URTeC: 2461040

Examination of Water Management Challenges and Solutions in Shale

Resource Development - Could Waterless Fracturing Technologies
Work?
Iman Oraki Kohshour (University of Wyoming), Tim Leshchyshyn (FracKnowledge//Fracturing Horizontal Well Completions Inc.),
Jason Munro, Meaghan Cassey. Yorro (Forum Energy Technologies), Adebola T Adejumo (Halliburton), Usman Ahmed
(Unconventional Oil and Gas technology and Development, and WellDog), Reza Barati (University of Kansas), Imre Kugler (IHS
Markit), Murray Reynolds and Mike Cullen (Ferus), James McAndrew and Dave Wedel (Air Liquide)

Copyright 2016, Unconventional Resources Technology Conference (URTeC) DOI 10.15530-urtec-2016-2461040

This paper was prepared for presentation at the Unconventional Resources Technology Conference held in San Antonio, Texas, USA, 1-3 August 2016.

The URTeC Technical Program Committee accepted this presentation on the basis of information contained in an abstract submitted by the author(s). The contents of this paper
have not been reviewed by URTeC and URTeC does not warrant the accuracy, reliability, or timeliness of any information herein. All information is the responsibility of, and, is
subject to corrections by the author(s). Any person or entity that relies on any information obtained from this paper does so at their own risk. The information herein does not
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Summary

With increasingly stringent regulations governing the use of fresh water in hydraulic fracturing, operators are
struggling to find alternative sources of fracture fluid for hydraulic fracturing operations. In some regions of the world
where abundant fresh water is not available, such as the Middle East and China, using large amounts of fresh water
for fracturing is not possible to develop fields. FracKnowledge Database tracking of USA water usage per well
indicates that, on average, a well requires 3 to 6 million gallons of water, even up to 8 million for the entire life cycle
of the well based on its suitability for re-fracturing. This depends on the number of fracturing stages and particular
characteristics of the producing formation. The same industry sources also suggest that about 30 to 70% of injected
water remains in the formation with unknown fate and potential consequences to formation damage. Sourcing, storage,
transportation, treatment, and disposal of this large volume of water could account for up to 10% of overall drilling
and completion costs. As a transition to a reliable and complete replacement for water in the fracturing fluid, mixtures
of fresh water with produced and brackish water are being applied. On the other hand, waterless fracturing technology
providers claim their technology can solve the concerns of water availability for shale development. These waterless
or minimal water methods have been used for decades, but are higher cost than conventional water fracturing
techniques and have usually been used in water sensitive formations that required the technology.

This study reviews high-level issues and opportunities in this challenging and growing market and evaluates key
drivers behind water management practices such as produced and flow-back water, waterless fracturing technologies
and their applications in terms of technical justification, economy and environmental footprint, based on a given shale
gas play in the United States and experience gained in Canada. Water management costs are analyzed under a variety
of scenarios with and without the use of fresh water. The results are complemented by surveys from several oil and
gas operators. With low economic margins associated with shale resource development, operators need to know which
practices give them more advantages and whether waterless methods are capable of fracturing the wells at optimal
conditions. Based on a high-level economic analysis of cost components across the water management value chain,
we can observe relative differences among approaches. Our analysis does not consider the effect of fracture fluid on
productivity, which can be considerable in practice. Bearing this limitation in mind, as one might expect, fresh water
usage offers the greatest economic return. In regions where water sourcing is a challenge, however, the short-term
economic advantage of using non-fresh water-based fracturing outweighs the capital costs required by waterless
fracturing methods. Until waterless methods are cost competitive, recycled water usage with low treatment offers a
similar NPV to that of sourcing freshwater via truck, for instance. Despite positive experiences with foamed fracturing
techniques in Canada, and the potential improvements offered by these techniques, the technology is still challenging
to apply in large scale fracturing jobs in the United States, primarily due to operators’ perceived level of technology
URTeC 2461040 2

complications, safety, economics, and other logistics. However, if these emerging technologies become widely
accepted, the development of shale resources, especially in those basins exposed to drought, has the potential to grow
both nationally and internationally. Although environmentally friendlier than using fresh water, the environmental
aspects of these technologies must be clarified and deserve closer examination. Such variables must be reviewed based
on specific shale reservoir characterizations before implementation on a large scale, and there are numerous other
supply logistics and HSSE-SR (Health, Safety, Security, Environment, and Social Responsibility) issues that need
additional discussion. Conclusions regarding current and future shale development have been proposed based on
results from comprehensive technical, environmental, economic, and regulatory evaluations.

1- Understanding the challenges

In the next eight to ten years, it is estimated that more than 100,000 wells and one- to two-million hydraulic fracturing
stages could be executed, resulting in close to one trillion dollars in industry spending (Ahmed and Meehan, 2016).
The US Environmental Protection Agency predicts that between 70 and 140 billion gallons of water are needed
annually for hydraulic fracturing operations in the US alone (EPA, 2011). Since 2008, the development pace and
production rates of North American unconventional resources have surged rapidly (Figure 1) and, as expected, played
a vital role in the regional economy, even creating a desire for the region to become less energy-dependent. These
practices started in the Barnett shale play in 1980s and soon spread out to other shale plays across North America, and
today, there is a significant level of interest and motivation to fully evaluate and exploit these resources worldwide
(Ahmed, 2015; Meehan, 2014; Casey et al., 2015; Olivas et al., 2013; Bonapace, 2015; Nuyens et al., 2012; Bartko et
al., 2012). In order to sustain the trend and accelerate oil and gas production, billions of barrels of water would be
needed, and billions barrels of water will be produced, which would require responsive and effective water
management solutions. This is caused by two factors: the increase in the number of wells per year during reasonable
commodity prices and the trend of increased water use per well for fracturing (Figure 2). The trend of increased water
use per well is an almost universal combination of factors in any given field development plan in any formation: longer
horizontal lateral lengths versus time, larger fractures per stage versus time, larger amount of water and proppant per
stage versus time, more stages per well versus time, and thus a higher water and proppant intensity per well versus
time.

The fast pace of shale development has come at a steep price and has galvanized environmentalist groups across North
America and elsewhere. Since the oil and gas industry is highly regulated due to its impact on society and its public
image, the production ramp-up has also resulted in increasingly strict regulations in order to keep up with
environmental trends and measures, which has stirred up strong opinions from both sides of the table. At the moment,
operators are battling tough times in a harsh price environment, looking for a silver bullet solution, if one exists. This
paper looks at water management in shale resource development as one of the most debated current topics and
discusses what has been done and explores future trends to counter this situation. Operators both small and large have
already or will soon come to realize the importance of water as a commodity and have created or will soon create
water and environmental engineer teams along with strategic marketing, sourcing, and supply chains to tackle the
problem. The questions are numerous: how can we manage water supply and demand effectively? What are the
challenges in water disposal and transportation? Can water re-use replace water disposal to boost operational
efficiency and lower break-evens in each individual shale play? Can we use untreated produced water? Are large
capital expenditures on water infrastructure feasible and how do they effect play economics? Can we envision a totally
waterless fracturing technology that can once and forever solve the problem of water supply in development of
unconventional resources? What are the consequences and costs in each category? Can a new technology drastically
change the way the fracturing operations are performed, or do we continue to rely on learning curves to gradually
reduce our dependence on water used in hydraulic fracturing?

Because of the complicated nature of hydraulic fracturing operations, when it comes to choosing a fracturing fluid,
making a well-informed decision has been always difficult. Many oil and gas companies prefer to go with the most
convenient and cheapest options available. Most oil and gas companies’ business structures are organized according
to business segment, assets, or function. For example, field operations are financially responsible for sourcing water,
but the costs of disposal are managed somewhere else in the organization (Whalen, 2012). Water sourcing, usage,
production flow-back, transportation, and disposal in hydraulic fracturing include both above ground and underground
risks. In fact, the scope and impact of the issues around water availability and sustainability seem so large that
sometimes they might be seen as an elephant in the room, preventing the manager’s team from logically and clearly
addressing the different viewpoints and opinions to make a well-informed long-term business decision. The corporate
URTeC 2461040 3

culture, especially in a low oil price environment where job safety is a big issue, is strongly and inherently against any
failure from trying newer technologies, which has been a big reason why waterless fracturing technology and
innovation has not yet been applied on a large scale. Supply chain logistics and optimization could be a nightmare for
oil and gas companies. The giant service companies also see higher values in water-based technologies, since the
economy is already proven, hence, an easier sale for them. Greater collaboration and more efficient means are required
to tackle the challenges and explore the opportunities in the supply and chain sector. For any organization, however,
acknowledgement of the existing problems has to be made first, and fresh ideas should be scrutinized based on the
concept of integrated shale water management (ISWM) (Figure 3). The integrated shale water management concept
for each play can be defined as the ability to manage social and environmental risks associated with water or fracturing
fluid in general, as well as to successfully deliver actual benefits based on operational and technical characteristics,
and consistently meet related obligations in the context of shared value for the business, host communities, and
regulatory bodies, which is vital for energy and national security and allowing for continued exploration and
production of these natural resources in the future.

Figure 1: Production ramp-up in major US unconventional plays normalized to the production start year, source: IHS.

Frac Water Used / Well (Source: FracKnowledge Frac Databse)

180,000
155,804
average frac volume (bbl water/well)

160,000
140,000 125,048
120,000
94,440
100,000
80,000 67,642
56,128 59,152
60,000
40,000
20,000
-
2011 2012 2013 2014 2015 2016
Average Water/Well
Figure 2: Average water use per well in the USA by year, source FracKnowledge Frac Database.
URTeC 2461040 4

Figure 3: Integrated shale water management and its relationship to national and energy security.

1-1 Drilling and completion: major costs categories in the low oil price environment
Industry sources indicate that water management is a staggering $51 billion annual market, with $3.8 billion in the
treatment and recycling of produced water (Navigant Research, 2016). Over 21 billion barrels of water per year are
being produced only in the U.S. (Argonne National Laboratory, 2009; Reuters, 2014). Our cost data shows that water
management can take up to 10% of the drilling and completion costs in some cases, where transportation and disposal
costs could be as high as $10 per barrel of water (Figure 4).
URTeC 2461040 5

Figure 4: Major cost categories in a typical hydraulic fracturing operations in a ~$3.5M horizontally drilled and completed well with slickwater
where transportation and disposal costs could be as high as $10 per barrel of water.

