QUARTERLY REPORT 9

MICHIGAN TECHNOLOGICAL UNIVERSITY

January, 1996

RECOVERY OF BYPASSED OIL IN THE DUNDEE FORMATION USING HORIZONTAL DRAINS

Cooperative Agreement No.: DE-FC22-94BC14983

Contractor Name and Address: Michigan Technological University, 1400 Townsend Drive, Houghton, MI 49931-1295

Date of Report: 31 July 1996

Award Date: 28 April 1994

Anticipated Completion Date: 27 April 1997

Government Award for Current Fiscal Year: $800,000.

Principal Investigator: James R. Wood (906) 487-2894

Project Manager: Chandra Nautiyal, Bartlesville Project Office (918) 337-4418

Reporting Period: April 1, 1996 - June 30, 1996

The principal objective of this project is to demonstrate the feasibility and economic success of producing oil from abandoned or nearly abandoned fields in the Dundee Formation of Central Michigan using horizontal drilling technology.

A site for a horizontal well was selected in Crystal Field, a nearly-abandoned Dundee oil field in Michigan. This field had produced over 8 million barrels of oil, mostly in the 1930's and 1940's. At the height of development, Crystal Field produced from 193 wells, but by 1995, only seven producing wells remained, each producing less than 10 bbls/day. A horizontal well was drilled as a field demonstration pilot, funded through this DOE project, and was immensely successful. Core and logs from the Dundee interval were recovered from a vertical borehole at the same surface location. The horizontal well was brought on production at a rate of 100 bbls/day and is probably capable of producing at a higher rate. The addition of several horizontal wells, similar to the demonstration well, will likely add another 2 million bbls (or more) to the cumulative production of the field over the next few years. The presence of untapped oil in this Dundee field was dramatically demonstrated and the favorable economics were made clearly evident. If other abandoned Dundee fields are re-developed in a similar manner, the additional oil produced could exceed 80 million barrels. Horizontal drilling will likely revolutionize the development of old carbonate fields such as those in the Dundee of Michigan.

Additional project work comprises characterization of 30 other Dundee fields in Michigan to aid in determining appropriate candidates for development through horizontal drilling. Further quantification of reservoir parameters such as importance of fracturing, fracture density, and irregularity of the dolomitized surface at the top of the reservoir will help in designing the optimal strategy for horizontal drilling.

Technology transfer takes place continuously, through the Michigan Oil Field Research Consortium (MOFRC) and its Newsletter. Reviews in the popular press have helped reach additional audiences. The success of the demonstration well has been recognized by independent operators, who have requested copies of information published the Newsletter, and who have expressed interest in attending workshops which are being planned for this year. The creation of an "Atlas of Michigan Dundee Reservoirs" is planned as a no-cost addition to this project. The Atlas will greatly enhance the capability of small operators in the state to independently explore and develop this neglected resource.

BUDGET PERIOD 2

TASK 1 PROJECT MANAGEMENT

1.1 COORDINATION

The management tasks have gone smoothly this quarter. Various subgroups met and worked on subtasks throughout the quarter.

In April, J. Allan and M. Luo traveled to Michigan Technological University (MTU) to work on the project with MTU faculty and graduate students. In April and June, J. Wood traveled to Western Michigan University (WMU) to review data and plan project tasks with W. Harrison. During the June visit, they reviewed data from Walker Field, a Crystal Field look-alike that produces out of the Traverse Lime. There may be an opportunity to drill horizontal wells in Walker Field using knowledge gained from the Crystal Field project. In April, May, and June various project team members attended the Michigan Oil and Gas Association's monthly meetings in downstate Michigan to communicate the results of our Crystal Field project to the Michigan oil and gas community. During these trips visits were made to several independent oil companies. These meetings are discussed in greater detail under Subtask 5.3.

1.2 BUDGET AND REPORTS

M. Gruener and A. Hein are responsible for daily management of the budget and expenditures. A. Hein is responsible for preparation of quarterly financial reports and for distribution of all reports to DOE. J. Allan is responsible for quarterly and annual technical reports.

TASK 2 RESERVOIR CHARACTERIZATION

During the fall of 1995, the demonstration well for this project, the TOW No. 1-3 well in Crystal Field, was completed in the Dundee. Daily production has varied from about 75 to 120 BOPD since that time. Currently the well is producing at the 120 BOPD level. The water cut remains at 0% and pressure has been maintained at 1445 psi by an active water drive. The well has nearly paid out now.

