Apache's Karl DeMong uses automation to gain shale gas insights

by Mike Byfield

[Figure 1]

A unique partnership and rivalry has sprung up in the Horn River Basin of northeastern British Columbia. In 2007, Apache Canada Ltd. and Encana Corporation formed a 50/50 partnership in the then-emerging shale gas play, pooling more than 400,000 acres. Unlike other oilpatch joint ventures where one operator is elected, in this joint venture each producer operates its own sites. In 2009, Encana drilled 19 wells and Apache drilled 23. Financially, both companies share equally in all of those wells. Operationally, however, their teams compete with and ultimately learn from each other.

"There's a big learning curve involved in figuring out how to economically develop a huge shale gas resource like Horn River. Our guys do their absolute best to get better results than Encana, and naturally they do the same," says Karl DeMong, completions manager for Apache Canada. "It's pretty intense, like good hockey. In our game, however, everyone wins. Each company tries out its own innovations and we both get the benefit of learning what works best. "

Until March, DeMong headed Apache's well completion team for the Horn River. Multi-stage horizontal well completions in northeastern British Columbia are massive operations, involving about 280 workers on site, split in two shifts. Also on site are some of the largest fleets-pressure pumpers, wireline trucks, cranes, coiled tubing service rigs, and other vehicles-ever assembled on site in Canada's oilpatch.

Frac proppant, chemicals, and other material needs are equally enormous. "When you're pumping water at the rate of 100 barrels per minute, you don't want empty surge tanks," DeMong says. Between Jan. 7 and March 18, Apache pumped about 500 million litres of water at Horn River, with 95 per cent being brought in "on the fly" during the fracs. By the end of March, DeMong's crew conducted 193 frac intervals (or stages) and placed 33,000 tons of sand. Although the company has not released budget figures, DeMong's team is spending tens of millions.

An Apache Horn River frac interval typically takes five to six hours. Supervision of a Horn River frac comes from three points:

1) the pumping company's horsepower control centre on site,

2) Apache's frac command centre on site, and

3) the frac control headquarters in Apache Canada's head office in Calgary.

The torrent of data that's essential to tight coordination between these centres moves via satellite within two seconds. Each centre has its specific duties. The frac command centre, for example, directs the actual facture pumping operation and monitors safety, and can shut down the entire operation for safety reasons at any time. The Calgary team usually mandates pressure and flow rates during the frac.

Horn River, just south of the Northwest Territories, ranks as the most geographically remote commercial-scale gas field now producing in North America. Apache and Encana will be competing with gas from big shale plays in the United States that sit far closer to market. To bring costs down, DeMong recognized two challenges. First, more work had to be performed in less time by fewer people. Second, the company had to learn the complexities of reservoir fracturing in this basin. On both counts, the team leader turned to innovative automation.

A mechanical engineer from the University of Saskatchewan, DeMong credits his personal enthusiasm for technical challenges to his father Leroy, a labourer who severely fractured both arms at age 19. "Dad had one artificial limb and limited rotation in his remaining wrist," the 41-year-old Calgarian recalls. "Every day, we kids watched him figure out innovative ways to shovel grain, hoist bales, and perform other tasks that would be routine for most people."

A high school stint at Saskatchewan's famed Athol Murray College of Notre Dame taught DeMong another lesson: "As a philosophy, 'everything matters' beats the hell out of 'nothing matters.'" After the 180-pound teenager enrolled at the University of Saskatchewan, he packed on an additional 60 pounds of muscle (from "two years of 20 hours of pumping iron per week, no steroids"), then served as an offensive lineman on the football team.

[Figure 2]

His first job came from PanCanadian Petroleum. "I didn't realize it until later, but they hired me mostly because I was big. In those days, the field supervisors [who'd risen from the ranks] tended to pick on the young engineers from headquarters. They'd ball your engineering program up and throw the paper in the wastebasket, saying they'd always done it their way," DeMong says. The neophyte won over these hard cases by integrating their operational understanding in his engineering programs. He subsequently worked for both senior producers (Wascana Energy Inc., Nexen Inc.) and juniors (Calahoo Petroleum Ltd., Intensity Resources Ltd.).

In 1998, Sperry-Sun Drilling Services posted the Canadian to Dubai, eventually promoting him to manager of global multilateral operations. "I'm basically a downhole tools guy with experience tying together multiple wellbores below the surface on high-value well pads. Initially, this involved challenging all the engineering done on the project," DeMong says.

