In September, GasFrac Energy Services Inc. signed a three-year contract with a two-year renewal option with Husky Energy for liquid petroleum gas (LPG) fracturing services. The company began operations under that contract in the fourth quarter.
The use of propane to replace water as the carrying agent for sand and chemicals in fracturing operations has begun to get the attention of operators in areas with water issues such as feared contamination of aquifers and drought.
GasFrac is a Canadian company that has been promoting use of a propane gel for several years. The company said it has so far performed more than 1,000 propane fracs on 400 wells.
In its third quarter report, the company said it anticipated that the Husky contract will initially utilize two of the four sets of equipment currently in Canada. Husky will focus on its development at Ansell. GasFrac expects more sets will be required as work under the contract expands.
During the second quarter two sets of equipment were mobilized to GasFrac’s operations in Texas. Since that time, the company has performed fracturing operations for several companies in a number of different formations, including a six-week project in Colorado. Revenues from U.S. operations grew consistently each month from $0.6 million in May to $12.9 million in October.
"To date in the U.S., we have performed fracturing services for 15 customers in numerous reservoirs. This has allowed us to introduce our LPG fracturing technology to a wide range of potential customers for their assessment. We remain confident that customer acceptance of our LPG fracturing technology will continue to grow based on results. While we have not to date signed any long-term contracts with U.S. customers, this will be a focus for us in 2012," the quarterly report noted.
The company has six sets of equipment operating and is expecting the delivery in the first quarter 2012 of four more sets that are currently under construction.
"We expect the North American, pressure-pumping market will remain strong in 2012. While there is some concern as to the level of capital budgets for exploration and development companies in 2012, we expect that expenditures will be flat to marginally down year over year.
"Further, capital budgets are expected to continue to move to oil and liquids-rich reservoirs and away from natural gas. As in Canada, more drilling activity in the U.S. is being focused on oil and liquids-rich gas. This trend is positive for GasFrac since the vast majority of our activity is in oil and liquids-rich reservoirs," the report continued.
"The expanded fleet size will allow us to have a greater geographic spread of equipment and revenue in 2012 helping to alleviate the extent of the impact of spring breakup. Further, the work under the recently signed contract with Husky is pad fracturing, which will allow us to continue a portion of this work through breakup," the report emphasized.
"The preliminary development plan in place for this liquids-rich formation at Ansell in west central Alberta includes the potential drilling of up to 2,600 Cardium and deeper Mannville wells, which are mainly comprised of horizontal wells. We further anticipate that demand in the deep basin will remain strong," the report stated.
The firm began operations in February 2006. The company has four wholly owned subsidiaries: GasFrac Services GP Inc.; GasFrac Energy Services Ltd. Partnership; GasFrac Luxembourg Finance; and GasFrac Inc. (a U.S. incorporated entity). In early November, Zeke Zeringue joined the company as chief executive officer and president.
The company's technology includes using LPG as the carrier fluid and a di-ester phosphoric acid gelling agent to provide enough viscosity to carry the sand and chemicals.
LPG is highly soluble in reservoir gas, which improves flow-back and allows up to 100% of the LPG to be recovered, according to GasFrac. There is no water or CO2 to recover and the chemicals are left in the formation. The LPG fracturing process is a closed system, which minimizes flaring.
Although the process is about 20% to 40% more expensive than conventional hydraulic fracturing, there is no backend cost for recovery and processing of the frac fluids. That would tend to even out some of the front-end cost.
However, there could be some issues remaining to solve with the technology. Safety remains a key concern for regulators. Canadian officials have approved the technology and several state agencies in the U.S. have studied the method with an eye on the flammability of the LPG.
In another example, GasFrac performed an LPG frac on a well in the Eagle Ford Shale for Jadela Oil Corp., a Canadian company, in August.
On Aug. 21, the fracing operation in the El Indio #1-H well in Maverick County, TX, was completed. Jadela used a StacFRAC® open-hole, multistage completion liner system from Packers Plus Energy Services Inc. and fraced the well using propane/butane.
On Sept. 7, Jadela reported that the well produced oil, gas, butane and other hydrocarbons. About 5,360 barrels of LPG were injected into the formation. At that time, the company expected to recover and either resell or store the recovered LPG.
Oil and gas flows were restricted by the capacity of the LPG equipment. The flow rate was restricted on a 10/64-inch choke. The company noted in a press release that two stages in the eight-stage frac were "not fully fraced."
In a Nov. 21 press release, Jadela stated that “there have been a series of events that started with technical issues with Stage 1 and the sand-off during Stage 2 of the fracturing process, which has resulted in operational delays and cost overruns.”
However, the process is getting industry attention because it provides an alternative to the use of water. The interest is increasing from international operators that are involved in shale gas/oil development worldwide.
Contact the author, Scott Weeden, at email@example.com.