Option Values of Alternative Completion and ProductionStrategies in Shale Gas Plays
Janie M Chermak, University of New MexicoJames Crafton, Performance Science Inc.,Robert Patrick Rutgers University
30th USAEE/IAEE North American ConferenceWashington, DCOctober 12, 2011
Shale Gas Plays
These wells are depleting so quickly thatthe operators are in an expensive gameof catch-upDeborah Rogers, 11/2009
Shale Gas Plays PRODUCTION- 2008: 2.02 trillion cubic feet (Tcf)- 2009: 3.11 Tcf
RESERVES- 860 Tcf, with 410 Tcf from Marcellus(EIA AEO 2011)
- 84 Tcf from Marcellus(USGS Aug 2011)
Shale Gas PlaysImpact of shale gas on the natural gas industry depends on:
- actual production meeting forecasts
- ultimate recovery
Research Actual production- reservoir characteristics- well characteristics- capital choices (completion and re-completion)- production choices
Ultimate recovery may depend on- all of the above and- early management production decisions
Model Develop a theoretical dynamic optimization model that allows for periodic capital investment overthe life of the well. Based on the necessary conditions we developan econometrically estimable cumulative production function:
X is a vector or reservoir characteristics and Z is a vector of completion and production choices. Included in Z are characteristics of the completion job, including the fracture half-length, Fi.
ModelThe fracture sub-production function is also a functionof reservoir characteristics and completion choices:
ModelWe estimate this simultaneous system of equations using3SLS and a log-log specification.
Data 120 shale gas wells located in the US- 39 horizontal wells- 81 vertical wells
all wells began production since 2007
have between 30 and 720 days of production data
production data
reservoir characteristics
completion and production choices
Well Characteristics- permeability thickness- Initial Reservoir Pressure- Perforated Interval Completion Choices- Gallons of fracture fluid- Pound of proppant- Barrels per minute- PSIG- Stages- Micro-emulsion concentration- 100 Mesh- 2040 Equivalent Mesh- Winter Fracture- Time between completion start and first production Completion Outcome- Fracture Half-length: final and early- Fracture Conductivity Cumulative Production- 10, 30, 60, 90, 1870, 360, 720 days- Ratio: Production Days to Calendar Days
Results The fracture resulting from the completion job is significant and positive for early period production
Fracture conductivity significant and positive for vertical wells
Micro-emulsion concentration has a positive and significant impact
The completion job is significant. For horizontal wells it is how the job is performed (rate and pressure); for vertical wells it is the volumes and how the job is performed.
Results
Stages are significant and positive for horizontal wells, but not for vertical wells
Delay between beginning completion and production significant and negative
Ratio is significant and negative
Winter completion job negatively impacts vertical well production
Decline (all else equal) different. Early period decline 7% larger for horizontal wells
Conclusions Shale Gas Plays impacting the US natural gas industry
May not be as well understood as we first believed
Initial choices may impact well potential
Initial choices may impact ultimate recoverable gas
Preliminary results suggest vertical and horizontal well productivity are impacted by reservoir characteristics, completion and production choices, but not necessarily in the same manner.
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