1-2 Environmental challenges and threats

In general, as a result of a renewed environmental awareness and in part due to the increasing number of wells being
drilled in areas previously insulated from large-scale energy development efforts, from a public policy perspective,
there are a number of immediate and significant issues that need to be addressed in order for the development of
unconventional shale gas resources to be realized. These include the following:

1-2-1 Water use at scale: Water usage per well varies across shale plays and regions. The shale plays where hydraulic
fracturing, or fracking as environmental groups spell it, dominated the majority of oil and gas drilling were also the
same plays where water use was highest, ranging between 2.6 million gallons and 9.7 million gallons of water per
well. The use of water in the development of unconventional resources is not exclusive to the hydraulic fracturing
process. Water is also used in drilling and cementing wells. Water-based mud (WBM) is commonly used during
drilling vertical wellbores, while oil-based mud (OBM) is used to drill the deviated and horizontal laterals in the
Marcellus Shale. It is expected that operators will continue using WBM in their future operations. WBM is more
environmentally friendly and less expensive than OBM. The amount of water used in drilling also varies from
formation to formation (Figure 5).
URTeC 2461040 6

6000

Water useper well (Throusand gallons)

Drilling Fracturing
5000
4000
3000
2000
1000
0

Figure 5: Water use in fracturing and drilling for some US shales (source: various).

1-2-1 Disposal of produced water: As mentioned previously, on average, the oil and gas industry in the United States
alone generates 21 billion barrels of produced water per year, or 58 million barrels per day (Argonne National
Laboratory, 2009; Reuters, 2014). The quality of the produced water varies from well to well, but in nearly all cases
it needs to be disposed of in deep formations (sometimes the same ones from which it is produced) due to its total
dissolved mineral content and other properties. In general, the quality/characteristics of the produced water depend
upon:

a) Type of hydrocarbon produced

b) Shale/rock formations where the wells are located
c) Method of production used (including formulations of fracturing fluids used).

Figures 6 to 9 show the amount of water produced at different shale plays in the year 2000. Note the difference in the
scale for the Permian basin.

40
waetr in Eagle Ford
Barrels of produced

35
30
(Millions)

25
20
15
10
5
0
Dec-99 Sep-02 May-05 Feb-08 Nov-10 Aug-13 May-16 Feb-19
URTeC 2461040 7

Barrels of produced waetr 35

in Barnett (Millions) 30
25
20
15
10
5
0
6-Dec 28-Jul 20-Mar 9-Nov 2-Jul 22-Feb 14-Oct 6-Jun 26-Jan 18-Sep 10-May 31-Dec

400
Barrels of produced waetr in

350
Permian (Millions)

300
250
200
150
100
50
0
6-Dec 28-Jul 20-Mar 9-Nov 2-Jul 22-Feb 14-Oct 6-Jun 26-Jan 18-Sep 10-May 31-Dec

25
waetr in Haynesville-
Barrels of produced

Bossier (Millions)

20

15

10

0
6-Dec 28-Jul 20-Mar 9-Nov 2-Jul 22-Feb 14-Oct 6-Jun 26-Jan 18-Sep 10-May 31-Dec
Figure 6, 7, 8, and 9: Water production records and flow-back estimates for several shale plays, source: Digital H2O. Digital H2O is a digital
oilfield intelligence company focused on developing software solutions for end-to-end management of water in oil and gas operations.

1-2-2 Water disposal and seismicity: There are an enormous number of faults in North America, and these faults
have been mapped, tracked, and sought during exploration as natural oil and gas traps as well as areas where secondary
(a.k.a. natural) fractures are present in reservoirs. However, in areas where there is a fault, water disposal and downhole
injection must be carefully studied for induced seismicity and more monitoring is required (Figure 10).
URTeC 2461040 8

Figure 10: Oklahoma injection wells (source: Oklahoma Corporation Commission, 2013, taken from Meehan, 2016).

Addressing limited disposal options in some shale plays through reuse, along with continuing successful experiences
performing hydraulic fracturing with lower quality makeup water, is making reuse of produced water a more viable
option. There are industry examples: Apache used brackish and sour produced water for shale fracturing in the Horn
River Basin in Canada (Pond et al, 2010; and Demong et al, 2010). The typical method for disposal of produced water
is through permitted injection wells. However, injection capacity can be limited due to geology and formation
pressures. In some areas, injection well operation has been stopped temporarily or curtailed due to concerns that
injection may induce seismic activity. This increases the distances to wells that are allowed to accept water, increasing
both costs and truck traffic.

1-2-3 Road disruptions: Truck traffic for only the hauling section of the hydraulic fracturing process and well
construction could account for 500 round trips per horizontal well (NYSDEC, 2011). Depending on the time of the
year, surface topography, and road restrictions in the area of the wells, the fracturing of the wells can be restricted by
the moving oilfield equipment or the trucking of the water supply or disposal volumes.

2- International scope of water stress and shale opportunity:

In this section, we briefly look at China and Saudi Arabia, as well as the United States, as countries with large shale
resource potentials.

2-1 China: With about 1,115 Tcf of technically recoverable shale gas resource (ARI, 2013), China has the fourth-
largest unconventional shale resources in the world. Most of the shale oil plays in China are clay-rich and hence, not
favorable for hydraulic stimulations (Kennedy et al. 2016a). However, the country’s large shale gas potential, aided
by government investment and decreasing well costs (Figures 11 and 12), can meet the growing natural gas demand
as the country faces difficulties in developing other natural gas resources, including coalbed methane (CBM).
URTeC 2461040 9

Figure 11: Components of a shale gas average well cost at depth of 11,500 feet, with 4,000 feet of horizontal drilling, Source: EIA, 2015.

Figure 12: Shale plays (right) and drought conditions (left) in China, sources: ARI 2013, Beijing Climate Center, 2016.

2-2 Saudi Arabia: With about 645 Tcf of technically recoverable shale gas resources (ARI, 2013), Saudi Arabia has
the world’s fifth largest potential shale resource development. Water is also a scarce resource in Saudi Arabia. Our
previous studies (Casey et al., 2015) have shown that under current conditions, the development of unconventional
resources in the Middle East could be challenging, due to hurdles in the form of water supplies, logistics, desert terrain,
and processing capacity. Saudi Arabia is home to the world’s largest desalination plant. Approximately 18% of the
nation’s water supply is produced through these industrial plants. Seawater could be used for hydraulic fracturing
potentially, but the infrastructure costs would be prohibitively high for economic development of these resources
(Figure 13).

Figure 13: Water desalination plants and pipelines (left), shale gas resources (middle), and water stress baseline in Saudi Arabia (right), sources:
Hart Energy Research 2014; US-Saudi Business opportunity forum, 2011; WRI 2013.
URTeC 2461040 10

The unavailability of fresh water, lack of infrastructure, and high costs could prompt the need to search for waterless
fracturing fluid. For example, a recent study (Al-Dhamen and Soriano, 2015) showed successful use of CO2 foams
(70% quality) for the first time in Saudi Arabia. Their results indicated a 50% improvement in well productivity,
attributed to better clean-up and less formation damage compared with the crosslinked fluids. Although this was the
first application in Saudi Arabia, the foam fracturing technique was first developed in 1968 (Grundmann and Lord,
1981). Conventional foam fracturing has been done on thousands of wells in North America (FracKnowledge frac
database, 2016) (refer to section 4-4).

2-3 United States: Figure 14 shows surface area of several shale plays in the U.S. and their drought risks. Although
the U.S. drought monitoring maps (US Drought Monitoring website) indicate that drought conditions are cyclic and
have peaked in 2010-2011, the data presented in Figure 14 show that most of the shale plays in the United States are
subject to drought challenges. In some cases, these challenges are extremely hard to manage. This is especially true
with the future water demand and the expected trends in shale oil and gas production. According to an industry report
(Ceres, 2014), more than 55% of all U.S. wells are in areas experiencing drought, and 36% percent of all U.S. wells
are in areas experiencing groundwater depletion. The effects of drought are unpredictable and in years when it affects
the industry, the increased water use causes a larger impact. Operators who are active in these regions, especially in
the Eagle Ford, Permian, and Barnett, must develop integrated water management solutions and implement operational
practices in order to continue support their drilling and completion operations. In some shale plays in the USA, there
is an integrated water management infrastructure, such as interconnected ponds in the field with pipelines between the
pads, to minimize impact, maximize recycling of fracturing fluid, decrease truck traffic, increase safety, and decrease
costs.

Figure 14: Surface area of several shale plays impacted by drought conditions, source: The future of water in unconventional oil and gas – water
management opportunities/ strategies, taken from Capper, L, CAP Resources presented at 2015 Shale Play Water Management, 2015.

3- Re-Fracturing:
The re-fracturing technique is a relatively new concept in shale resource development for horizontal wells, however,
it has been done thousands of times on vertical wells. Horizontal shale wells can be re-completed for a second chance
to regain their initial production rates and increase the total recoverable reserves. Often, costs for preparing, re-
fracturing, and putting the well back on production can be only 25% of the initial drilling and completion costs (Sam
French, 2016 and Leshchyshyn, FracKnowledge, 2016). Leshchyshyn (2016) has created the largest fracture database
in North America, including a section on re-fracturing that has over 2,000 horizontal and vertical wells, which is
accessible on the internet (www.geowebworks.com). It includes an analytical toolkit that compares the incremental
recoverable reserves, decline rates, comparison of the IP rates of the original fracture/re-fracture, and pre-re-frac and
post-refracture production rates. Some of the sorting functions include original/re-fracture design comparison,
type/sub-type of re-fracture, re-fracturing strategy, and production interpretations by engineers. The screening and
well candidate selection can differ based on the well’s initial performance, design and type of the initial completion,
URTeC 2461040 11

geology, recovery factor to date, and EUR potential of the formation. So far, there have been limited re-fracturing
results in horizontal multistage fractured wells (only about 0.05% of the existing wells in the U.S.), with the potential
wells being over 10% of the existing inventory (Leshchyshyn and Weaver at ShaleTech, 2016). Figure 15 shows the
number of re-fractured horizontal wells in the major shale plays from 2011 to 2015 (Rystad Energy Analysis, taken
from Schmelzl, 2016). Vertical wells have been re-fractured more than ten times that amount over the last four decades
as a normal part of their well intervention and production maintenance using standard and usual technology, whereas
multistage fractured horizontal wells have inherent issues with re-fracture treatments with positive stage isolation or
predicting where the fracture stimulation will go for each pump schedule. It is expected that re-fracturing, where done
successfully, can provide tremendous opportunities for incremental hydrocarbon production, but would bring extra
water needs and challenges. According to Halliburton estimates in a Bloomberg report, there are about 50,000 wells
in the U.S. that are candidates for re-fracturing (Bloomberg, 2015). According to IHS, the total number of re-fractured
wells in the U.S could account for up to 11% of the total horizontal wells fractured each year by 2020 (IHS, 2015).
With re-fracturing growth expected to gain momentum, water and water-less fracturing technologies have to be
prepared in the near term. The use of water in the re-fracture depends upon the current state of technology that is
effective in the producing formation, the current reservoir pressure, the field development plan, the problem that led
to re-fracturing being an option, and other factors.

