Sydney Field

"Litigation against unconventional gas producers; lessons from the US experience."

Richard M Lightfoot, Casconsult Pty Ltd

In North America, exploration and production of oil and gas from unconventional sources principally shale, but also tight sandstones and coal seams – is more developed than elsewhere in the world. The presence of large shale, tight gas, and coal seam gas reserves has led to exploration throughout the world.

In Australia, the unconventional gas industry is most developed in Queensland, is seeking to expand in New South Wales and South Australia, and is prospective in Western Australia the Northern Territory, and, to a much lesser extent Victoria.

In the light of the US experience, which has included claims of mechanical failures and inappropriate waste treatment and disposal, leading to groundwater contamination, induced seismicity and hazardous fugitive emissions, government and scientific agencies have produced thousands of studies of the perceived benefits and risks associated with the gas.

In each jurisdiction where unconventional gas extractions has been proposed, governments have been developing legislative regimes for resource allocation and for the managing of risks, through statutes, regulations, standard, and codes of practice.

In the USA, landowners and other citizens who believe that unconventional gas extraction has caused damage to land, water, human and animal health, have resorted to ligation seeking to recover damages, principally by bringing tortuous claims in negligence, nuisance and trespass. In some jurisdiction, actions have also been based on strict liability and legislated rebuttable presumptions of liability.

The paper summarises some cases brought in the USA, to identify the basis of the claims and to analyse their outcomes. In particular, claims brought in tort, and the potential for such claims brought in Australia must be considered.

All sections of the Unconventional Gas Industry need to become aware of their continuing responsibilities. Corporations require an intimate knowledge of the law, its interpretation and the need to minimise exposure to financial, environmental and health risks.

Summary

Coalbed methane (CBM) produced from subsurface coal deposits has been produced commercially for more than 30 years in North America, and relatively recently in Australia, China, and India. Historical challenges to predicting CBM-well performance and long-term production have included accurate estimation of gas in place (including quantification of in-situ sorbed gas storage); estimation of initial fluid saturations (in saturated reservoirs) and mobile water in place; estimation of the degree of undersaturation (undersaturated coals produce mainly water above desorption pressure); estimation of initial absolute permeability (system); selection of appropriate relative permeability curves; estimation of absolute-permeability changes as a function of depletion; prediction of produced-gas composition changes as a function of depletion; accounting for multilayer behavior; and accurate prediction of cavity or hydraulic-fracture properties. These challenges have primarily been a result of the unique reservoir properties of CBM. Much progress has been made in the past decade to evaluate fundamental properties of coal reservoirs, but obtaining accurate estimates of some basic reservoir and geomechanical properties remains challenging.

The purpose of the current work is to review the state of the art in field-based techniques for CBM reservoir-property and stimulation-efficiency evaluation. Advances in production and pressure-transient analysis, gas-content determination, and material-balance methods made in the past 2 decades will be summarized. The impact of these new methods on the evaluation of key reservoir properties, such as absolute/relative permeability and gas content/gas in place, as well as completion/stimulation properties will be discussed. Recommendations on key surveillance data to assist with field-based evaluation of CBM, along with insight into practical usage of these data, will be provided.

Coalbed methane (CBM) produced from subsurface coal deposits, has been produced commercially now for over 30 years in North America, and relatively recently in Australia, China and India. Historical challenges to predicting CBM well performance and long-term production have included: accurate estimation of gas-in-place (including quantification of in-situ adsorbed gas storage); estimation of initial fluid saturations (in saturated reservoirs) and mobile-water-in-place, estimation of the degree of under-saturation (undersaturated coals produce mainly water above desorption pressure); estimation of initial absolute permeability (system); selection of appropriate relative permeability curves; estimation of absolute permeability changes as a function of depletion; prediction of produced gas composition changes as a function of depletion; accounting for multi-layer behavior, and accurate prediction of cavity or hydraulic fracture properties. These challenges have primarily been a result of the unique reservoir properties of CBM. Much progress has been made in the past decade to evaluate fundamental properties of coal reservoirs, but there is still work to be done to obtain accurate estimates of some basic reservoir properties.

In recent years, horizontal wells and more complex well architectures and stimulation methodologies have been implemented to improve recovery of CBM. These more complex development options bring with them a new set of challenges for operators producing CBM. The exploitation of more geologically-complex coal with poorer reservoir quality will necessitate new and inventive ways to develop the existing natural gas resources and possibly combine this with new methods to extract energy from the coal in-situ. Development planning in these scenarios will become increasingly complex as will evaluation methods.

The purpose of the current work is to review the state-of-the-art in CBM reservoir property and stimulation efficiency evaluation and speculate on possible CBM development scenarios for the future and the technical challenges they will bring. Current and future work required to meet these challenges will be discussed in the hope that industry, academia, and government bodies alike will be proactive in the development of solutions that will make future CBM recovery efficient, economic, and environmentally friendly.

