The Eia’s latest Drilling Productivity Report is out. However they have only updated the PDF file. The spreadsheets have not been updated and still have last month’s data. But I will give you what the PDF file shows and perhaps add some charts tomorrow if they get around to updating the Excel spreadsheets.
The EIA says Bakken new wells will produce 100,000 bpd in October but all the old wells will decline by 73,000 bpd and leave a net increase of 27,000 bpd. If these numbers are correct and September production was 1,152,000 bpd then that means the monthly decline rate is 6.33%.
The EIA says Eagle Ford new wells will produce 154,000 bpd in October but all the old wells will decline by 123,000 bpd and leave a net increase of 31,000 bpd. If these numbers are correct and September production was 1,551,000 bpd then that means the monthly decline rate is 7.93%. Read More
The first half of this post is a guest post by Enno Peters. The second half is taken from the latest EIA Drilling Productivity Report.
GEOGRAPHICAL ANALYSIS OF WELL QUALITY IN NORTH DAKOTA
by Enno Peters
SUMMARY
I was interested in doing a geographical analysis of the oil production in North Dakota. Detailed information made freely available by the NDIC allowed me to analyze how, geographically, wellperformance has been changing over time, in the area of North Dakota where most oil is produced.
RESULTS
In the following animated gif, you will see part of North Dakota. It contains the North West corner that borders Montana and Canada. The scale is in miles, with a rather arbitrary origin. Projected on this map is a contour map. The numbers of these contours are the cumulative 1 year returns for wells drilled within that area, and the unit is 1000 barrels of oil (no gas). For example, contours with the value 50 mark the area in which wells produced at least 50 k barrels of oil in their first year.
I could calculate the surface areas of several levels of first year well returns, in order to determine the trend of these areas. In the following chart you can see for each year the (estimated) surface volumes for 3 levels of first year well returns, 50k, 80k, and 110 k barrels of oil.
The sudden increase in 2013 of estimated productive surface area, in which wells could produce at least 50 k barrels of oil in their first year, may be explained by
1) the fact that I could only use data until June 2013 (as the 2014 May data is currently the latest one available), and therefore the number of data points are 1/3 of what I have for 2012. The method to determine the contours may not be suitable with this number of data points.
2) changing well practices
3) entering of new formations
So far I suspect that it is mostly 1), but that 2) and 3) could also be part of the answer, and therefore recommend to mostly ignore the 2013 results for now.
As a guide to interpret these results, I estimate (based on a discounted cash flow analysis) that a well that returns 50 k barrels of oil needs a minimum WTI price of about $120; about $82 WTI is needed for 80 k wells or better, and a well that returns 110 k barrels of oil in its first year is about even with $64 WTI. These are rough indications; I have seen a good analysis that estimates 10% higher required WTI prices for these levels of well performance. With current prices that would mean that 50 k wells are not profitable, while 80+ k wells clearly are.
I further estimate that the estimated total oil return (EUR) of a well is just over 4 times its first year return. Read More
Note: Just as I was finishing this post North Dakota published their production numbers for May 2014. North Dakota production was up over 36,000 barrels per day on 227 new well completions according to The Director’s Cut. I will have a post on all that tomorrow.
The EIA’s Drilling Productivity Report has just came out. Below are a few charts gleaned from that report. The World’s seven largest publicly owned oil companies have peaked. Their combined production has declined 12.4% since 2009.
The Drilling Productivity Report shows, or tries to show, the true decline rate of shale oil and gas. I usually only track the oil however.
In January the EIA estimated that Bakken production from new wells would equal 88 kb/d. They estimated that the declines of all older wells would equal 63 kb/d leaving net production at 25 kb/d.
In August they estimate that Bakken production from new wells will equal 90 kb/d or 2 kb/d above January new well production. They estimate that the decline from older wells will equal 73 kb/d, an increase of 10 kb/d from January, leaving a net increase in production of 17 kb/d.
Eagle Ford fared a bit different. In January they thought new well production would increase by 120 kb/d while older wells would decline by 91 kb/d leaving net production 29 kb/d. In August they expect production from new wells will equal 140 kb/d, a whopping 20 kb/d over January numbers. However decline from older wells will have increased to 115 kb/d, 24 kb/d more than it was in January, leaving net production up 25 kb/d. So in spite of the 20 kb/d increase over January new well production, net production will still be 2 kb/d lower than January. Read More
The eventual peak and decline of light tight oil (LTO) output in the Bakken/ Three Forks play of North Dakota and Montana and the Eagle Ford play of Texas are topics of much conversation at the Peak Oil Barrel and elsewhere.
