Underbalanced Drilling Overview and Status

MK0124

Introduction • Why drill Underbalanced - theory and results • Techniques for achieving Underbalance • Surface considerations • Downhole technology • Lessons learned

Why Drill Underbalanced • Production – Minimize formation damage – Improve initial and long term production rates • Improve ROP • Reduce payback time by initiating production earlier • Eliminate or reduce expensive stimulation and clean up procedures • Cost – Short term pain for long term gain

Well Selection Criteria • Formation Pressure - How depleted, depth? • Reservoir Properties - Permeability/porosity, structure... • Expected Production Rate - Must handle produced fluids on surface while drilling • Rock Strength - Will hole collapse? • Produced fluids - Gas vs. Oil - Chemistry - CO2/H2S

Techniques • Natural (Pmud < Preservoir) • Air drilling • Injection/Artificial lift – Two phase fluid – Parasite string* – Concentric casing/microannulus*

* New wells

Underbalanced Drilling Through Drillstring Injection Injected Gas Produced Fluid

Underbalanced Drilling Microannulus Injection Injected Gas Produced Fluid Smaller Diameter Casing String

Intermediate Casing String

Husky Oil Edgerton Horizontal Well - Surface Casing Head

13 3/8" 9 5/8" 7"

Underbalanced Drilling Parasite String Injection Injected Gas Produced Fluid

Small Diameter Coiled Tubing String

Side Pocket Mandrel

Parasite String Surface Hookup Intermediate Casing Bowl

Packing Nut BOP’s

Packing

Intermediate Casing Parasite String Valve Slips Casing Slips Parasite String

Companion Flange

Casing Slips Orienting Screw

Surface Casing Bowl

Parasite Equipment Gas-Injection Float Shoe

Steel Saddle Steel Inlet Block

Aluminum Insert

Pros and Cons of Each Technique • Two phase flow – Interferes with conventional MWD – Suitable for re-entries • Parasite string – Provides additional injection volume with two phase flow – Limited to installation at less than 50° – Can be damaged when installing – Provides external conduit to surface-safety risk

Pros and Cons of Each Technique • Microannulus – Can be installed at 90° – System can be pulled and re-used • Microannulus and Parasite – Both allow conventional MWD use – Both allow continuous U.B. condition even during surveys – Only appropriate for new wells

Downhole Equipment • Hydrostatic control valve • Pressure-while-drilling • Motors • MWD – Mud pulse telemetry – Electromagnetic telemetry • Coiled tubing orienter

Hydrostatic Control Valve Fully Closed

Fully Open

Underbalanced Drilling with PWD 15900

450

14250

375

12600

300

10950

225

9300

150

7650

75

SAMPLE WELL 6000

215 06:49:0

0

360 09:14:0

505 11:39:0

650 14:04:0

795 16:29:0

940 18:54:0

TIME (minutes)

1085 21:19:0

1230 23:44:0

1375 02:09:0

1520 04:34:0

TEMPERATURE (°C)

PRESSURE (Kpa - G)

Pressure

Downhole Orienter For Coiled Tubing Drilling HCV, Shear Sub, CT Connect Sub

MWD Orienter

Dump, EQ Subs Motor

Coiled Tubing

Electromagnetic Telemetry

LS 200

0

Surface Antenna

Command Center • Central location for monitoring all critical surface and downhole parameters • Communications center • All drilling procedures synchronized

Software • Allows planning and modelling of potential scenarios • Inputs: geometries, reservoir pressure, fluid descriptions, temperature • Models effects of: – Reservoir influx – Surface injection rate – Surface pressure – Compressive/non-compressive fluids • Calibrated with Pressure-While-Drilling sub to actual conditions

Pressure-While-Drilling • Measures annulus pressure, transmits via MWD to surface • Static pressure measured • Software model gives injection rate to achieve desired underbalance pressure • Formation comes in and creates dynamic pressure situation • PWD allows continuous monitoring • Injection rate modified as necessary

Surface Monitoring System Advanced, Proven Sensors • Pressure/temperature: casing annulus, standpipe, N2 injection line, and separator • Venturi flow meters (N2 injection rate and flare line) and Mass flow meters (fluid flow rate and density) • H2S sensors (if required) • Infrared Continuous Gas analyzer (total hydrocarbon %) • Ultrasonic Tank Level sensors

