PETE 689

Underbalanced Drilling (UBD)

Lesson 12
Selecting an Appropriate Technique
Read: UDM Chapter 4
pages
p g 4.1-
4.1-4.54
Harold Vance Department of Petroleum Engineering
Selecting an Appropriate
Technique

• Potential applications and

candidate technique
technique..
• Technical feasibility.
feasibility.
• Economic
E i analysis
analysis.
l i .

Harold Vance Department of Petroleum Engineering

 Required Data For UBO
Candidate Identification
• Pore pressure/gradient plots.
plots.
• Actual reservoir pore pressure
pressure..
• ROP records.
records.
• Production
d i rate or reservoir
i
characteristics to calculate/estimate
production
d ti rate
rate.
t .
• Core analysis
analysis..

Harold Vance Department of Petroleum Engineering

Required Data For UBO
Candidate Identification

• Formation fluid types

types..
• Formation integrity test data.
data.
• Water/chemical sensitivity
sensitivity..
• Lost circulation information.
information.
• F
Fracture
t pressure/gradient
/ di t plot
plot.
l t.

Harold Vance Department of Petroleum Engineering

Required Data For UBO
Candidate Identification

• Sour/Corrosive
S /C i gas data
d t .
data.
• Location topography/actual
l
location.
location
ti .
• Well logs from area wells.
wells.
• Triaxial stress test data on
any formation samples.
samples.
 Poor Candidates For UBD

• High permeability coupled with high

pore pressure
pressure..
• Unknown reservoir pressure.
pressure.
• Discontinuous UBO likely (numerous
trips, connections, surveys)
surveys)..
• High production rates possible at low
drawdown..
drawdown
 Poor Candidates For UBD

• Weak rock formations prone to

wellbore collapse at high drawdown.
drawdown.
• Steeply dipping/fractured formation
in tectonically active areas.
areas.
• Thick,
Thick unstable coal beds
beds..
 Poor Candidates For UBD
• Young, geo
geo--pressure shale.
shale.
• H2S bearing formations
formations..
• Multiple reservoirs open with
different ppressures..
pressures
• Isolated locations with poor
supplies..
supplies
• Formation with a high likelihood of
corrosion..
corrosion
 Good Candidates For UBD

• Pressure depleted formations

formations..
• Areas prone to differential pressure
sticking..
sticking
• Hard rock (dense,
(dense low permeability,
permeability
low porosity).
porosity).
• “Crooked
“C
“Crooked-
k d-hole”
h l ” country
t and
d steeply
t l
dipping formations
formations..
 Poor Candidates For UBD

• Lost-
Lost-returns zones.
zones.
• Re
Re--entries and workovers (especially
pressure depleted zones)
zones)..
• Zones prone to formation damage.
damage.
• Areas with limited availability y oof
water..
water
Good Candidates For UBD

• Fractured formations
formations..
• Vugular formations.
formations.
• High permeability formations.
formations.
• Highly
g y variable formations.
formations.
 Good Candidates For UBD

• Once the optimum candidate has

been identified, the appropriate
technique must be selected, based
on much of the same data required
to pick the candidate.
candidate.
Candidate Decision Tree-
Tree-Sheet 1
Previous history of
underbalanced
Operations (UBO)?
No

Hydrocarbons
H d b
Yes Go to
anticipated Sheet 2

No

Drilling No
problems No UBO
anticipated

Yes

Lost
Yes
circulation

No

Stuck
Yes Cost/safety No
No UBO
pipe benefits

No

Yes
Hard Yes Candidate
drilling
(ROP/bit)

No

No UBO
Candidate Decision Tree-
Tree-Sheet 2
Depleted
Yes Go to
reservoir Sheet 3

No

Drilling No
Problems No UBO
anticipated

Yes

Lost
Yes Reservoir damage
No
circulation Production impairment No UBO

No Yes

Stuck
Yes Cost /safety
No
pipe benefits No UBO

No
Yes
Candidate
Hard Yes
Drilling
(ROP/bit)

No
 Candidate Decision Tree-Sheet 3

Drilling Yes Lost

Yes
problems
circulation
anticipated

No No

No Reservoir damage
No UBO Production impairment Stuck Y
Yes Cost /safety
Y
Yes
pipe benefits Candidate

Yes
No No

Candidate
Hard Yes
Drilling No UBO
(ROP/bit)

No

No UBO

This decision tree can be found on the IADC website (www.iadc.org).