A common trend in nearly all formations is that the wells were under-stimulated, particularly at the beginning of each
field, as the reservoir was being proved up and optimization was not the goal. In many formations in North America,
the learning curves demonstrated in the FracKnowledge fracture database show increased lateral lengths, more fracture
stages, greater volume of water per fracture stage, and sometimes using slickwater instead of other fracturing fluid
options. All of these factors individually lead to the current exploitation strategy requiring more water per well on
average, and in combination, a much higher volume per well year over a year, as demonstrated by USA averages in
Figure 2. The current reservoir pressure for a re-fracture can be depleted to the point of being underpressured, which
would create a problem to flow back after the fracture and minimize reservoir damage. The benefits of foam fracture
in underpressured reservoirs are well established, so foams are a good fit for re-fracture. At the time of this paper,
over 25% of the multistage fractured horizontal wells in the FracKnowledge frac database that were re-fractured in
Canada, mostly in the Bakken, used N2 foamed surfactant gelled fracture fluid that required less than half of the water
compared to the original fracture. Thus there is a general trend for a re-fracture to use more fluid than the original
fracture, but the amount of water used may be less, because re-fracture targets are often underpressured, which favors
replacing water with an energized fluid or foam. The advantage of using liquefied petroleum gas or LPG (as discussed
later sections) in re-fractures comes from the fact that for the re-fracturing, the wells are already connected to the
production pipeline, so separation and re-use of the LPG in future re-fracturing treatments can be achieved.
Additionally, the need for flaring or release to the atmosphere is reduced or minimized. Leshchyshyn and others (1999)
showed that two oil and gas wells which were vertically drilled and originally fractured by cross-linked water-based
fluids in gas-bearing Viking and oil-bearing Glauconite formations in Canada gained improved results with excellent
recovery and propped fracture length when re-fractured with oil-based fracturing fluid and a larger proppant
placement. The re-stimulation success was achieved after rigorous well-log analysis and a review of reservoir and
offset wells. The formations were believed to have undersaturated water content resulted in poor load recovery and
early screen-outs. The selection of freshwater or produced water for a re-fracture is also an important factor to consider
when undertaking a re-fracture process and optimization. Shale rock and water interaction has to be studies for
selection of fracturing fluid and changes within the formation minerals (Ali and Hascakir, 2016; Esmaeilirad et al.
2016). Vincent (2010) has recommended judicious use of biocide and scale inhibitors for re-fracture treatments and
fracture protects with produced water. Re-using the produced water in a re-fracture is attractive because it has already
been in contact with the formation rocks and hence might be more compatible in many shale formations. The use of
fresh water in a re-fracture, however, might be beneficial because the existing fractures could be mineralized and their
dissolution might increase their porosity and flow pathways. The final selection will need to be based on a fluid
decision matrix.
URTeC 2461040 12

Figure 15: Number of re-fractured horizontal wells in the major shale plays, source: Rystad Energy Analysis, taken from Schmelzl, 2016.

The field development plan can impact the need for re-fracturing to protect the first well on a pad, called a “parent
well,” before the other new wells, called “child wells,” are fractured years later during field development. It has been
documented and measured in the field that if the parent well is not pressured up to prevent a pressure sink so that the
fracture of the child wells does not cause a frac hit (the child well fractures into the parent well), it could reduce or
stop production on the parent well, sometimes permanently. The protection of the parent well requires additional water
to fracture it a second time before the child wells are fractured; this recommendation comes from several industry
experts (Atamanik, 2016; Baihly, 2016; Stegent, 2016; French, 2016). The reasons that a well is under-performing or
has reached the end of its life can vary greatly. The solutions of exactly how it should be re-fractured to solve this
problem can also vary, but any re-fracturing requires more fracturing fluid, which, particularly in the U.S., is water
based. There are several other options that will be discussed later in this paper of existing technologies that can reduce
or eliminate the use of water. In summary, the industry normally under stimulates their wells in the original fracture,
often early in a field program. Due to improved fracture optimization later in the program, more often than not, the
re-fracture uses more water in the second stimulation compared to the original stimulation. Also, a current
advancement in re-fracturing is to pressurize the well before starting the re-fracture to fill the void in depleted areas
of the reservoir first with water, or possibly in the future with natural gas, nitrogen, or carbon dioxide. Invariably, if
there is a re-fracture, the total water use of the well does go up, often by double or more. However, in regaining a well
with production, operators do avoid having to drill as many new wells to maintain their yearly production levels in a
given field development plan, which also limits landowner issues, avoids permitting new wells, reduces truck traffic,
and increases safety, in essence, recycling or reusing the whole initial wellbore versus drilling as many new wells.

4- Accepting the water challenge and the way forward through integrated shale play water management
Water is in high demand now as companies are drilling more and longer lateral wells to expand their assets and plan
to re-fracture their existing completions to meet their oil and gas production targets. They are also concerned about
the environmental requirements and being responsible energy players. It seems that most of the operators did not
anticipate water shortages in their initial planning. As a result, competition has now started among different operators,
especially in Texas, New Mexico, and Colorado, which are more affected by the drought conditions as to whether
they can find water or other fluid alternatives to meet their stimulation needs. In unconventional resources, smart water
management integrates the well and water life cycles to holistically design a system that controls and reuses water.
This approach proactively controls water-induced issues in the formation (such as scaling and bacteria) and maximizes
reuse of produced water (Monroe et al., 2014). The technology and best practices for water management are available
and established. Such strategies could help operators manage and resolve their immediate need for water in their
hydraulic fracturing operations.

Water with TDS content less than 3,000 ppm (~3,000 mg/L) is considered to be fresh water and any level greater than
3,000 to 10,000 ppm is brackish water. In addition to the fluid base, the chemistry of the additives must be matched
to the water being re-used. Initial analysis of the operators produced and flowback water will determine the TDS and
temperature range, and based on these properties, a fracturing fluid suitable to the water profile and compatible with
URTeC 2461040 13

the formation will be designed for qualification. There have been numerous cases of successful treatments of re-used
water stimulation, each with production rates similar to the offset wells. These prequalified fracturing systems have
been successfully tested with produced water in the Tubb formation (77 C [170F] / 55,000 PPM TDS); the Uintah
Basin (74̊ C to 82̊ C [165̊ F to 180̊ F]/ 125,000 ppm to 200,000 ppm TDS); the Pinedale Anticline (93̊ C to 121 C
[200 ̊F to 250 ̊F]/ 10,000 to 15,000 ppm TDS); and the Midland Basin’s Canyon, Wolfcamp, and Spraberry formations
(71 ̊C [160 ̊F]/75,000 ppm to 90,000 ppm TDS) (Smarovozov et al., 2014).

Another important feature in water quality to consider in water reuse and treatment is TSS (total suspended solids).
Untreated or inadequately treated waters with high TSS content can cause excessive formation damage and
compromise the hydraulic fracturing job, resulting in reduced productivity from the well (Figure 16). Many operators
fail to consider the impact of TSS. A typical oilfield filter size of 20 or even 10 microns can do very little when most
of the particles are smaller. The cost of using untreated water can be significant. In one case, the productivity of a
compact zone was 45% with a perforation plugging loss of 13 percent. The combined effect in final productivity was
39 percent of the original value. With undamaged production at 500 bbl/day, this equated to a production loss of 305
bbl/day. At an oil price of USD 80/bbl, first year revenue loss was significant (Dawson et al., 2013).

Figure 16: Suspended solids reduce proppant permeability, source: Dawson et al., 2013.

Reuse of produced and flowback water, if accurately performed, can save the operators time and money. If the
produced water is not used for fracturing reuse purposes, especially in the Bakken, Barnett, and Eagle Ford shales
where injection wells dominate the source of disposal options, the cost of water disposal, including the costs of
transportation from where it is gathered and stored at the well site to the disposal well, can sometimes exceed the cost
of the water reuse treatments. For example, in northern Pennsylvania, where the nearest commercial disposal well
may be in Ohio or West Virginia, the cost of transportation can easily add $4.00 to $6.00 per barrel of water to the
cost of disposal (McCurdy, 2014), not to mention the wear and tear on the local roads and the potential CO2 emissions
associated with the trips. In some locations the geological characteristics of the underlying formations to accept fluids
for disposal dictate the need to transport the disposable water to other suitable locations. In these locations, the water
transport might cost even more (up to $10 to 15 per barrel in some cases). Additionally, by having a more active water
recycling program, wastewater injection well drilling could be eliminated or minimized, resulting in reduced potential
seismic activity. Most scientific inquiries have indicated that long-term wastewater injection (rather than hydraulic
fracturing) is a potential contributor to seismic activity, and that increases are primarily in the very small earthquakes
that are generally not felt at the surface. However, larger tremors have been linked to wastewater injection and a few
to hydraulic fracturing. The volume of water disposed of in injection wells vastly exceeds even the largest
unconventional well hydraulic fracture treatment.

The oil and gas industry has come a long way in dealing with environmental crises and management. As required,
particularly in jurisdictions with large amounts of yearly activity, regulators develop rules, laws, recommended
practices, and guidelines to maintain sustainable development to allow the industry to continue while protecting the
environment. Due to the large volume of water used each year in fracturing, any decision would reflect how the
industry as a whole reacts to the consequences and manages the problem. Given the increase of water use yearly under
economic development, there are several solutions and on how to tackle the issue, depending on needs and conditions.
URTeC 2461040 14

4-1 Treatment options, costs and quality comparison:

There are at least 100 companies offering water treatment services and there exist 6 basic treatments, including EC
(electrocoagulation), reverse osmosis, distillation evaporation, chemical precipitations, basic filtration, and ozone
ultrafiltration. The treatments must remove the impurities such as gelling agents, boron, suspended solids, iron sulfide,
H2S, metals, and sulfate and acid reducing bacteria. While there are some evidences that high salinity (TDS around
250,000-300,000 ppm) can impact well productivity, in fracturing fluids where gel-based or cross-linked gels are used,
any levels of boron (as low as 25 ppm) can create sensitivity and adverse effects in the fracturing fluid (Patil et al.,
2015). However, not to get lost in the theory of how completely fracturing supply water needs to be treated, one must
ask how well must it be treated for the next job. As slickwater becomes more frequently pumped, it has a lot less
impurities that need to be removed from the water, and it is very tolerant of fracturing water mineral content before
being pumped again. Developing a holistic water management solution requires an integrated multidisciplinary
approach to address the full life cycle of water challenges. Drilling and completion engineers, reservoir engineers,
asset development managers, strategic sourcing and supply chains, water and environmental engineers, production
and operations, and land, surface, and legal regulatory bodies must work alongside each other to reach the production
target for the well and hydraulic fracturing.