The decline rates of individual wells are very steep, especially early in the life of the well (as much as 75% in the first year for the average Eagle Ford well), though the decline rates become lower over time and eventually stabilize at around 6 to 7% per year in the Bakken.
What is not obvious is that for the entire field (or play), the decline rates are not as steep as the decline rate for individual wells. I will present a couple of simple model to illustrate this concept.
Much of the presentation is a review of ideas that I have learned from Rune Likvern and Paul Pukite (aka Webhubbletelescope), though any errors in the analysis are mine.
A key idea underlying the analysis is that of convolution. I will attempt an explanation of the concept which many people find difficult.
At Wikipedia there is a fairly mathematical presentation of the concepts which often confuses people. There are a couple of nice visuals to convey the concept as well see this page.
In the visual below a function f (in blue) is convolved with a function g (in red) to produce a third function (in black) which we could call h where h=f*g and the asterisk represents convolution, just as a + symbol is used to represent addition.
I think the best way to present convolution is with pictures. Chart A below shows a relationship between oil output (in barrels per month) and months from the first oil output for the average well in an unspecified LTO play. This relationship is a simple hyperbola of the form q=a/(1+kt), where a and k are constants of 13,000 and 0.25 respectively, t is time in months, and q is oil output. Chart A is often referred to as a well profile. The values for the constants were chosen to make the well profile fairly similar to an Eagle Ford average well profile. EUR30 is the estimated ultimate recovery from this average well over a 30 year well life.
Chart B shows the relationship between the number of new wells that begin producing each month and the months from the start of production for the entire field.
It is indeed strange that two very different shapes (a hyperbola and a trapezoid) would combine to form the shape shown in chart C. A spreadsheet can be downloaded here, with the scenario above laid out.
What was surprising to me when I first tried this analysis was that a combination of the average well profile with the number of wells added each month reproduced the oil output data fairly closely.
To clarify this further, I have created a simple model. As before, we have a hyperbolic well profile in chart 1 (slightly different than chart A above) and the number of new wells added each month in chart 2, but in chart 2 this is over a short 6 month period. After that time no more new wells are added.
In the chart below I show the output for each group of wells that begins production in successive months. The output from all wells starting production in month 1 are labelled “month 1 wells”, there are 6 of these groups up to “month 6 wells”. The number of wells added each month is shown as a dashed line read off the right axis. Remember that 30 wells are added each month from month 1 to month 6 so output for “month x wells” will be 30 times month 1 of the well profile in month x and 30 times month 2 of the well profile in month x+1, etc.
The convolution of Chart 1 and Chart 2 results in Simple oil model 1 shown below.
This model is very simple in order to present how the principle works in a clear manner. When the annual decline rate for the “field” is compared to the average well’s annual decline rate, they are very similar for this simple 6 month model. More realistic models are presented later for comparison.
Note that month zero in the chart below is the month of maximum annual decline rate, for the average well the maximum annual decline rate happens in month 13 and for the field it occurs in month 18, the curves have been shifted to the left by 13 and 18 months so that the maximum decline rates match up at month zero for easy comparison.
A second simple model with the number of wells added each month rising from 5 new wells per month to 30 new wells per month over 6 months and then falling back to no wells added by month 12 is shown below.
Note that the “month 7 wells” output curve is the same as the “month 5 wells“ output curve, but shifted 2 months to the right. Likewise month 8 is month 4 shifted 4 months to the right and this same symmetry is true for months 9 and 3(6 month shift right), months 10 and 2, and months 11 and 1 where the shift right in the curve is equal to the difference in the month when the well started production (8 months and 10 months for the last two cases respectively).
When all of these 11 curves are added up for each month (the convolution of the “well output of the average new well” chart and the “number of new wells added per month” chart) we get the Simple Oil Model 2 chart below.
I now present a different model with a higher EUR well profile (than in chart A) and a lower rate of addition of new wells (than in chart B). This model’s well profile is similar to the average North Dakota Bakken well profile.
The convolution of the two charts above results in the field output shown below.
How does the annual field decline rate compare to the average new well annual decline rate in this case? In the chart below we see that a slower decrease in the rate that new wells are added causes the annual field decline rate to be only 22% at most, about 3 times lower than the maximum annual well decline rate.
As this result is rather counterintuitive, I will try another modification to the model. The well profile remains unchanged, but there is a steeper reduction in the rate that new wells are added to field production.
Such a scenario could occur if there was a steep drop in oil prices as in the early 1980s. It will also occur if there is a decrease in new well productivity which will reduce profits and the incentive to add more wells.
