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中国石油中国石油

China National Petroleum Corporation

2016.11

Preface

China National Petroleum Corporation (CNPC) has attached great importance to

shale gas exploration and development, and taken shale gas as the strategic focus of

unconventional gas development. In accordance with the guideline of “Indentify

resources, Evaluate productivity, Advance technology and Develop effectively”,

through ten years of exploration and research, CNPC has proved resource

distribution, developed six major technologies, innovated four models of exploration

and development, established HSE system for production, built two national shale gas

demonstration zones (i.e. Changning–Weiyuan, and Zhaotong), and laid the

foundation for the "13th Five-Year" shale gas scale development.

Outline

Overview of shale gas

Main achievements

Difficulties and challenges

Future work deployment

4 4 CNPC’s exploration and development course of shale gas

CNPC’s exploration and development course of shale gas

Cooperating and learning stage (2007-2009)

In 2007, the agreement “Joint study on shale gas in Weiyuan area” was signed with America Newfield oil company,

which is the first international cooperation agreement on shale gas development.

In 2008, the first shale gas well for collecting geological data — Changxin 1 was drilled at the north limb of

Changning structure.

In November 2009, the agreement on joint evaluation on Fushun-Yongchuan was signed with Shell.

In December 2009 , the Program of CNPC for Demonstration Zones of Shale Gas Industrialization was approved, which

identified Longmaxi and Qiongzhusi formations as the primary targets, and formally launched the industrialization of three

demonstration zones (Changning, Weiyuan, and Zhaotong), with production capacity of 1.5 billion cubic meters. And pilot test

in drilling and fracturing was commenced.

Joint study with Newfield oil company

By international cooperation, the layer and goal were defined

preliminarily. With drilled geological wells and made

development plan, the demonstration zones have been prepared

for the development of shale gas.

Exploration and evaluation stage (2010-2013)

In September 2010 , Wei 201, the first vertical evaluation well of shale gas in China, produced gas after fracturing.

In April 2011, Wei 201-H1, the first horizontal well of shale gas in China, was drilled and then fractured.

In November 2011, Ning 201-H1 was drilled and got high yield after fractured, stage fracturing technique has been

broken through.

Well depth : 2823m, horizontal length

1078m

Target layers: Longmaxi

Fracturing and gas test: 11 stage, 23655m3

fracturing fluid, 959.5t proppant, test

production 1.3 104m3/day

Well depth : 2840m

Target layers: Longmaxi and Qiongzhusi

formations

Fracturing and gas test: Longmaxi 0.3-

1.7 104m3/day, Qiongzhusi 1.08 104m3/day

Well depth 3790m, horizontal length

1045m

Target layers : Longmaxi

Fracturing and gas test 10 stages, 21605

m3 fracturing fluid, 568.12t proppant, test

production 15 104m3/day

Wei 201 Well Wei 201-H1 Well Ning 201-H1 Well

Ning 201-H1 Well gas test Wei 201 Well site Wei 201-H1 Well fracturing site

In March 2012, National Development and Reform Commission (NDRC) and National Energy Administration

(NEA) approved the establishment of two demonstration zones.

In July 2012, factory test on Changning H2 and H3 pads was launched in Changning demonstration zone.

By drilling vertical and horizontal wells, using stage fracturing technology and conducting factory-mode test, the

resource was evaluated, the adaptability of technologies was confirmed and the barrier of gas production was broken

through, making sufficient preparation for the commencement of scale production.

Exploration and evaluation stage 2010-2013

Scale construction and production stage (2014-)

In February 2014, the special meeting on shale gas development was held, and a field coordination and command

team was set up.

In March 2014, CNPC approved the first shale gas development programs for production capacity of 25 108m3.

By referring to the Sulige model, CCDE and GWDC were urged to carry out risk operation and implement the

four development models.

Founding conference of the field coordination and command

team for shale gas development

Leadership delegation visited Weiyuan 204-H11 pad

In August 2015, using “double rigs and batch operation”, Changning H6 become the first pad delivering daily

production of more than 1 106 m3.

