Appendix F
Extraction Path Alternatives

To assess the various production strategies that might be considered for the Bush Dome Reservoir, it is necessary to consider the factors that impact the production potential for a single well as well as the impact of interactions between wells. Before assessing the various production strategies for the field, a short, simplified description of reservoir characteristics and well production is necessary, beginning with physical reservoir characteristics.

The ability to produce gas from a single well depends on physical, completion, and production factors, including the following:

  • Physical characteristics of the reservoir rock in the field,

  • Initial reservoir pressure,

  • Composition of the gas and fluids in the reservoir rock,

  • Number of wells and spacing of the wells within the field,

  • Characteristics of the individual wells within the field once they are completed,

  • Production paths chosen for the individual wells, and

  • Enhancements to production, such as compression to change the pressure impact in a field.

The gas in place in a reservoir before production depends on the porosity (the percent of void space in the reservoir rock) and the physical dimensions of the reservoir (thickness, length, and width). These features, combined, determine the maximum amount of space available in the reservoir that can be occu-



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Appendix F Extraction Path Alternatives To assess the various production strategies that might be considered for the Bush Dome Reservoir, it is necessary to consider the factors that impact the produc- tion potential for a single well as well as the impact of interactions between wells. Before assessing the various production strategies for the field, a short, simplified description of reservoir characteristics and well production is necessary, beginning with physical reservoir characteristics. The ability to produce gas from a single well depends on physical, completion, and production factors, including the following: • Physical characteristics of the reservoir rock in the field, • Initial reservoir pressure, • Composition of the gas and fluids in the reservoir rock, • Number of wells and spacing of the wells within the field, • Characteristics of the individual wells within the field once they are completed, • Production paths chosen for the individual wells, and • Enhancements to production, such as compression to change the pressure impact in a field. The gas in place in a reservoir before production depends on the porosity (the percent of void space in the reservoir rock) and the physical dimensions of the reservoir (thickness, length, and width). These features, combined, deter- mine the maximum amount of space available in the reservoir that can be occu- 

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aPPendix f  pied by gases. This volume is then reduced by water saturation—the percentage of the void filled by water. The quantity of gas that can be produced depends on the permeability, or interconnectedness, of the reservoir rock, which determines how easily fluids can move through the reservoir, as well as on the initial reservoir pressure. Reservoir pressure generally increases with depth and is the pressure on the fluids within the pores of the reservoir. Initial pressure influences how quickly gas can initially be produced (all else equal). The porosity, permeability, water saturation, and reservoir pressure will deter- mine, in part, the amount of gas that can be produced from a single well drilled into a reservoir. However, the diameter of the pipe, the completion job chosen for the well, and the drilling path—the physical path along which the well is drilled—will also impact the primary production capability of the well. A complete assessment would require knowing the size of pipe used in the well, the number of perfora- tions in the pipe, and any fracturing of the reservoir rock to enhance the ability of gas to flow to the pipe for production. Total production from the well over time can also be impacted by the produc- tion path. Consider a well ready for initial production. The operator of the well could choose to produce the well at “absolute open flow.” That is, it could allow the well to produce against the full force of the reservoir pressure. While this would generally result in high production at first, pressure might decline rapidly, produc- ing too low a flow to maintain economic viability in later years. In other words, because there are minimum costs associated with operating a well, operating it at high rates initially will cause it to be very profitable at first, but fairly unprofitable soon after, even though significant helium remains. An analogy can be made to the blowing up of a balloon. Assuming no reservoir damage from the aggressive production choice, releasing the gas from the reser- voir would reduce the pressure in the reservoir, as would letting the air out of the balloon. If you blow the balloon up and then let the air escape unimpeded, the air will rush out but then decline over time as the pressure in the balloon declines. When there is no more air escaping there will still be some air inside the deflated balloon. This well could also be produced more conservatively by letting the gas flow against a percentage of the available pressure, reducing initial production and also changing the pressure regime within the reservoir over time. For instance, in a second identical balloon, the air would be allowed to escape but with the throat of the balloon opened only partially. There would be different production and pres- sure paths. Production would be lower initially than from the first balloon, pressure would decline more gradually, and air would escape for a longer period of time. The balloon example does not, however, reflect the complicated pressure gradi- ents and barriers to flow that exist in actual reservoirs. In the balloon, the quantity of air left when the throat is wide open or only partially open might vary somewhat,