The well profile chart is unchanged, the other two charts are as follows:
Even in this case the maximum annual field decline rates are less than half the maximum well decline rate. This is because we have almost 15,000 wells added over an 11 year period and their decline behavior in the aggregate is much different than that of an individual well. See chart below.
Note that the field decline rate is very high, close to a 30% maximum rate in this scenario. If the rate that new wells are added drops to zero over a 1 to 2 year period and no further wells are added, we would expect the field decline to behave like the gray curve in the chart above. Spreadsheet for the 5.6 Gb scenario can be downloaded here.
Earlier I mentioned that when I first tried this method I was surprised that such a simple model could accurately match output from the Bakken or Eagle Ford fields.
Using data from the North Dakota Industrial Commission(NDIC) on oil output, the number of new wells added per month, and individual well data(from Rune Likvern initially and lately from Enno Peters) I attempted to match scenarios initially presented by Rune Likvern at the Oil Drum.
Below I present the well profile and number of new wells added each month.
When the two charts above are combined (convolved) we get the output curve below.
Note that the sharp drop off in the number of producing wells added each month is not very realistic and is an artifact of the way I set up these simple models for illustration (they end at 130 months so the number of producing wells had to be ramped down very quickly).
Such a scenario would be more likely if there was a sharp rise in well costs, or a sharp drop in oil prices or new well productivity (EUR). The field decline rate is somewhat similar to the previous scenario, rising quickly to a 28% annual decline rate which falls to 10% after 5 years and to 7% in 8 years.
A fairly realistic scenario for the North Dakota Bakken/Three Forks (it is a little on the low end of likely scenarios) is presented now for comparison to the model above. This scenario has an ERR (economically recoverable resource) of 5.8 Gb where the more likely range is 7 to 9 Gb, based on USGS estimates. The average well profile and number of new wells added each month are below.
When we convolve the two charts above the following model output results. The match to the data is surprisingly good.
The annual field decline rate and well decline rate are shown below. In this case the maximum annual field decline is about 16% in 2021 and falls to 8% by 2026 and to 5% in 2031, the maximum annual well decline rate is 61%, the well decline rate is shown for a well starting production in Dec 2013.
The spreadsheet with this more realistic model is quite large (18 MB) so those with limited bandwidth may want to skip it. The realistic Bakken model can be downloaded here.
For the Eagle Ford play I was able to collect data on single well leases from the Railroad Commission of Texas, data on the number of producing wells in the play and output data. I developed an average well profile (shown below) and combined it with the number of new wells added each month to produce an output chart.
Note that the output chart is for crude only and does not include condensate.
The two charts above are combined (or convolved) to give the output chart below.
Note that there is about 20% of Eagle Ford output that is condensate, when this condensate is added to the URR above for crude only we get a URR of 5.1 Gb of C+C.
As in the case of the North Dakota Bakken/Three Forks the match between the model and data is surprisingly good considering the simplicity of the model and the complexity of the real world.
Summary
Oil field output can be simulated with the convolution of the average well profile of newly added wells and the number of new wells added each month. I presented several simple models to demonstrate this concept. An obvious weakness for any attempt at forecasting is that the future average well profile may change over time and the number of new wells added in any future month is unknown.
The decline rate of a field of wells will tend to be considerably lower than the decline rate of the individual well. The field decline rate depends on several factors: the decline rate of individual wells, the total number of wells in the field, the period of time over which these older wells were added (whether the period was long or short), and finally the rate at which the number of new wells added decreases as the field begins to decline.
Several models were presented showing how the field decline rate might vary under differing circumstances.
The concepts presented were applied to scenarios which simulated both the North Dakota Bakken and Eagle Ford shale plays with fairly good precision.
In a future post I plan to show how the convolution of two mathematical functions is used to develop the Oil Shock Model.
The Texas Rail Road Comission has released their latest report with oil, gas and condensate production for April. The RRC data is always incomplete however and takes many months for the all the data to trickle in. The below chart shows that problem.
The data is barrels per data with the EIA data through March and RRC data through April. The EIA has Texas C+C data is highly linear for the 10 months June 2013 through March 2014, increasing at 48 kb/d for 4 months, 41 kb/d for one month then 49 kb/d for the last 5 months.
The EIA has Texas C+C increasing at an average of 48.6 bp/d each month for the last two years. I think that is a little high. I think the production has been increasing at close to 43 kb/d each month but with a recent slow down in that increase.
All Texas RRC June report data is through April. The RRC does not combine Crude with Condensate so I have to add the two. But here you can see the problem. Each month the reported data increases with the latest months showing the largest increase. However even if this is the case, the latest month should show an increase almost equal to the final total increase for that month. That was the case in the April Report, (January to February), but not the case for the last two reports. Read More