Cronus Development Co. plans to drill 5 to 6 additional horizontal wells in the Dundee in Crystal Field during the coming year. Cronus plans to drill 1900 ft. laterals (horizontal legs) in each well, similar to that originally planned for the TOW No. 1-3 well. However, to prevent lost circulation and blowout in the fractured and vuggy Dundee reservoir, as occurred while drilling the 1-3 well, special drilling technology will be required. Underbalanced drilling, in which the formation is allowed to flow during drilling, will probably be used. Coiled tubing technology, which minimizes time-consuming trips in and out of the hole, is being considered. The 90 ft lateral in the TOW No. 1-3 well is producing 120 BOPD with no water cut. It is expected that 1900 ft laterals will be capable of much higher water-free production.

MTU acquired five existing seismic lines in the Crystal Field area from Marathon Oil Co. Paperwork releasing the lines to the University was signed in July, 1996. MTU researchers have been offered free processing of the lines by a commercial vendor. This data will add a significant dimension to our study.

2.1 CORE AND LOG ANALYSIS

A 59.3 ft core was recovered from the top of the Dundee in the TOW No. 1-3 well. W. Harrison described the core and J. Allan and Harrison later sampled. Petrographic, Xray diffraction, and fluid inclusion analyses will be performed on these samples in the coming months. The well-bore diagram and core description log were placed on the WMU Internet Homepage and can be downloaded by anyone with interest in the project. Xray diffraction analyses of the core were completed by graduate student H. Wines at WMU during this quarter.

Haliburton ran 3 consecutive log suites on the TOW No. 1-3 well, which included: 1) a gamma ray and dual laterolog with microresistivity, 2) a lithodensity log (compensated formation density plus photoelectric factor), and 3) a compensated neutron log. The logs were then correlated with a high degree of confidence and combined. During the last quarter, Pennington loaded the digital log traces into MTU's GeoGraphix Exploration System's QLA2 log evaluation software module and began evaluation of the logs for porosity and fluid saturations.

During the second quarter of FY 1996, K. Moss and two other staff members from Western Atlas spent two days at MTU discussing the Crystal Field well, logging techniques, and, in particular, use of the Circumferential Borehole Imaging Log (CBIL) with W. Pennington and other faculty and graduate students. During this past quarter, discussions with Moss continued, and it now appears that we may be able to get Western Atlas to run a CBIL log along with lithology and saturation logs on one of the upcoming Crystal Field horizontal wells. Since the relative contribution of matrix porosity and fracture porosity to reservoir produceability and storage capacity are still uncertain at this time, it is essential that these logs be run. We have applied to DOE for a supplemental grant of $20,000 to enable us to acquire this data.

2.2 DATA MEASUREMENT AND ANALYSIS

The uppermost Dundee reservoir was cored in the TOW No. 1-3 well. The coring point was in the lowermost Bell Shale, immediately above the Dundee. 59.3 ft of core were recovered out of a possible 60 ft. The core was shipped to OMNI Laboratories in Houston where a core gamma ray log was run and the core was photographed under plane and ultraviolet light to reveal sedimentary structures and heterogeneities in oil saturation. Porosity, permeability, and residual fluid saturation analyses were performed on whole-core samples taken at 1 ft intervals. Xray diffraction analyses of core samples were completed during the past quarter.

Twenty nine feet of higher residual oil saturations at the top of the Dundee (3190-3219 ft) in the core indicate significant unrecovered oil. Beneath that, seven feet of lower residual oil saturations (3219-3226 ft) indicate either a transition zone or a swept zone where the oil-water contact moved up as a result of primary oil production. In the water leg below 3226 ft, residual oil saturations are 0.0%. W. Pennington has evaluated the log suite in the TOW No. 1-3 well using GeoGraphix' QLA2 log-evaluation module, but to date is still having difficulty matching saturations calculated from logs to saturations measured in core.

W. Harrison has begun to sift through production data for the 30 project fields and to reorganize and replot it in ways that will provide useful insights into reservoir heterogeneity and past production practices. The first effort has concentrated on Isabella Field, where production data are available for individual leases. Production was plotted for 20-acre boxes in the field and color-coded according to production volume. Production maps constructed at individual time increments reveal changes in the production pattern with time, while the map of total production pinpoints reservoir heterogeneities and "sweet spots" in the field.

Fourier Transform Infrared Spectroscopy (FTIR) - Elemental analyses were completed using the Inductively Coupled Plasma Spectrograph (ICP) at MTU. More problems were experienced in the calibration of FTIR standards. Current efforts concentrate on obtaining better standards. The FTIR work represents the M.S. thesis research of graduate student N. Popko.

