The lifecycle of a Medicine Hat oil well can be divided into the following activities. A well may produce both natural gas and oil. These activities related to the skills of the professional experts and contractors (link to Who we are) associated with NGPR’s ongoing work. (Link to NGPR Business Units).
• Production & Processing
• Monitoring & Reporting
|• Transportation & Marketing
• Suspended Well
• Reclamation & Remediation
• Environmental Stewardship
All activities are regulated by the Provincial and Federal rules including applications, monitoring and reporting and compliance. Daily reports are filed and records are kept for all oilfield activity.Planning
Alberta’s geological history (link to History) lends itself to large deposits of oil far beneath the surface. Experts such as geologists and geophysicists review seismic maps to determine where hydrocarbon deposits, or reservoirs, might exist that will result in oil and natural gas recovery. This activity is both an art and a science that depends on professional skills, experience and hunches. Therefore, there is always some inherited risk as decisions are made to take the next step of exploratory drilling. This pays off when productive reservoirs are found.
- Does the rock have reservoir characteristics, such as porosity (spaces in the rock) and permeability (ability of substances to move through porosity links within the rock)
- Are hydrocarbons present and are they oil or gas or both?
- Is there enough hydrocarbon in the reservoir to be economic?
- Analyze information from existing wells such as logs, drill cuttings, and core samples.
- Logs consist of data derived from various wireline tools which are run into the wellbore after drilling. While being pulled back up to the surface, the tools measure various characteristics of the rock formations and fluids. From these measurements, we can determine formation lithology (eg. sand, shale, limestone, etc), porosity, permeability, and fluid type.
- Core samples and cuttings. When a well is drilled the drill bit cuts in the rock, creating small rock chips called “cuttings”, brought to the surface by drilling fluid. The cuttings are examined to learn more about the age, chemistry, porosity, permeability, etc. of the rock formations. Core samples are also obtained during this drilling procedure. Core samples are cylindrical rock samples, which provide information on the composition and characteristics of the rock and any fluids in it. In Alberta, core samples and cuttings from existing wells are available to any oil and gas company to view.
- Review seismic surveys. Seismic surveys use sound waves to produce images of the rock formations below the Earth’s surface. These surveys can be completed in two dimensional (2D) or three dimensional (3D) formats. Generally, the more dimensions the more costly, however, the extra expense may be worth it as 3D seismic usually presents a more complete model of the subsurface. These surveys can also be purchased from other companies, but are extremely expensive.
Once all the above data is reviewed, if there appears to be a promising prospect, the Geology team will recommend to the company where to drill an “exploration well”. This exploration well will confirm whether there is oil or gas present and to measure the volume of the resource.
Once minerals are confirmed and surface leases obtained, the oil and gas company is ready to drill. Plans to drill are developed in concert with Land and Environment experts and follow strict environmental guidelines and regulations.
- First the site must be prepared which may involve clearing, levelling, and building access roads. The well is then drilled to determine whether hydrocarbons are present. Drilling operations begin with drilling a large diameter hole to depths of 75m to 300m+ depending on total depth of well and formation characteristics.
- Surface casing is then set and cemented to surface. Approximately 8 hours after surface casing is cemented, the drilling process continues to either total depth of the well or a certain point where intermediate casing is set and cemented. This process usually happens in wells that are 2000m (vertical or horizontal wells). Depending on the wellbore, once surface and some instances intermediate casing are set and cemented the remaining wellbore is then drilled to TD (Total Depth) and production casing is set in the wellbore and cemented. Prior to production casing being run in the hole and cemented, open hole logs are run from surface by an electronic wireline unit to understand formation characteristics and determine if hydrocarbons are present. If hydrocarbons are found and producible, further wells are drilled to determine the size and extent of the reservoir.
- Drilling rigs vary in size, generally the bigger the rig, the deeper it can drill. Companies will decide on what kind of rig to use based on cost, availability, depth and the characteristics of the site and reservoir. There are also different types of drilling, with the following two being the most commonly used:
- Directional – this allows multiple wells to be drilled from a common drilling pad, reducing the wells’ disturbance on the land. A slanted or curved wellbore is used. The drill bit can change directions underground by the use of measured while drilling (MWD) instruments in the drill string and coordinated from surface by a directional engineer.
- Horizontal – this involves a vertical well where the path can turn more than 80 degrees in a horizontal direction.
Once the drilling is complete and the company is confident in the success of the well, the well is prepared for production, through a process called completion:
- After the interpretation of the open hole logs, the formation(s) are perforated by running in the wellbore with a perforated gun either by a wireline unit or service rig. Once at the desired depth the perforating gun shoots various sizes of holes through the production casing and into the hydrocarbon zone.
- A smaller rig, classified as a service rig is moved in and setup on the wellbore to land jointed production tubing. The size of tubing is dependent on the hydrocarbon characteristics.
- Some wellbores may only require production tubing for gas and/or oil to flow to surface, but in most cases a rod string and bottom hole pump is lowered inside the production tubing and controlled at surface by a Pumpjack.
Production & Processing
Production is the process of bringing hydrocarbons to the surface where the crude oil or natural gas is prepared for processing.
- Natural Gas generally flows under its own pressure through the wellhead into the gathering system pipeline. The gas from the pipelines flow to and is processed at the compressor station, which takes the water and impurities out of the gas by means of inlet water knock out vessels or scrubbers, and is compressed through to a dehydrator to dry the gas and on to a sales line.
- Oil production is more complicated and varies depending on the weight of the oil, how easily it flows, the porosity and permeability of the rock, the pressure in the oil reservoir and the pressure of other fluids such as natural gas and water in the reservoir.