In September 2015, proven geological reserves of 1635 108m3 shale gas has been approved.

In January 2016, CNPC approved the second shale gas development programs (capacity expansion).

Scale construction and production stage (2014-)

Through the market-based operation, and horizontal well group development, scale production was

achieved rapidly

The review meeting of shale gas proven reserves The review meeting of shale gas development programs

CNPC plays the leading role in China shale gas development

Through ten years of unremitting efforts, CNPC has basically kept up with the pace of the international "shale gas

revolution", continued to lead the development of China's shale gas industry, and set up the important status of shale

gas as a new natural gas energy

In 2007, the first shale gas geological comprehensive evaluation by international co-operation was carried out.

In 2010, the first shale gas vertical well in China — Wei 201 was drilled and produced gas after fractured.

CNPC became the first enterprise to produce and sell commercial shale gas in China.

In 2011, the first horizontal well in China—Wei 201-H1 was drilled and produced gas after fractured.

In 2012, the first shale gas well with commercial value in China—Ning 201-H1 was drilled , and the first

national demonstration area of shale gas was approved and established.

In 2013, the first industrialization platform test in China was carried out.

In 2014, the construction of the first export pipeline of shale gas —Changning export pipeline was completed.

In 2015, the construction of the first platform with shale gas production of more than 100 m3/day

Changning H6 well pad was completed.

Workload completed by CNPC

Focusing on Changning, Weiyuan and Zhaotong blocks, CNPC acquired 2D seismic data in

5695 km and 3D seismic data in 1750 km2, drilled 51 evaluation wells and 176 horizontal wells,

and 137 production wells produced cumulative gas production of 37.17 108m3

页岩气水平井压裂施工现场

Shale gas horizontal well hydraulic fracturing

Demonstration area of shale gas

In 2016, there are 8 new pads drilling, and 48 wells drilled, accumulating footage of 21.31 104m. It is expected to

drilling 54 wells

Totally 43 pad was set up over the years, 176 wells drilled, accumulating footage of 89.57 104m

Block Changni

ng

Wei

yuan

Zhao

tong Total

The first half of

2016 2016 plan

New drilling pads

Wells drilled well

Footage

104m

Drilling Statistics

Horizontal wells drilled

Horizontal length

Drilling cycle

In 2016, 40 wells and 789 stags have been fractured, and 64 wells are expected to be fractured during

the whole year

There are cumulatively 26 pads, 139 wells and 2528 stags fractured over the years

Fracturing Stimulation

Item Changni

ng

Wei

yuan

Zhao

tong

Tota

l

The first

half of

2016

2016

plan

Stags

Statistics of fracturing workload

2016 45 918 / 20.4 /

In 2016, test gas in 45 wells, obtaining test production of 918 104m3/day and single well average

production of 20.4 104m3/day.

107 1882 / 17.6 /

There are 107 wells tested over the years, obtaining test production of 1882 104m3/day and single

well average production of 17.6 104m3/day.

Statistics of test production

3.

Test production

Block Number of

wells

Test production

(104m3/day)

Average

production of

single well

(104m3/day)

Weiyuan

Changning

Zhaotong

Total

Single well average test production in different production stages

From January to October 2016, 44 new production wells were put into production and increased capacity of

10 108m3/year. By now 137 production wells were put into production, among which 118 wells are producing a

daily gas production of 792 104m3, and cumulative production of 23 108m3 from January to October. It is

expected to increase capacity of 18.2 108m3, and gas production of 27 108m3 all the year round.

137 production wells have been put into production over the years, and delivered cumulative gas production of

37.17 108m3.