TASK 3 DATABASE MANAGEMENT

The Multimedia Database Management System (MDMS) has been developed in the commercial software package Toolbook. Design and implementation, which were carried out by C. Asiala, are now essentially complete. All data and information are accessible through drop-down menus and hotlinks in a Table of Contents. A tutorial is presented up front to guide users through the MDMS and instruct them on the various ways in which data can be viewed and retrieved. The MDMS will be written to CD ROM at the end of the project. Copies of the CD ROM will be pressed and made available to the public. The CD ROM, which will contain project maps, cross sections, core and production data, interpretations, and nonproprietary log and seismic data, will be the principal project deliverable.

C. Asiala developed a search engine in Microsoft Access which can be used to retrieve logs from the CD ROM. Any desired log curve can be located using queries and then exported from the CD ROM to temporary Access tables created on the computer's hard drive. Once in the Access tables, log curves can be manipulated or transferred to log evaluation packages such as GeoGraphix' QLA2 or Crocker's Petrolog program for analysis and plotting.

During the last quarter, log digitization software, produced by Neurolog, Inc., was purchased by MTU, along with a 36 in scanner for reading logs into the program. Hundreds of paper copies of Michigan Basin well logs are available to us from the WMU Core Repository and from companies such as Angstrom Precision and Maness Petroleum that have been providing us with data for the project. With this new software, project staff can digitize their own well logs and input them to QLA2 or Terrastation for quantitative analysis. This eliminates the prohibitive expense of having well logs digitized commercially and will be important to the modeling part of our effort, which will require hundred of digitized well logs in order to be successful. Neurolog also provided us with their map-digitization software module. Summer student P. Lasco is organizing our log database this summer in preparation for digitization.

3.1 TOPICAL REPORTS

W. Harrison has collected reservoir data for the 30 oil fields in our study area and is organizing and reformatting it into tables of reservoir parameters for the Topical Reports required by DOE and for inclusion in our "Atlas of Michigan Dundee Reservoirs" (see Subtask 3.2). As he completes each field, he forwards the data to C. Asiala enters it in a Microsoft Access database, where it will eventually be input to the MDMS and written to CD ROM.

3.2 DUNDEE ATLAS

We plan to create an "Atlas of Michigan Dundee Reservoirs". As envisioned, this Atlas will include a regional overview of Dundee stratigraphy and reservoir variability; development history of the trend, including comparisons between different fields; production history, including a discussion of engineering and completion techniques; and a table of important reservoir parameters for use in characterizing the Dundee reservoir in other old fields for which little data are available. The maps and cross sections already prepared during the first phase of this DOE project will serve as the cornerstone of the Atlas. The main body of the Atlas will consist of individual discussions of reservoir geology, engineering practices, and tables of reservoir parameters for each Dundee field. Discussion of the importance of fracturing, fracture density, and irregularity of the dolomitized surface will aid in the design of the optimal strategy for horizontal drilling. This Atlas will undoubtedly enhance the capability of the small operators in the state to independently explore and develop this neglected resource. The Michigan Basin Geological Society has expressed interest in publishing the Atlas. The Atlas will represent a major project deliverable.

3.3 PSEUDO-SEISMIC VISUALIZATION

3-D visualizations of the Michigan Basin have been constructed in MatLab. This commercially available statistics and visualization package is both flexible and powerful and can easily perform both 3-D surface and 3-D volume visualizations. M. Luo loaded the Angstrom database into MatLab and produced a 3-D volume visualization of the basin that shows the thickness and distribution of the Dundee and other key formations. Cross sections can be made through the basin at any desired angle.

B. Wei is using MatLab to produce "pseudo-seismic" sections from SP and gamma ray-logs. Using Wei's program, individual pseudo-seismic logs (log traces whose amplitudes have been color-coded to resemble seismic amplitude traces) can easily be selected from a map-view window and then displayed as well-log or pseudo-seismic cross sections. This capability adds another useful dimension to our visualization capabilities. During the past quarter, efforts focused on basic program development.

TASK 4 MODELING

4.1 GEOCHEMICAL MODELING

The geochemical modeling program CHILLER is being used to model fluid-rock interaction. The feasibility of porosity prediction using CHILLER is being investigated. Geochemical mass transfer work using CHILLER is being carried out by J. Suchoski. Two databases are currently being used. The thermodynamic database SOLTHERM contains thermodynamic information on fluid species, gases, and minerals. Over 400 species are contained in the database. The data are valid over a temperature range of 0oC to 300oC. The database OXYBASE is being used for oxygen isotope calculations.