Introductory Comments
The Sydney Basin represents the most easterly extent of the upper Paleozoic fill of the much larger Maritimes Basin of Atlantic Canada (Figure 1). Thick sequences (12 km+) of mid-Devonian to Upper Carboniferous / Permian sediments include thick non-marine, multi-storied sandstones, extensive limestones and thick salt overlain by multistoried fluvial sands and coal measures. It is worth noting that a significant portion of Canada's light oil and gas output comes from Paleozoic reservoirs, and over 20% of world oil reserves originate in Paleozoic reservoirs. (Enachescu, M.E, 2006)

The Carboniferous sediments of the Maritimes Basin have been productive since the very early 1900's with both oil and gas being produced over an 80+ year period from the Early Carboniferous rocks in the neighbouring province of New Brunswick. Corridor Resources of Halifax has been producing natural gas from the McCully field in New Brunswick from these same sediments since 2003. That field is now connected to the Maritimes & Northeast Pipeline which provides some 400+ mmcf/d to markets locally and to the northeastern U.S. Corridor has also made a significant discovery of oil in sandstone lying beneath as well. Oil shales are found in New Brunswick, Nova Scotia and Newfoundland. Stealth Ventures Ltd. has committed to eastern Canada's first coalbed methane production agreement in the Cumberland Basin of western Nova Scotia. One nearshore well drilled just in the same rock units on the western side of Cape Breton Island, Nova Scotia yielded gas rates of 5.5MMcf/d. Shale gas has been evaluated in Nova Scotia with independent estimates suggesting that some 63 trillion cubic feet (in place) may exist in only one of several basins where the shales are known to occur. On June 24, 2008 Elmworth Energy Corporation submitted a development plan as part of their application in accordance with requirements for a shale gas production agreement. In each case sited, the mentioned resource has both its source and reservoir unit within the Carboniferous interval. Some fifteen companies are currently exploring for, or are developing, Carboniferous reservoirs in the Maritimes Basin of Atlantic Canada.

ABSTRACT: Underground hydrocarbons storage is a very specific domain for the designer. He is usually free to adjust the section, shape and layout to cope with the geological and geotechnical conditions. This paper presents a panorama of the geotechnical design of mined underground storage caverns, then lists a number of uncommon features encountered in a storage excavated in Sydney, Australia, the Elgas LPG project that had to face major non-isotropic conditions with numerous local variations, impacting on the achievement of the design profiles. Changes in geotechnical design methodology and practice are examined through this project, now in operation, which will have lasted altogether almost ten years.

ZUSAMMENFASSUNG: Die untertaegige Speicherung von Kohlenwasserstoffen unterliegt in der Planung sehr spezifischen Bedingungen. Der planende Ingenieur hat bei der Dimensionierung und Formgebung der Speicherhohlraeume gewisse Freiheiten, muss jedoch vorgefundene geologische und geotechnische Bedingungen beruecksichtigen. Der vorliegende Beitrag gibt zunaechst einen allgemeinen Ueberblick ueber die geotechnische Planung von bergmaennisch aufgefahrenen Speicherhhohlraeumen. Darueber hinaus werden Besonderheiten betrachtet, mit denen das Elgas LPG-Speicherprojekt in einer bergmaennisch aufgefahrenen Kaverne in Sydney, Australien konfrontiert war. Hierbei ging es um die Beruecksichtigung anisotroper Bedingungen mit zusaetzlichen Heterogenitaeten im Gestein und den daraus erwachsenden Schwierigkeiten, die geplante Hohlraumform zu verwirklichen. Ueber einen Zeitraum von fast 10 Jahren, in denen das jetzt in Betrieb befindliche Projekt unterschiedliche Betriebsphasen durchlaufen hat, wurden verschiedene geotechnische Entwurfsverfahren auf ihre Anwendbarkeit geprueft.

RESUME : Le stockage souterrain d'hydrocarbures est un domaine très specifique pour le concepteur, car celui-ci dispose d'une large liberte pour adapter les sections, les formes et les implantations aux conditions geologiques et geotechniques de l'environnement choisi. Après un panorama de la conception geotechnique des stockages souterrains d'hydrocarbures par la methode dite des cavites minees, l'accent sera mis sur un certain nombre de particularites rencontrees lors du projet de stockage de GPL de Elgas à Sydney en Australie, creuse dans de très fortes conditions d'anisotropie du massif rocheux, avec de nombreuses variations locales et toutes les implications que cela peut avoir sur le maintien des formes. L'evolution des approches methodologiques geotechniques durant la dizaine d'annees de developpement de ce projet depuis les premières etudes jusqu'à l'exploitation actuelle est egalement presentee.