Statistics of production wells in demonstration zones

Block

Producti

on

well

New

producin

g well

Daily gas

production

104m3

Single well

average gas

production

104m3

Cumulative gas

production

104m3

Planned

production1108m3

New production

well

Produced gas

yield

108m3

Estimated annual new

capacity

108m3

Estimated annual

production

108m3

Changning

Wei

yuan

Zhao

tong

Total

Production Performance

61 wells drilled, 45 wells fractured, 32 wells

producing, 6 wells being fractured

Test production: 5.5-35.0 104m3/day,

average 20.3 104m3/day

Daily gas production: 345 104m3/day

Gas production in 2016: 9.4 108m3

Development of Changning

Progress in demonstration zones

Development in Weiyuan

87 wells drilled, 67 wells fractured, 63

wells producing



Daily gas production : 315 104m3/day


49 wells drilled, 27 wells fractured, 26

wells producing



Daily gas production : 132 104m3/day


Development in Zhaotong

Well site hydraulic fracturing

Built and put into operation for 5 dehydrating stations, 5 export pipelines with a total length of 124.3 km, which

provided dewatering ability of 1130 104m3/day and gas transport capacity of 1200 104m3/day . Internal

transportation and water supply project has been fully completed and put into operation.

Export main line D457-93.7km daily gas transmission capacity 450 104m3 put into operation in April 2014.

Dewatering device; one set of triethylene glycol dewatering daily dewatering capacity 300 104m3, put into operation in April

2015.

Internal gathering & transmission; gathering gas pipeline 37km, 13 well stations put into operation from April 2015 in

succession

Centralized water supply ; Water supply pipeline 45km, 9 pumping stations, put into operation from February 2015 in succession.

Booster device: 1 RTY3360 unit daily boost scale 450 104m3, built in September 2015.

Huangjinba gathering and degassing station

Nanguanghe across of Changning shale gas

producing test main line

Ning 201-H1 central station

Export main line

Wei 202 well area D273-1.8km daily gas transmission capacity 100 104m3 put into operation in April 2015.

Wei 204 well area D406-7.3km daily gas transmission capacity 280 104m3 built in October 2015. D406-16.4km daily gas

transmission capacity 300 104m3, put into operation in December 2014.

Dewatering device

Wei 202 well area one set of triethylene glycol dewatering daily dewatering capacity 100 104m3 put into operation in June 2015.

one set of triethylene glycol dewatering daily dewatering capacity 280 104m3 put into operation in April 2016.

Wei 204 well area one set of triethylene glycol dewatering daily dewatering capacity 300 104m3 put into operation in April 2015.

Internal gathering & transmission gathering gas pipeline 54km 13 well stations put into operation from December 2014 in succession

Centralized water supply Water supply pipeline 63km 7 pumping stations put into operation from October 2014in succession.

Export main line 5.1km put into operation in February 26. 2015.

Dewatering device one set of triethylene glycol dewatering daily dewatering capacity 150 104m3 put into operation in August

2015.

Internal gathering & transmission gathering gas pipeline 16.3km put into operation from August 2015 in succession

Zhaotong

Weiyuan

Changning

长宁H2平台 Changning H2 platform

Surface engineering construction

Safe and clean production

Treatment device of flow-back fracturing fluid

Changning H6 platform, treatment device of oil bearing

cuttings using LRET tecnology

Established and published HSE management system to form a

normalization management mechanism

Regulated drilling and completion operation of shale gas , and

completed safety pre-evaluation of construction project

Completed EIA on all separate engineering construction

projects, and got approved

Changed rigs from oil to electricity, and improved silencer

facilities; adjust fracturing time and used insulation plates to

reduce operating noise

Promoted anti-mud spill device and harmless treatment of oil

bearing cuttings while drilling

Strengthened recovery and reuse of flow-back fracturing fluid,

and built standard treatment installation

Outline


Main achievements



Based on the chronostratigraphy and the lithological and electrical properties, defined the layering and

comparing standards in the whole region for the first time, so as to confirm the sweet spot area and provide

the bench mark for determining the target in a horizontal well.

Layering plan for Wufeng-Longmaxi shale

Defined layering method and identified target zones

The Longmaxi Fm in the Middle-Upper Yangtze region contains gas in general, with the prospect area of

5.07 104km2, including 3.86 104km2 in the Sichuan Basin. Available prospects in southern Sichuan

Basin cover an area of 1.2 104 km2, with shale gas resources of 5.6 1012m3.

