The U.S. Shale Oil and Gas Resource – a Multi-Scale Analysis of Productivity

Abstract:

Over the past decade, the large-scale production of natural gas, and more recently oil, from U.S. shale formations has had a transformative impact on the energy industry. The emergence of shale oil and gas as recoverable resources has altered perceptions regarding both the future abundance and cost of hydrocarbons, and has shifted the balance of global energy geopolitics. However, despite the excitement, shale is a resource in its nascency, and many challenges surrounding its exploitation remain. One of the most significant of these is the dramatic variation in resource productivity across multiple length scales, which is a feature of all of today’s shale plays. This paper will describe the results of work that has looked to characterize the spatial and temporal variations in the productivity of the contemporary shale resource. Analysis will be presented that shows there is a strong stochastic element to observed shale well productivity in all the major plays. It will be shown that the nature of this stochasticity is consistent regardless of specific play being considered. A characterization of this stochasticity will be proposed. As a parallel to the discussion of productivity, the paper will also address the issue of "learning" in shale development. It will be shown that “creaming” trends are observable and that although "absolute" well productivity levels have increased, "specific" productivity levels (i.e. considering well and stimulation size) have actually falling markedly in many plays. The paper will also show that among individual operators' well ensembles, normalized well-to-well performance distributions are almost identical, and have remained consistent year-to-year. This result suggests little if any systematic learning regarding the effective management of well-to-well performance variability has taken place. The paper will conclude with an articulation of how the productivity characteristics of the shale resource are impacting on the resources’ economic profile, and the implications of this in terms of the commercial risks associated with shale production activities.