Click on Committees.
Potential Applications and
Candidate Technique
L
Low ROP Th
Through
hHHard
dRRock
k
• Dry
D air.
air
i .
• Mist, if there is a slight water inflow.
inflow.
• Foam, if there is heavy water inflow,
if the borehole wall is prone to
erosion,
i or if there
h i a large
is l h l
hole
diameter..
diameter
• N2 or natural gas, if the well is
producing wet gas and it is a high
L t Circulation
Lost Ci l ti Through
Th h The
Th
Overburden

• A
Aerated
t d mud, d if the
th ROP isi high
hi h (rock
( k
strength low or moderate) of if
water--sensitive shales are present
water present..
• Foam is possible if wellbore
instability is not a problem
problem..
Differential Sticking Through
The Overburden
• Nitrified mud, if gas production is
likely, especially if a closed system is
to be used.
used.
• Aerated mud, if gas production is
unlikely and an open surface system
is to be used.
used.
• Foam is possible if the pore pressure
is very low and if the formations are
 Formation Damage Through A
Soft/Medium--Depleted Reservoir
Soft/Medium

• Nitrified brine or crude

crude..
► string
g injection,
j , if the ppore p
pressure is
very low.
low.
► parasite injection, if the pore pressure is
hi h enough
high h andd a deviated/horizontal
d i d/h i l
hole needs conventional MWD and/or
mud motor
motor..
► Temporary casing injection, if the pore

pressure is intermediate and a high gas

 Formation Damage Through A
Soft/Medium--Depleted Reservoir
Soft/Medium

• Nitrified brine or crude, con’t.

con’t.
► String and temporary casing
injection, if the pore pressure is very
low and/or if very high gas rates
rates..
• Foam, if the pore pressure is very
low and an open surface system is
acceptable..
acceptable
Formation Damage Through A
Normally Pressured Reservoir

• Flowdrill (use a closed

surface system if sour gas is
possible).
 Lost Circulation/Formation
Damage Through A Normally
P
Pressured,
d F
Fractured
t dR
Reservoir
i

• Flowdrill ((use an atmospheric

p
system if no sour gas is possible).
possible).
Formation Damage Through
An Overpressured Reservoir.

• Snub drill ((use a closed surface

system is sour gas is possible).
possible).
 T h i l Feasibility
Technical F ibilit
• In evaluating the feasibility of candidate
drilling techniques, a controlling factor is
the range g of anticipated
p borehole
pressures which will be required for each
zone to be drilled.
drilled.
• The upper limit for UB conditions is
formation pore pressure.
pressure.
• Lower
L li it will
limit ill generally
ll be
b regulated
l t d by
b
the lowest pressure at which wellbore
 T h i l Feasibility
Technical F ibilit

• First stepp is to determine the

anticipated pressures.
pressures.
• Step two is to determine which
methods are functional within the
anticipated pressure window
window..
 T h i l Feasibility
Technical F ibilit
• Other
Oth considerations
id ti are:
► Will there be sloughing shales?
► Are aqueous fluids inappropriate?

► Will water producing horizons be

penetrated?
d?
► Will multiple, permeable zones,
with
ith dramatically
d ti ll different
diff t pore
pressures, be encountered?
 T h i l Feasibility
Technical F ibilit

• Other considerations con’t:

con’t:
► What is the potential for chemical
formation damage, due to fluid/fluid
or fluid/formation interaction and is
this an overwhelming problem,problem
regardless of what wellbore pressure
is used?
► Is there a potential for sour gas
production?
 T h i l Feasibility
Technical F ibilit

• Other considerations con’t:

con’t:
► Are there features of the well
geometry which dictate specific
underbalanced protocols?
► What is the local availability of suitable
equipment and consumables (including
li id
liquids and
d gases for f th
the drilling
d illi
fluids)?
 B
Borehole
h l PPressure Li
Limits
it
• Pore pressure
► The wellbore pressure must be
maintained below the formation
pressure in all open hole sections.
sections.
► If there is no formation fluid inflow,

borehole pressures with dry gas, mist,

foam or pure liquid will be lower when
not circulating
circulating..
► With fluid influx, borehole pressure can
increase or decrease when not
 B
Borehole
h l PPressure Li
Limits
it

• Pore pressure
™ Best p
practice is to use the:
the:
► Lower bounds for pore pressure
prediction when choosing a
technique..
technique
► While surface equipment capacity
and drilling specifics should be
based on an upper bound
bound..
B
Borehole
h l PPressure Li
Limits
it

• Wellbore stability provides the

lower limit to the allowable
borehole pressures.
pressures.

• Will be discussed later

later..
 B
Borehole
h l PPressure Li
Limits
it

• Hydrocarbon production rates can

sometimes set the lower bound,
depending upon the surface
equipment available
available..
• Formation damage may effect the
tolerable drawdown due to fines
mobilization in the producing
formation..
formation
 B
Borehole
h l PPressure Li
Limits
it

• Backpressure from a choke can

sometimes be used to protect the
surface
f equipment
i t from
f excess
production rates or pressures
pressures..
• This also increases the BHP
BHP..
• The allowable backpressure is limited
by the pressure rating of the
equipment and formation upstream
of the choke.
choke.
 B
Borehole
h l PPressure Li
Limits
it

• When using compressible fluids,

fluids it
is usually more cost effective to
switch to a higher density fluid
than to choke back the well.
 B
Borehole
h l PPressure Li
Limits
it

• Applying back pressure will:

► Increase the gas injection
pressure.
► Increase the gas injection rate

required for acceptable hole

cleaning.
► These
Th b h will
both ill increase
i the
h cost
of the gas supply.
 B
Borehole
h l PPressure Li
Limits
it

