Title: Option Values of Alternative Completion and Production Strategies in Shale Gas Plays Janie M Chermak, University of New Mexico James Crafton, Performance Science Inc., Robert Patrick Rutgers University 30th USAEE/IAEE North American
1Option Values of Alternative Completion and
ProductionStrategies in Shale Gas PlaysJanie
M Chermak, University of New MexicoJames
Crafton, Performance Science Inc.,Robert Patrick
Rutgers University30th USAEE/IAEE North
American ConferenceWashington, DCOctober 12,
2011
2Shale Gas Plays
3These wells are depleting so quickly thatthe
operators are in an expensive gameof catch-up
Deborah Rogers, 11/2009
4Shale 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)
5Shale Gas Plays
Impact of shale gas on the natural gas industry
depends on - actual production meeting
forecasts - ultimate recovery
6Research
- 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
7Model
- Develop a theoretical dynamic optimization
model - that allows for periodic capital investment over
- the life of the well.
- Based on the necessary conditions we develop
- an 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.
8Model
The fracture sub-production function is also a
function of reservoir characteristics and
completion choices
9Model
We estimate this simultaneous system of equations
using 3SLS and a log-log specification.
10Data
- 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
11- 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
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13Results
- 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.
14Results
- 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
15Conclusions
- 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.