Christmas comes in June for energy geeks and graph junkies. Every year, the Energy Information Administration of the Department of Energy releases its Annual Energy Outlook (AEO), a compendium of 30-tear forecasts and analyses of energy sources and uses. The 212 page .pdf file contains tables, bar charts and area graphs galore, enough to provide blog fodder at least until Christmas (the December one).
This week’s installment is a look at production decline curves from selected shale gas plays. The extreme rates of decline experienced in these wells has interesting and far-reaching policy implications, although this angle is rarely described in the mainstream press. For the energy operator, the performance of his wells in aggregate determine the success or failure of his enterprise. For the nation, shale well performance has become a key factor in energy policy and planning.
The curves in Figure 54 at left represent averages for five different shale plays; each well is an individual. But what this curve fails to make explicit is the fact that there are very few wells in these shale gas plays with more than four years of history; the rest is projection.
Engineers commonly use decline curves (pdf) as a primary tool for analyzing historical performance of producing wells and forecasting their future performance. The total accumulated past and future production of a well is termed its Estimated (or Economic) Ultimate Recovery (EUR). The EUR of gas wells is measured in billions of cubic feet (BCF). The estimate of future production is termed “remaining reserves”.
Since a resource company’s primary asset is its reserves, these squiggly lines have a lot to do with a company’s financial performance. Truth be told, decline curve analysis can be subjective instead of scientific, particularly early on in a well’s life. Tight rocks like shales typically exhibit this characteristic “hyperbolic” shape, declining precipitously in the early years; EUR depends on how quickly the rate “breaks over” to a lower, more sustainable rate.