INTERPRETATION NOTE ISSUED UNDER THE PETROLEUM DRILLING REGULATIONS (CNR 1150/96)

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BOP CLASSIFICATION SYSTEM FOR ONSHORE NEWFOUNDLAND AND LABRADOR INTERPRETATION NOTE ISSUED UNDER THE PETROLEUM DRILLING REGULATIONS (CNR 1150/96) PREPARED BY THE PETROLEUM RESOURCE DEVELOPMENT DIVISION UPDAT ED; DECEMBER 2004 GOVERNMENT OF NEWFOUNDLAND AND LABRADOR Department of Natural Resources

Page 1 INTRODUCTION This Interpretation Note is intended to clarify the Newfoundland and Labrador Department of Natural Resources (NLDNR) requirements, to assist operators when sourcing blowout prevention (BOP) equipment for use in standard overbalanced drilling programs. The blowout prevention system requirements, where air, gas, or foam (underbalanced drilling) is being considered, must still meet the requirements of section 74(3) of the Petroleum Drilling Regulations (CNR 1150/96) and contain the maximum formation pressure that is anticipated. The classification system clearly distinguishes between the depth limitations while drilling versus pressure testing of the production liner/casing. Blowout preventer pressure ratings are controlled during the drilling phase by the requirement to maintain a stack that has a minimum pressure rating of 50% of the anticipated maximum reservoir pressure. As currently exists, the pressure testing of production liner/casing requires a surface test that is equivalent to 90% of maximum reservoir pressure. Therefore for each class of BOP, there will be a depth range that will require greater pressure capability for testing of the production string than required for drilling of the main hole. The decision is left to the discretion of the Operator but in no way will it prejudice the testing requirements of the production liner/casing. The review of the casing program must still consider the testing requirements of the production liner/casing. While standard equipment combinations similar to those utilized in Alberta are given, the classification system is structured to be consistent with the Petroleum Drilling Regulations (CNR 1150/96) and subsequent amendments.

Page 2 NEWFOUNDLAND AND LABRADOR ONSHORE BOP CLASSIFICATION SYSTEM BASIS: The rated working pressure for all drilling operations is 50 % of the maximum anticipated bottom hole pressure taken as 11 kpa/m. This classification does not guarantee the BOP system can be used to meet the pressure testing requirements of the production liner/ casing. See Appendix 1 for schematics of BOP Classifications CLASS MINIMUM PRESSURE DEPTH PARTICULARS REFERENCE I(mud) 13.8 0-500 conductor casing min. of 1 m into bedrock or 30 m whichever is lesser no surface casing set drilling spool c/w quick opening valve & min. 50 mm line to pit diverter c/w hydraulic control casing head c/w two valved outlets (threaded or flanged) Petroleum Drilling Regulations (CNR 1150/96) Part IV Well Control Section 52(5) I(air) 5.5 (static) 500 - surface casing setting depth conductor casing min. of 1 m into bedrock or 30 m whichever is less no surface casing set rotating head & spool c/w 100 mm line to pit (>5.5 MPa) full opening drill through valve (>5.5 MPa) below spool Petroleum Drilling Regulations (CNR 1150/96) Part V Drilling Operations and Procedures Section 74 II 13.8 surface casing setting depth - 2500 surface casing cemented to surface drilling spool c/w quick opening valve & min. 50 mm line to pit. Flanged pipe connections from drilling spool to connection to choke manifold, but may contain threaded fittings thereafter annular, pipe and blind rams c/w hydraulic controls near rig floor, accumulator and remote. casing head c/w two valved outlets (threaded or flanged) HC R required for all situations. Section 58(3),(4) Manual adjustable chokes permitted

Page 3 III 20.7 2500-3700 surface casing cemented to surface intermediate casing cemented to a minimum of 300 m above surface casing drilling spool c/w full opening remotely activating valve at least 75 mm in size all flanged pipe connections from drilling spool to last valve on choke manifold min. of two adjustable chokes, one must be automatic with controls near drill floor min. of 75 mm line to flare pit/tank Automatic choke required Section 58(7) IV 34 3700-6100 Similar to C lass III with following additions: dual drilling spools c/w choke and kill lines that are all min. 75 mm throughout. Upper spool contains HCR in addition, a lower spool is plumbed in so as to provide an emergency auxiliary bleed-off line. V 69 6100-12500 Similar to Class IV requirements except: higher pressure rating both chokes automatic another set of pipe rams required VI 105 12500-19000 Similar to Class V except higher pressure rating second annular may be requested section 55(3)