• With a gasified liquid, BHP can

usually
y be increased by y reducingg the
gas injection rate.
rate.
• When drilling g with foam,, back
pressure may be necessary to
maintain foam quality.
quality.
• Holding back pressure is most
beneficial when drilling with liquids.
liquids.
 B
Borehole
h l PPressure Li
Limits
it

• Once the maximum tolerable surface

pressure is reached, production rate
can only be further reduced by
i
increasing
i d
downhole
h l pressure by b
increasing the effective density of the
drilling fluid.
fluid
 Implications of Drilling
Technique Selection
• Pore pressure gradients vary with
depth
depth.
p .
• Formation strength varies with depth.
depth.
• In
In--situ stresses vary with depth
depth..
• The tolerable stresses, are affected
by by the inclination and orientation
of deviated, extended reach and
 Implications of Drilling
Technique Selection

• Production rates depend on the

length of the reservoir that is open
to the wellbore and on the
underbalanced pressure
pressure..
 Implications of Drilling
Technique Selection
• Once the borehole pressure limits,
corresponding to wellbore instability
and excessive production rate, have
been determined , a first pass
evaluation of the different drilling
techniques can be performed
performed..
 Example 1
4500

4000

allow, normally 3500

essured reservoir.
e (psi)

3000

wellbore
llb stability
t bilit
ehole Pressure

2500

oblems. 2000

rface equipment can 1500

Bore

ndle the anticipated 1000

OF.
500

nimal water inflow 0

expected.
0 2000 4000 6000 8000 10000

True Vertical Depth (feet)

Stability regimes for the well described in Example 1.

 Example
l 2
pleted
l t d sandstone
d t from
f 4500

00 to 4,000 ft with a 4000

e pressure gradient of 5 3500

. Pore ppressure above

psi)
hole Pressure (p

3000
sand is 8 ppg.
2500

t circulation and 2000

erential sticking
g is a
Boreh

1500
blem with mud.
1000

instability problems 500

icipated if borehole
0
ssure is > 2 ppg. 0 2000 4000 6000 8000 10000

True Vertical Depth (feet)

duction rate is low.
Stability regimes for the well described in Example 2.
 Example
l 3
e pressure = 8 ppg 4500

le from 6,000-
6,000-8,000’ 4000

uires a minimum wellbore 3500

ssure of 7 ppg
psi)

3000
ole Pressure (p

get zone is 9,000’ 2500

ervoir itself is competent 2000

ess borehole p pressure
Boreho

ppg 1500

ect high flow rates.

1000

500
ximum drawdown
00 psi 0
4000 5000 6000 7000 8000 9000 10000

e p. at 9,000’ = 3,744 psi True Vertical Depth (feet)

 Example
l 4
4500

4000

3500

aximum drawdown
psi)

3000
ole Pressure (p

100 psi.
2500

quivalent to 7.79 ppg. 2000

esell or crude
d gives
i a
Boreho

1500

essure lower than 1000

is. Plain water is too 500

ense
ense.
0
4000 5000 6000 7000 8000 9000 10000

True Vertical Depth (feet)

 Example
l 5
4500

4000
ervoir is depleted to
ppg. Maximum 3500
psi)

wdown is 500 psi. The 3000

ole Pressure (p

erable range for ECD 2500

ough the reservoir
uld be 5.4-
5.4-6.5 ppg. 2000

asified
ifi d liquid
li id would
ld be
b
Boreho

1500

uired. 1000

s would not supply 500

fi i t supportt for
ficient f the
th
0
le above. 4000 5000 6000 7000 8000 9000 10000

True Vertical Depth (feet)

Evaluating Highly Productive
Formations

• Require
q detailed numerical
analyses of circulating pressures
pressures..
• Formation fluid influx interacts
with drilling fluids which effect
borehole pressure - effecting
influx rate
rate..
Evaluating Highly Productive
Formations

• When circulation stops, the

influx lifts mud from wellbore.
• This changes the borehole
pressure and the production
rate.
t
Evaluating Highly Productive
Formations
• Choking back the well returns further
complicates
p the calculation of borehole
pressures and production rate
rate..
• If the fluid is incompressible,
p ,
backpressure changes BHP by the
amount of pressure applied.
applied.
• If the fluid is compressible,
backpressure changes density,
Evaluating Highly Productive
Formations

• Uncertaintyy of input
p p parameters in
simulators leads to uncertainty in
output..
output
• In many cases these uncertainties
can make simulations in technique
selection unjustified.
unjustified.
 W t Production
Water P d ti

• Production of small quantities of

water makes dry y ggas drillingg
difficult.
• If offset wells have a history
y of
water production, dry gas drilling
below the water zone is probably
impractical.
 W t Production
Water P d ti

• When misting, higher gas rates are

required
q to p
prevent slugg flow
flow..
• Slug flow can damage the borehole
and surface equipment.
equipment.
• Higher injection rates and the
increased density in the annulus
may require i b
boosters
t on the
th
compressors..
compressors
 W t Production
Water P d ti