Defined layering method and identified target zones

Classified evaluation of shale gas prospects of Longmaxi Fm in the Sichuan Basin and its adjacent area

Proved reserves of 1635.31 108m3 in Ning 201, Wei 202 and YS108 well areas.

Completed the first round of shale gas reserves calculation of CNPC with

high quality and efficiency

Newly increased proved reserves of Ning 201, Wei 202 and YS108 well areas

The drilling evaluation cycle is reduced from 150 days to 70 days.

The encountering rate of Class I reservoirs increased from 60% to 96%.

The casing loss rate decreased from 62.5% to 15%, and the cementing quality rate was up to 90%.

The length of the horizontal section was 1082 m in the evaluation period and increased to 1503 m during the

construction and production period.

The production of single well test increased from 10 104m3 to 20 104m3 in the early stage of evaluation.

Six major technologies for exploration and development

Six key technologies with significant promotion of quality and efficiency

Comprehensive geological evaluation technology

Determined key parameters and evaluation system suitable for evaluation and area selection of marine

shale gas in south China, and defined 4 prospects and 3 production construction areas.

Developed 3D seismic fine structure, small fault, buried depth interpretation, characteristic parameter

and fracture prediction technology for shale gas.

Established a series of logging techniques, and formed fast logging identification and evaluation

technology for shale gas.

3D visualization of pre-stack Depth

Migration in Ning 201well area

High quality shale thickness distribution

map of Longmaxi Fm in Ning 201 well

area

Fracture prediction plan of the bottom of

Longmaxi Fm in Ning 201 well area

2. Optimization technology for shale gas development

Summarized the characteristics of shale gas development and the law of gas production in the

production area, and formed a set of effective development technique policy

Horizontal tunnel location: in the Wufeng- Long11b of Changning, and Long11a of Weiyuan

Horizontal tunnel orientation: about 10-25 in the northeast of Changning, and the angle with

the direction of the minimum principal stress in Weiyuan is 45

Distance between horizontal tunnels: 400-500m in Changning – Weiyuan areas

Length of horizontal section: 1400-1800m

Drilling and completion technology for shale gas horizontal wells

Optimized the well structures in different regions of Weiyuan and Changning.

Formed the optimizing drilling technology in horizontal wells, and the encountering rate of Class I reservoirs

increased to more than 95%.

Independently developed oil-based drilling fluid, and successfully tested water-based mud

Significantly enhanced drilling rate and efficiency, and greatly reduce the drilling cycle as compared with that in

the evaluation period

增下508mm套管，解决表层恶性井漏、垮塌复杂

减小技术套管下深，降低大井眼段长，有效提高机械钻速

井身结构由“非常规” 变为“常规”，配套工艺更加成熟

增大油层套管内径，为高效压裂创造条件

增大表层套管下深，解决表层恶性井漏、垮塌复杂

4. Volume fracturing technology for shale gas horizontal wells

Horizontal well fracturing technology with low viscosity slick water + ceramic proppant to increase complex fracture

system and effectively perform volume fracturing

Supporting technology for horizontal well volume fracturing, such as step displacement + prepad glue fluid technology,

turnaround fracture, etc

Localization of fracturing fluid system and key supporting tools

Other technology: micro seismic monitoring, SRV calculation and post-frac fracture description, etc.

渗透率预测图主缝+次缝三维模图

主缝网

随机缝

Fast drilling bridge plug

Casing starting slide sleeve

Large diameter bridge plug Post-frac fracture system description

“Factory” drilling mode: double drilling rigs, batch drilling, standardized operation

