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  4. Non-Geological Factors

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- You've reached the final section of this four part series on the deveoplent of unconventional reservoirs. In part four, we'll discuss the key non-geologic factors associated with the development of these resources and then wrap up with conclusions. If the key geological factors associated with an unconventional play are not in place, that resource does not exist. So obviously, there's nothing there to produce. That being said, if the non-geologic factors are not in place. Even the most promising geologic unconventional play is not viable. As with topics discussed under the geologic section, many of the slides presented today or topics presented today could be the cornerstone for their own presentation or discussion. With the time constraints we're working under, this level of detail will not be possible. I start with the environment because of its profound importance. The development of an unconventional resource is a long term project. One expects to be in an area for tens of years both drilling and producing an unconventional resource. And being a good environmental neighbor will help develop community support which is vital for the long term success of any project. Water. Each frac job requires millions of gallons of water. So defining the source for this supply of water is crucial. Also, following the frac job, a great deal of water that was used for the frac will be produced back. Now part of this water will be reusable in the next frac job. But portions will not be reusable and that must be disposed of in a responsible fashion. Again, good neighbor policy is vital. Proppant. Along with millions of gallons of water Many tons of proppant are required for each frac job. Now this proppant, or sand, must meet strict specifications with regard to grain size, percentage of quartz, and roundness or sphereocity. Now one of the primary areas in the Americas for this sand are the Midwest states of Wisconsin and Minnesota. As these source areas are great distances from areas that are currently being developed such as the Balkin in North Dakota Montana or the Eagle Ford in South Texas. Associated logistics for transporting that proppant to the development areas is critical in defining financially successful developments. Infrastructure is critical in an unconventional play. Is good road to required to transport the drilling and completion equipment into an area where thousands of wells can be drilled. Following the completion of these wells we need a method to transport error egress the hydrocarbons away from the field and into consumer areas. Then method for egress, the produced hydrocarbons must also be available. You will remember from the final slide of part three the map of the Eagle Ford in South Texas. That EIA map shows the Eagle Ford play ending at the Texas Mexico border Now realize Eagle Ford formation was deposited in a marine environment over 65 million years ago and did not care where the Texas Mexico border was, or is. That play is currently limited to the area North of the US/Mexico border because Texas has the infrastructure to drill and produce the Eagle Ford. Mexico does not. Manpower and Equipment. The development of an unconventional resource requires large numbers of very well trained personnel to drill complete and then produce this resource. There's also a need for a large amount of very specialized equipment in order to do the drilling in needed stimulation projects. Both the training of these personnel's and the manufactore of this equipment are long term projects. Unconventionals are long term projects. Community Support. I mentioned this one more time to emphasize the importance of having a local area behind a project. There are areas in the U.S. that have excellent geologic potential for unconventional development that are not being developed due to a lack of local support. So what can we take away from this series on unconventional resources. First, the discovery of how unconventionals can be produced economically has caused a paradigm shift in the oil and gas industry and not just in the U.S. Where discoveries of conventional resources may have peaked, the discovery and development of unconventional resources is very much in early stage development and there are vast resources not just in the Americas, but worldwide. These very large resource plays have relatively low geologic risk. Note that I said geologic not economic. Further, the development of these resources will be technologically driven. It's one thing to identify a potential unconventional play, and quite another to produce it economically. Production curves for unconventional wells are very different from those of conventional wells. Typical unconventional wells they're production will drop off significantly in the first couple of years but then run at low rates for tens of years. As such, to maintain a significant production profile, in an unconventional play, requires many more wells in comparison to the development of the conventional field of a similar size. Unconventional plays are all different. There are going to be lithologic variations not only from basin to basin but also within a basin. There will also be changes in things such as depth of burial and structuring. It's vital to understand where these variations in geology take place in order to optimize the development. Paleo-histories. Understanding an area's paleo-history will help define that area with greatest prospectivity and what that prospectivity might be. You'll remember the Eagle Ford example were understanding its paleo-history helped define the area that is currently being produced. That area that does have the highest prospectivity. Present environment. This bullet speaks to the non-geologic factors associated with the production or development of the play. And these can have a very large effect again, back to the Eagle Ford The portion of the Eagle Ford currently being produced is in Texas not in Mexico and that has everything to do with present environment. Variations within a play. An early understanding of the geologic variations mentioned in the bullet above, will allow for the definition of sweet spots early in a development plan and thus improve the economics. The best way to define these early sweet spots is by data mining. Take advantage of all geologic and non-geologic data as early as possible. The idea of drill baby drill is not the way to optimize the development of an unconventional play. Unconventional exploration and and development techniques are still in an early stage. And there is still a lot to be learned about how to optimize these projects. But there is one thing we can be certain of. Unconventional plays are all different.