• Large water influxes may require

foams..
foams
• High disposal costs can sometimes
make mist drilling impractical
impractical..
• Higher density foams can decrease
water influx,
influx however the increased
volume of makemake--up water may
 W t Production
Water P d ti

• If high water influx makes

gas and foams impractical,
aerated mud or low density
y
liquids may be required.
required.
Multiple Permeable Zones
• If all zones are to be drilled
UB, the circulating pressure
must satisfy the borehole
pressure requirements for all
open permeable zones,
simultaneously..
simultaneously
• Several factors can prevent
 Factors Preventing UB
In All Zones
• The ECD of compressible fluids
increases with increasing depth
depth..
• In vertical wells, it is possible for
a permeable zone close to the bit
to be overbalanced when a
permeable zone higher up hole,
with the same pore pressure
gradient, is UB.
UB.
 Factors Preventing UB
In All Zones

• This effect is more pronounced in

high angle and horizontal wells.
wells.
• AFP increases along the borehole
even if formation pore pressure
remains relatively constant along
the borehole.
borehole.
 Factors Preventing UB
In All Zones

• Changes in pore pressure

gradient along the wellbore may
be p
present..
present
• This can be due to abnormally
pressured formations,, or p
p partially
y
depleted formations
formations..
Multiple Permeable Zones

• The major concern with multiple

permeable zones is the potential
for underground blowouts
blowouts..
• Extreme care must be taken to
prevent this from happening
when pressure changes occur
such as tripping, or connections
connections..
f Cross Flows Cannot Be Tolerated:
Tolerated:
• Use a different drilling technique
that allows all permeable zones to
remain UB, if possible
possible..
• Kill the well before suspending
circulation..
circulation
• Change the casing scheme so that
the upper formations are cased of
before penetrating the lower zone
 Sour Gas
• There must be no possibility of
releasing hydrogen sulfide into
the atmosphere while the well is
being
g drilled or completed.
completed
p .
• If any is produced during drilling
it must be disposedp of in a
suitable flare.
flare.
 Sour Gas
• H2S can become entrained in
any liquid in the wellbore, and
must be completely removed
from the fluid and flared before
any of the liquids are returned
to any open surface pits.
pits.
• The separation process should
be completed in a closed vessel
vessel..
 Sour Gas
• Sour gas can become entrained in
foams..
foams
• The
h f
foam must be
b completely
l l
broken prior to separation
separation..
• Unless
l effective
ff i d f
defoaming
i can be
b
guaranteed foams cannot be used
in closed systems,
systems and should not
be used in the presence of
Drilling/Reservoir Fluid
Incompatibility

• It can be difficult to prevent

temporary overbalance.
overbalance.
• Drilling fluids should be tested
for compatibility with formation
fluids..
fluids
 H l G
Hole Geometry
t
• A compressible fluid will have a
greater ECD in deep wells than in
shallow
h ll wells.
wells
ll .
• Annular gas injection only reduces
th density
the d it off the
th fluids
fl id above
b th
the
injection point
point.. Drillpipe gas
injection may be necessary if long
vertical sections are to be drilled
 H l G
Hole Geometry
t

• Increasing ECD with depth may

make it impossible to maintain
th proper foam
the f quality
lit in
i deep
d
wells..
wells Backpressure may be
required increasing the gas
required,
supply needed.
needed.
• Increasing hole size makes hole
cleaning more difficult.
difficult.
 H l G
Hole Geometry
t

• Large hole sizes may require

larger diameter surface
equipment..
equipment Larger surface
diverter equipment may not
have the pressure rating of
smaller resulting in lower back
pressure capabilities.
capabilities.
Naturally Fractured Formations

• In fractured formations,, highg

viscosity drilling fluids,
circulating at low rates may
p e ent hole enlargement
prevent enla gement and
still maintain UB.
UB.
• Stiff foams may be the preferred
candidate..
candidate
 Logistics

• Water supplies may be limited in

some areas,
areas and a technique that
limits water use may be chosen.
chosen.
• Availability and access to the
gaseous phase can influence the
choice of gas used
used..
 Logistics

• Offshore locations generally do

not have the same space
available as land locations.
locations.
• Equipment used on surface
l
locations
ti may nott be
b suitable
it bl for
f
offshore locations.
locations.
• Modular closed systems must be
used offshore.
offshore.
 Logistics

• The high production rates

necessary for
f offshore
ff h wells
ll
to be economically viable
may make them unlikely
candidates for UBD.
UBD.
 Economic Analysis

• Rules of thumb
thumb..
► UBO increases costs 1.25 - 2.0

times the cost per day over

conventional.
conventional
ti l.
► but may be accomplished in

1/4 to 1/10 off the

h time.
time
i .
 Economic Analysis
• Rules
R l off thumb
th
thumb.
b.
► In permeable rock ROP may be
increased from 30 30%
% to 300
300%%
as well goes from overbalanced
to balanced
balanced..
► Below balance ROP will increase
another 10-
10-20
20% %.
► In impermeable rock, ROP will
increase 100
100--200
200%%.
 Drilling Days
0 20 40 60 80 100 120
0

1000

2000

3000
epth (feet)

4000

5000

6000
De

7000

8000

9000

10000

Gas and mud effect on drilling time (after Moore, 197456).

