China’s low-permeability gas resources await development

Jan. 5, 2009
China has large volumes of low-permeability natural gas resources with unique characteristics that could be exploited with appropriate technologies.

China has large volumes of low-permeability natural gas resources with unique characteristics that could be exploited with appropriate technologies. At present, lack of development and management technologies has hindered effective exploitation of these resources.

The low-permeability gas resources are distributed widely in the Ordos, Sichuan, Tarim basins, as well in other basins.

Resource estimates

In China, exploration efforts to date have yielded the discovery of more than 30 large and medium-sized, low-permeability gas reservoirs. Proved reserves are greater than 2 trillion cu m (about 70.6 tcf), accounting for more than half the total proved natural gas reserves in China.1

In Ordos basin, five large-scale low-permeability gas fields (Sulige, Daniudi, Jingbian, Yulin, and Wushenqi) have proved reserves of more than 100 billion cu m each (see table). Xinchang and Luodai are two large-scale, low-permeability gas fields discovered in Sichuan basin.2

The latest national oil and gas resource evaluation (NOGRE) released in August 2008 shows that China has 56 trillion cu m of prospective natural gas resources, 35 trillion cu m of geological resources (including proved reserves and reserves not yet proved but that could be produced with current technology), and 22 trillion cu m of recoverable resources.3

By applying a 20/80 rule,4 our rough estimate is that the low-permeability portions of these resources are 44.8 trillion cu m, 28 trillion cu m, and 17.6 trillion cu m, respectively.

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Fig. 1 shows the resource triangular for natural gas in China. In 2007, low-permeability gas production was more than 20% of all natural gas produced in China. Gas production in China during 2007 was 69.3 billion cu m, of which 13.9 billion cu m was from low-permeability reservoirs.5

Low-permeability gas resources in China have unique characteristics in geology, development, and economics. Understanding these characteristics is essential for determining the best technical and economic strategies for successful exploitation.

Resource characteristics

Most low-permeability gas reservoirs in China have a sedimentary facies and include fluvial, delta, or volcanic rock.

The physical property and distribution of reservoirs are the most important geological factors influencing development of low-permeability gas reservoirs. Pores and fractures in low permeability reservoirs always have irregular distribution and are poorly connected by very narrow capillaries.

The microscopic sections show the difference in high permeability (top photo) and low-permeability (bottom photo) sandstones (Fig. 2). Photo from US Department of Energy National Energy Technology Laboratory.
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Fig. 2 compares the microscopic sections of high permeability and low-permeability sandstone.

Geological characteristics of low-permeability gas reservoirs in China include low porosity, deep depth, thin reservoirs, and much heterogeneity.6

Due to the geological characteristics mentioned previously, the low-permeability gas reservoirs in China are characterized as followed:

  • Well production capacity generally is low and distributed unevenly.
  • Producing pressure drop is always large for stabilized production.
  • Maintenance of stable production is difficult because reservoir pressure declines quickly.7
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Development of a low-permeability gas reservoir depends on its economic viability. These projects are often marginally economic, have long payback periods, and have risks that derive from the uncertainty from such factors as resource quantity, geological conditions, technology, and gas price.

Key technologies

During recent decades, technology has played an important and crucial role in producing these gas resources. With advanced and compatible key technologies, China’s low-permeability natural gas resource can be developed effectively and economically.

An important factor for developing these resources is reservoir characterization for quantifying fracture systems and their variability.8 This information along with other data can identify the prospective reservoir areas, reduce risks, and improve the viability of low-permeability reservoirs development projects.

Because of their complex geological characteristics, it is difficult for engineers to obtain an objective and systematical understanding of low-permeability gas reservoirs. Detailed reservoir characterization technology, however, can reveal such properties as flow distribution, fracture network distribution, water and gas distribution, reservoir connectivity, and sequence division to help engineers understand better and optimize gas field development programs.9

With this information, engineers can determine sweet spots in low-permeability reservoirs for prioritizing development.

Reservoir characterization has played an important role in developing Sulige gas field, at this time the largest low-permeability gas field in China.

Low-cost and efficient drilling technology tailored for low-permeability reservoirs is indispensable for successful development.

Horizontal drilling has helped oil and gas field development in North America. For low-permeability reservoirs, horizontal drilling increases well productivity and improves recovery factors because of a larger drainage area. The technology also reduces the number of production wells needed and the cost per unit of produced gas.10

Currently in China, the cost of drilling a horizontal well nearly equals the cost of drilling a conventional vertical well. The production from a horizontal well, however, is several times more than from a conventional vertical well.

During the past decade, Chinese oil and gas companies have accumulated experiences in applying horizontal drilling in Ordos basin low-permeability gas fields.

Underbalanced drilling also is becoming common for developing low-permeability oil and gas fields in the world. Underbalanced drilling can reduce reservoir formation damage and increase gas recovery. At the same time, it can increase the bit penetration rate, shorten the drilling cycle, and reduce drilling costs. Both horizontal and multilateral drilling hold promise for drilling more cost-effective wells.11

The overall level of underbalanced drilling technology in China lags behind that of the world. The technology has been successfully tested in Sulige gas field, and it is believed that the technology will be used widely in development of low-permeability gas fields in China.