Page 4 DISCUSSION OF LOCATION OF BLIND RAMS VS. PIPE RAMS AEUB in all its schematics always has the lower most set of rams identified as pipe rams with the blind rams always positioned in the stack above the pipe rams. The Petroleum Drilling Regulations (CNR 1150/96), administered by NLDNR do not specify the location of the preventers. There are essentially two schools of thought on this issue as follows: Pipe Rams Below Blind Rams If SIP at surface exceeds rating of annular, pipe rams can be activated and blind rams can be changed out for another set of pipe rams, allowing the well to be circulated through the upper pipe rams via the spool and choke line above the lower set of pipe rams, maintaining an emergency back- up system. This change-out decision must be made immediately prior to commencement of circulation. The disadvantage with this arrangement is the inability to strip through the pipe ram since there is no outlet below the ram. Pipe Rams Above Blind Rams Allows well to be secured with blind rams when pipe is out of the hole; for example, when changing out pipe rams to casing rams prior to running casing. Any influx can be immediately circulated out through drilling spool below pipe rams with annular as back-up. Allows stripping through rams bleeding off through the choke line assuming the distance between annular and pipe ram provides sufficient length to contain a tool joint THE EFFECT OF PRESSURE TESTING REQUIREMENTS ON BOP PRESSURE RATING SELECTION The above pressure ratings will be impacted by the casing pressure testing requirements. As presently exists, the regulations require the following minimum surface applied test pressures: 1 000 kpa for conductor pipe for surface and intermediate casing or liner, lesser of the rated working pressure of the BOP stack; 40% of maximum pore pressure anticipated during next phase of drilling; calculated formation fracture pressure at the shoe. for production casing and production liners, a minimum of 90% of the maximum formation pressure However, as indicated previously, section 55(2)(b) specifies that a BOP for all drilling operations below the surface casing is to have a working pressure greater than 50% of the maximum anticipated formation pressure. This selection criterion will allow pressure testing integrity for all but the production liner/casing scenario.

Page 5 The following table illustrates the point by utilizing an example. A conductor pipe is set at 30 m, surface casing set at a maximum depth of 500 m, intermediate casing is set at 900 m, and a production casing is installed at 3600 m. Using this scenario, a Class III BOP system can be utilized based on the depth limitation of 3700 m. This would require a minimum of a 20.7 MPa BOP system. BOP Class Minimum Depths Test Requirements Conductor Surface Intermediate Lesser of: BOP 40% PP Fracture @ Shoe Lesser of: BOP 40% PP Fracture @ Shoe Production 90% of Maximum Formation III 20.7 30 1.0 500 21.0 4.0 11.0 900 21.0 15.8 19.8 3600 35.6 The rating of the BOP system based on the classification system would be 21 MPa (3600 x 11.0 x 0.5 = 19.8 MPa) which falls well short of the surface test pressure requirement for a production liners/casing. The maximum depth limitation for a 21.0 MPa stack that would provide pressure integrity to test at 90% of the bottom hole pressure is 2090 m although the maximum drilling depth would be 3700 m.

Page 6 The following table shows the effect of the production pressure testing requirements as currently exists on the BOP pressure rating selection process and the selected Class based on a reduced production casing testing of an applied surface pressure of 80% of maximum reservoir pressure. The 80% is equivalent to a 11 kpa/m pore pressure gradient minus a gas gradient of 2.2 kpa/m to surface. BOP Class Minimum Maximum Depth For Drilling Production Casing Test Requirements Surface Test @ 90 % of PP Surface Test @ 80 % of PP Maximum Depth For Testing Production Casing at 90% of PP Maximum Depth For Testing Production Casing at 80% of PP Class I 13.8 500 N/A N/A N/A N/A Class II 13.8 2500 24.8 22.0 1390 1570 Class III 20.7 3700 36.6 32.6 2090 2350 Class IV 34.0 6100 60.4 53.7 3435 3865 Class V 69.0 12 500 123.8 110.0 6970 7840 Class VI 105.0 19 500 > 193 >171.6 10600 11 930

SUMMARY TABLE: Page 7 Classification AEUB NDNR Depth Gradient (KPa/m) Drilling Depth Gradient (KPa/m) I (mud) N/A 0 - sur. casing N/A 13.8 0-500 27.6 4 0 - sur. casing N/A 5.5 11.0 I (air) 500 sur. casing IA N/A sur. casing - 750 N/A N/A N/A N/A II 14 sur. casing - 750 18.7 13.8 sur. casing - 2500 5.5 III 14 750-1800 7.8 21 2500-3700 5.5 III High Hazard 14 750-1800 7.8 N/A N/A N/A IV 21 1800-3600 5.8 34 3700-6100 5.5 V 34 3600-6000 5.7 69 6100-12 500 5.5 VI 69 > 6000 <11.5 105 12 500-19 500 5.5