 Rotating Time (hours)
0 10 20 30 40 50 60 70 80 90 100
0

500

1000
epth (feet)

1500
De

2000

2500

3000
Steps for Economic Analysis
1.Determine the expected
penetration rate or drilling time
of each candidate hole-interval,
hole interval if
the operation were to be carried
out conventionally.
2.Estimate the daily cost of
g operations
conventional drilling p
for each prospective hole-interval
based on empirical data.
Steps for Economic Analysis
3.Multiply the conventional daily
cost by an underbalanced factor
(1.3-2.0, depending on difficulty
of the operation) to get the
expected daily cost of UBO
UBO..
4.Apply the expected
underbalanced operating cost by
the anticipated underbalanced
drilling ROP to get the total cost
Factors that Effect the
Economics of UBD

• Penetration rate.
• Bit selection.
• Bit weight and rotary speed.
• Mud weight
weight.
 C
Completions
l ti and
d Stimulation
Sti l ti
• UBO does
d nott save completion
l ti ti
time.
time.
• But, if you are going to drill UB to
preventt formation
f ti d
damage, you
better complete UB.UB.
• Mitigation
Mi i i off formation
f i d
damage i
in
wells that will need to be
hydraulically fractured (except
naturally fractured) may be a poor
 F
Formation
ti Evaluation
E l ti

• Real time formation evaluation

possible.
• UB coring possible.
Environmental Savings

• Closed systems make

smaller reserve pits and
locations p
possible,, but there
is additional costs of rental
of the systems.
systems.
 Fluid Type

• The bottom line controlling

factor may be the specific
fluid system adopted. Each
fluid type has technical and
economic advantages and
limitations.
Drilling Method Problems and/or
Savings
or Fluid System Potential Expenditures
High penetration Possible problems if water
rates and reduction flow is encountered
in rig time.
Low bit cost Hole erosion, if poorly
consolidated.
Air Low water Possibility of downhole fire, if
requirement hydrocarbons are
encountered.
No mud removal Supplementary
pp y equipment
q p
rental.
Low additives cost Is not suitable for H2S
D illi
Drilling Method
M th d Problems
bl and/or
d/ Potential
i l
Savings
or Fluid System Expenditures
High penetration rates Problems if water flow is
and reduction in rig encountered
encountered.
time. Cost of gas and/or rentals.
Low bit cost Hole erosion, if poorly consolidated.
Gas
(Nitrogen or Low water requirement Cost is high if a market for the gas
exist.
Natural Gas)
No mud removal Rig safety.

Low additives cost Supplementary equipment rental If

H2S is expected, consider a closed
system.
D illi
Drilling Method
M th d P bl
Problems and/or
d/ P Potential
i l
Savings
or Fluid System Expenditures
High penetration rates Problems if substantial water flow is
and reduction in rig encountered. Gas Cost if air not
time. used.
Low bit cost Hole erosion, if poorly consolidated.

Low water requirement Shale stability.

Mist
Disposal of waste water/gas and
supplementary rental cost.
No mud removal
Air-mist not suitable if H2S is
present.
Modest additives cost. Equipment rental.
Drilling Method Problems and/or
Savings
or Fluid System Potential Expenditures

High penetration rates and Considerable

C id bl ffoamer cost.
reduction in rig time. Gas cost if air not used.

Low bit cost. Careful metering required.

Low water requirement. Specialized metering

equipment.
High solids carrying capacity. Defoaming.

Stable foam Good hole cleaning capability.

Compatible with oil, salt water, Considerable cost.
calcium carbonate and most
formation contaminants.
Can safely entrain a considerable Separation and disposal.
volume of gas into aqueous
foam, rendering in non-
flammable until sumped.
Drilling Method P bl
Problems and/or
d/
Savings
or Fluid System Potential Expenditures
Considerable mud and
High penetration rates and chemical cost.
reduction in rig time.
Gas cost if air is not used.
Low bit cost. Fluid degradation possible if
oil, salt water or calcium
chloride are encountered.
Stiff Foam
Low water requirement. Specialized metering
equipment.
High solids carrying Defoaming.
capacity
capacity.
Good hole cleaning
capability.
Drilling Method Problems and/or Potential
Savings
or Fluid System Expenditures
Expense of running a parasite
string or a temporary casing
string.
Higher gas rates are required.
Sl
Slow pressure response if a
Higher bottomhole pressures. parasite string is used.
Low underbalance pressure may
cause transient departures from
underbalanced conditions and
Gasified Liquids advantages to impairment
reduction may be lost.
Improved directional drilling Tool problems with drilling
in comparison
p to dry
yggases or injection.
j
mist (refer to chapter 6).
Reduced drillstring wear. Supplementary surface
equipment.
Drilling Method Problems and/or
Savings
or Fluid System Potential Expenditures
Higher borehole Supplementary surface
pressures reduce the equipment and safety
possibility of instability. measures.
No gas supply system. Excessive production is
Flowdrilling
possible.
Conventional mud motors Safety issues associated with
and MWD units can be oil and gas on drill site.
used.
Can be used in situations Supplementary equipment and
Mudcap Drilling where surface pressure is safety considerations.
too high for flowdrilling.
Can be used at pressures Snubbing or CT unit.
too high for conventional
Snub Drilling or CT
units
i and d underbalanced
d b l d
drilling equipment.
Environmental savings Equipment rental and operating
cost
Cost Comparisons - Case 1
Nitrogen vs. Pipeline Gas

