|
Sample Issue -- December 27, 2007
EUB Grants Duvernay Bluesky Gas Application
Natural gas prevailed in the latest bitumen versus gas debate as the
Energy and Utilities Board gave the nod to an application from
Duvernay Oil Corp. to produce Bluesky gas.
Murphy Oil Canada, meanwhile, was denied its application to
shut in gas production from the Bluesky formation. Murphy had applied to shut in
gas from a well at 8-24-82-16 W5M while Duvernay’s application was to
produce Bluesky gas from a well at 1-25-82-16 W5M.
In its decision the board said it was not convinced that the available
evidence shows that “the region of influence (ROI) of the Seal Bluesky A
pool should be significantly extended beyond the edge of the gas pool or that it
shows that the bitumen within the ROI is potentially recoverable.”
Down the road, however, there may be a need to reassess the
“appropriateness” of continued gas production from the A pool if
additional information becomes available on the ROI or the potential to recover
the underlying bitumen.
Pearl Exploration and Production Ltd., as operator and 50%
working interest owner of the 8-24 well, submitted an objection to
Murphy’s application. However, Pearl did not provide any witnesses at a
hearing.
Murphy objected to Duvernay’s application because it was concerned that
increased gas production from the A pool would continue to cause exsolution of
solution gas from the bitumen that it owned underlying and surrounding the A
pool, removing the primary drive mechanism for bitumen recovery.
Pearl and Duvernay are required to continue getting pressure measurements at
the 8-24 and 1-25 wells and to submit annual reports to the EUB and Murphy.
On the basis of available data in the area, the board concluded that the
bitumen resource within what it referred to as the region of influence of the A
pool is poor quality since it’s relatively thin and in an interbedded
muddy facies. Although no bitumen viscosity measurements were made on the
bitumen encountered by the 8-24 and 1-25 wells, the board expects the bitumen
may have high viscosity because of the presence of top water. The poor quality
of the bitumen resource, combined with the presence of overlying gas and water,
suggests that producing the bitumen would be very difficult or unlikely.
“The board is not convinced that there are identified examples of
bitumen being produced in situations similar to that encountered at the 8-24 and
1-25 wells,” the EUB said in its decision.
The board agreed with Murphy that the drilling density in the area of
application is low, so the quantity and quality of the bitumen resource are
“not known with confidence.” However, based on the seismic and net
bitumen thickness maps provided by both parties, the board considered the
presence of undetected high-quality bitumen within the ROI of the A pool to be
unlikely.
“The board recognizes that in determining whether bitumen is
potentially recoverable, the board must consider whether the bitumen is
exploitable with reasonably foreseeable technology and economic
conditions,” the decision report noted. “It also recognizes that
existing projects will develop lesser quality resources as the projects expand.
However, considering the evidence provided in this hearing, the board accepts
Duvernay’s view that there is a low probability that the bitumen within
the ROI of the A pool is potentially recoverable.”
While the EUB concluded that gas production from the A pool should be
allowed, the board recognized that this is based on limited data and so
there’s uncertainty regarding the extent of the ROI of the A pool and the
potential recoverability of the bitumen within the ROI.
There may be a need to reassess the appropriateness of gas production from
the A pool if data becomes available indicating that the ROI of the pool is
larger than what the board currently interprets or that the underlying bitumen
is potentially recoverable, the board concluded. If this were to occur,
additional pressure data from the 8-24 and 1-25 wells might assist in
reassessing the situation.
In terms of the pressure measurement requirement, Pearl and Duvernay must get
concurrent pressure measurements at the 8-24 and 1-25 wells every six months for
a five-year period or as otherwise stipulated by the board, starting in early
2008.
The EUB encouraged Murphy to consider installing piezometers – defined
as an observation well designed to measure the elevation of the water table or
hydraulic head of groundwater at a particular level – at some of its
existing wells or at any new wells that it may drill in the vicinity of the
application area to gather pressure data that might assist in better
understanding the ROI of the A pool. The board expects Murphy to continue to
assess the potential recoverability of the bitumen within the ROI of the A pool
based on any new wells drilled in the vicinity of the A pool.
Meanwhile, Duvernay stated that it was opposed to the board setting a
regional policy for gas production in the area based on the evidence provided at
the hearing. Because of the complex geology and the highly variable nature of
the bitumen resource, deciding whether gas production should be allowed must be
determined on a case-by-case basis, and affected gas producers must be given an
opportunity to provide their views.
Duvernay acknowledged that it would not be prudent to produce gas in the main
bitumen trend.
Murphy stated that the board should consider implementing a regional
conservation policy. Since the issue of grandfathered wells in the Peace River
oilsands area was not as large as it was in the Athabasca oilsands area, the
gas/bitumen issue would be addressed at a relatively early stage. Murphy stated
that it expected the issues in the Seal area to exist elsewhere in the Peace
River oilsands area. Murphy noted that there was agreement between itself and
Duvernay that gas production should not be allowed in the main bitumen trend.
The Seal area should not be divided into areas of gas production and no gas
production, according to Murphy, adding that the EUB should not define a lower
bitumen thickness limit for considering bitumen to be recoverable.
Murphy stated that more and better pressure data is required, including
pressure data from the gas and bitumen zones. The details of requiring
additional pressure data could be determined through a consultative process and
the use of resource management reports at Surmont and Chard/Leismer could be
applied to Peace River.
The board added that there’s a need to assess whether there is gas
production occurring in the main bitumen trends throughout the Peace River
oilsands area, and if there is, whether a need exists to curtail the gas
production.
“The specific process that should be used to conduct this assessment
should be determined by the board at a later time,” the EUB said.
|