4.2 BASIN MODELING

Student M. Slis collected stratigraphic nomenclature and correlation data from throughout the Michigan Basin and constructed a master stratigraphic correlation chart for the basin. This was an essential first step in the modeling effort, since formations change name across the basin and all stratigraphic equivalents encountered on drillers' logs had to be identified and properly correlated before the drillers' logs could be used to correlate formations across the basin.

W. Everham loaded the Angstrom data set, which contains formation-top and lithology data for 51,359 Michigan wells, into GeoGraphix and prepared maps which displayed all well penetrations for each geologic period (Fig. 1). Similar maps were prepared using only the deepest well in each section in the state. Comparison of the two demonstrated that the second, more manageable, data set of about 10,000 wells provided nearly as good 3-dimensional coverage of the basin as the complete 50,000-well data set. The 10,000 wells were used to construct isopach maps of sediment thickness for each geologic period (Figs. 1, 2). These isopach maps enabled Everham to trace the change in location of the Michigan Basin depocenter through time (Fig. 3). Everham also continues to construct simple regional cross sections which he uses to identify and correct bad formation-top picks.

During this quarter, Everham wrote a PC-based FORTRAN program to convert lithologic sample descriptions on drillers' logs to log ASCII standard (LAS) format, in which form they can be input to GeoGraphix' QLA2 log evaluation module. Once in QLA2, they are converted to log binary standard (LBS) and can then be handled and displayed as graphic lithology logs (Attachment 1). Since QLA2 is used as both a log-evaluation and a cross-section construction tool, we now are able to construct facies cross sections in GeoGraphix (Fig. 4). All 10,000 drillers' logs in our working database are now convertible to lithology logs. GeoGraphix, Inc.'s management is quite interested in this work, since at present the GeoGraphix Exploration System does not have the capability of handling facies data. Once the Neurolog software is operating, we plan to digitize the paper copies of wireline logs already in our possession and overlay log traces on the facies cross sections.

The facies plotting capability that we have achieved in GeoGraphix will enable graduate students to do sequence stratigraphic analyses of the Michigan Basin on any scale that they choose. A. Wylie plans to do a sequence stratigraphic study for his doctoral dissertation. During the last quarter, he plotted all significant penetrations of the Glenwood - Prairie du Chien (Cambrian) interval on a map of the Michigan Basin and constructed three cross section (one north-south and two east-west) through the basin using 38 wells. After he acquires digitized wireline logs for these wells, Wylie plans to do a "first-pass" sequence stratigraphic analysis of the basin.

After completing this pilot study, he will decide whether to focus his dissertation on the complete stratigraphic section for the entire Michigan Basin, or focus solely on the Devonian interval in our 7-county, 30-field Dundee study area. Each approach has its advantages. A basin-wide study would utilize the same well-data set that W. Everham is using in his thermal and compaction-history modeling study of the Michigan Basin. The two dissertations would dovetail nicely. A study restricted to the Devonian of central Michigan would contribute directly to our Dundee project and has the added advantage that 243 wireline logs from this area have already been acquired from Maness Petroleum.

TASK 5 TECHNOLOGY TRANSFER

This task involves the transfer of information and useful products derived from this study to our target audience, the oil industry.

Internet Homepage

The Dundee Project has its own Homepage on the Internet, which is hot linked to the Geology Department at WMU. It can be reached at: http://www.wmich.edu/geology/corelab/coreres.htm. Project data and figures are being placed on the Homepage as they become available, and can be downloaded by interested parties.

5.1 MICHIGAN OIL FIELD RESEARCH CONSORTIUM (MOFRC)

Because of the MOFRC Newsletter and press releases, many people who are interested in horizontal drilling and the development of shallow-shelf carbonate reservoirs, both within the Michigan Basin and in other areas, have contacted project personnel. Several calls were from principal officers of independent oil companies who requested information to help them initiate horizontal drilling programs.

5.2 REPORTS

PROFESSIONAL PAPERS AND PRESENTATIONS

DOE Project Review Meeting

In May, W. Harrison, J. Wood, and W. Pennington attended the DOE Project Review Meeting on Improving Production in Shallow-Shelf Carbonate (Class 2) Reservoirs, which was held in Midland, TX. W. Harrison presented a talk entitled "Michigan Technological University's Improved Recovery Using Horizontal Drilling, Devonian Dundee Formation, Michigan Basin". MTU also had a booth at the meeting in which computer demonstrations were presented.

