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Permalink Reply by little ole 1st grade teacher on July 8, 2011 at 4:19

So, Skip, am I understanding correctly:   companies do drill in areas where there are faults.

We have property in Texas, and was leased at one time; however, we are not leased at this time.

We were at one time told  that having a fault was good because faults trap oil & gas.   However, when I've asked on GHS I get about as many answers as there are people.  What is your understanding of faults?  Good or Bad?  And what is the possibility of getting leased again with a fault running through the property? 

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Permalink Reply by Skip Peel - Mineral Consultant on July 8, 2011 at 4:40

Faults must be understood as they relate to the formation being explored and produced.  In the case of conventional reservoirs, faulting is a common means of forming a "trap" for hydrocarbons that are free to migrate though the sub-surface.  Those hydrocarbons migrate upward in the stratigraphic layers until they become trapped and accumulate.  They are produced through a vertical or directional well bore.

In the case of unconventional reservoirs such as the shales, hydrocarbons can not migrate, they are bound in the formation and can not be produced without fracture stimulation to enhance their ability to flow (permeability).  In order to do so, operators must drill horizontal wells.  Dealing with a fault of a significant throw (vertical separation) while trying to drill a horizontal well bore if a huge challenge, if not an impossibility.  The drill bit can only turn a limited radius.

Therefore the logical approach to faults of significant throws when drilling horizontals wells is simply not to drill through them.  An operator in that case will drill "up to" both sides of a fault.  The simple way to do that is to form a unit of a size and shape that allows horizontal laterals of an economic length that do not penetrate faults.  In Texas operators can from units of varying sizes and shapes to address this challenge.  Louisiana operators dealing with units based on sections must convince the LA. Office of Conservation to allow them larger and more irregular shaped units or do as EnCana is proposing to do, drill Cross Unit wells.

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Permalink Reply by HBP on July 8, 2011 at 4:53

Skip, Are you sure this is a fault issue here?  Or are these directions the only way to infill your alts due to the first older wells going in that direction?   I thought the fault in this area was further South and ran SW to NE.

 

Even if a fault is the reason, I seem to prefer HK's re-unitization where they still go North to South and try to unitize with the fault as the unit line.  This Encana depiction allows for a few long laterals to supposedly hold two 640s but then the corners wouldn't be worth drilling due the laterals having to go shorter and shorter.  Maybe in the long run its 6 one way and a half dozen the other...your thoughts?

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Permalink Reply by Skip Peel - Mineral Consultant on July 8, 2011 at 5:04

HBP, my description is general in nature as that's what I deemed little ole was asking.  It is not specific to the proposed EnCana "Cross Unit".  That development design appears to me to be based on a fault line.  I too prefer the HK design as it appears to provide for the shortest lateral to be longer in length than the one in the ECA design.  Regardless of whether one is superior over the other, the more important issue is for  lessors to accept that in order to get all their minerals successfully produced some units will be larger than a section and shaped to accommodate a reasonable drilling plan or lateral well bores will pass through multiple units.  In the past fears of royalty dilution and suspicion regarding operator motives led many members to reject anything other than a square section unit out of hand.  Now with time and knowledge I hope many will understand the reasons for the "odd" units.  If operators can not find a way to successfully drain those units, they simply will not get produced.

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Permalink Reply by HBP on July 8, 2011 at 5:38

True, you have to be flexible and trust the operator to a point when faults are involved. 

In this particular case though, I would have to know more if it is faulting.  Because the first two in these units were drilled in those directions very early in the game, probably prior to good seismic or other HA logs in the area to map faults from, so its not like they had the fault pegged back then and adjusted those early ones.  Also these are two good units to practice some economies of scale drilling (and possibly royalty dilution for certain owners) which Encana and Shell have been doing lately - since you have Blackstone as your majority in both Sections it is probably an easier road getting support or oddities like this.

 

Just thoughts, others may know more behind this specific configuration.

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Permalink Reply by Skip Peel - Mineral Consultant on July 8, 2011 at 5:50

Royalty dilution is a misnomer.  As unit acres increase and individual ownership participation decreases, the unit and all who participate in the royalty derived from the production get more wells.  Since royalty is tied directly to production and operators strive to maximize economic production, both lessor and lessee have mutual interest and benefit.  It is the price of a mcf and deductions from royalties where the disagreements between lessor and lessee tend to occur.  Operators are not likely to allow any economically recoverable hydrocarbons to go untapped.  Anything that gets more gas out of the ground is good for all involved.

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Permalink Reply by HBP on July 8, 2011 at 7:53

I will agree to a point.  It is a misnomer in the situation you describe. 

I certainly agree that deductions, price, etc... would be the most common issues.  But there are others as well where the mutual interest ends and each side has to keep watch and I feel that at times re-construction of a unit should be scrutinized.

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