General Assumptions

Flowrate…………………………………...3,000 cfm
Gas Price……………………………… $2.00/mcf
Trucking Distance………....
Distance 50 miles (one way)
Drilling Hours/day……………....………… …… 20
Average Gas Drilling Days/well…………… ….12
Diesel Usage/hour/unit…………….10.7
Usage/hour/unit 10 7 gallons
Diesel Fuel Price…………………... $ 0.80/gallon
Standby Days (Equipment)/well…..……......... 4
 Cost Comparisons - Case 1
Nitrogen Drilling System Cost Pipeline Gas Drilling Cost
Compressors (8) @ $ 12,960 Pipeline gas 43.2 mmcf @ $ 86,400
$135/unit/day $2.00/mcf
Boosters (2) @ $200/unit/day $ 4,800 Booster (2) $300/unit/day (gas $ 7,200
(air use) use)
Membrane Skids (2) @ $ 36,000 Drill Gas Unit (installed on $ 1,000
$1 500/unit/day
$1,500/unit/day location)
(1,800 cfm/skid)
Trucking/Transportation Fuel $ 9,200 Gas Line (2,000 feet) $ 1,800
(delivered)
25,680 gallons * $0.80/gallon $ 20,540 Trucking/Transportation Fuel $ 1,800
(delivered)
Mist Pump $ 1,500 5,138 gallons @ $0.80/gallon $ 4,110

Equipment Standby (4 days) $ 1,800 Mist Pump $ 1,500

Equipment Standby (4 days) $ 700

Total Nitrogen Drilling $ 88,600 Total pipeline Gas Drilling $ 104,510

 Cost Comparisons - Case 2
Portable N2 Generating
Item Liquid N2
System
Drilling Program 90 days 90 days

N2 1,500 scfm 1,500 scfm

Duration of N2
240 hrs ((10 days)
y ) 240 hrs ((10 days)
y )
requirement
Minimum 95 % (by
N2 Purity Minimum 95 % (by volume)
volume)
N2 Pressure 5,000
, psi
p 5,000
, psi
p
1,500 scfm * 60 min/hr
*
1,500 scfm * 60 min/hr *
24 hr/day *10 days =
584,000 sm3 24 hr/day *10 days = 584,000
N2 requirement
sm3
= 834,000 liters liquid
N2
= 139 tanks
 Cost Comparisons - Case 2
Portable N2 Generating
It
Item Liquid
Li id N2
System
139 liquid N2 tanks, 1 4 skid maximum, 14 tonnes
Logistics evaporator and 1 diesel each, 1 power unit, 14 tonnes (5
skid (141 containers) containers)
Electrical power: 1,400 kW * 10
Cost of Utilities days * 24 hrs @ $0.05/kWh
(liquid N2 , electricity, $ 1,284,000 = $ 16,800
di
diesel)l) (P
(Power unit
it rental
t l included
i l d d in
i
capital cost)
10 % of interest and
Maintenance None depreciation
$ 32,000
32 000
Interest and depreciation
Capital Cost None
over 10 years $324,000
 Economic Analysis
• On the basis of available
technology, select the potential
d illi
drilling systems
t t be
to b evaluated.
evaluated
l t d.
• Tabulate the tangible and
i t
intangible
ibl costs t for
f each h system
system.
t .
• Rely on previous history and
recognizei the
h i
inevitability
i bili off
statistical variation.
variation.
 Economic Analysis
• Perform basic cost/ft drilling evaluations
evaluations..

CT = [B+Cr(t+T)]
[B+C (t+T)] / F (4.12)

