Abstract

Shallow gas sands in an area straddling the southern portion of the Alberta-Saskatchewan border are becoming increasingly important sources of supply for natural gas in western Canada.

These sweet, dry gas reserves have recently become economically attractive as a result of the prospect of higher prices for gas purchased by gas transmission companies, and the rapidly escalating processing costs for sour gas reserves.

The magnitude of development of these reserves is influenced by a combination of physical and economic factor including well deliverability, compression and gathering costs and selling price.

A method of evaluating the timing and ultimate level of reserves developed as a function of these variables is outlined.

Introduction

Rapidly increasing requirements for natural gas for use in Alberta, eastern Canada and existing and future commitments to the U.S.A. require a stable gas discovery rate in order to meet both the increasing requirements and to offset the decline of existing fields. Historical data as shown in Figure 1 suggests that the discovery rate has in the past few years suffered a significant decline partially due to what appears to be a lack of economic incentive for producers to explore for and develop gas.

In spite of fairly extensive development in Alberta, there are two areas which have a high development potential provided the proper economic incentive mainly in the form of gas price is provided. These two areas are the "foothills" or "deep basin" area and the shallow " sweet gas" areas in southeastern Alberta as shown in Figures 2. and 3. There are dissimilar economic criteria related to development in each of these areas. In the case of the foothills or deep basin area, a high exploratory risk together with high processing costs due to the presence of hydrogen sulfide in the gas and low sulfur revenue due to depressed sulfur prices. tend to discourage development at the present gas price structure. In the case of the shallow sweet gas, the reserves may be categorized as semi-proven and therefore, having very tow exploratory risk. However, individual well deliverability is low and subsequently drilling. gathering and operating costs are high and must be offset by a correspondingly higher price for the gas. However, the gas is sweet and processing is limited to dehydration only.

The Milk River Formation is one of the most important shallow sweet gas reservoirs in Alberta. Due to its general occurrence and reasonably predictable reservoir properties, it has recently attracted considerable development. The Upper Cretaceous Milk River consists of up to 300 feet of very fine to medium grained salt and pepper sandstone, siltstone and sandy to silty dark gray shales. The formation outcrops in southwestern Alberta and rises structurally towards the shale out edge in western Saskatchewan. In southeastern Alberta and southwestern Saskatchewan the Milk River Forn1ation is a natural gas reservoir. The reservoir facies are present over an area of approximately 300 townships or 11, 000 square miles.

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