Slimhole drilling technology is another low-cost and efficient technology tailored for low-permeability reservoirs. Worldwide experiences on the application of slimhole drilling technology in Europe and the US show that it can reduce drilling costs. Compared to conventional drilling, slimhole drilling can lower drilling costs by 20% on average.

If the gas fields are in remote areas or areas where the natural environment is poor or the transportation is inconvenient, slimhole drilling can reduce drilling cost by up to 50-70%.12

Economic production of natural gas from low-permeability reservoirs requires reservoir stimulation, such as hydraulic fracturing, to obtain adequate producing rates.13 14 In China, fields that have hydraulic fractured wells include Bajiaochang, Xinchang, and Luodai gas fields in the Sichuan basin and Sulige, and Daniudi gas fields in the Ordos basin.

Operators also have applied high-energy gas fracturing in developing the tight sandstone gas reservoirs in west of Sichuan.15

Overall, Chinese oil and gas companies have mastered a variety of effective reservoir stimulation technologies; however, a gap with the world’s advanced technology still exists. In particular, key equipment and assorted technologies for fracturing need improvements before development of many low-permeability reservoirs can proceed.

References

  1. Dong Zhenzhen, et al., “A discussion on the boundary of low-permeability gas field capacity-building investment,” Natural Gas Technology Journal (Translated from Chinese), Vol. 2, No. 2, 2008, pp. 76-77.
  2. Dai Jinxing, et al., “The geochemical features of natural gas fields with reserves more than one hundred billion cubic meters in China,” Petroleum Exploration and Development Journal (Translated from Chinese), Vol. 32, No. 4, 2005, pp. 16-17.
  3. http://www.sinooilgas.com/NewsShow.asp?NewsID=10639.
  4. Stephen A. Holditch, “Tight Gas Sands,” JPT, Vol. 58, No. 6, 2006, pp. 83-96.
  5. BP Statistical Review of World Energy 2008, http://www.bp.com/statisticalreview.
  6. Gu Li, et al., “A discussion on geologic features and genesis of low-efficiency gas reservoirs,” Oil & Gas Geology Journal (Translated from Chinese), Vol. 25, No. 5, 2004, pp. 577-80.
  7. Wu Zhijun and He Shunli, “A discussion on the geologic characteristics and offtake strategy of low permeability sandstone gas reservoirs,” Drilling & Production Technology Journal (Translated from Chinese), Vol. 27, No. 4, 2004, pp.103-04.
  8. Jenkins, C.D., “Technology: catalyst for coalgas growth,” Paper No. SPE 87358, SPE Applied Technology Workshop on Coal Bed Gas Resources of Utah, Salt Lake City, Oct. 24-25, 2003.
  9. Yuan Shiyi, Hu Yongle, and Luo Kai, “State of the art, challenges and countermeasures of natural gas development in China,” Petroleum Exploration and Development Journal (Translated from Chinese), Vol. 32, No. 6, 2005, pp. 1-6.
  10. Chen Zhiyong and Ju Mancheng, “Research and application of horizontal drilling techniques in Sulige gas field,” Natural Gas Industry Journal (Translated from Chinese), Vol. 22, No. 6, 2002, pp. 65-67.
  11. Wang Haige, et al., “Using underbalanced drilling technology to economically develop low permeability Reservoirs,” Drilling & Production Technology Journal (Translated from Chinese), Vol. 24, No. 3, 2001, pp. 1-3.
  12. Ju Mancheng, Chen Zhiyong, and Ouyang Yong, “Application of slim hole drilling techniques in Sulige gas field,” Natural Gas Industry Journal (Translated from Chinese), Vol. 25, No. 4, 2005, pp. 74-76.
  13. Zhang Ningsheng, “Key production technologies of low-permeability gas reservoirs and their development trend,” Natural Gas Industry Journal (Translated from Chinese), Vol. 26, No. 12, 2006, pp. 38-41.
  14. Ammer, J.R., et al., “Technology for Increased Production from Low-Permeability Gas Reservoirs: An Overview of U.S. DOE’s Gas Program—Successes and Future Plans,” Paper No. SPE 60310, SPE Rocky Mountain Regional Low-Permeability Reservoirs Symposium and Exhibition, Denver, Mar. 12-15, 2000.
  15. Kang Yili and Luo Pingya, “Current status and prospect of key techniques for exploration and production of tight sandstone gas reservoirs in China,” Petroleum Exploration and Development Journal (Translated from Chinese), Vol. 34, No. 2, 2007, pp. 242-43.

The authors

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Luo Dongkun ([email protected]) is a senior professor at the school of business administration, China University of Petroleum, Beijing. His main research interests are oil and gas resource appraisal, economic evaluation of oil and gas exploration and development projects, and project management. Luo holds a BS in petroleum geology and exploration from the University of Petroleum (East China), an MS in management engineering from China University of Petroleum, Beijing, and a PhD in petroleum and coal field geology from the University of Petroleum (East China).

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Dai Youjin ([email protected]) is a PhD student at the school of business administration, China University of Petroleum, Beijing. His main research interest is economic evaluation of oil and gas exploration and development projects.