Mountain “factory” fracturing mode: "overall deployment, distributed fracturing, zipper type

operation", platform fracturing efficiency up to 2-3 intervals in 12 hours, and the average fracturing

cycle of half platform is 30 days

Regional platform water storage

Centralized water supply network

Regional team support

Equipment & materials sharing

Step-by-step implementation of

fracturing and drainage

Recovery and utilization of flow-back

liquid

Programming operating

Wellbore operation integration

Material reserve integration

Equipment maintenance integration

5. “Factory” operations of shale gas horizontal well group

Synchronous and zipper type fracturing

Standardized design and integrated skid assembly: skid assembly in various stages, shortening

construction cycle

Following the model of one gas field + one control center+ one shift apartment, a digital gas field was

built with front" automatic collection, middle centralized control, and back analysis and decision

6. Shale gas gathering & transmission technology

20

10

4m

3

hea

t m

eter

ing s

kid

gas from

wellhead

Decontamination pool Rotation measurement

Changning H2 pad

Outline


Main achievements



Due to low resource quality and complex external environment, the development cost is relatively high,

presenting challenge to economical and efficient development

Compared with the U.S., the marine shale formation in China is older, with higher thermal

maturity and larger burial depth after reworking of multi-stage tectonic movements. The

preservation conditions are not favorable, and the resource quality is relatively poor.

Complex crustal stress in main distribution area, variable landform elevation, dense

population and environmental sensitivity bring difficulties to field operations.

Shale gas development in China is still at the initial stage. Limited by geological conditions

and technical capacities, together with fast production decline at early stage, more wells and

high cost, the production cost in China is significantly higher than that in the United States.

Even if large-scale production is activated, the investment in single well might be about 60

million yuan. The figure might be higher if surface engineering, transmission in mountains

and other factors are considered.

Research should be made on technologies for reservoirs deeper than 3500m

The development technology for reservoir shallower than 3500m is basically mature, but some core processes and

equipment should be imported.

Key technolgies of horizontal well drilling and completion, staged fracturing and fracture monitoring are still in the

integration and improvement stage.

Key engineering technologies applied to reservoirs deep than 3500m in southern Sichuan Basin are not

satisfactory enough, suggesting challenge to effective development.

Slid-rail hydraulic drilling rig Overseas “factory mode” operation site

Unknown production law brings challenges to scientific drainage and production

At present, the effective production period of shale gas wells is short. For some wells which are producing for less

than one year, both gas and water (fracturing fluid) are produced at early stage, and production is significantly

different among wells. The production law of gas wells is not clear. Especially, field tests and researches should

be carried out in relation to single well drainage system, rational allocation and production decline.

62% 46% 33% 25% 20% 17% 14% 13% 10%

Single well production declines fast 62%, 46%, 33%, 25%, 20%, 17%, 14%, and 13% in turn and less than 10%

after ten years

Total production in these blocks keeps declining rapidly

Production prediction curve of Changning Production prediction curve of Zhaotong Production prediction curve of Weiyuan

Outline


Main achievements



Further researches on key engineering technologies

In Changning and Zhaotong blocks, optimize and solidify key technologies, and make more efforts to reduce

costs and improve operational efficiency.

202

In Wei 202 block, speed up the fixing of key technologies, optimize process parameters, and continuously

improve the production of single well.

204

In Wei 204 block, speed up the breakthrough on key technologies, and especially improve vertical fracture

initiation technology to address the bottleneck in single well production.

3500

Continue to carry out deep shale gas development test in Zigong, Dazu, and Luzhou blocks, in order to

discover the resources below 3500 m.

Number of shale gas development wells in different blocks

Unify gas reservoir engineering method and optimize development mode

Continually implement shale gas production performance analysis, establish a unified applicable gas

reservoir engineering method, and accurately evaluate shale gas well development effect.

Implement the research on optimal parameters of gas field development and field test to determine the

optimal well spacing, drainage system, production allocation program and decline rules.

The relationship between daily test production and the

average production of the first year

The relationship between average daily production in the

first three months and average daily production in the

first year

Guided and supported by national ministries (i.e. National

Energy Administration), shale gas exploration and development

of CNPC has made great achievements. Our future work will

continuously adhere to increase production, reduce cost and

control risk as goals, take update technology and enhance

management as measures, seize opportunities and actively

assume responsibilities to make a greater contribution to the

national shale gas industry development.

Conclusions

Thank you

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