Where:
CT……total cost/foot.
B…….bit cost.
Cr……hourly
hourly rig cost.
cost
t……..rotating time.
T…….round trip time.
 Assess Drilling
g Costs
Item Air Drilling Mud Drilling
Interval From 4,000 to 7,000 ft From 4,000 to 7,000 ft
Interval Length (F) (ft) 3,000 3,000
Penetration Rate (ft/hr) 30 15
Rotating Time (t) (hr) 100 200
Bit Life (hr) 100 100
Bits Required 1 2
Unit Bit Cost $ 4,800/bit $ 4,800/bit
Bit Cost (B) $ 4,800 $ 4,800
Trip in to 4,000 ft
Trip in to 4,000 ft Trip out from 5,500 ft
Trip Schedule
T i out ffrom 7
Trip 7,000
000 ft
f T i iin to 5,500
Trip 5 500 ft
f
Trip out from 7,000 ft
Total Trip Footage 11,000 ft 22,000 ft
 Assess Drilling
g Costs
Item Air Drilling Mud Drilling
Trip Time (T) (hr) 16.5 33
Hourly Operating Cost
$ 375/hr $ 250/hr
(Cr)
Cost / ft [9,600+250(33+200)] / [3000]
[B+Cr(T+t)]/[F] $ 22.62
22 62 /ft
[4,800+Cr(16.5+100)] /
Competitive Cost for Air [3000]
Drilling = $ 22.62t
Cr = $ 541.29/hr
541 29/hr
Barrels of Water That
($541.29 - $375)/ $1.00 =
Can be Disposed of at
166 * 24 = 3,984 BWPD
$ 1.00/bbl
Barrels of Water That
($541.29 - $375)/ $5.00 =
Can be Disposed of at
33 * 24 = 798 BWPD
$ 5.00/bbl
Barrels of Water That
 25

24

23

22
Cost ($/ft)

21

20

19

18

17

16

15
0 500 1000 1500 2000 2500 3000
Barrels of Produced Water per Day

1
 Accelerated Production
• Earlier production can improve the NPV

NPV = 1 / (1+DR)t = (1+DR)-t

NPV = net present value (discounted

value of asset).
DR = discount rate.
 Improved
Production/Reserves
• The absolute and relative
increase in p
production should be
calculated, or estimated
estimated..
• Productivity Index, PI should be
calculated based on whether the
well is vertical, horizontal, oil,
gas radial,
gas, radial transient flow,
flow or
pseudo--steady
pseudo state flow
 Improved
Production/Reserves

• Well Inflow Quality Indicator,

WIQI, is the ratio of the PI for
an impaired
i i d tot that
th t for
f an
undamaged well.
well.
 Improved
Production/Reserves
onsidering
id i the
h following
f ll i example
l f
for
valuating PI
PI::
K 50 mD
H 25 feet
µ 2 cP
Bo 1 bbl/sbbl
re 1,980 ft
rw 0.411
S variable
Orientation vertical
depth 10
10,,000 ft
 Improved
Production/Reserves

Skin Production Rate (BOPD) PI WIQI

0 761 0.572 1

1 674 0.507 0.89

2 604 0.455 0.79

5 462 0.348 0.61

10 331 0 249
0.249 0 44
0.44

100 55 0.041 0.07

 Improved
Production/Reserves
800 1.12

700 0.98

w Quality Indiicator
D)

600 0.84
on Rate (BOPD

uctivity Index
x
500 0.7

400 0.56

Well Inflow
0.42

Produ
300
Productio

200 0.28

100 0.14

0 0
0 1 2 5 10 100
Skin

1
 Example
p
Oil well
Revenue Interest =R=0 0.375
375
Working Interest = WI = 0.5
Gross Income (per net bbl)
C d P
Crude Price
i = $20.00/bbl
$20 00/bbl
Less
Transportation
p =$$1.00/bbl
/
Production taxes = $6.00/bbl
Leaves
Gross Income (per net bbl) = $13
$13.00/bbl
00/bbl
Estimated Op. Expense = $5000/well month
Number of wells =5
 Case
C 1

All five wells drilled

in the first year with
a conventional mud
system..
system
 Case 1 (Base Case)
Year 1 2 3 4 5 6 7 Total

Estimated Future Operation Units

(1)
Gross Lease - bbl 201,204 170,280 122,952 96,720 77,960 55,388 18,024 742,528
Production

(2)
bbl
Net Production R * (1) 75,452 63,855 46,107 36,270 29,325 20,771 6,759 278,448
To Operator

(3)
Gross Income (2) * $13.00 $ 980,870 830,115 599,391 471,510 380,055 270,017 87,867 3,619,824
To Operator

(4)
Development $ 750,000 0 0 0 0 0 0 750,000
Cost
(5)
Number of
- - 60 60 48 48 36 36 24 312
Producing
g Well
Months

(6)
Operating (5) * $5,000 $ 300,000 300,000 240,000 240,000 180,000 180,000 120,000 1,560,000
Expense
 Case 1 (Base Case)
Year 1 2 3 4 5 6 7 Total

Estimated Future Operation Units

(7)
Capital - $ 20,000 20,000 20,000 20,000 20,000 20,000 20,000 140,000
Expenditure

(8)
Share of WI *
$ 535,000 160,000 130,000 130,000 100,000 100,000 70,000 1,225,000
Operating and [(4)+(6)+(7)]
Capital Expenses

(9)
Cash Flow to (3) – (8) $ 445,870 670,115 469,391 341,510 280,055 170,017 17,867 2,394,824
Operator

(10)
5% Annual © - 0.9740 0.9276 0.8835 0.8414 0.8013 0.7632 0.7268 0.9010
Deferment Factor