4-1-1 Treatment versus disposal:

Produced water re-use could mitigate both the water supply challenges and the produced water disposal limitations.
The Delaware Basin in the Permian has multiple stacked formations, each one producing different water levels and
chemistry, which can introduce further complexity in the field water management plan. Disposal via Class II UIC
wells is limited by the availability of the appropriate geology and the time needed to obtain the necessary permit from
the state or the regional EPA office, which is the case in Pennsylvania (Meehan, 2016). With transportation being such
a substantial component of water management, it is critical to include some flexibility in the infrastructure such as
plans to create pipeline networks in the shale resource development. Dunkel (2016) looked at a simple comparison
between a pipeline and trucking, and he found that a pipeline is a more effective strategy for long-term value of the
infrastructure for the oil and gas companies, primarily because it could benefit them by reducing their OPEX costs,
but also improving their social license in the community in which they operate.

4-1-2 The level of water treatment

4-1-2-1 Re-use versus recycling:
Re-cycling refers to the process in which flowback and produced water are treated fully, from basic hydrocarbon
removal all the way to hardness reduction, removal of scale forming constituents, TDS removal, and deionization, in
order to make them suitable for subsequent fracturing jobs. However, re-using means that the water receives basic
filtration treatment in order to remove only the main contaminants and TSS coming from formation fines and grains.
It is obvious that in this case, the volume of wastewater that has to be disposed of as nonhazardous material is still
high. One of the advantages of produced water is that it has come from the producing formation, which has been in
thermodynamic equilibrium with the formation (McMahon et al., 2015). However, concerns over fluid stability of the
produced and flowback water and presence of suspended solids, boron, iron, and bacteria that could cause potential
formation damage has resulted in specific treatments design that each could address and alleviate the concern. Today,
with the right resources and treatment strategy, most of these concern could be reduced cost-efficiently (Table 1).
Removal of suspended solids has been shown to increase the proppant pack permeability by up to 40% when smaller
ceramic proppant (30/60-mesh) sizes were tested (Ye et al., 2013).

Although challenges over real-time analysis and the fluctuations in the chemistry of the produced water make it
challenging to overcome the limitations with use of traditional treatment options, the treatments have yet to reach their
full potential in terms of NPT (non-productive time) and processing capacity.
Depending on the formation, the level of the TDS could be as high as 300,000 ppm. In order to justify re-cycle or re-
use of the produced water for a particular fracturing job, the TDS has to be significantly low. High TDS could increase
the pipe friction pressure. Some operators currently blend the high TDS produced water with fresh water in order to
have a more stable fluid rheology (Seth, 2012; Bonapace et al., 2015). However, the pH level and the potential
precipitation of the calcium and magnesium hydroxide scales has to be considered. In some cases, polymers might be
added to the produced water to more stable viscosity which could tolerate the high bottom-hole temperature, operating
conditions, and higher TDS values (Gupta et al., 2012).
URTeC 2461040 15

Table 1- There are currently 3 general water treatment solutions in the oil-field water industry, source: Fountain Quail Water Management, a
wastewater treatment company active in some of the largest shale plays in North America.
Treatment Description Performance quality Costs ($/bbl of water)

Disinfect only
Basic Pretreatment
Full Treatment to Discharge
Quality Freshwater
like ClO2, biocide and others
Chemical clarification uses
adjustable chemical system and
polymer blends
MVR evaporation similar to
thermal-based technologies
There is no solids removal and $0.05-$0.20 depending on the
any "floc" ends up in pits and concentration
containments (or downhole).
Complete TSS removal, iron and $0.65-$0.85 range depending on
bacteria removal, and solids are the chemical required
removed as a "dry cake". Product
is crystal clear saltwater for re-
use, with feed and discharge
clean brine capacity of 10,000
BPD. Relocatable on wheels
Near complete TDS removal, $2 - $3/bbl
bacteria eliminated. With feed
and distillate capacity of 2,500-
4000 BPD, and 2,000 BPD,
respectively, mobile set-up

There are several case studies, however, that show the produced water can be used without any treatment. We briefly
review and investigate if indeed the produced water can be re-used without any treatment. There is also the question
of how much the produced water should be treated. In these cases, however, the need to add clay stabilizers is
eliminated, as the high TDS content has sufficient inhibition to prevent clay swelling. Huang and others (2005) studied
feasibility of reusing untreated produced water with TDS up to 23,000 ppm in San Juan county, New Mexico with
70% CO2 liquid foam quality and 30% cross-linked fracturing fluid in the lab. Field testing showed that the produced
water could be the base fracturing fluid and generate cross-link rheology fluid suitable for fracturing. The re-stimulated
gas production rates doubled after the test. In laboratory testing and field trials, Kakadjian and others (2013) reported
use of Bakken untreated produced water with up to 300,000 ppm TDS formulated in both linear and cross-linked
systems and showed that it could also be used in field applications with boron levels exceeding 500 mg/L and
temperature ranges of 120-200 F and result in improved gas production rates with savings of up to 3 million gallons
of fresh water. Schmidt and others (2015) did a similar field study using 100% untreated produced water with simple
bag type filtration for removal of TSS, formulated in a hybrid slickwater and linear/cross-link system and stored in
open receptacles adjacent to a two well pad in the Bakken and showed improved results when the only variables were
the base fluid (produced versus fresh), gel, and the cross-linked system. In most of these cases, the costs of the cross-
linked polymer addition have not been discussed, though they could be a major factor in the well economics.
McMahon and others (2015) reported use of filtered but untreated produced water in a two-lateral well with 60 HF
stages completed with slickwater and cross-linked systems (7 million gallons of water, of which 2.2 million gallons
were cross-linked) in the Williston Basin and showed satisfactory production results compared to those of offset wells.
Since the quality of the produced water is expected to vary during the life of a well, fluid performance adjustments
and production capacity and systematic storage planning complying with environmental regulations are required in
each case, before relying on the reuse of untreated produced water for fracturing. Open storage pits can increase the
evaporation rates. It is estimated that in hot and windy Texas summers, the evaporation rates can be as high as 1 inch
in 24 hours, which can consequently increase the water salt concentration.

The re-injection of produced water down into the formation to hydraulic fracture a new well or to re-fracture an
existing well is an attractive choice from an environmental point of view. In some examples like in the Horn River
basin, the most massive fractures in Canada have migrated to produce brackish and/or sour water for large fracturing
campaigns. However, specific technical and economic considerations have to be taken into consideration. The current
practice in the industry is limited to rudimentary treatment methods in most parts. It is expected that as more case
studies are done and as the oil price and well economics return to normal, we will see an increase in the higher
treatment, technologies, and the investment required to work out any unexpected implementation issues encountered
on the first few programs. This is especially true in areas where the TDS of the produced water is higher than normal
(200,000 ppm) and suspended solids accumulate in flowback and produced water (Table 2).
URTeC 2461040 16

Table 2: Flow-back volume at different shale plays. Data are only estimates based on interviews with several operators in each play and are not
meant to be used for accurate development plans.
Shale play Percentage of flowback water (first few Typical TDS range (thousands)
weeks)
Eagle Ford 3 – 15% 80 – 250
Permian basin 40 – 60% 20 – 200
Marcellus 10 – 40% 100 – 300
Bakken 15 – 40% 80 – 250
Rockies 15 – 30% 15 – 35

Two major oil and gas service companies reported successful fracking with the use of produced water with TDS higher
than 200,000 ppm after electrocoagulation treatment. However, high levels of TDS may impact the effectiveness of
some of the friction reducers, resulting in adverse precipitation. Other considerations for water reuse in fracking
include levels of total suspended solids (TSS) that indicate the treated water should not cause scaling or clogging
issues. Additionally, the levels of scale forming chemicals, such as calcium, barium, iron and magnesium, should be
minimized and microbial growth should be controlled in order to avoid plugs and possible corrosion. With the
capabilities of the integrated service companies, much of the focus is now towards treating the produced and flowback
water. Data from Sharr (2014) shows that the produced water treatment is becoming more attractive in shale resource
developments, especially in areas with very limited access to fresh water. In the Eagle Ford, the treatment and
recycling market is expected to grow to more than 700 million barrels of water by the end of 2016 (Sharr, 2014).

4-2 Potential solutions to the water availability and competition

Information and surveys on water flowback estimates in the shale formations indicate that each well completion and
play represents a different flowback water output based on the desiccation level of formations and water content (Table
2). It is evident that, in some cases, the sources of water used for hydraulic fracturing have changed since 2011 and
the percentages of required water have shifted towards more re-use or less fresh water (Table 3). There are, however,
substantial opportunities for the use of brackish water, or re-use of the produced water, especially during the growth
phase of each shale gas development area. Wells that produce significant volumes of produced water during the initial
time period are preferred for reuse due to the logistics involved in storing and transporting the water for reuse. Long-
term water production remains an important factor to consider when deciding whether to use water for fracturing fluid,
while keeping in mind that a disposal or reuse facility in close proximity to the wellsite must be available in order to
retain the economic value of the operation (Mantell, 2011).

Table 3: Current Texas fracturing water sources and estimated percentages. Data from 2011 are from Rassenfoss, 2013. Data from 2016 are only
estimates based on interviews with several operators in each play and not meant to be used for accurate development plans.

Shale play Type Approx. percentage used in Approx. percentage used in

2011 2016 (current)
Eagle Ford Fresh 80% 60-70%
Brackish 20% 20-25%
Recycle/Reuse 0% 0-10%
Permian Fresh 68% 50-60%
Brackish 30% 0-5%
Recycle/Reuse 2% 5-10%
Barnett Fresh 92% 60-70%
Brackish 3% 20-30%
Recycle/Reuse 5% 0-5%
Anadarko Fresh 50% 35-45%
Brackish 30% 35%
Recycle/Reuse 20% 20-25%
Marcellus Fresh NA 5-10%
Brackish NA 5-10%
Recycle/Reuse NA 85%

4-3 Some insights on future of shale play water management:

We expect that the regional competition for use of water among different operators will rise and demand for alternative
fracturing fluids will be evaluated and considered. As recently as 2012, about 95% of all fracturing in US was done
with water (Sharma, 2013). With the shortage of fresh water, and the need to sustain and grow the production from
unconventional resources, there have been a number of technologies that have seen renewed interest or been
URTeC 2461040 17

introduced recently which claim they could technically replace water as a fracturing fluid, while the safety and
economicissues are still under evaluation and improvement.