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selling n at i o n ’ s h e l i u m r e s e rv e 4 the but the variation probably is not significant. However, for the typical reservoir, the rate at which helium is removed can significantly affect how much helium remains when gas flow drops below levels at which it no longer is profitable to remove more gas. Typically, the structure of reservoirs is such that the greater the initial rate of production, the more gas remains when that unprofitability level is reached. Gas fields do not generally consist of a single well. Instead, there are a num- ber of wells within a producing field. The spacing of the wells will depend on the characteristics of the field. Highly permeable reservoir rock (all else equal) may not require as great a density of wells as less permeable reservoirs because fluids can flow more easily through the high-permeability reservoir and so can travel further to a well for production. Multiple wells can complicate production. Not only is an individual well impacted by the production choice for that well, but its production potential is also affected to the extent that production from other wells impacts pressure in its vicinity. The production path chosen can also impact future potential by degrading the reservoir characteristics (usually under drawdown strategies that rely on higher pressure) and by changing the gas properties as fluids from the surrounding area move into the reservoir, commingling with the gas in place. Finally, production potential can be impacted by the addition of compression in the field, which impacts the pressure of the field and the field’s future potential. With these concepts in mind, various production strategies for Bush Dome Reservoir can be considered. Bush Dome Reservoir is slightly different because it is not a new field being considering for initial production. Rather, it has already been produced, and that production history impacts its current and future production capabilities, constraining the latter. However, the concepts presented in the preceding example apply at any point during the producing life of a field. In the end, determin- ing the optimal production path depends on the objective of the producer. MAxIMIzE WITHDRAWALS THROUGH 2015 Maximizing withdrawals is an objective that relates only to the physical resource and does not consider the costs of withdrawals relative to the value of the helium. To maximize withdrawals over a given time horizon, the production plan would have to take into account the field characteristics. Given that reservoir pressure declines with production, this objective would result in declining production over the time horizon. The initial production rates would be chosen to maximize the production potential of the pressure gradients in the reservoir over the time horizon, while considering the potential for reservoir degradation. This objective could include (or not) added compression and/or new wells. The terminal time of 2015 adds a restriction to this production objective. Depending on the reservoir characteristics, a longer (or shorter) time horizon

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aPPendix f  might result in higher total production. This, however, is a matter of reservoir engineering, not of economics. MAxIMIzE TOTAL RECOVERY Maximizing total recovery will result in the most conservative production plan of the ones presented. Again, this is not an economics-based objective, but a physical-based objective that may be consistent with treating the Bush Dome Reservoir as a strategic reserve. A strategic reserve would normally consider the value to a country of having access to helium. In this case it is the total quantity of helium that can be produced, regardless of time, that is important. This production objective (all else equal) would be most protective of the reservoir. Given the more conservative production path, payback (if achievable) would be over a longer time horizon. This objective may also reduce the requirement for additional investment, because not as many additional wells may be needed to produce the helium as with the previous objectives. However, there is no guarantee of payback under this objective. MAxIMIzE NET BENEFITS Under the objective of maximum net benefits, the management plan for the field would be based on the simultaneous consideration of economic and reservoir factors. Gross benefits are gained from the production and use (sales) of the helium. Net benefits are gross benefits less costs of production and scarcity value. To maxi- mize the benefits of the field, the production plan would look to maximize the net benefits over the optimal life of the field. However, such a plan would need to take into account that today’s production choices impact the production choices avail- able tomorrow (through changing pressure, reservoir degradation, etc.). Thus, the drawdown path would incorporate all of the economic and reservoir engineering information that would find the optimal trade-off between the marginal benefit from the production of another unit of helium today and the marginal cost of not leaving it for tomorrow plus the marginal damage to the reservoir from the production of one more unit today. The committee believes that this last objective would be the most appropriate one for the Federal Helium Reserve. The efficiency of a production plan depends on its objective. If the objective is to maximize production over a time horizon or to maximize recovered gas, there are efficient paths to achieve these objectives. However, nothing will guarantee cost recovery. Maximizing net benefits will not guarantee maximizing recovery, nor will it guarantee breaking even. It does, how- ever, provide a method to produce the helium that considers the value of helium in different time periods.