Janie M. Chermak, University of New MexicoJames W. Crafton, Performance Science Inc.

Robert H. Patrick, Rutgers University

31th USAEE/IAEE North American ConferenceAustin, Texas

November 5, 2012

SHALE GAS WELL COMPLETION & PRODUCTION PRACTICES:

CONSERVATION, ENVIRONMENTAL & REGULATORY IMPLICATIONS

Shale Gas Plays

THE US SHALE GAS INDUSTRY• US PRODUCTION

- 2000: 0.4 trillion cubic feet (TCF)- 2008: 2.0 TCF- 2009: 3.1 TCF- 2010: 5.3 TCF (23% of total production)

•2035 FORECAST- 13.6 TCF (49%)- RANGE: 9.7 TCF – 20.5 TCF

•RESERVES ?

(EIA AEO 2012)

Regulatory Concerns

• Environmental

• Conservation

• Energy Policy

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

The Firm’s Problem

Choose the initial (and periodic) capital investment(s)

and production path

to max profits over the life of the well

subject to:

R( j ) R( j

) u(R( j ), K j , j ), j 1,...,k

q t h A t ,Z t , K j

ert

0

T

P(t)q(t) w t Z t dt er j v(R( j ), K j , j )

j1

k

,

�Rj (t) s[A, K j , R,q,t], R 0 R0 A 0 , K0 , and R(T ) 0,

Econometric Model

lnQit 0 jj1

M

ln Zijt j lnj A Aijt F ln Fit C lnCit j

j D Dijt e1it

ln Fit 0 jj K ln Kijt j ln

j A Aijt j

j D Dijt e2it

lnCit 0 jj K ln Kijt j ln

j A Aijt j

jD Dijt e3it

Data

• 111 shale gas wells located in the US- 39 horizontal wells- 72 vertical wells

• all wells began production since 2007

• have between 30 and 720 days of production data

• reservoir characteristics

• completion and production choices

• RESERVIOR CHARACTERISTICS- permeability thickness- initial reservoir pressure- perforated interval

• COMPLETION- hydraulic fracturing fluid - proppant- Injection rate- treating pressure- stages- surfactant concentration- winter fracture- time to complete

•THE RESULTING COMPLETION PARAMETERS- fracture Half-length: final and early- fracture Conductivity

• MANAGEMENT AND TIME- 10, 30, 60, 90, 1870, 360, 720 days- ratio: production days to calendar days

BASIC RESULTS

• Consistency across technologies in EQ1- Initial Reservoir Pressure (+), - Permeability Thickness (+)- Fracture Half Length (+),- Dimensionless Fracture Conductivity (+), - Difference (-), - Days (i = 30, 60, 90, 180, 360, 720).

- CNF (+)

• Consistency across EQ2 and EQ3

But these only include the direct impacts from each equation 

Direct and Indirect Effects

Qi t Kim0 0

t

(hit Kim0

direct� �� ��

hit Fim0 Fim0 Kim0

indirect� �� � � �� � �

hit Cim0 Cim0 Kim0 )indirect

� �� � �� �� � � � dx

CUMULATIVE PRODUCTION ELASTICITIESVERTICAL HORIZONTAL

Variable Elasticity SE Prob>0 Elasticity SE Prob>0Reservoir Characteristics

Initial Reservoir Pressure 2.335 0.33 1 0.521 0.234 0.987Permeability Thickness 0.564 0.027 1 0.44 0.029 1Perforated Interval 0.075 0.068 0.863 n.a. n.a. n.a.

Completion OutcomesFinal Fracture Half-length 0.509 0.088 1 0.354 0.046 1Early Fracture Half-length 0.177 0.034 1 0.268 0.037 1Dimensionless Fracture Conductivity 0.433 0.219 0.976 0.213 0.135 0.943

Completion ChoicesCnF 0.062 0.029 0.984 2.251 0.486 1Surfactant n.a. n.a. n.a. -0.027 0.016 0.055Average Proppant per Stage 0.0017 0.029 0.523 -0.182 0.102 0.037Proppant Concentration 0.11 0.057 0.972 0.213 0.135 0.943Average Injection Rate 0.027 0.042 0.738 0.237 0.056 1Average Treatment Pressure -0.314 0.124 0.006 n.a. n.a. n.a.Difference -0.221 0.035 0 -0.124 0.034 0Stages n.a. n.a. n.a. 0.19 0.047 1

ProductionRatio 0.541 0.218 0.994 -0.00088 0.0414 0.491

SAME SIGN;  DIFFERENT SIGN

DISCRETE EFFECT IMPACTS ON CUMULATIVE PORDUCTION

VERTICAL HORIZONTAL

Variable Semi-elasticity SE Prob>0 Semi-elasticity SE Prob>0

Completion Choices

Winter Fracture -0.0064 0.04 0.436 -0.0814 0.079 0.151

CnF Intercept n.a. n.a. n.a. 15.351 3.3 1

Summary

• Reservoir characteristics expected impact, butdifferent magnitudes

• Completion outcomes consistent but diminishing returns

• Completion choices vary

• CnF positive impact

Conclusions• Vertical and horizontal wells respond differently

• Conventional wisdom from vertical well history may not be appropriate for horizontal wells.

• Results are preliminary and only for early period production

• On-going research with expanded data set

Regulatory Implications• Shale gas completions and production choices may impact ultimate recovery

What does this imply for natural gas as a transitionenergy source?

What does this imply for conservation regulation?

• Bigger completions jobs may not always be better

Does this have environmental implications?

• CnF, a relatively benign additive out performs traditionalsurfactants

What does this imply for environmental regulation?

Thank you.

Working paper with technical details:http://papers.ssrn.com/sol3/papers.cfm?abstra

ct_id=2162486and

http://www.rci.rutgters.edu/~rpatrick/hp.html

Questions and comments:rpatrick@rutgers.edu

Horizontal and Vertical Wells

DATA DESCRIPTION

DESCRIPTIVE STATISTICS

HORIZONTAL RESULTS

VERTICAL RESULTS

Forecast Contributions of Shale Gas

From EIA Early Release AEO 2012