(11)
Present Worth (10) * (9) $ 434,277 621,599 414,707 287,347 224,408 129,757 12,986 2,157,736
Of Cash Flow

© DCR= [(1+i)1-t – (1+i)-t] / 12[(1+i)1/12 -1]

DCR annual deferment factors, applicable to equal payments at the end of each month
 Case 2

Same as Case 1 with the

exception that there is
higher production to
reduced
d d formation
f ti d
damage
from UBD.
UBD.
 C
Case 2
Year 1 2 3 4 5 6 7 Total

Estimated Future Operation Units

(1)
Gross Lease - bbl 221,324 187,308 135,247 106,392 85,756 60,927 19,826 816,781
Production

(2)
Net Production R * (1) bbl 82,997 70,241 50,718 39,897 32,159 22,848 7,435 306,293
To Operator

(3)
Gross Income (2) * $13.00 $ 1,078,956 913,127 659,330 518,661 418,061 297,018 96,654 3,981,806
To Operator

(4)
Development $ 750,000 0 0 0 0 0 0 750,000
Cost

(5)
Number of
- - 60 60 48 48 36 36 24 312
Producing Well
Months

(6)
Operating (5) * $5,000 $ 300,000 300,000 240,000 240,000 180,000 180,000 120,000 1,560,000
Expense
 C
Case 2
Year 1 2 3 4 5 6 7 Total

Estimated Future Operation

p Units

(7)
Capital - $ 20,000 20,000 20,000 20,000 20,000 20,000 20,000 140,000
Expenditure

(8)
Share of WI *
$ 535,000
, 160,000
, 130,000
, 130,000
, 100,000
, 100,000
, 70,000
, 1,225,000
, ,
Operating
O ti and
d [(4)+(6)+(7)]
[(4) (6) (7)]
Capital Expenses

(9)
Cash Flow to (3) – (8) $ 543,956 753,127 529,330 388,661 318,061 197,018 26,654 2,756,806
Operator

(10)
5% Annual © - 0.9740 0.9276 0.8835 0.8414 0.8013 0.7632 0.7268 0.9010
Deferment Factor

(11)
Present Worth (9) * (8) $ 529,814 698,600 467,663 327,019 254,862 150,364 19,372 2,483,883
Of Cash Flow

© DCR= [(1+i)1-t – (1+i)-t] / 12[(1+i)1/12 -1]

 Case 3

Same as case 2 with the

exception that development
costs for the five wells are
$150
150,,000 less, due to
improved drilling while
underbalanced..
underbalanced
 C
Case 3
Year 1 2 3 4 5 6 7 Total

stimated Future Operation Units

(1)
Gross Lease - bbl 221,324 187,308 135,247 106,392 85,756 60,927 19,826 816,781
Production

(2)
Net Production R * (1) bbl 82 997
82,997 70 241
70,241 50 718
50,718 39 897
39,897 32 159
32,159 22 848
22,848 7 435
7,435 306 293
306,293
To Operator

(3)
Gross Income (2) * $13.00 $ 1,078,956 913,127 659,330 518,661 418,061 297,018 96,654 3,981,806
To Operator

(4)
Development $ 600 000
600,000 0 0 0 0 0 0 600 000
600,000
Cost

(5)
Number of
- - 60 60 48 48 36 36 24 312
Producing Well
Months

(6)
Operating (5) * $5,000 $ 300,000 300,000 240,000 240,000 180,000 180,000 120,000 1,560,000
Expense
 C
Case 3
Year 1 2 3 4 5 6 7 Total

Estimated Future Operation Units

(7)
Capital - $ 20,000 20,000 20,000 20,000 20,000 20,000 20,000 140,000
Expenditure

(8)
Sh
Share off WI *
$ 460,000 160,000 130,000 130,000 100,000 100,000 70,000 1,150,000
Operating and [(4)+(6)+(7)]
Capital Expenses

(9)
Cash Flow to (3) – (8) $ 618,956 753,127 529,330 388,661 318,061 197,018 26,654 2,831,806
Operator

(10)
5% Annual © - 0.9740 0.9276 0.8835 0.8414 0.8013 0.7632 0.7268 0.9010
Deferment Factor

(11)
Present Worth (9) * (8) $ 602,864 698,600 467,663 327,019 254,862 150,364 19,372 2,551,458
Of Cash Flow

© DCR= [(1+i)1-t – (1+i)-t] / 12[(1+i)1/12 -1]

 Summary of all Cases
(Present Worth of Cash)

Year
C
Case
1 2 3 4 5 6 7 Total

1 434,277 621,599 414,707 287,347 224,408 129,757 12,986 2,157,736

2 529,814 698,600 467,663 327,019 254,862 150,364 19,372 2,483,883

3 602,864 698,600 467,663 327,019 254,862 150,364 19,372 2,551,458

 Summary of Examples
700,000

600,000
Worth of Cash Flow ($)

500,000

400,000

300,000
Present W

200,000

100,000

0
1 2 3 4 5 6 7

Year

Projections Over Seven Years