Underbalanced Drilling Surface Monitoring System P2

RIG MUD PUMPS

NATURAL GAS SUPPLY

FLOW MONITORING 1. Flow Line 2. Flare Line 3. Pump Rate 4. Gas Injection Rate

F3 HORIZONTAL SETTING TANK

T2

SETTING TANK1 (1000 bbl)

T1

SETTING TANK 2 (1000 bbl)

SETTING TANK 3 (1000 bbl)

DRILL PIPE

TO STAND PIPE

TOP DRIVE

TANK LEVEL SYSTEM

T3

1. Tank Level 2. Tank Level 3. Tank Level 4. Dump Tank

P4

ROT. BOP GAS COMPRESSORS

PIPE RAM

SAMPLE CATCHER

MANIFOLD

MUD CROSS

P3

DUMP TANK (400 bbl)

F1 P5

KILL LINE

P1

T4

GAS SEPARATOR

BLIND RAM

F4

PRESSURE MONITOR

ANNULAR

PARASITE STRING

GAS COMPRESSORS

P6 GAS TO FLARELINE (C/W REMOTE ELECTRIC IGNITION)

F2

1. Gas Injection Pressure 2. Mud Pump Pressure 3. Flow Line Pressure 4. Separator Pressure 5. Flare Line Pressure 6. Kill Lin e Pressure

Surface Monitoring System Software • Monitors all critical surface parameters at one central location • User-defined alarm conditions • Allows onsite configuration •

Real-time plotting

• Supports multiple displays • Windows based

SENTRY® Software

E.R.C.B. Recommended Surface Layout Flare

50m

50

m

m 50

Production Tanks Wellhead Rig Tanks

50m

m

25

Remote BOP Controls

50m

Status • Over 300 underbalanced wells drilled to date - 3 rigs drilling continuously for one customer • Predominantly in Canada • One well drilled on Barrow Island, Australia • Plans to drill in Oman and Germany • To date: No major safety incident

Lessons • Command Center, communication, contingency planning is vital • Injection has resulted in rapid hole cleaning • Top drive drilling reduces connections and idle survey time • Must consider stack height when using R-BOP (must be close enough to kelly bushing to engage kelly drive) • Concentric string – run packers below before pulling 7" • Rigsite layout

Conclusions • SSDS have drilled over 300 underbalanced wells in Canada • Three different techniques have been developed • ROP improvements of up to 10x, average of 2-4x realized • Production rate improvements of 10x, average of 3x realized • SSDS is continuing development of techniques and equipment

Blaine Comeau has asked that a copy of these notes be included with each set of overheads or 35mm slides provided to persons giving the presentation. – BJB 1/29/97

UNDERBALANCED DRILLING PRESENTATION SSDS MKTG. COMM. DOCUMENT CONTROL NO. MK0124

PRESENTATION NOTES 00516.01= Slide 1 -

Title slide

00516.02= Slide 2 -

Introduction - just read

00516.03= Slide 3 Why Drill Underbalanced Minimize formation damage - In zones that are sensitive to invasion and/or are very depleted. Improve initial and long term production rates - some wells produce so well that they pay for themselves before the drilling is finished. Eliminating the damage while drilling can have a lasting impact on the total production from the well. Some reports of 10 times production rate of conventional well, average improvement of about 3x Improve ROP - some reports of 10 times improvement, average improvement of 2-4 times Reduce payback time - by initiating first oil sooner, profit is realized sooner. Eliminate/reduce stimulation - by avoiding formation damage instead of trying to go back and clean it up Cost - Short term increased upfront cost due to extra expense primarily for nitrogen and pumping equipment, is offset by the long term benefits of eliminating stimulation and improved long term production. 00516.04= Slide 4 Well Selection Criteria Formation pressure - will dictate how much underbalanced you need to be, which will determine the technique (water/oil for higher formation pressures, nitrified/gasified fluid for depleted to severely depleted, air/mist/foam for hard, mostly dry rock above the reservoir (air not generally used in reservoir due to fire hazard), nitrogen mist for severely depleted with fairly high condensates present (to reduce fire hazard) Reservoir properties - just read Expected Production Rates - logistical issue - how much production can you handle, and how fast? These wells will be producing while drilled, and injection rate will be increased/decreased depending on flow rate...can you handle the optimum production rate to ensure underbalanced conditions are maintained at the end of the well as well as the heel? Rock Strength - should have sufficient hole strength to avoid hole collapse Produced Fluids - gas requires separation equipment rated to handle expected volumes. Oil requires enough tank capacity. Environmental restrictions may apply. C02/H2S will require completely closed surface systems and may produce a safety hazard that may make other well candidates a better choice. Comment: Our Canadian operations have been able to operate safely on a ROUTINE BASIS with significant levels of H2S. 00516.05= Slide 5 Techniques Natural - formation pressure is higher than the pressure created by the mud column (hydrostatic).