4-3-1 Less-water and water-less fracturing solutions:

4-3-1-1 Slickwater versus energized foams:
The purpose of hydraulic fracturing is to enhance the rock permeability through creation of artificial flow pathways
and an increased surface area for the in-place hydrocarbon to flow. Slickwater fracturing treatment has probably been
the most commonly used method in shale gas hydraulic fracturing operations, primarily due to its relatively low cost,
evidently larger created surface area (or stimulated reservoir volume), and arguably less formation damage, at least
within the proppant pack (Penny et al., 2006) (Figure 17). In fact, the industry developed the slickwater solution when
it was realized that the more viscous fracturing fluids such as cross-linked gels could damage the fracture conductivity
and hence result in reduced productivity of shale gas wells (Barati et al., 2009; Barati and Liang, 2014). The water
used in the slickwater treatment is basically slickened with either polyacrylamide or a linear gel (low concentration
10 ppg) as a friction reducer when pumping hydraulic fracturing fluids downhole (Palisch et al., 2008). Although the
technique is operationally easier than other methods and relatively old, the dynamics of the water phase within the
fracture-matrix network and its impact on short and long-term well performance and well-management implications
are poorly understood, even today (Ehlig-Economides and Economides, 2011; Cheng, 2012; Bertoncello et al., 2014).
Most of the tight shale gas formations are also water-wet (Taylor et al., 2006). Industry data (Rystad Energy Analysis,
taken from Schmelzl, 2016) suggesting that only 30 to 50% of the hydraulic fracture stages are producing effectively
begs the question whether this shortcoming is a result of damaging mechanisms such as fracturing fluid loading, and
blocking the stimulated and produced reservoir volume (Ehlig-Economides and Economides, 2011, Ibrahim et al.
2016, Li et l. 2016) becomes more relevant. Baker Hughes estimates that ineffective stages have come at an annual
cost upward of USD 40 billion (Jacobs, 2016). It is believed that on average, 30 to 70% of injected water remains in
the formation with unknown fate and potential consequences to formation damage and capillary pressure shifts making
it challenging to handle these complexities of flow mechanism in the simulation models (Ghanbari and Dehghanpour,
2016; Li et al., 2016; Penny et al., 2006; Barati et al., 2009; Thompson et al., 2010; Ehlig-Economides et al., 2012;
Makhanov et al., 2012; Sharma and Agrawal, 2013; Ghahri et al., 2011; Esmaili, et al., 2012). We hypothesize that
more complex and larger stimulated reservoir volumes achieved by slickwater fractures (Brannon et al., 2011; Cipolla
et al., 2008) could mean less water recovery and impact production negatively. Field observations are mixed with
different evaluations and responses per well. Ghanbari and Dehghanpour (2016) suggested that the more complex
fracture network would result in a higher gas production and less load recovery, due to increased surface area and
more efficient counter-current water imbibition in Horn River basin, especially after longer shut-in time. Although
Wang and others (2012) using analytical models showed that the damaging mechanism by a uniform fluid invasion
doesn’t affect the gas production in a noticeable manner. The field observations are mixed with the well performance.
Wells that have high liquid recovery are among the bad wells, and wells with poor liquid recovery (~30%) are among
the good wells. The higher fluid recovery does not necessarily mean higher gas production rates. Kong and others
(2016) used numerical simulation for a shale gas well in water-sensitive Montney formation and divided the load
recovery into three ranges: low (<10%), medium (10-40%), and high (>40%) and looked at cumulative gas production
separately in six-month intervals up to 18 months. They showed that the higher recovery will always result in higher
gas production with the most substantial effect on the early production. Holditch (1979) had concluded that if the
pressure drawdown exceed the capillary pressure, the water blocking will not cause any damage to the gas flow. It is
believed that the nature of water flowback and blockage is complex because several factors are at play at a time, where
relative strength of each one determines the degree of severity of the damage mechanism in these heterogeneous shale
formations. Drawdown typically does not exceed capillary pressure in these tight and ultra-tight gas and oil formations.
Therefore, some degree of formation damage is expected in water-sensitive formations in the form of water leak-off.
URTeC 2461040 18

Figure 17: Proppant pack damage with different fracturing fluids (Linde, 2014).

In addition to the state of the stress in the rock and reservoir rock properties which we do not control, the related
properties of the selected fracturing fluid (such as density, viscosity, surface tension, and miscibility with hydrocarbon)
and proppant (such as size and sphericity) also have some degree of influence on the propagation and quality of the
induced fractures in the rock. Horsepower requirements and pumping schedules are also important to consider.
According to Stokes’ law, slickwater treatment depends on turbulent flow, sand banking, and/or bed transport
(Kostenuk and Browne, 2010). This would result in the proppant being deposited at the bottom of the fractures, leaving
a large portion of the created fractures un-propped. A major drawback of poor proppant suspension in the slickwater
fracturing technique, especially when applied in the thicker shale zones, is the limited height of the created fractures.
As a result, more hydraulic fracture stages are being conducted in order to compensate and cover a larger lateral
section of the pay zone instead, and hence larger volumes of water are consumed. Intuitively, the higher volume of
water and injection rates (50-100 bbl/min) could also mean that there is a higher chance for the linear polymers used
in the slickwater to deposit and cause formation damage. As the development of unconventional reservoirs increased,
so did the demand for innovative fracturing fluid design. In the meantime, operators continued with more water-
intensive fracturing techniques in order to place more proppants (1 to 2 ppa) into the formations. The effect of post-
fracture cleanup and trapped water on the unpropped fractures appears to be more severe than on the propped fractures
(Cipolla and Wallace, 2014). We think it could be both positive under the imposed pressure gradient in the fracture
(Ehlig-Economides and Economides, 2011) adjacent to ultra-low matrix permeability and negative if water entrapment
in the unpropped and induced fractures effectively impedes the flow of gas from the matrix (Sharma and Agrawal,
2013). With minimal wall-building capabilities of the slickwater techniques, which would result in higher leak-off of
the fluids into the matrix, the damage to the formation becomes more obvious, especially in water-sensitive formations.

Regardless of proppant size and density, concerns and investigations over low proppant transport and suspension
capability (0.25 to 1 ppa) and also possible aqueous phase trapping in tight gas formations at sub-irreducible water
saturations (Bennion et al. 1994, 1996; Kamath and Laroche, 2003; Shanley et al., 2004; Mirzaei-Paiaman et al., 2012)
led the industry to reconsider the fracturing fluid solutions for shale gas resources and improve upon their design
further. The current recovery rate of unconventional resources is very low, within 5 to 10% of the initial hydrocarbon
in place (Zanganeh et al., 2014). The future trends in the technology indicate that these recoveries could be
significantly increased by use of enhanced oil and gas recoveries (Kennedy et al., 2016b; Zhang et al., 2016), re-
fracturing (Eshkalak et al., 2014, Haddad et al., 2015), and proper selection of fracturing fluid systems (Lu et al., 2016;
Middleton et al., 2015). Technologies such as N2 and CO2 fracturing fluids could meet the water supply challenge in
fracturing jobs. The use of energized fracturing fluid is not a new topic in the industry (Gupta and Leshchyshyn, 2005).
Addition of CO2, N2, or other gases to the base fracturing fluid in the form of foams has been tested to give satisfactory
results as far back as the 1980s in a number of case studies in South Texas, and may prevent water blockage and
reduce formation damage (Friehauf and Sharma, 2009; Ribeiro and Sharma, 2013). Energized or foamed fracturing
fluids were designed in an attempt to improve the clean-up efficiency and reduce the amount of water needed for
hydraulic fracturing. These techniques were initially attempted in the 1960s with some degree of success, have
regained attention since the year 2000, and have been used widely in Canada ever since. Reynolds and others (2014,
2015) have investigated extensively the benefits of different fluids such as slickwater and CO2, N2 foams and compared
fifty multi-stage hydraulic fractured horizontal wells the Montney formation in Canada. They focused on completion
and fractures separated from the reservoir properties (effect of permeability, thickness, etc.) and have demonstrated
the superiority of foam-grouped wells versus wells completed by slickwater. Their economic analysis assumed the
same well and completion costs for slickwater and showed that foam NPV10 economics are superior by approximately
$3.066MM per well, resulting from more efficient fractures, and supported by better early rates. Most of the shale
URTeC 2461040 19

plays in Canada are water-sensitive, and hence early fracturing fluids were considered to be mainly gelled crude or
condensate initially, but later changed to energized fractures to respond to the larger fracture job sizes. Today, more
than 40% of the fracture jobs are completed with energized fracture fluid in Canada, compared to only 2% in the U.S.
(Jacobs, 2014). The energized fractures are nearly all in the San Juan Basin or the Anadarko Pennsylvanian plays. We
are aware of testing the energized fractures in the Bakken, Eagle Ford, Niobrara, Barnett, Utica and Marcellus shales.
However, the results of these tests are not public. There are a few publications, mainly from the 1980s-1990s,
discussing foam applications in more highly pressured reservoirs. For example, Harris and others (1984) discuss
results from the Red Fork formation, which is a sandstone above the Woodford (depth of 12,700 ft). This formation
is highly overpressured: the reported fluid pressure of 10,500 psi corresponds to 0.83 psi/ft. In this example, 14 zones
were stimulated with crosslinked gel fluids, yielding an average rate of 1602 Mcf/day at 2626 psia, whereas 5 zones
stimulated with CO2-foam yielded an average rate of 2234 Mcf/day at 4110 psi. The quantity of data is too small to
be statistically reliable, but is indicative of the improved performance. In another case, Wamock and others (1985)
investigated the use of CO2 foam fracturing in high-pressured reservoirs. A series of eight wells in comparable sections
showed gas production approximately 3 times higher with CO2 foam than with gel, both initially and after 30 days. A
larger study over 85 wells was carried out in the strata above the Haynesville. With depths to below 14,000 ft and
pressures as high as 13,200 psi, these are some of the greatest depths ever recorded for foam fracturing. The reservoirs
were also highly overpressured. There is no restriction regarding proppant type with foam fractures. Ceramic
proppants or other high strength proppants can be used as needed. CO2 and N2 foams do require a higher surface
pressure than slickwater, and for some very deep wells, surface pressure requirements exceed 10,000 psi. As this may
require an equipment upgrade, it is one of the reasons why foams are rarely applied in very deep wells. However,
foam fractures have been reported in the Woodford shale at deeper than 12,000 ft. Thus the limitation to shallower
wells is dictated by general practice and equipment availability rather than by any fundamental consideration. True
"foam" behavior arises when bubble-bubble interactions become important, i.e., at 50-60% and higher. Foam behavior
is quite different from the behavior or the liquid or gas components taken separately. For example, foams typically
have a viscosity that is much higher than that of either component. In practice, volume fractions in the 75-80% range
are typically used. Improved proppant transport is one of the key advantages of foam fractures. The average loading
in the slickwater case is 1.9 lbs per gallon. The downhole loading in the foam cases is similar to the slickwater case.
The loading in the liquid fraction (at the surface) is 6.3 lbs/gallon, which is diluted on combination with N 2 or CO2.
The liquids used are capable of carrying these proppant loadings.

