SASKATCHEWAN OIL AND GAS SUPPLY CHAIN REQUIREMENT GUIDE Table of Contents AUTHORSHIP & DISCLAIMER ...................................................................................................... I EXECUTIVE SUMMARY ...............................................................................................................II GLOSSARY ................................................................................................................................III ACRONYMS ............................................................................................................................. IV 1.0 BACKGROUND OF THE OIL AND GAS INDUSTRY IN SASKATCHEWAN .........................1 HISTORICAL INFORMATION .......................................................................................................... 1 VERTICAL VERSUS HORIZONTAL DRILLING & PRODUCTION LEVELS ........................................ 6 THE DRILLING RIG .......................................................................................................................... 8 SURFACE PRODUCTION FACILITIES .............................................................................................. 9 2.0 LIFE CYCLE STAGES OF A TYPICAL WELL ..................................................................... 11 EXPLORATION .............................................................................................................................. 11 Permission to Explore ...................................................................................................... 11 Exploratory Process ......................................................................................................... 12 Development Analysis ................................................................................................... 13 Regulation and Land Acquisition ................................................................................. 14 DRILLING DEVELOPMENT ............................................................................................................ 14 Site Preparation .............................................................................................................. 14 Conventional Drilling ...................................................................................................... 16 Unconventional Drilling .................................................................................................. 18 COMPLETIONS ............................................................................................................................. 21 Casing and Casing Techniques .................................................................................... 21 Perforation & Stimulation ............................................................................................... 22 The Production Tree........................................................................................................ 23 PRODUCTION............................................................................................................................... 25 Extraction 25 Maintenance, Work Overs and Reliability ................................................................... 26 RECOMPLETION AND ENHANCED OIL RECOVERY ................................................................. 27 Alternate Production Methods ..................................................................................... 27 Recompletions ................................................................................................................ 27 Thermal Recovery ........................................................................................................... 27 Polymer Flooding ............................................................................................................ 28 Solvent Injection.............................................................................................................. 29 ABANDONMENT AND DECOMMISSIONING ............................................................................ 30 Abandonment ................................................................................................................ 30 Saskatchewan Reclamation Standards ...................................................................... 31 3.0 REQUIRED WELL GOODS AND SERVICES .................................................................... 32 INTRODUCTION ............................................................................................................................ 32 DEFINING A TYPICAL OIL AND GAS FACILITY ........................................................................... 33 SASKATCHEWAN OIL AND GAS SUPPLY CHAIN REQUIREMENT GUIDE EXPLORATION .............................................................................................................................. 35 Major Components ........................................................................................................ 35 Consumables & Feedstock ........................................................................................... 40 Supporting Services & Resources ................................................................................. 40 COMPLETIONS ............................................................................................................................. 44 Major Components ........................................................................................................ 44 Consumables & Feedstock ........................................................................................... 45 Hydraulic Fracturing & Associated Costs .................................................................... 47 PRODUCTION............................................................................................................................... 48 Major Components ........................................................................................................ 48 ESTIMATE OF PRODUCTION COMPONENTS ................................................................. 60 METHODS OF TRANSPORTATION ................................................................................... 62 4.0 POTENTIAL AREAS OF ENTRY INTO THE SASKATCHEWAN OIL & GAS SECTOR ........... 67 5.0 MARKET OVERVIEW & THE CURRENT STATE OF THE INDUSTRY .................................... 74 6.0 PROSPECTIVE MARKET CONDITIONS .......................................................................... 80 Direction of the Economic Conditions for Oil and Gas ............................................. 80 Impacts on the Oil and Gas Supply Chain ................................................................. 85 Future Economic Conditions ......................................................................................... 87 7.0 POTENTIAL INDUSTRY HURDLES .................................................................................... 88 8.0 ISSUES IMPACTING THE EXISTING SUPPLY CHAIN ....................................................... 90 9.0 GUIDE TO OIL AND GAS IN SASKATCHEWAN ............................................................ 94 TYPICAL BEST PRACTICES WITHIN THE SUPPLY CHAIN .............................................................. 94 ADDITIONAL INFORMATION ....................................................................................................... 96 Related Professional associations ................................................................................ 96 Location of Proved & Probable Reserves ................................................................... 97 WORKS CITED ...........................................................................................................................98 ADDITIONAL DIGITAL GENERAL ............................................................................................ 100 REFERENCES ........................................................................................................................... 100 SASKATCHEWAN OIL AND GAS SUPPLY CHAIN REQUIREMENT GUIDE LIST OF FIGURES Figure 1.1 Saskatchewan Oil & Gas Information Map 2 Figure 1.2 Athabasca and Cold Lake Oil Sands Deposits Information Map 3 Figure 1.3 2014 Crude Oil Volume by Area (Excluding Recovered Crude Oil) in Cubic Meters 4 Figure 1.4 2014 Crude Oil Volume by Area (Recovered Crude Oil) in Cubic Meters 5 Figure 1.5 Saskatchewan Historical Oil Production by Crude Type 6 Figure 1.6 Saskatchewan Oil Well Drilling Statistics for 2012 to 2014 7 Figure 1.7 Saskatchewan Annual Horizontal Well Crude Oil Production 8 Figure 1.8 Typical Upstream Production Management 10 Figure 2.1 – Wireline Logging Depiction 13 Figure 2.2 Conventional Oil Well 16 Figure 2.3 A Comparison of Vertical & Horizontal Drilling Techniques 19 Figure 2.4 a) Before Polymer Injection and b) After Polymer Injection 28 Figure 2.5 - Polymer/Surfactant Flooding 29 Figure 3.1 Typical Drilling Rig Components 34 Figure 3.2 Yield & Tensile Strength of Common Drill Pipe Varieties 39 Figure 3.3 DETAILED DRILLING ESTIMATE 41 Figure 3.4 Tensile Strength of Common Steel Grades 45 Figure 3.5 Detailed Completion Estimate 46 Figure 3.6 Nominal Capacity of Welded Storage Tanks 48 Figure 3.7 Typical Horizontal Storage Bullets 49 Figure 3.8 Typical Three Phase Vertical Separator Vessel 51 Figure 3.9 Typical Three Phase Horizontal Separator Vessel 51 Figure 3.10 A Typical Heater- Treater 53 Figure 3.11 Simplified Lease Automatic Custody Transfer (LACT) Unit 57 Figure 3.12 Canadian Crude Oil Exports by