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Page added on January 27, 2015

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Tight Oil Production Will Fade Quickly: The Truth About Rig Counts

Tight Oil Production Will Fade Quickly: The Truth About Rig Counts thumbnail

U.S tight oil production from shale plays will fall more quickly than most assume.

Why? High decline rates from shale reservoirs is given. The more interesting reasons are the compounding effects of pad drilling on rig count and poorer average well performance with time.

Rig productivity has increased but average well productivity has decreased. Every rig used in pad drilling has approximately three times the impact on the daily production rate as a rig did before pad drilling.  At the same time, average well productivity has decreased by about one-third.

This means that production rates will fall at a much higher rate today than during previous periods of falling rig counts.

Most shale wells today are drilled from pads.  One rig drills many wells from the same surface location, as shown in the diagram below.

(click image to enlarge)

The Eagle Ford Shale play in South Texas is one of the major contributors to increased U.S. oil production.  A few charts from the Eagle Ford play will demonstrate why I believe that U.S. production will fall sooner and more sharply than many analysts predict.

The first chart shows that the number of active drilling rigs (left-hand scale) in the Eagle Ford Shale play stabilized at approximately 200 rigs as pad drilling became common. The number of producing wells (lower scale), however, has continued to increase.  This is because a single rig can drill many wells without taking the time to demobilize and remobilize. In other words, drilling has become more efficient as less time is needed to drill a greater number of wells.

(click image to enlarge)

The next chart below shows Eagle Ford oil production, the number of producing wells and the number of active drilling rigs versus time.

(click image to enlarge)

This chart shows that production growth has not kept pace with the rate of increase in new producing wells since mid-2012.  That is because the performance of newer wells is not as good as earlier wells.

The final chart shows that the rate of daily production is now more dependent on the number of drilling rigs than on the number of producing wells. Rig productivity–the barrels per day per rig–has increased but average well productivity–the barrels per day per well–has decreased.  In other words, production can only be maintained by drilling an ever-increasing number of wells.

(click image to enlarge)

Average rig productivity has almost tripled since early 2012. Average well productivity has decreased by one-third over the same period. This means that every rig taken out of service today has more than three times the impact on daily production as before pad drilling became common.

Most experts do not anticipate any significant decrease in U.S. tight oil production in the first half of 2015.  Their analyses may not have accounted for the effect of pad drilling and the decrease in average well productivity.

Using the Eagle Ford Shale is as an example, U.S. oil production should fall sooner and more sharply than many anticipate. This will be a good thing for oil price recovery but maybe not such a good thing for the future profitability of the plays.

Petroleum Truth Report



6 Comments on "Tight Oil Production Will Fade Quickly: The Truth About Rig Counts"

  1. rockman on Tue, 27th Jan 2015 10:19 am 

    “Every rig used in pad drilling has approximately three times the impact on the daily production rate as a rig did before pad drilling.” Ridiculous. Obviously this person knows nothing about drilling. The oly impact of drilling multiple wells from the same surface location is the time/money aved moving the rig from location to location. Needless to say the EFS and its production rate doesn’t know if was drilled from a single surface location or multiple location.

    All things being equal, 3 wells drill from different surface locations can produce a much as 3 wells drilled from a single pad. And sometimes more or sometimes less. Depends on the geology and not what surface location a well is drilled from.

    A “truth report”. The really said part is that they may actually believe the “truth” they are puking out. LOL.

  2. Pops on Tue, 27th Jan 2015 10:54 am 

    ROCK, The point is that each rig is drilling 3x as many wells in the same time it took to make one a few years ago.

    It seems logical then to say that if a rig is making 3x as many wells in the same time period, a loss of 1 rig in the weekly statistics has 3 times the impact today as back when.

    No?

  3. baptised on Tue, 27th Jan 2015 12:23 pm 

    The article is about rig counts. So your answer Pops is yes.

  4. rockman on Tue, 27th Jan 2015 9:28 pm 

    Pops – OK…that logic I can follow. But only so far. But still a tad ass backwards IMHO: the number of rigs drilling doesn’t determine how many wells are drilled. The number of wells drilled determines how many wells are drilled.

    If we drill 3000 wells it matters little if it’s done from 1,000 drill sites or 3,000 drill sites. The same number of wells are drilled. It sounds as though the rig count is being used as a surrogate for the well count metric. But we track the well count just as easily. Consider this: not all EFS are drilled in multiples from the same pad. So if you hear 100 rigs drilling in the EFS trend does that mean we lose 100 wells or 300 wells?

    Actually that’s a trick question. It doesn’t mean either. A rig drills a well one t the time. If those rigs drilled 3 wells per pad it means those rigs would drill about the same of wells in X years as would be drilled from single well pads in X years. The rig drilling muliwell pad might put wells down a little faster. But one needs to understand that wells drilled directionally from the same pad have to drill a little more hole then if drilled from a single surface location. The main reason for miltipas drilling is to save money and to not as much to drill faster. Not building those two extra locations can save $500k to $1 million. And saving to rig moves could save $300k to $500k: tricks don’t move those rigs for free. And lastly the rig company makes the operator pay for “mobing” (mobilizing) the rig to the next location. So a 3 well pad could save the operator more then $1 million.

    But the same rig still only drills 3 wells whether from one pad or 3 pads. Losing a rig means it won’t be drilling any wells. IOW it won’t be drilling 3 wells whether from the same pad or 3 different pads. It’s almost as if some folks think it takes 1/3 the time to drill 3 wells from one location as it does to drill the same wells from 3 different location. Not even close.

  5. buddavis on Wed, 28th Jan 2015 8:08 am 

    Yes Rock. The only time saved is rig mobilization, rigging up and down. But then it will also take slightly longer drill those additional wells because you need more hole. It certainly is not 3 to 1.

  6. Financier43 on Wed, 28th Jan 2015 10:44 am 

    On the average, will three wells drilled from the same pad drain the same volume of oil bearing rock as three wells drilled from separate sites? The sketch in the article seems to imply that the wells drilled from a pad
    are spaced closer together. Any comments?

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