4-3-1-2 Waterless fracturing solutions: Although liquefied petroleum gas (also known as LPG or propane-based
gelled) systems have been patented recently and added to the family of nontraditional fracturing fluids (Loree and
Mesher, 2007), their benefits to prevent formation damage were realized as early as 1970 (Smith, 1973; Tiner et al.,
1974), when authors addressed shale formations especially sensitive to water. LPG exists in a liquid state at ambient
temperature and moderate pressure (about 200 psi). The process uses propane or butane to fracture the rock and carry
the required proppant, much like conventional fracturing techniques (Martin et al., 2016). LeBlanc and others (2011)
reported that LPG fracturing in the McCully field in Canada improved both the cleanup and the initial performance of
the well compared to slickwater fractures. In the LPG fractures, they reported that the maximum fracture conductivity
and 100% of propane recovery were achieved within only 24 hours of flowback and within 7 to 15 days, respectively,
versus extensive and multiple shut-in and flow periods in the slickwater fracturing cases to achieve the maximum
fracture conductivity with only 40% load recovery. In a recent waterless field application attempt performed by
Chesapeake Energy in the Utica shale oil play window in Ohio, the company used 75% liquid butane and 25% mineral
oil fracking fluid to complete the candidate well, but according to our knowledge, the results were not encouraging
(Bizjournal, 2015). It is unclear whether the application of the technology failed due to the hard to characterize nature
of the shale window in Utica, or because of something else. Tudor and others (2009) analyzed post fracture transient
pressure data for several case studies by James (2008) where 100% LPG fracturing were used and showed the benefits
compared to conventional water fractures. The benefits were specially realized by post fracture clean up due to
capillary pressure requirements and effective fracture lengths due to LPG viscosity improvements. They reported that
by June 2009, over 210 fracturing jobs had been performed by LPG from depths of 750 ft to 11,500 ft.

Ribeiro and Sharma (2013) used a 3D compositional model and showed that LPG, gelled CO2, and high quality foams
have more advantages compared to slickwater, in terms of productivity index. In their specific study, CO2
outperformed LPG due to its lower density.

In water sensitive or pressure depleted formations, a 100% CO 2 fracture will flow more readily, enabling the initial
production rate and ultimate recovery to be higher than with water or foam mixtures. CO 2 reduces formation and water
URTeC 2461040 20

blockage damage, helping increase production and recovery rates. With slickwater, damage to the formation is
expected to increase significantly with the increased number of fracture stages.

Other than the foam-based fluids discussed previously, there is limited literature around the use and investigation of
pure CO2 or N2 as non-aqueous fracturing fluids. The research into this topic, however, is expected to grow
significantly in the next several years. The importance of finding and applying suitable replacements for water is
becoming more critical in locations where the drought conditions are severe and drilling permits might be denied
based on the requirements of the water (Hargreaves, 2012). Such conditions could also be alleviated or stressed by the
availability and proximity to the non-water fracturing fluid sources. Bullis (2013) reported that CO2 fracturing is used
in Wyoming where CO2 sources and pipeline are already in place. Other than elimination of using water in water-
sensitive formations, or in areas with limited access to water, other potential benefits of using CO2 as a fracturing fluid
are CO2 capture and storage, which could result not only in reduced CO2 emissions but also help increase hydrocarbon
recovery. Most recently, Lu and others (2016) studied the rock-fluid geochemical interactions between CO2 and the
water phase present in the sample in a series of autoclave reaction experiments at reservoir conditions (115 C, 300
bar) on middle Bakken core fragments exposed to CO2-saturated synthetic brine and supercritical CO2 cases only. In
the case of CO2 and brine experiments, they found that geochemical reactions, dominated by calcite dissolution, take
place, which create large pores and increase the porosity and permeability of the samples. In experiments that had
only supercritical CO2 (single-phase) as fracturing fluid, it was found that the geochemical alterations of the rocks
were minimal due to lack of liquid water: net dissolution was found to be negligible. In such conditions, however,
even very low residual water content in the rock would partition into the supercritical CO2 and result in dissolution
and precipitation of calcite and salt found on the surface of the rock samples. This would potentially affect the
production adversely as a result of evaporation of the pore water into the supercritical CO 2. In another study, Middleton
and others (2015) also investigated using supercritical CO2 as a non-aqueous fracturing fluid and evaluated
opportunities and challenges. They proposed three main mechanisms at which supercritical CO 2 might benefit the
fracturing performance and focused on miscibility of CO2 with the hydrocarbons (minimized blocking and access to
trapped hydrocarbons), enhanced fracture propagation, and increased desorption of methane adsorbed in organic-rich
part of the shales, using hypothetical, theoretical, and experimental evidence supported by numerical simulations. Due
to its lower viscosity than slickwater, and isenthalpic expansion of CO2 compared with water, they hypothesize
through initial assessment that the CO2 fracture network might be more complex than the one created by slickwater.
They also looked at the CH4 and CO2 Langmuir adsorption data and suggested that displacement of adsorbed methane
by CO2 is likely to occur under fracturing conditions. According to them, the proppant transport capabilities of pure
CO2 could be enhanced by adding viscous-modified CO2 gel agents to deliver the required loadings. Li and others
(2015) performed a geomechanical study and examined the use of H2O, N2, and CO2 fracturing fluids with respect to
breakdown pressure on 1-inh diameter, 2-inch long shale samples of the Green River shale (fine-grained, highly
laminated, and with low-grade kerogen with TOC 17-20%) with confining pressures ranging from 10~25 MPa and
axial stresses ranging from 0-35 MPa. They studied the behavior and morphology of the fracture network and found
that fracturing with CO2 created the coarsest fracture surface and the most complex fracture network, which agrees
with Lu and others’ (2016) findings. They also showed that under the same stress conditions, CO2 has the highest
breakdown pressure, followed by N 2, with H2O exhibiting the lowest breakdown pressure. The relationship between
the breakdown pressure and the complexity of the created fractures is still not understood, however (Ishida et al.,
2012; Alpern et al., 2013; Gan et al., 2013).

4-4 Brief Introduction to some waterless foam or other stimulation technologies in Canada:
In Canada, due to water sensitive formations, several water technologies have been used for fracturing beyond those
applied in the U.S. The water sensitivity of various reservoirs was declared by operators due to be sub-irreducibly
water saturated, severely under-pressured, swelling clay, and migrating clay, among others. A short description of
these technologies, the significant differences among them, their difference with water fracturing, and how often they
have been implemented in the field on wells follows.

1) Conventional N2 or CO2 Foam Fractures:

a. Number of wells: > 20,000 wells
b. General description of the process: A conventional set of fracturing equipment blends proppant up to 16.5 ppg
(2000 kg/m3) on a water base linear or surfactant based gel. After the high pressure pumps, an N2 or CO2 high
pressure stream is teed in before the wellhead to results in concentrations that usually maximize to a limit of about
8.5 ppg (1000 kg/m3), although higher values are possible operationally and are limited only by the placement
success in the formation. Typical foam qualities for conventional foams vary between 65 to 75%, although they
URTeC 2461040 21

can be pumped as low as 60% on average, and at 55% during some high proppant concentration stages. The
general approach is that nitrogen would be used on conventional wells up to a depth of 4,750 ft (1,500 m), then
CO2 for deeper fracturing based on job cost crossovers. However, in unconventional horizontal wells, according
to our fracture database, N2 is used predominantly even on wells deeper than 10,000 ft (3,300 m).
c. Historical well candidates: They are typically run on lower pressure wells or water sensitive formations. During
areas and years of drought, fracturing programs were limited by the local irrigation authorities/county water
licensing to smaller volumes of water for fracture programs. This forced the use of foams to increase the number
of wells that could be fractured using the fixed amount of water available for the jobs. This number increased
greatly when frac fluid (including chemical) recycling was employed (Gupta and Hlidek, 2010).
d. Specialized equipment: CO2 is pumped with high pressure pumps that normally pump water with pressure limits
of 15,000 psi. N2 requires a cryogenic pump with a heat exchanger to vaporize the liquid N 2 after it is taken from
storage tank pressure up to treating pressures. N2 pumps are standard and readily available to 10,000 psi, but some
more expensive N2 pumps are starting to be seen on the market that can go to 15,000 psi, with some discussion
of 20,000 psi, possibly to match the 20,000 psi water pumps that have been introduced to the marketplace.

2) Poly CO2 fractures:

a. Number of wells: > 10,000 wells
b. General description of the process: These are a specific variation of foam fractures. A conventional set of
fracturing equipment blends proppant up to 16.5 ppg (2000 kg/m3) on a methanol water base linear gel that
conventionally had 40% methanol/60% water, although for economics in later years it only had 20% methanol.
After the high pressure pumps, the CO2 high pressure stream is teed in before the wellhead to results in
concentrations that usually maximize to a limit of about 8.5 ppg (1000 kg/m3). Typical foam qualities were 85%,
although in later years for economics it could be only 75%. At the higher proppant concentrations for the final
stages, the foam quality would have to be reduced to 55% as needed operationally. A key feature is that the
methanol would help reduce surface tension, and at 85% foam quality and 40% methanol water, the water content
is only 9% of the injected gas/liquids.
c. Historical well candidates: They are typically run on lower pressure wells or water sensitive formations.
d. Specialized equipment: CO2 is pumped with high pressure pumps that pump water with pressure limits of 15,000
psi.

3) Gelled Hydrocarbon Fractures:

a. Number of wells: > 20,000 wells
b. General description of the process: A refined fracturing oil base (similar to a diesel fuel or condensate) with a
specific gravity of approximately 0.78 is gelled with a phosphate ester (or in more recent times, to limit issues at
refineries, a phosphonate with a lower volatile phosphorous content). A crosslinked or complexed micelle
structure is formed, with an iron- or sometimes aluminum-based chemistry. The equipment is identical to water
based fracturing equipment and although the concentrations are not limited operationally (the same applied to
water based fractures), typical successful placements of proppant often peak at 8.5 to 10 ppg (1000 to 1200
kg/m3). After the high pressure pumps, an N2 or CO2 high pressure stream can be teed in (optionally) before the
wellhead, resulting in the same typical concentrations listed previously for the wellhead’s measured values.
Typical qualities for energy assisted jobs vary between 15 and 40%, although a few jobs have gone to the 50%
mark or even as high as conventional foam quality in a few cases. N2 is inert and effortlessly compatible with
gelled hydrocarbon systems and forms a secondary phase. CO2 forms a miscible phase only, or at higher
concentrations, both a miscible phase and a secondary phase. CO2 must be used cautiously as it can interfere with
the breaker technology, which, if overcompensated, can flash break the system prematurely, sanding off or
screening out the well.
c. Historical well candidates: They are typically run on under-pressured wells, or water sensitive formations. Some
unconventional plays in Canada, such as the Cardium formation, used this fracturing fluid exclusively for the first
2 years before experimenting successfully with slickwater and foam fractures in some areas.
d. Specialized equipment: There are no special requirements for this chemical system relative to water based
fractures.

