Longest Lateral: Consol Innovates Efficiencies

November 16, 2013

Youngstown Business Journal Daily. In the quiet countryside of Westmoreland County, Pa., pumps a record-breaker.

There, just outside the hamlet of Mamont about 30 miles east of Pittsburgh, CNX Gas Co. LLC has drilled the longest lateral leg of a horizontal well to date in the Marcellus shale. The company has also earned that same distinction in eastern Ohio’s Utica shale.

“They’re starting to stretch that envelope,” says Jeffery Boggs, vice president of drilling for Consol Energy Corp., parent of CNX. “The longer the lateral, the more pay zone you have.”

Consol, based in Canonsburg, Pa., is moving forward with new techniques, technologies and completion methods intended to tap as much oil and gas as possible from a single well pad while maintaining costs, Boggs says. And, in the competitive, volatile world of shale economics, the most efficient company wins.

This year Consol drilled the longest lateral in the Marcellus, the Kuhns 3B well, which stretches 10,684 feet – or nearly two miles – across strata of the Marcellus shale in this part of Pennsylvania.

Horizontal drilling technology, combined with completion methods such as hydraulic fracturing, has revolutionized oil and gas production in the United States. The drilling method uses a vertical bore first, then turns that drill bit to target a relatively thin layer of shale rock – about 300 feet thick – packed thousands of feet below the surface of the earth.

Drilling vertically through the shale isn’t cost-efficient because the quantity of oil and gas retrieved would be minimal.

But drilling across the shale formation is.

The trick is hitting that “pay zone” – that rich spot of either the Marcellus and Utica shale formations – and drilling across the length of the rock. Consol is using longer laterals and shorter fracturing stages to great effect, Boggs says.

In Westmoreland County, Boggs gestures toward a rig preparing to drill a second horizontal well at the Mamont South pad that’s 8,000 feet in length. He says Consol is pioneering the use of longer extensions and innovative completion methods. A single well from this pad could net an estimated ultimate recovery – that is, the amount of gas produced over the life of the well – of between 10 billion and 15 billion cubic feet.

“It has a lot to do with completion design,” Boggs says, and how the well is hydraulically fractured.

Hydraulic fracturing injects millions of gallons of water, sand and chemicals under high pressure into a well to free up oil and gas hydrocarbons tightly held in the shale. Once the well is drilled, it is “fracked” or perforated in stages.

A lateral the length of the Kuhns well, for example, would take about 35 stages to complete.

“In the early days, we would do five, six stages on a well,” Boggs says. “Now, we’re doing 35. You want the completion fluids to contact as much rock as possible. The more fractures you can initiate in that rock, the more productive your well will be.”

Hydraulic fracturing has stirred protest from groups across the country, especially in Ohio, New York and Pennsylvania. These organizations contend that the chemicals used in hydraulic fracturing stand to contaminate water supplies and could cause other threats to public health.

Nevertheless, the Mamont pad sits on land owned by the Westmoreland County Municipal Water Authority and overlooks a large reservoir that supplies water to 150,000 residents.

“We’ve had a good relationship with them, and there have been no real issues,” says Tom Andreassi, Consol manager of district drilling operations.

About 8% to 10% of the water used to fracture the well flows back to the surface in the first six weeks after its completed.

“Then it comes back a few barrels at a time over the next several years,” Boggs says.

Much of this water is recycled for reuse at other drilling locations, he emphasizes. “We’ll use that water for our next frack job,” he says, instead of transporting the water to disposal wells, which is a source of contention across the state line in Ohio.

It takes between 10 days and two weeks to drill the vertical stage of a well, Boggs says.

Consol uses the expertise of smaller companies that have operated rigs for decades in the region as they explored other formations to drill the vertical stage, and then brings in another, larger rig to complete the horizontal leg.

Drilling the horizontal leg takes another eight to 10 days.