1. General description of geotechnical design of mined storage

The design of underground LPG storage in mined caverns has been presented in various papers [1] [2] [3] [4] with reference to their stability and product containment criteria.

In the following, a brief overview of some of the main geotechnical features relating to the design of stable underground caverns in difficult conditions is presented [5].

While the task of the geotechnical engineer or design team for storage caverns is in many ways comparable to that of designers of related works such as tunnels, it can be thought of as being easier in some aspects and more difficult in others.

The task is made easier because:

• the site will usually have been selected in good engineering ground,


• the designer is generally free to choose the most appropriate layout, especially the geometry and the orientation of the tunnels,


• cross-sections and locations can be matched to the local geological conditions.

• the importance of the required hydrodynamic containment conditions (for example, groundwater pressure drawdown when a pervious feature is encountered may not be allowed)

The use of easily deployable penetrometers, for obtaining bearing strength estimates of seabed sediments, has been under investigation for a number of years. The motivation, in most cases, has been to develop a rapid method of obtaining suitable data for estimating the depth of burial of naval mines when they strike the seafloor, immediately after being deployed, but such instruments would be of general use for obtaining bearing strength profiles in the upper metre or so of the seafloor. Previous experiments have found that the measured bearing strength decreases as the diameter of a penetrometer increases. This effect is not currently understood, but in this paper it is shown, with the help of some new experiments, that with the right penetrometer design it is possible to obtain bearing strength profiles which can be validly used for mine burial prediction. Finally a particular penetrometer configuration is recommended. INTRODUCTION Many nations have wide areas of continental shelf for which seabed sediment data are required for purposes such as natural resources investigations, ecological zone mapping and defensive mine counter-measures. Because knowledge is often required on quite fine scales over considerable areas, remote sensing methods, particularly acoustic, are being investigated. The potential benefit of acoustic seabed classification systems is that they would be able to determine seabed characteristics continuously with a ship under way, as against the conventional approach of stopping at regular intervals to obtain bottom samples. Without some ground truthing, however, it is still difficult to relate sediment properties to acoustic returns, and this is particularly true for sediment bearing strength, which is the main sediment property controlling mine burial on impact (Satkowiak, 1988; Chu et al., 2000). Instead, to obtain sediment strength values quickly and easily, a number of free-fall penetrometers have been developed (e.g., Beard, 1975 and 1984; Crook et al., 1995),

Abstract

Although knowledge is predicted to surpass oil and gas reserves as the most important asset in 21st century oil and service companies, engineers remain cynical about the benefits of current knowledge management initiatives. This paper discusses problems such as the strong bias of existing knowledge management systems in favour of document searching and focuses on how overlooked areas can be addressed. Results of a collaborative project with 5 major oil companies aimed at overcoming some important limitations of current knowledge systems are discussed. A key feature of the initiative is software to integrate knowledge capture and reuse into normal work processes. The software uses well data and stored drilling experiences, including problems and solutions, from a global drilling and completions database provided by the member oil companies. Experiences with deployment of this software into oil companies will be covered as well as the results of research projects on automated learning and case based reasoning to enhance the company knowledge base for optimal design of new wells. The study of overall well quality has also been included in the project. By defining well quality metrics and then examining them collectively, we can better assess drilling performance in a given field, and ascertain if the company is using its knowledge to improve new well production and cut costs.

Introduction

This report considers two main categories of knowledge exchange, viz. people to people networks and IT assisted people to knowledge base exchange. Companies do not take a uniform approach to managing knowledge. In some companies the strategy centres on the computer. Knowledge is carefully codified and stored in databases where it can be used easily by anyone in the company. Hansen¹ calls this the codification strategy. Other companies rely mostly on direct people to people contacts.

Examples studied in the oil and gas industry indicate that both strategies are necessary for a successful knowledge management process. A review of existing knowledge management systems is presented with an emphasis on systems deployed into the oil and gas industry. Several workshops were organized by CSIRO with oil industry participants to elicit their current most pressing needs in the knowledge management area. These workshops and other recent industry studies highlight missing elements needed for the acceptance of knowledge management initiatives into the oil industry.

Software to fill gaps in existing knowledge base systems has been produced, the major contribution is integration of knowledge from diverse data, document and knowledge stores into everyday planning and operational processes. Another useful contribution is automation of knowledge extraction from text documents. The new software is described and results of trials with oil companies in Australia, Europe, the Middle East and North and South America are discussed. The paper also describes current work on overall quality metrics to enhance the knowledge store. The authors believe that the study of overall well quality is a neglected area of the industry, for example, well quality aspects such as formation damage, drilling interactions, and hole rugosity tend to be treated separately in the literature.