4) Mist Fractures (>95% quality):

a. Number of wells: Between 500 and 1000 wells
b. General description of the process: There are several methods of doing this depending on the fracturing company
and their technology and patents. One method usesproppant suspension, usually incorporating an ultra-
URTeC 2461040 22

lightweight proppant such as FracBlack from Sun Drilling. The major way this is suspended is in a brine of about
SG 1.05. A second method is to use conventional fracturing equipment that blends conventional proppant at 8.5
ppg (2000 kg/m3) using a water based linear gel. After the high pressure pumps, an N2 or CO2 high pressure
stream is teed in before the wellhead at high ratios, resulting in concentrations that usually maximize at 3.5 ppg
(400 kg/m3), although higher values are possible. The foam quality reaches over 99% and thus uses less than 1%
water. Depending on the technology and patents employed, the results mixture is described as a mist (continuous
gas phase with droplets and damp proppant) or a foam (a continuous liquid external phase with gas bubbles in an
internal phase).
c. Historical well candidates: They are typically run on extremely low pressure wells or extremely water sensitive
formations. Examples of reservoirs that use this type of technology are wells containing 95% under-pressured dry
coal seams, immature shales, and severely under-pressure shallow sandstone formations. Quite often a much
higher percent of the frac water flows back into the wellbore.
d. Specialized equipment: For the proppant suspension version of these jobs, specialized slurries need to be pre-
blended. Smaller conventional pumps are used for the high concentration proppant. Normal equipment is used
for the conventional proppant version of pumping these jobs.

5) 100% N2 Fractures:
a. Number of wells: > 10,000 wells
b. General description of the process: A coiled tubing unit is often used with 2 5/8” to 3 ¼” pipe to isolate a
conventional set of perforations with cup and/or straddle packers. A high rate of nitrogen in the range of 35,500
to 71,000 scf/min (1000 to 2000 scm/min) for 3 to 5 minutes to blow any near well damage into formation, erode
new paths and dilate natural fractures or coal cleats. Optionally, there are several technologies to pump a small
amount of proppant in a batch mix process. These vary from the first implementations of ultra-lightweight
proppant to conventional proppant. The depths were usually a maximum 3,000 ft (900 m).
c. Historical well candidates: They are typically run on dry coal seam gas wells. These are high permeability, but
high skin damaged wells, usually from drilling and cementing damage near the wellbore.
d. Specialized equipment: The proppant is added on the high pressure side of the cryogenic pumps, which is unlike
conventional proppant fracturing where the proppant is added on the low pressure (suction) side of the high
pressure pumps. There were patents that expired that incorporated conventional proppant that used casing with
valves at the bottom to trickle in proppant to the high pressure and high N2 rate stream between the N2 pumps and
the wellhead. Some other patented methods incorporate the addition of ultra-lightweight proppant through
proprietary equipment.

6) 100% CO2 Fractures:

a. Number of wells: > 2,000 wells
b. General description of the process: A pressure vessel called a CO2 sub or blender is vented to the atmosphere and
filled with conventional proppant. The pressure vessel is then sealed and filled with liquid CO2. CO2 storage tanks
are fed to the higher pressure pumps with a teed in section where the CO 2 sub or blender augers in proppant into
the high rate CO2 stream. Concentrations usually reach a maximum of 3.5 ppg (400 kg/m3). CO2 as a low viscosity
fluid breaks down the formation and quickly reaches an equilibrium where the fracture volume remains constant.
The liquid CO2 transfers proppant in turbulent flow into the fracture and then leaks off into the formation quickly.
The fracture ends when the desired amount of proppant is transferred into the formation, or the fracture fills up
completely and sands off/screens out. There is typically a limit of 44,000 lb (20 tonnes) to the job sizes due to
this being a batch process, although a few jobs using two CO2 subs or blenders in parallel have led to doubled
volumes. Since this original technology was introduced, two hybrids of this method have been developed: binary
fractures and N2 foamed CO2 fractures. Binary fractures (50% N2 / 50% CO2) are where the N2 is teed in between
the high pressure pumps and the wellhead. N2 foamed CO2 fractures use a highly volatile foamer that is introduced
at the suction of the CO2 pump and the N2 is run at 75% foam quality, with proppant concentrations reaching as
high as 6.5 ppg (800 kg/m3).
c. Historical well candidates: They are typically run on water sensitive formations.
d. Specialized equipment: CO2 is pumped with high pressure pumps that normally pump water with pressure limits
up to the standard of 15,000 psi. The CO2 sub or blender is a specialized unit that has augers at the bottom that
can operate at CO2 storage pressures. There is usually the need for a regulated pressure of an N2 blanket to
maintain the vapor pressure in the CO2 storage tanks as the level is quickly drawn down to prevent warming and
flashing of the CO2 and to prevent solid CO2 forming as dry ice. The nitrogen replacement volume can be from
compressed nitrogen tanks or from a traditional N2 pump.
URTeC 2461040 23

7) Gelled Propane Fractures:

a. Number of wells: 2,300 frac stages on >700 wells.
b. General description of the process: A pressure vessel (the blender) is brought to the well at atmospheric pressure
and purged to N2. The blender is filled with conventional proppant. The blender is then sealed and filled with
propane. Propane storage tanks are combined with gel, complexer/crosslinker, and breaker and fed to the higher
pressure pumps with a teed in section where the blender introduces proppant into the high rate crosslinked propane
stream. Concentrations usually reach a maximum of 8.5 ppg (1000 kg/m3). The chemistry is most similar to the
gelled hydrocarbon technology. Depending on the BHST, the propane can be combined with heavier carbon
chains such as butane. Propane can be recycled at the battery to reduce shipping and supply costs on projects.
c. Historical well candidates: They are typically run on water sensitive formations, or in exploration areas where
they want to remove the impact of fluid on the production.
d. Specialized equipment: The blender is unique as a batch process vessel. There is a data van with remote controls
for all equipment. Zero propane gas circulation lines / equipment. Fail closed safety valves.

8) Other methods:
There are other technologies introduced from time to time that are thought to be a replacement for large hydraulic
fractures. Most of these have limited applications of fewer than 100 wells and/or are not widely known or used as of
yet. These will not be discussed in this paper.

5- Summary of Environmental considerations:

As with every energy production process, it is critical to manage the potential environmental and regulatory impacts
associated with shale resource development. The oil and gas industry has come a long way in dealing with
environmental management. As required, particularly in jurisdictions with large amounts of yearly activity, regulators
develop rules, laws, recommended practices, and guidelines to maintain sustainable shale resource development to
allow the energy industry to continue operations while protecting the environment. Due to the large volume of water
used each year in fracturing, any business decision-making process must incorporate the HSSE-SR consequences and
manage the environmental problems. Environmental and regulatory considerations of fracturing fluids and water
limitations are the main drivers in the development and use of newer fracturing technologies in the future. The new
technology values and impacts must therefore be assessed in advance of use, especially for improving public and
social perception and licenses. As much as the idea of using gas instead of water as a fracturing fluid sounds like a
milder alternative for potential environmental issues, in the regions suffering from water scarcity, to move towards a
pollution-free shale development, extreme care has to be practiced in selecting what is injected into the formation and
at what proportion and composition, and to closely monitor the formation pressure and temperature. The formation
integrity has to be validated and tested to make sure that the injected fluid does not cause any leakage into the
groundwater aquifers. Furthermore, based on our review, with regards to the footprint and storage sites of the
energized and waterless fractures, there may be a significant reduction in the number of truck trips to the wellsite for
the waterless technologies depending on design and gas used. Some of the larger energized fracturing jobs do require
significant on-site storage. If the lease is too small, a nearby staging area might be used. Another option is to shut
down fracture operations part of the way through the job, then reload all of the tanks on site and begin again. For most
jobs of 2,000 m3 or less, there is not an issue with placing all of the tanks on site. With regard to the number of trucks
for CO2 vs. water, the relationship is 1:1, so there is no reduction in truck traffic. With N2 vs. water, the relationship
is approximately 1:2 or 3 depending on expected downhole pressure: at least a 50% reduction in trucking. This is
related to the expansion of N2 gas at fracture pressure. So there is a definite advantage to N2 if truck traffic is an issue
in the community. These aspects might mitigate the potential benefits, compared to the use of water in some regions
with tight space. Some gases such as propane and butane used in fracturing fluids by several other companies are
flammable, and when compared to other waterless fracturing fluids such as N2, CO2 fracturing has the added benefit
of being non-flammable. Triggered seismicity resulting from the injection of produced water must also be addressed
and, in some cases, eliminated (using non-aqueous fracturing fluids that can be reused safely will reduce the need to
inject large volumes of disposed water back into the formation). In these respects, we firmly believe innovation will
lead the way.

6- Perception of operators
A survey of water management practices was conducted to evaluate the response and opinions from several operators
active in the development of unconventional resources. The results are provided in Table 4. While the perception and
URTeC 2461040 24

concerns of the operators in the U.S. about waterless technologies are obviously valid and understandable, one should
realize that the issue of some operators looking for reasons to not use energized fluids is a complex process. According
to our survey and database, most operators like easy and simple operations and do not want to complicate their
completions, which appeared to be the major reason they prefer not to use energized fluids, as it might complicate
things to a degree, at least in the beginning. That is why suppliers of the energized fluids have addressed this issue by
supplying trained field supervisors to look after all field operations. All the truck locations may be tracked by GPS
(Global Positioning System) and locations known to within a small distance. Several operators have told us that
although slickwater is not the best for the reservoir, it gets the job done and is easy, and their fracture operations are
not based on how a fracturing job should be designed and optimized. Regarding safety, although N 2 and CO2 are
inherently non-toxic and environmentally safe, extreme care has to be practiced in order to corroborate the added
environmental benefits compared to the use/reuse of water. Pumping gases or flammable fluids at high pressure and
the safety potential must to be further addressed and demonstrated by skilled personnel and equipment. Regarding
costs, more case studies and economic analysis have to be performed in order to mitigate these concerns. The corporate
culture, especially in a low oil price environment where job safety is a big issue, is strongly and inherently against any
failure from trying newer technologies, which has been another reason why the energized and waterless fractures have
not still been applied on a large scale: in order to ensure on-time delivery of product for large treatments.