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Air Drilling - I usually don’t mention this much, because as a company we have focused on nitrogen injection or natural gas. However, you may mention we are developing an air motor and conducting tests at our Houston facility to model mud motor performance on air and mist. Injection/Artificial Lift - this is the focus of this talk. Three methods exist. Two phase fluid - nitrogen or natural gas injected into water or crude oil (usually from the formation being drilled if possible). Applies to new as well as re-entry wells. Parasite string - where typically 1” Coiled Tubing is strapped to the outside of the casing string which is run in just before drilling the reservoir, so that the injection point is as deep as possible. However, as a practical rule of thumb, the inclination is usually limited to no more than 50° due to the damage which has occurred to the CT when attempting to install it at higher inclinations. Concentric casing/microannulus - casing liner is hung off at some point above the reservoir, then a “scab” liner is run in which has perforations (holes) in the last joint. This joint is run in until just above the first liner, and gas is injected down the backside between the primary casing and the scab liner. The gas flows down, enters the drill pipe/casing annulus through the perforations, and returns up the drill pipe/casing annulus where it lightens the head. Slide 6 Underbalanced Drilling Through Drillstring Injection (graphic) Show and describe flow path through drill pipe, out bit, and up annulus (mixed with mud from surface to surface) Slide 7 Underbalanced drilling - Parasite String Injection (graphic) Show flow path down parasite string, entering into side pocket mandrel (much like typical gas lift mandrel) and entering annulus. Although graphic shows greater than 50° installation, should reiterate the rule of thumb - 50° max inclination for installation/side pocket location Slide 8 Parasite String Surface Hookup (graphic) Point out the yellow coiled tubing location and the valve for safety control. Slide 9 Parasite Equipment (graphic) This is installed at the bottom of the casing string. The aluminum insert is drilled out when the float shoe is drilled out, thus opening the flow path from the coiled tubing into the annulus. Use a pointer to run vertically along the inside right wall of the float shoe to illustrate where the aluminum insert will be cut across. Slide 10 Underbalanced Drilling - Microannulus Injection (graphic) Show flow path down annular gap between two casing strings, entering through ports, and returning up drillstring/casing annulus. Reiterate that this is for new wells, and that this allows you to inject at the bottom of the curve (not limited to 50° like parasite string) Slide 11 Husky Oil Edgerton Horizontal Well - Surface Casing Head Point out the three casing strings, show the injection point (middle port on left/right side) and flow path down gap between 95/8” and 7”. Slide 12 Pros and Cons of Each Technique Two Phase Flow - aerates the mud, making it impossible to pulse an MWD signal through. Has been done with MWD by shutting off nitrogen long enough to pump up a survey, but some risk of exerting pressure on the formation, thus negating or reducing benefit of underbalanced drilling. Also, must shut off nitrogen to make a trip, thus killing well. Suitable for re-entries (as opposed to microannulus and parasite string, which both require installation of new equipment). Parasite string - can be used in conjunction with drillstring injection to further reduce hydrostatic. Drillstring injection can be shut off on connections while continuing to pump down parasite string, thus maintaining underbalanced at connections. Slide 13 Pros and Cons pt. 2 Microannulus - Read. Scab liner is not permanent, so can be re-used on multiwell project.

