Abstract

The advent of deregulation and privatization in the natural gas industry will result in a more competitive environment. Low cost gas suppliers, transporters and load balancing providers will succeed in the market. As a gas producer, CanEnerco is developing underground gas storage pools in the Guelph (Niagaran) reefs of the Michigan Basin, Southwestern Ontario, Canada. Reducing facility costs associated with the projects is paramount in maintaining a competitive advantage. The proper use of three dimensional (3D) seismic has allowed CanEnerco to identify higher porosity and permeable areas within the reef. Wells drilled into these sections of the reservoir have resulted in high deliverability wells. Higher deliverability enhances the physical use of the reservoir while reducing the number of wells required and horsepower needed to meet design day parameters. The paper outlines the design of the 3D program the results of the interpretation and drilling, and a cost-benefit analysis for CanEnerco's most recent gas storage project.

Introduction

The management of CanEnerco recognizes that the advent of deregulation in the Ontario market will allow suppliers of natural gas direct access to the burner tip. The ability to provide load balancing services will be open to every participant and the need for storage will become more important to suppliers and marketers. Existing utility storage in Ontario meets only the needs of current customers and incremental long term demand for storage cannot be fully satisfied.

In order to meet the growing needs of the natural gas market in Ontario and elsewhere, the use of storage by CanEnerco as part of its ability to provide gas supply is deemed by management to be of the utmost importance.

The development of the Chatham "D" storage project will give CanEnerco 2.4 billion cubic feet (bcf) of available capacity for purchasing and injecting natural gas during periods of lower pricing and selling and withdrawing during periods of higher demand and higher pricing. Furthermore, CanEnerco can also utilize the capacity to provide term contracts at fixed prices with the security of the physical hedge provided by the gas in storage.

Figure 1 is a plot of the NYMEX historical closing prices for its future contracts since inception and Figure 2 is a plot of the trading range of the next 11 months of futures contracts. These exhibits combine to indicate the volatility associated with the natural gas market and the opportunity to improve margins through the use of underground gas storage. In order to ensure competitiveness it is imperative that CanEnerco develop its storage at the lowest possible cost. One way to lower the cost of development is to drill fewer wells, thus reducing the amount of gathering lines, and yet achieve optimal deliverability from the pool. Higher deliverability wells are generally indicative of higher porosity and permeability within the storage reservoir. These reservoir characteristics allow for reduced reliability on compression to achieve the volumes of gas required resulting in a reduction of horsepower requirements and costs.

CanEnerco is currently developing the Chatham "D" storage project. The use of 3D seismic over this pool provided a significant difference in the interpretation of the reservoir that resulted from the initial two dimensional (2D) seismic and the geology from the two production wells.

Background

The Chatham "D" 7–17-XII gas field is located in Chatham Township, Kent County, Ontario, Canada. Figure 3 shows the location of the pool relative to other gas storage pools in southwestern Ontario. The field is a Silurian-aged gas bearing pinnacle reef of the Guelph (Niagaran) formation (Figure 4.). Currently there are 20 underground gas storage pools in operation in southwestern Ontario with a total working capacity of 208 billion cubic feet. All of these pools are Guelph formation pinnacle reefs and are part of the Michigan basin reef trend that circles the basin (Figure 5.).

The Chatham "D" pool was discovered by the original operator in May, 1990. The discovery well, 748160 Chatham #2, 7–17-XII, was drilled based on the 2D seismic (Figure 6.) and encountered gas bearing reef reservoir at a depth of 1407 feet.

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