In 2006, the experienced manager became an independent consultant, gravitating toward Apache Canada (who later brought him on staff). DeMong encourages high-energy discussions that he calls "happy yelling," prompting his staff members to debate divergent opinions in the search for solutions. "You can tell by the smiles that the team is really enjoying tackling these challenges," he says.

At Horn River, Apache drilled its 70-K pad with 16 wells, divided into two pods of eight wells apiece for working purposes. The 52-L pad has 14 wells, while 34-L is scheduled to have 22. "Pressure pumping [for fracs] is the critical path item in the whole operation," DeMong says. "People were doing one thing at a time in sequence and it wasn't efficient." To help prepare a better work program, the engineer brought his supervisors to head office for four months. "I regard their 200 years of field experience as gold and we definitely tap into that," he comments.

A key component of his technical strategy focused on automating the fracture manifold (an assembly of actuated and manual valves plus piping) that sits astride each wellhead. "The frac supervisor [on site] swings the valves and keeps the pump program on track during the frac interval," DeMong explains. "Simultaneously, the pumpdown supervisor can do work on the other pod like placing the plug and perforating gun or pulling out of the hole. Due to automation, we're reducing cycle times and doing it safely."

Through redesigning its fracture manifolds, Apache has shrunk wellhead spacing to an industry-leading 10 feet. Smaller manifold shelters and shorter trunk lines are easier to maintain and cost less, while rig-up cranes can do their tasks with fewer movements, reducing risk and expense further.

The smaller overall footprint for each pad harmonizes with the environmental concerns of regulators, First Nations, other neighbours, and the industry itself. Responsible use of water is another priority for all stakeholders. "We are in the process of moving over to employing non-potable [formation] water for our fracturing," DeMong says. "This will enable us to avoid using surface water supplies."

During a fracturing operation, Apache's completion specialists can watch pumping pressures along with proppant concentrations and flow rates in real time on screens in the frac-control headquarters. This technology is the norm among major producers in Horn River. Uniquely, however, Apache's specialists can access another 18 screens of data from SCADA (supervisory control and data acquisition) sensors placed on wellsite equipment at Horn River. This automation gear is transferable to a new pad when the drilling and completion operation moves on. Critical performance and safety information is available at the team's fingertips to support decision making.

"We have real time information and a historical record of every pressure event, valve position, temperature, and other data that's generated during frac intervals," DeMong says. "This information enables us to diagnose successes and problems as they occur. This is the most demanding project that Apache's SCADA specialists have ever worked on. Our guys are really excited; they keep offering us new ways to do more."

On a conventional oil or gas well, most of the budget is spent on drilling the well and installing production facilities. For shale gas projects, however, completions comprise the majority of the capital cost. DeMong hopes that the use of SCADA will improve the efficiency of the hydraulic fracture operations, which absorb billions of dollars on an annual basis. To date, Apache has invested over $10 million in new automation technology at Horn River, including about $1 million for SCADA.

Apache acknowledges that it's a risky ploy, and its partner may not be willing to help fund the investment. "We have strong management support to go ahead with the innovations, even if we had to do it on our own," DeMong says. He credits John Crum, Apache's co-COO for North America, and Tim Wall, president of Apache Canada, for that decision. Apache has long specialized in wringing more oil and gas from known reservoirs through engineering advances. This is a natural progression to wringing gas out of previously unproducable rock in the Horn River shale.

[Figure 3] Not that Encana lacks boldness. Earlier in this decade, the Calgary-headquartered producer stunned its industry peers by investing billions in marginal resource acreage, effectively betting the company on prospects previously considered almost worthless. Other independents followed that lead. Now Exxon Mobil Corporation and Royal Dutch Shell are investing heavily in North American tight gas, a strong signal that the gamble is paying off.

"Encana has a completely different culture than us," the Apache Canada completions manager comments. Fortunately, he says, the partners' expertise tends to be complementary. The two producers meet for a regular weekly project review and constantly share data. Rob Spitzer, Apache's VP of new ventures, helps the teams lever off each other's strengths rather than bicker over operational differences.

Spitzer's steady fence-mending pays off. "It is really Rob's positive attitude toward the partnership that helps make this all work," says DeMong, adding that the dual operator configuration "creates a stronger project. We were the first two companies to grasp the potential of the Horn River Basin, and Encana has a great team. Almost as good as us-hey, I'm just kidding, right?"