Anadarko Petroleum Corp., based in The Woodlands north of Houston, is using a directional drilling technique originated for relief wells to cut a transportation route for natural gas under a 1,000 ft gorge on the Buckinghorse River in northeast British Columbia.
Anadarko already has drilled two natural gas wells, capable of combined production of 10 MMcfd, that tap into reserves estimated at 20 bcf in its huge acreage position north of that rugged river. However, there are no pipelines to provide transportation for that stranded gas to processing plants and pipeline infrastructure to the south.
The banks of the gorge are so steep that the "standoff" distance required to drill a gently sloping hole though which to insert a conventional pipeline under the river would be "tremendous," said Robert P. Daniels, vice-president of Canadian operations for Anadarko. Moreover, he said, "The slope on both sides of the gorge is very unstable, with a lot of sloughing. It would have been a very ambitious project, very expensive," to put a conventional pipeline under that river.
Even worse, said Daniels, "The chance of success wasn't very high."
Drilling two wells
Instead, Anadarko plans to drill two wells 1.8 miles apart on opposite sides of the river, down 4,600 ft to the "very tight" Baldonnel formation. The two wells then will be drilled horizontally through that formation to intersect each other under the river. When that project is completed, Anadarko plans to inject gas from its producing wells down the cased well on the north side of the river, through 100 m of horizontally drilled open hole under the river, and up the cased well on the south bank. That well will "tie into the Jedney [pipeline] infrastructure that will transport the gas to the Caribou gas processing plant, Daniels said.
Anadarko figures it will cost $12 million (Can.) to drill the two wells with the under-the-river open-hole connection. "We looked and looked at a pipeline, but it would have cost twice that much money," said Daniels. The distance that would have to be drilled to install a shallow-grade pipeline under the river in the steep gorge and back to the surface on the opposite side "would have been almost a record distance for a pipeline crossing," he said.
In drilling the intersecting horizontal wells, Anadarko will use technology originally developed for drilling relief wells to intersect and kill blowouts. That technique also has been employed in the development of coalbed methane, with radial wells drilled to intersect a central wellbore. That's accomplished by placing "a magnetic source down [the target well] and a magnetic receiver down the other [intersecting well] and drilling to intersect the signal," Daniels said.
The industry has demonstrated a "very good ability to intersect wells" using that technology. Anadarko's proposed project represents "a totally new application" of that technology with "a better chance for success" than a conventional pipeline, said Daniels.
"The Baldonnel is actually the reservoir rock to the north, but there are three sections. The upper-most formation—the reservoir rock—is porous and permeable. But the middle one is tight, and the lower section is tight," he said. In the river gorge, the top two Baldonnel sections are missing, leaving only the third section under the riverbed. That formation is "very, very tight, with no fracturing or anything like that. We think it's going to be very good rock to go through" with horizontal wells, Daniels said.
"We have one of the horizontal wells drilling right now. We expect to have production online in March," said Daniels.
The proposed project would have a throughput capacity of 20 MMcfd when completed. In addition to its two existing gas wells, Anadarko is drilling a third development well north of Buckinghorse River. "We anticipate by next winter we will have 20 MMcfd coming through the proposed river crossing," Daniels said.
Promising technology
Anadarko and British Columbia government officials "are very excited about this, because this kind of technology can open up a lot of area up here," he said. "There are all sorts of areas up there that are very, very remote, and there are lots and lots of rivers. It's very expensive to bring [pipeline] infrastructure in. We would always look at the merits of this [intersecting-wells approach] vs. just a standard under-the-river [pipeline] crossing."
Daniels said, "We think that's going to be a big growth area because, just to the south of the river, the Jedney area has produced 900 bcf of gas, and the plays don't stop at the river. Development stopped at the river, because we couldn't get [pipelines] across to get the gas out."
He said, "We have several wells already drilled that are capable of production. A couple of other people have standing wells up there. We're trying to consolidate our position. We're shooting a 3D [seismic survey] up there to identify more prospects."
Anadarko has a resource potential of 200-500 bcf of gas on its properties north of the Buckinghorse River, said Daniels. The company acquired that acreage though its merger with Union Pacific Resources Corp. in July 2000, which put Anadarko back in Canada.
Anadarko previously had a small Canadian operation but closed that office in 1994.
However, the company made a strategic decision in the late 1990s "to have more exposure to North American gas. We thought the North American gas market was though the bubble period to where we needed to have as much gas as we could to feed into the market," Daniels said.
Anadarko Canada
The Canadian division headed by Daniel operates in the provinces of British Columbia, Saskatchewan, Alberta, and Northwest Territories. Anadarko also has operations in the Mackenzie Delta and off Canada's east coast, but those are part of its international operations out of its corporate headquarters near Houston.
Anadarko Canada ranks 13th in Canada on a production basis, 16th in reserves, and 11th in land holdings with about 5 million net acres. It produces some 106,000 boe/d. Its proved reserves totaled 288 million bbl at yearend 2002 and are expected to exceed 300 million bbl at the end of 2003, Daniels said.
"We're about 16% of Anadarko, whether it's employees, production, reserves, or capital. This year, we'll produce about 30.1 million boe and spend $425-430 million (US)," he said.
"We deal with numerous groups in Canada that are quite different from what you have in the US, particularly the aboriginal groups that have quite different rights in Canada than in US," he said. "So we have to be constantly working with them and making sure we understand their needs, and that they understand what we are trying to do."
Daniels said, "Most of British Colombia has unsettled land claims. If you put all the traditional lands on a map, about 110% of BC is claimed as traditional lands [by native tribes], so they've got some issues they've got to settle up there. But this is an industry growth area—not just for Anadarko but for the industry."
Anadarko should have 18-19 rigs working in Canada at the peak of winter drilling 2004, down slightly from 21-22 in 2003. Anadarko Canada drilled 350 wells this year, but that rate of activity probably will be "down a little bit" in 2004, with next year's capital spending "close" to the 2003 level, "but not as high," Daniels said.
Because of seasonal restrictions, Canadian rig activity peaks during the winter and falls to much lower levels during the summer. As a result, Daniels said, "We did a study and found we could save a tremendous amount of money if we'd contract rigs for the year. We could gain efficiencies, we could gain safety by keeping the same crews operating all year round."
Therefore, he said, "What we've tried to do is level out the utilization of the rigs. Two years ago, we went from 27 rigs working in the winter to 4 rigs active in the summer. In 2003, we kept 8 rigs running all summer, and we peaked at 22 during the winter. In 2004, we're going to keep more rigs going in the summer time and have about 18 rigs. We're trying to level off that peak-trough cycle, identify those areas where we can operate in the summer time, and keep some rigs going all year round."
Anadarko Canada expects to achieve a 25% cost savings with that 3-year drilling program it now has in place, Daniels said.