American Association of Petroleum Geologists (AAPG) 1996 Annual Meeting

MTU once again ran a booth featuring the Michigan Dundee DOE Project in the Exhibit Hall at the AAPG National Meeting in San Diego, CA, in May, 1996. Along with our normal poster display, the booth featured a computer-graphics display, projected onto a large screen, that presented an overview of project activities and results. Faculty and graduate students had many inquiries from and discussions with interested individuals concerning the project.

Society of Exploration Geophysicists' Production and Development Forum

In June, W. Pennington presented a talk entitled "Characterization of Old or Abandoned Fields in Michigan for Horizontal Drilling" at the Society of Exploration Geophysicists' (SEG) Production and Development Forum on "Characterizing the Interwell Reservoir Space: Geophysics, Geostatistics, and Visualization", in Vail, CO.

Oil and Gas Journal Paper

A paper describing the DOE Michigan Dundee project and the results of the Crystal Field demonstration well is in the final stages of preparation. It is entitled "Recovery of Bypassed Oil Through Horizontal Drilling, Dundee Reservoir, Crystal Field, Michigan" and will be submitted to the Oil and Gas Journal.

AAPG Computer Applications in Geology Volume

A. Wylie and J. Huntoon are editing a volume entitled "Practical Reservoir Characterization", which is to be published as a volume in the AAPG Computer Applications in Geology series. Wylie is writing the first six chapters, which constitute a "how-to" guide to computerized reservoir characterization. The remaining chapters will be case studies in reservoir characterization. One of the case studies will be a paper on the Dundee reservoir in Winterfield Field.

5.3 CD ROM AND MEETINGS

Multimedia Presentations on CD-ROM

C. Asiala has completely transferred the Multimedia Database Management System to the commercial software package Toolbook. Design and implementation are now essentially complete. As new data and interpretations become available, they are added to the database on a continuing basis. At the completion of the project, the entire MDMS will be written to CD ROM for distribution to the public. The MDMS is discussed in greater detail under Task 3.Michigan Oil and Gas Association Monthly Meetings

MTU faculty and graduate students now regularly attend monthly meetings of the Michigan Oil and Gas Association (MOGA). J. Wood, W. Pennington, S. Chittick, and J. Suchoski attended the April MOGA meeting in Mt. Pleasant, MI. M. Gruener, S. Chittick, and J. Suchoski attended the May meeting in Acme, MI, and J. Wood attended the June meeting in Mt. Pleasant, MI. MOGA meetings provide project staffers with a forum for meeting informally with executives and employees of the Michigan oil and gas industry (particularly those from independent companies) at which they can exchange ideas, keep abreast of recent developments, and communicate project results to the our primary target audience, the independent oil and gas community.

Meetings with Independent Oil Companies

In April, J. Wood met with C. Tester and M. Ligina of Cronus Development Co. to discuss Cronus' latest plans for developing Crystal Field. In June, J. Wood, W. Pennington, and A. Wylie traveled to Traverse City and met with C. Tester and E. Taylor of Cronus to review Crystal Field development progress and drilling plans. While in Traverse City, they also met with personnel at Petrostar to negotiate release of well logs for our basin modeling effort; with E. Walker at KEP, who has requested that we keep him informed of our project results; and with staff at Northwestern Natural Gas, which invited members of our project team to meet with them to discuss possible horizontal well targets in Michigan outside of the Dundee Formation. Wood, Pennington, and Wylie provided the Northwestern Natural Gas staff with advice on horizontal well design.

5.4 WORKSHOPS

A Technology Transfer Workshop, designed to present project results to the Michigan oil and gas community, has been tentatively scheduled for November, 1996. The location is still undecided, but current plans are to hold the workshop in a downstate oil center, probably Traverse City, MI.FIGURE CAPTIONS

Figure 1. Isopach map showing thickness variation of the interval between the Upper Silurian Salina G Unit and the Middle Devonian Dundee Formation. The locations of all well penetrations of this interval are plotted on the map.

Figure 2. Isopach map showing thickness variation of the interval between the Middle Devonian Dundee Formation and the Upper Devonian Traverse Formation. The locations of all well penetrations of this interval are plotted on the map.

Figure 3. Map showing the change in location of the Michigan Basin depocenter through time, from the Lower Ordovician to the Lower Carboniferous. Depocenter locations were derived from isopach maps, such as Figs. 1 and 2.

Figure 4. Lithologic pseudolog cross section through Crystal Field. Lithologs were created by converting drillers' lithologic sample descriptions to LAS format and importing these pseudolog traces into GeoGraphix, where they were plotted in graphic format and cross sections were constructed. Method is described in Attachment 1.