John Applegarth, Range Resources Sr. VP for the Marcellus Region agreed to speak at the 2014-15 season opening meeting of the local Pittsburgh Chapter of AIChE on Sept 17. His talk focused on why engineers and ChE’s in particular should consider a career in oil & gas. EKT Interactive’s representatives in the region were able to attend the informative session.
The meeting was held at Range’s regional HQ at the Southpointe Office Park near Canonsburg, PA. About 40 AIChE members and guests enjoyed the dinner buffet followed by John’s talk.
His interesting and insightful comments:
- History – Range brought horizontal drilling and hydraulic fracturing technology to the Marcellus Shale region in PA in 2007-08. They chose to focus primarily on Washington County in SW PA where they their exploratory wells were producing very good quantities of wet gas and there was some existing pipeline infrastructure to help get the gas to market.
- Well Pipe – Like other producers, they use 5 concentric layers of steel pipe (with concrete between each layer) to line each well and prevent any gas or frac fluids from leaking into drinking wells or spilling onto the ground around the well. They are required to pay special attention to any layers of coal deposits (mined or unmined) to prevent any leaks into underground coal mines prevalent in the area.
- Well Depth and Spacing – Their wells are generally 5-6,000 ft deep with 5-8,000 laterals. Their directional drill can bend up to 3.5° but they generally use 1.8° bend which gives them a 90° bend in about 600 ft. They have always preferred to drill multiple wells from one larger pad. Well lateral spacings were initially 1000 ft apart, but they moved to a 500 ft spacing with no loss of production per well. In a few years when most of the gas has been extracted, they plan to add new laterals lowering the spacing to 250 ft. Those later wells probably won’t be quite as good but will have a very acceptable economic payback.
- Fracking – A typical well is perforated in about 25 stages of 200 ft each. It usually takes about 25 pumping days over 4-5 weeks to frac a well. They use about 4-5 million gal of water along with 400,000 lbs sand and assorted minor chemicals for each fracking job. Water pressure is 3-9,000 psi. All the fracking equipment is run remotely from a trailer-mounted portable control center with no personnel in the immediate area for safety reasons (piping / joint ruptures and silica inhalation).
- Water & Sand – They recycle 100% of their water and don’t use any of the injection wells in the Youngstown OH area or elsewhere. Sand is imported from Wisconsin where the individual sand particles are quite circular. They tried less expensive Ohio River sand which has flatter particles but the gas production wasn’t as good. They also tried using fracking gels that worked well elsewhere but with poor results – their laterals are only at about 120°F vs. up to 300°F elsewhere.
- Well Monitoring – Once the well is in production, they continually monitor its operation by tracking 128 variables from an offsite operations center. They use specially designed 3 phase separators to separate the methane gas from the light ends and the water. The separators are heated to prevent the water from freezing. The light ends and water are stored in nearby tanks sized for that well’s output. They typically see only 5-10% of the frac water returned as flowback. Tanks have radar-based level detectors so operators don’t need to climb up the tanks and open the hatches to check the levels. Each site has several LEL detectors to monitor for gas leaks. They also check their piping with IR scanners from Clean Air Task Force in Boston to detect fugitive gas leaks. Stopping any piping leaks is environmentally friendly and also improves their collection of salable gas.
- Well Spacing – At present they usually drill 10 wells per pad – 5 to the NW, 5 to the SE. They expect to eventually have 18 Marcellus wells, along with 18 Upper Devonian and 10 Utica wells per fully-developed pad. They worked with Paterson UTI to develop walking drill rigs that can be moved from well site to well site on a pad without taking days to disassemble / reassemble the drilling rig.
- Limitations – since starting to drill gas wells in PA, their major problem has been getting the gas to market. They rely on others (mainly MarkWest) to install pipelines and separation plants, keeping the Range cash flow invested in drilling more wells. They make long term commitments to use major portions of new pipelines as plans are announced. At present methane is worth about $4 per MCF on the Gulf Coast but stranded gas here is worth only $2. Total transportation cost to pipe gas to the Gulf Coast is only about $0.30 per MCF. Their rate of return on dry gas wells is around 100% per year, on wet gas wells they get about 125% per year (based only on their direct well costs, no corp overhead).
- Urban Wells – John’s maps of well locations show an undrilled area around the city of Pittsburgh. He said that is due partly to local regulations and small lot sizes in the urban area. A larger problem is getting surface access to the land to lay gas pipelines. Some gas well laterals in Russia have been drilled (without fracking) to over 40,000 ft so he sees drilling technology could evolve to 10 mile long laterals. This would allow extensive harvesting of gas from existing and abandoned industrial sites around the urban area.
- Staffing – The new Range HQ building in Southpointe houses a staff about 300, 250 of which are directly engaged in gas exploration, drilling, fracking, and production. They did a census and found the staff of their service companies directly involved in Range activities is about 5000 – a 20:1 ratio. He said that is typical of their industry where the E&P firms rely on smaller contractors to do most of the work at Range’s direction. Much of their time is spent coordinating the work of all these contractors. They require each contractors’ vehicles to have GPS with internet connectivity so they can continuously track the location and speed of every vehicle involved in their operations.
- US Gas Supply – Range estimates that Barnett (previously the premier gas field in the US) is producing about 12 BCF per day while Marcellus is producing about 16 BCF per day and supplying about 20% of the US natural gas needs. He expects Marcellus will increase to about 32 BCF per day within a few years and supply 40% of US gas needs as drilling continues and the pipeline infrastructure bottlenecks are removed. He expects Range will increase their production from 1 BCF per day to about 3 BCF.
- CNG vehicles – John said they have about 160 trucks that are equipped to run on either gasoline or CNG. He doesn’t think CNG refueling stations are yet plentiful enough for CNG-only vehicles. He didn’t think there was enough pipeline infrastructure to support CNG refueling stations at most of the truck stops in the US (required to support an extensive conversion of trucks to CNG).
- Future Jobs Outlook – Someone asked John about emerging industries of the future. John feels that GTL (gas to liquids) plants will become economical within a few years and foresees hundreds of mini-GTL plants scattered around the gas fields rather than a few super-plants such as the $20 billion plant proposal Shell recently cancelled. Economically converting natural gas to gasoline on a large scale would really help ease the over-supply of natural gas.
Related Article: Upstream vs. Downstream