View PDF version

LETTER TO OPERATORS 1998-12-22

APPLICATIONS FOR APPROVAL TO PRODUCE GAS IN OIL SANDS AREAS
INTERIM APPROVAL CRITERIA AND CONDITIONS

22 December 1998

To: All Gas and In Situ Oil Sands Operators

The Alberta Energy and Utilities Board (Board) has decided to release interim approval criteria and conditions for applications for approval to produce gas in oil sands areas. The criteria and conditions were developed by Board staff. The decision to release these interim criteria and conditions was made in recognition of the difficult business decisions facing many gas producers at this time. The board believes that it should make companies aware of the direction being considered by the Board to help companies assess the risk of their drilling and tie-in decisions for this winter's drilling season.

It is important to note that these interim approval criteria and conditions are for new wells drilled and/or completed after 1 July 1998.

APPROVAL CRITERIA

For this winter's drilling season, Board staff will be using the following criteria to evaluate applications. For those applications that do not meet the criteria, a more in depth review will be required and it will likely take longer to process applications.

Bitumen ThicknessClastics

For formations that are considered to only be amenable to thermal bitumen recovery, the Board will protect areas where wells have a new bitumen thickness of 10 metres or more, using a bitumen saturation cut-off of 50 per cent pore volume.

For formations that are considered to be amenable to primary bitumen recovery, the Board will protect areas where wells have a new bitumen thickness of 3 metres or more, using a bitumen saturation cut-off of 50 per cent pore volume.

In the Athabasca Oil Sands Area, Board staff consider primary areas to include the Wabiskaw formation in Township 86 and south and the Clearwater formation. These primary areas are based on the work done by the Industry/EUB Committee to recommend application areas ⁽¹⁾ . In the Cold Lake Oil Sands Area all formations are currently considered to have primary recovery potential; however, this could change after the area is reviewed by the Industry/EUB Committee. In the Peace River Oil Sands Area no formations can be completely ruled out for primary recovery until the Industry/EUB Committee has reviewed this area; however, Board staff believe the potential for primary recovery in Peace River is quite limited.

Bitumen ThicknessCarbonates

Board staff are not aware of any potential for primary bitumen recovery from the carbonates. For formations that have potential for thermal bitumen recovery, the Board will protect areas where wells have a net bitumen thickness of 25 metres or more, using a bitumen saturation cut-off of 50 per cent pore volume. However, this criterion needs to be further clarified because of the problems associated with drilling into the carbonates.

Drilling Depth Requirements

Board staff are aware of the reluctance of operators to drill to the base of the carbonate formations because of the concerns with lost circulation and formation damage. For this winter's drilling season, the Board will exempt operators from the requirement to drill deep enough to be able to log over the base of the carbonate formation targeted for gas production. As a result of the exemption the net bitumen thickness of new wells will be unknown and hence it will not be possible to ascertain whether the criterion of 25 metres or more of bitumen thickness is met. Therefore, applications for approval to produce gas from the carbonate will not be required other than for wells drilled into:

• the Grosmont deposit application area recommended by the Industry/EUB Committee (see attachment);
• a Grosmont G Order that overlaps the Grosmont application area; or
• the G Order for the Liege Nisku-Upper Ireton-Grosmont A Pool.

Board staff are also aware that the concern about drilling into the carbonate formation can affect the ability of an operator to satisfy the requirement to drill deep enough to be able to log over the base of the clastic formation, in situations where the clastic formation is in direct contact with an underlying carbonate formation. While the Board will not require operators to drill into the carbonate formation in these situations, operators should attempt to drill as close as possible to the base of the clastic formation to be able to assess the thickness of the bitumen in the clastic formation. In processing applications for approval to produce gas from clastic formations where wells have not been drilled deep enough because of direct contact with an underlying carbonate formation, the Board will use other wells in the area to estimate the thickness of the bitumen in the applied-for wells.

Board staff will recommend that the drilling depth requirement proposed in the draft Interim Directive ⁽²⁾ be changed from requiring wells to be drilled deep enough to be able to log over the base of the oil sands deposit to requiring wells to be drilled deep enough to be able to log over the base of the oil sands zone. This change will be recommended because of the potential for trespass. However, in situations where trespass is not an issue and where channeling of overlying zones into underlying zones is expected, operators are encouraged to drill deep enough to be able to log over the base of the deposit.

Region of Influence ⁽³⁾

To estimate the region of influence in situations where there is little well control and no evidence of pressure depletion in the applied-for wells, only wells within the two sections surrounding the sections of application will be considered. On the other hand, in situations where there is evidence of pressure depletion in the applied-for wells, the source of the pressure depletion will be considered in estimating the region of influence. An initial pressure should be taken for any new well drilled in the oil sands areas for which application is made to produce gas.

Pressure Depletion

For this winter's drilling season, the Board will protect areas where the existing reservoir pressure is above 500 kPa absolute.

APPROVAL CONDITIONS

Approvals to produce gas will be subject to the following conditions.

• Approval will be contingent upon there being no objections from potentially affected oil sands leaseholders. If there are objections to an application by potentially affected oil sands leaseholders, gas producers should understand that the timing of a decision on the application will be dependent on the resolution of the objections either between the companies or through the Board's hearing process.
• Approval will not be given to a well until information from the well is submitted to the Board and it is determined that the approval criteria described is this letter are satisfied.
• As is the case with other applications submitted to the Board, and considering the interpretive nature of the approval criteria and the variable well control available to decide applications for approval to produce gas, the Board reserves the right to review and rescind any approvals that are granted.

CONCLUDING COMMENT

The Board understands that the criteria and conditions described in this letter are debatable. If a company wants to argue the criteria and/or conditions, it is invited to do so; however, the company should understand that it may not be possible to resolve the arguments before the end of this winter's drilling season.

Yours truly,

G.W. Dilay, P. Eng.
Reservoir Advisor
Reservoir Development Group

Attachment

⁽¹⁾ Report of the Industry/EUB Committee: Gas Production Application Oil Sands Areas, 24 November 1998. Available at the EUB's Information Services.

⁽²⁾ Draft Interim Directive: Gas/Bitumen Production in Oil Sands Areas; Application, Notification and Drilling Requirements. Available at the EUB's Information Services.

⁽³⁾ The region of influence is taken to be the extent of the gas pool in the case of gas directly overlying bitumen or the combined extent of the gas pool and water zone in the case of gas overlying water overlying bitumen.