Table 4: Summary of case studies highlighting different E&P phase “Water Management Practices,” including treatment/recycle of produced water
and use of brackish water and use of water-less fracture technologies in the hydraulic fracturing operations around the U.S.

7- Case Study:
In this section, and based on actual and estimated cost elements for fracturing, we compare different water
strategies for a well in the Eagle Ford formation. A single well economic model is used to produce NPV and IRR
economics for 6 water management scenarios. Completion costs for each scenario take into account the full scope
of the value chain (Figure 18).

Figure 18: Water management value chain components.

URTeC 2461040 25

In terms of water sources, both fresh and brackish water are options where the main consideration is storage
implications. Regulations are rising over the leakage and contamination of fresh aquifers from brackish water, and
so storage can require double-lining of pits and leakage monitoring in order to prevent contamination. The cost
differences can be variable depending on region, so we assume fresh water sourcing for the purpose of this
economic analysis.

Scenario #1 assumes 100% fresh water sourced via pipeline, 100% disposal of produced water, and no fresh
treatment costs. Produced water will be disposed in Class 2 injection wells and therefore requires no treatment for
the purpose of this analysis. Scenario #2 maintains the same assumptions except fresh water is transported via
truck. Pipeline transportation can be significantly cheaper, although the infrastructure is not always readily
accessible. Transport costs for pipeline vs. trucking amount to $0.03/bbl vs. $1.50/bbl, respectively.

Scenario #3 assumes a mix of 50% fresh water and 50% flowback water usage and low treatment for basic removal
of TSS particles. The remaining 50% produced water is disposed of. Scenarios #4 and #5 both assume 100%
produced/flowback water usage. Scenario #4 accounts for low treatment costs and some level of disposal while
Scenario #5 accounts for high treatment costs to remove all TSS and TDS particles. Therefore, no disposal is
required in the high treatment scenario. The final two scenarios reflect the use of waterless fracturing technology
in the form of gas supplied by commercial liquid plants. Scenario #6 considers N 2 while Scenario #7 considers
CO2 applications. There would be no disposal or treatment requirements. It is also important to note that waterless
fracturing may often include a small contribution of sourced water to reduce costs and therefore increase
effectiveness. We have used the same type curve and production scenarios for the volatile oil section of the Eagle
Ford play for all the above scenarios. Input costs to the model are presented in Table 5.

Table 5: Input cost data for the single well model.

For the proppant and liquid volume, we assume 2.8 million pounds of proppant and 5 million gallons of liquid. To
generate NPV and IRR economic results, the single well model applies a 10% discount rate, and scenarios are
tested against a range of flat oil prices including $45/bbl, $55/bbl, and $65/bbl to assess price impact.

Table 6: Single well economic results for NPV, IRR, and breakeven oil price by scenario.
URTeC 2461040 26

NPV Economic Results ($MM) IRR Economic Results

Flat Oil Price $45/bbl $55/bbl $65/bbl $45/bbl $55/bbl $65/bbl Oil Breakeven

100% Fresh Water

1 $3.78 $4.13 $4.48 34% 36% 39% $55.60
via Pipeline

100% Fresh Water

2 $3.62 $3.96 $4.31 32% 34% 37% $57.15
via Truck

50% Fresh Water +

3 $3.42 $3.76 $4.11 30% 32% 34% $59.03
50% Recycled

100% Recycled with

4 $3.59 $3.94 $4.28 32% 34% 36% $57.42
Low Treatment

100% Recycled with

5 $3.39 $3.74 $4.09 30% 32% 34% $59.26
High Treatment

6 Waterless Tech - N2 $2.91 $3.26 $3.61 25% 27% 29% $63.76

Waterless Tech -
7 $2.04 $2.39 $2.74 19% 21% 23% $71.75
CO2

Results
NPV-10 values range from $2.04 million to $3.78 million and the biggest decrease in value is the difference
between N2 and CO2 technology (Table 6). Corresponding IRR results across all scenarios range from 19% to
39%. In terms of rankings, Scenario #1 with 100% freshwater sourcing via pipeline produces the most favorable
economics. Fresh water transported by truck in Scenario #2 and low treatment recycled water in Scenario #4 are
the next most economic strategies. Scenario #7 using CO 2 waterless fractures is the least economic.

Regarding impact from oil prices, IRR increases by about 10% between $45/bbl case and $65/bbl case in each cost
scenario. The financial position of a company can determine the significance of these differences: it could be
inconsequential for those that are more stable than others. Breakeven oil prices range from $56/bbl to $71/bbl
among cost scenarios, which can be an important driver of water management strategy in today’s current low price
environment. It is encouraging that 100% recycled water with low treatment is nearly comparable with sourcing
100% fresh water via truck. On the other end of the spectrum, sustainable shale development through waterless
fracturing applications may be difficult to achieve until prices recover and it is cost competitive with other methods
discussed herein, except where productivity benefits have been demonstrated. Still, under these more capital
intensive scenarios, intangible tradeoffs must be carefully weighed against economic return. Other potential
incentives include limited access to disposal, regulatory barriers, and environmentalist resistance to water usage
for large scale multi-well pad development, for instance.

8- Evolution of major technologies and the impact on unconventional technologies

Conventional reservoir exploration and development has evolved over the years and if we take a closer look we will
find that unconventional resource development is intertwined with such development while also has its own roots.
Table 7 provides us with a timeline of developments that deserve discussion.

The first introduction of stimulation technology (nitro-shot) was in 1867 for the purposes of introducing the first high
energy fracturing job. Hydraulic fracturing was not applied commercially until 1947, when experiments in vertical
hydraulic fracturing began. It was not till the 1980s that horizontal well hydraulic fracturing was introduced. The
rotary steerable system was introduced subsequently. Around the same time, in the 1980s and early 1990s, the full-
fledged application of 3D seismic and associated attribute analyses started to shape the world of “sweet spot” analysis,
which became quite the buzzword in the unconventional community in the second half of the past decade. The shift
in the development of the unconventional resource development or the shale revolution did not begin until 2005 with
the instruction of long laterals and multi-stage hydraulic fracturing. This combined introduction gave birth to improved
unconventional field development practices.

Table 7: Major technology and concept innovations in the oil and gas industry that led to reserve replacement and advanced E&P efficiency. List
is non-exhaustive by the authors, updated from Weijermars and Watson (2011).*: based on the current expectations, trends in demands and
directions
URTeC 2461040 27

9- Concluding remarks:

This paper reviewed the current state of solutions and new applications to the existing water challenges and
technologies in shale resource development and discussed a new technology as a replacement to more extensively
used water fracturing operations in the U.S. and compared the cases with the same technology implementation in
Canada. Light was shed on the costs and what could happen in each case from an HSSE-SR point of view. As we
continue development of shale resources, and the scale and circle of impact of these activities expand, it is anticipated
that the regulations will significantly increase around water, which has been traditionally regarded as a critical
economic and safety element of the hydraulic fracturing process. Such regulations could result in a change in the way
water is used in the fracturing process. A few operators are recycling their flowback to reasonable scales or have
infrastructure in place to handle disposal and sourcing for the long term. In these cases, water has not been all that
expensive to source and operators have handled disposal well. However, as regional competition and number of wells
grow, the demand for fresh water might outpace the supply. United Nations is predicting a 40% decrease in freshwater
supplies by 2030 (UN, 2015) which will put additional pressure on the amount of fresh water used by oil and gas
companies. The amount of funding and research put into developing new technologies will increase. In the case of
lack of supportive technology to address water challenges at larger scales, development of shale might slow down or
even potentially stop in some areas. Water re-use with treatment and brackish water sourcing are also expected to
increase within the next few years. Our technical and environmental review, combined with economic results, shows
that despite the promises and potential offered by the waterless and energized fracturing techniques, they are still
challenging to apply in large scale fracture jobs in the United States, primarily due to its relatively poorer economics,
URTeC 2461040 28

perceived level of complications by the operators, lack of sufficient technical validations and proof, potential safety,
and other operation logistics. The LPG fractures have been successful in Canada, and could be promising, especially
for re-fracturing treatments, if they could be handled safely. However, as improvements are made on logistics and
safety by suppliers of the energized fractures and waterless technologies, they could become widely accepted, and the
development of shale resources will potentially grow in the U.S. and in arid regions around the world. The technical
variables must be reviewed based on specific shale reservoir characterizations before implementation on a large scale.
It is particularly important to understand productivity impacts of low water and waterless fracture techniques, as their
economics are compared to the traditional water methods. Such analysis should be performed for the specific shale
characteristics, fracture treatment design, and re-fracture optimization prior to the selection of the fracturing fluid. The
current situation may change quickly if the carbon dioxide emission policy is advanced, encouraged by tax credits and
subsidies, particularly as the carbon dioxide partly stays in the formation along with the water that does not flow back
after the frac. Although every shale play is different, our modeled well represents more sustainable shale development
of how different fracturing costs compare to each other at high level and what are the technical
and environmental pros/cons in each category. The economics from our single well might change or improve for
multi-well pads. As re-fracturing gains popularity and momentum, there are additional water demands from the life
of the well and a need for more advanced fracture fluid systems. We must support new technologies and reconsider
and improve upon long-used past practices. Although some regulations make it impossible to truly capitalize on the
energy renaissance, we believe that such challenges could be resolved through judicious integration of shale play
water management to address HSSE-SR and concerns of the stakeholders. Higher prices would potentially justify and
encourage using waterless fractures for sustainable development compared to some of the water cases, especially in
regions where access/disposal is limited, and where rising demands over use of water for large scale shale development
planning will be restricted by NGO/environmentalist/regulatory resistance, keeping in mind that there might not be a
completely technically satisfactory, environmentally acceptable, and economically sound solution to these challenges.

Acknowledgements:
We would like to acknowledge all who contributed to preparation of this study, especially, Trent Jacobs (SPE),
Michael Dunkel (CH2M), Robin Watts (Linde), Scott Rothbarth (Digital H 2O), Usman Aslam, Laura Capper (CAP
Resources), Sarah Fletcher, Robert Bruant, Kirk Trosclair and Brent Halldorson (Fountain Quail Water Management),
and Dr. Nathan Meehan for his encouragement and everyone else who kindly collaborated with us in the course of
this study.

References:
Ahmed, U. (2015, June 1). Optimized Shale Resource Development: Transforming Unconventional to Conventional
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