And, Consol drills the vertical stage first on all of the wells slated for a single pad, Boggs notes. Then, a “walking” horizontal rig is used to drill that phase of each well.

For example, a completed well site near the Mamont pad, the DeArmitt South pad, holds six horizontal wells now producing 24 hours a day.

Each well is spaced 20 feet apart. Instead of completing one well and hooking it into production, Consol waits until all the wells on the pad are drilled, completed and prepared for production, Boggs notes.

Once finished, gas essentially is produced naturally from the pressure within the formation. “It comes to the surface, goes into the production units and from there it is separated out and goes into gathering lines,” he says.

The gas is transported to compressor stations, which can be automated or manned, and then sent into pipelines that push dry gas to markets all over the country.

Despite low natural gas prices that have clobbered most energy companies over the last two years, Consol has been able to drill and produce profitably in the Marcellus, which yields mostly lower-priced dry gas such as methane.

Consol, for example, was the first company to use a rotary steering bore in the Marcellus, Boggs says, a method that has become commonplace in Appalachia.

“If you can drill more pay zone on that one fixed cost, then that unit cost will decrease,” Boggs relates. “What used to take 15 to 20 days to drill just the curve and the lateral, now we’re doing these long laterals in eight to 10 days.”

The Marcellus still holds some of the best economics in all of the shale plays, Boggs says, despite a natural dry gas price that’s hovering around $3 per thousand cubic feet. “With our efficiencies and our economics,” he says, “we can still make rate of return drilling these wells.”

The payday could be even sweeter in the Utica, where “wet” gas such as propane, ethane and butane is abundant in the southern tier of the play, he observes.

As such, the company has shifted its focus from its initial core business – Consol was founded in 1864 as the Consolidation Coal Co. – of mining to natural gas exploration and production.

Consol announced Oct. 28 that it would sell five of its coal mines in West Virginia for $3.5 billion and recapitalize its oil and gas business in the Marcellus and Utica.

“Consol, being 150 years old, has learned to change with the marketplace,” said Brett Harvey, Consol chairman and CEO, during a conference call with analysts. “I think it’s prudent to harvest mature assets and reinvest in growth opportunities, especially in projects such as the Marcellus shale and Utica shale.”

The company says it expects to boost natural gas production by 30% each year through 2016.

Consol holds strong acreage position in both shale plays, including significant leaseholds in the wet gas windows of each. The company also sees potential in developing the Upper Devonian shale, a collection of rock formations that lie a couple hundred feet above the Marcellus,.

Consol operates three Utica shale wells in Mahoning County, two in Jackson Township and another in Ellsworth Township. The company last year abandoned development of its sole well in Trumbull County.

Consol also holds sizeable acreage in the southern tier of the Utica – especially Noble County. This section of the Utica is considered the most profitable portion of the play because of the high geological pressure found in the rock. Its Utica venture partner, Hess Energy, also holds a strong position in this region.

Boggs says that Consol has taken all that it’s learned from drilling the Marcellus formation and applied those lessons to the natural-gas liquids window of the Utica.

“This rig just finished up a well in Noble County,” he says, pointing to the M62 rig now positioned in Westmoreland County, Pa.

It was this rig that also drilled the longest lateral in the Utica, just slightly shorter than the Kuhns well. “We plan a pretty robust drilling program in Noble County.”

Drilling the Utica is more complex because it’s deeper, but Consol uses a mid-rig operator to bridge the smaller vertical drillers and the larger horizontal rigs. “On into 2015, we will have at least two horizontal rigs running, and a couple of mid-rigs going out in front,” Boggs says.

In the Marcellus, the ramp up is even greater, he reports. By 2015, more than 20 vertical and horizontal rigs are expected to be active across the play.

“By the end of next year, we’ll be going to seven rigs,” Boggs says. “Our plan is to increase production by 30%. In order to do that, you’ve got to drill wells. When that price of gas increases, we’ll be right at the forefront.”

By Dan O’Brien

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