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Microannulus and Parasite - conventional MWD because mud is only thing in drill pipe. Continuous underbalanced as explained above for parasite string - can continue to pump nitrogen while making connection to keep hydrostatic head off. Only appropriate for new wells - requires new equipment to be installed. Slide 14 Downhole Equipment - read Slide 15 Hydrostatic Control Valve - open only under flowing pressure, so when pumps are shut off, keeps mud in drill pipe from U-tubing through to annulus (which may be lighter due to micro/parasite injection in annulus). Describe flow path blue area must line up with dashed circle below in order to open channel for mud flow. Slide 16 Pressure while Drilling - First bullet is general description, bullets 2-6 are steps in sequence. For example, “We measure the static pressure, then run the software model to determine the injection rate to achieve the underbalanced condition. The formation comes in...” Slide 17 Underbalanced drilling with PWD - High pressure at left is before nitrogen was turned on. After that, high points are connection, low points are high nitrogen rates to displace annulus, then backing off nitrogen to achieve a relatively flat rate through drilling of joint. Disregard temperature curve on right.. don’t even mention it. I’ll get it removed. Slide 18 Electromagnetic Telemetry - currently under development, with some early versions in the field now. Expect to be launching it early next year (97). EM telemetry transmits a signal through the earth and does not rely on a continuous liquid phase in the drill pipe for signal transmission. Somewhat dependent on geology for operation... doesn’t work in all wells. Slide 19 Coiled Tubing Drilling - Perhaps the best means of doing underbalanced drilling due to the built in ability to handle very high pressures safely. SSDS have drilled over 30 wells in Alaska and California with coiled tubing, and are watching the market demand for an underbalanced CTD system. (Truth is: we don’t have anyone working on a wireline system, which is what all the other competitors are doing. Our orienter will work in some cases depending on the pressure difference between the bore and the annulus.) - Orienter is required for CTD because you cannot rotate the BHA from the surface in order to change direction. Works by cycling the pumps. Every pump cycle, the orienter changes by 20°. No tubing movement is required, thus reducing fatigue, and no weight on bit is required. Orienter is very fast and reliable. Slide 20 Command Center - critical component of Underbalance Drilling. Enables key communications during all phases of drilling. Single trailer unit for co. man, geologist, directional driller, air/nitrogen man, tool pusher Slide 21 ERCB Recommended Surface Layout - the Energy Resources Conservation Board of Alberta Canada has adopted the recommendations of the oil companies and service companies who are active in underbalanced drilling and have issued guidelines on UBD which include this recommended layout. Ensures adequate spacing between flare, production tanks, rig tanks, and remote BOP controls in relation to well head. Slide 22 Software - Read Note: Sperry-Sun have tried some software, but for the most part today we know what to expect and are basing our field operations on past experience in the given area/field. No adequate software is commercially available for nitrified/gasified fluid drilling. Slide 23 Surface Monitoring System - Advanced/Proven Sensors Sperry-Sun has put together a surface sensor package which is a combination of proven and new technology...Read off list. Slide 24 Underbalanced Drilling Surface Monitoring System Point out the various types of sensors (pressure, flow, tank level) and their locations Slide 25 Surface Monitoring System - Software

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Sperry-Sun Canada have developed the SENTRY surface system for monitoring all sensors and critical parameters at one central location. Extremely configurable. READ. Final note... since the system is windows-based, it should be easily incorporated into SSDS’s new INSITE surface system, based on Windows NT. Slide 26 Sentry Software Show how the software emulates the various components in the surface system. Talk about how every parameter on the screen can have a user-defined low and high limit to automatically alert the user of a potential hazard condition Slide 27 Status - Read, then home in on last point - NO MAJOR SAFETY INCIDENT TO DATE - this is in part due to the fact that people are much more alert during this operation and paying attention to details. Slide 28 Lessons - MAJOR POINT - Command Center is crucial. Injection has gotten stuck pipe unstuck, increased hole cleaning capability. READ the rest. Slide 29 Conclusions - READ

All comments, suggestions, and yes, even corrections, are gladly welcomed and are to be sent to the attention of Blaine Comeaux in Houston at bcomeaux on cc:Mail. All “Notes” are intended for your eyes only and are not to be relayed to the customer without some filtering.

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