1,080

3,480

 

Flowback water volume - m3

7,920

137,280

 

Flowback water chemical waste content (@2%) - m3

158

2,746

Surface Activity

Total duration of surface activities pre production – days

500

1,500

 

Total truck visits – Number

4,315

6,590

Technical and Operational Concerns: Although shale gas development and production has many things in common with conventional oil and gas, there are significant differences that sets them apart:

  • Although it is relatively straight forward to map the extent of a shale basin with rich total organic content (TOC), so far, there are few reliable methods of detecting and explaining local variations within the overall shale basin.

  • Whereas the conventional hydrocarbon reservoir is a natural trap that can store migrated hydrocarbons owing to the physical properties of the reservoir rock (e.g., porosity, permeability), for shale gas, the source and the reservoir are one and the same. The reservoir is “man-made” in the sense that the hydrocarbons only flow when the shale is subjected to hydraulic fracturing.

  • Shale gas operations are totally dependent on horizontal drilling and hydraulic fracturing

  • To produce the equivalent of what one conventional well can produce, many shale gas wells need to be drilled; this requires optimal, efficient, automated approach to drilling. Our conceptual model of drilling has evolved towards a factory or assembly line, rather than “one-at-a-time” drilling.

  • So far, identifying the sweet spots for drilling seems to be more of an art than science, although progress is being made in this domain; the description of the “induced reservoir” is at best, incomplete.

  • Although much progress has been made in recent years, there is still no consensus on best fracturing strategies and the optimal cost vs. benefit.

  • Understanding the flow characteristics of shales and target zones/areal extents within the basin still require drilling and testing.

  • So far, there seems to be little predictive science to help us understand the flow rates for a planned well, and how long these flow rates will be sustained. This results in large numbers of wells being drilled which either do not produce much, or do not produce for long.

In summary, we face many technical challenges in all phases of shale gas production from discovery to appraisal to development and to production.

The new Data Management Paradigm

So far, we have described various dimensions of shale gas production and have only mentioned in passing the changing data management paradigm to address these challenges.

One possible approach is to build a collaborative data management platform for Vaca Muerta to be shared by all the operators and service providers as well as the regulator (see Figure 4). This platform would:

  • facilitate the submission of all data from the operators to the national and provincial regulators

  • facilitate the submission of all data from the service contractors to the operators

  • facilitate the submission of all data from the field to the office

  • enable automated QC of all received data on the basis of pre-defined business rules, which in turn are based on the regulatory and industry standards.

  • Enable and track the delivery of all data to end users (provided that they are properly authorised and entitled)

  • Release data to universities and research organisations to promote regional and local analysis of the data sets.

Figure 4: Proposed Vaca Muerte Database to be shared by all stakeholders

From an IT and data management perspective, the challenges and needs specific to shale gas can be summarised as below:

  • Large volumes of data: from microseismic, real time production data, real time drilling data, etc.

  • Large number of transactions: data arriving from many wells simultaneously

  • Regulatory burden: backlog for permits, need for new governance model, new standards and new reporting procedures

  • Types of data:

  • Hydrocarbon system analysis (Basin Modeling)

    1. Geochemistry, TOC, thermal maturity

    2. Cuttings

    3. Seismic (for anisotropy, fracture characterization, extent, attribute analysis to correlate with sweet spots)

  • Field development (drilling & completion)

  • Microseismic – fracture modeling, assessing effectiveness of hydraulic fracturing operations

  • Rock physics

  • Pressure

  • Decline analysis

  • Identifying best fracturing strategies for future wells

  • Production forecasting

  • Water data, pollution data

  • Earthquake data, regional seismic networks

  • Production

  • Environmental data

In addition, there are a number of “generic” needs which have become more pressing due to the specific nature of the shale gas operations:

  • Need for high degree of operational automation

  • Need for real time data capture (for detection of significant events)

  • Business intelligence and analytics to analyse and interpret real time data

  • Exception based analysis

  • Collaborative systems

  • Knowledge capture and sharing systems

  • Expert systems

  • Governance based process and workflow management system

  • Web and cloud enabled system

  • Secure, reliable access by different actors in different organizations.

Figure 5 below is a conceptual architecture for such a platform, to be shared by all stakeholders.

Figure 5: Conceptual architecture diagram of the proposed platform for Vaca Muerta database

 

As a final note, we must point out that the systems cited above would be of limited use without a skilled and experienced workforce that participate in all aspects of the shale gas development, and without a regulatory framework that is transparent, fare but most importantly, evenly enforced.


Notes