- The City of Medicine Hat has conventional crude oil wells. These wells bring oil to the surface, using either the pressure of the reservoir itself or with the addition of pumping equipment with flow lines to onsite water separation, oil treaters to dry the oil and piping to storage tanks for future hauling by truck to sales facilities.
- Cleaning the well bore – using acid mixtures (acidizing) to dissolve offending material
- Hydraulic fracturing - injecting high pressure fluids into the perforation tunnels to cause rock formation to fracture thereby opening up gas channels to allow gas or oil to flow more freely
- Artificial Lift – artificial means to increase flow of liquids or gas where downhole pressure is minimal to produce on its own further assistance of coiled tubing well bore clean outs, swabbing, velocity strings or various subsurface or surface pumping systems.
- Monitoring of active wells takes many forms. Overall monitoring for performance and compliance is done by provincial and federal regulation. Reports and information are provided including information gathered from monitoring such things as equipment operation, flow rates, recovery rates, and environmental data. Some monitoring is done on the ground, and other monitoring is done using wireless technology or contracted to companies who specialize in the collection and analysis of data.
Transportation & Marketing
- Once our oil is produced and processed, the commodity is ready to go to market. Oil is transported via truck to the most economic terminal connected to a pipeline offering the best net back for the commodity.
- Each year The City of Medicine Hat reviews and enters into oil trucking (transportation) agreements to transport clean oil from our batteries to a pipeline connected terminal. Transportation agreements are based on price per meter cubed (m3) and accesses the closet and most economic pipeline terminal. Oil storage facilities are usually stored in large above ground tanks until the oil can be moved by pipeline.
- The supply/demand and price for oil fluctuates based on seasonal demand in Canada, the United States, worldwide and geopolitical events. Seasonal demand in Canada and the United States are driven by consumers traveling more during the summer increasing demand on gasoline and in the winter for heating oil (mostly on the Canada east coast and in the American northeast). Oil prices in Canada and US can fluctuate in the spring and fall due to refinery turnarounds and repairs. Gas is usually stored underground.
- At the pipeline the marketing group ensures the City receives the best price for the oil. Transportation costs and distance of haul are the main reason why crude oil prices vary from place to place. Tariffs (cost associated with offloading at the terminal and moving the oil through the pipeline) are another factor that forms part of the negotiated price for the City as a seller of the commodity. Prices for oil in North America are based on the “benchmark crude” (an oil with which others are compared to determine their price) of Western Texas Intermediate (WTI).
- Another “benchmark crude” is Brent Blend but it is considered more of a world price for oil. In Canada there are two benchmark crude streams discounted (priced lower) off of WTI. The first is for a heavy crude that is a Western Canadian Select (WCS) (the discount can be between $8 and $30 lower per barrel) and the second is a lighter crude Edmonton Sweet (a discount can be between $3 and $15 lower per barrel). The oil the City sells is based off of the WCS price.
- Once our natural gas is produced and processed the commodity is delivered to NOVA Gas Transmission Limited pipeline in Alberta and the TransGas pipeline in Saskatchewan. The demand for the commodity will fluctuate based mainly on the weather (winter & cold = increased demand for gas for heating or in a hot summer where there is extra natural gas fired electric generation to keep up with air-conditioning demand). Another influence in price is supply (North American production), the amount of gas that is in (the ground) storage in North America and the amount of pipeline capacity there is to move natural gas.
- The City owned natural Gas is used to heat the homes of the Citizens of Medicine Hat, help run large industrial plants, etc. Excess gas that is not needed is sold on the daily market.
Cost recovery is important in the business of gas and oil wells. Over time, a well may begin to cost more to maintain than it makes in revenue. Eventually a well may reach an economic limit where its production rate does not cover operating expenses. This well will be slated to be plugged and until that happens, it is recorded officially as a suspended well.
All wells that are not producing or no longer being used must be officially abandoned, and the land must be returned to its original state. Well abandonment involves the preparation of an extensive abandonment plan and there are significant costs involved for it to be done correctly.
- The wellbore is closed, usually with cement.
- All equipment is removed from the site.
- The well casing is cut below the surface and the well is capped. Often the term ‘Decommissioning’ is used when a well is abandoned. This also refers to the removal of facility followed by removal of equipment, buildings and other structures, and to the remediation of the surface and subsurface.
- The Alberta Energy Regulator regulates all of these activities
Reclamation & Remediation
When all of the surface equipment has been removed and the wellbore has been appropriately abandoned, it is the company’s responsibility to reclaim the site. The intent of reclamation is to achieve ‘equivalent land capability’. Depending on the current use of the land, the site should be functionally equivalent to what it was prior to occurrence of the energy development activity.
- Surface reclamation may occur in several phases in which both the current state of the site and its operational history, are thoroughly examined. Should subsurface contamination have occurred during the lifecycle of the activity, these contaminants are removed or remediated to meet provincial regulatory requirements.
- Once the subsurface requirements have been met, surface reclamation is undertaken with the end goal of ensuring the topography, soils, and vegetation on the site is consistent with the surrounding landscape. Depending on the nature of the site, this process may be relatively short or take several years. Provincial regulators have established legal criteria which must be met in order to achieve closure on the site.
- Upon completion of surface reclamation activity a detailed site assessment is undertaken by an independent third party contracted by the company, to evaluate the site in accordance with the established criteria. Once regulators are satisfied that criteria have been met, the site is certified as having been reclaimed.
- In sensitive native prairie landscapes the more recent focus has been on landscape restoration as opposed to reclamation. To aid in achieving restoration, measures are undertaken to ensure disturbance to topography, soils and vegetation is minimized during the operational lifecycle of the energy development activity.
Alberta is among the world’s leaders in oil and gas environmental regulation. A recent study compared ten leading oil and gas producing regions from around the world, Alberta consistently landed in the top three in terms of stringency of environmental policies and laws, compliance and transparency.