Unconventional Fields Decline Fast
Unconventional hydrocarbon resources are still a new segment of the oil and gas industry, and the industry is still learning. However, some information regarding well depletion rates is escaping into the public domain and this suggests that, in the absence of significant drilling, unconventional fields decline at much faster rates than conventional fields.
This matters. If the world is to be “saved” by unconventional oilfield technology (as suggested in countless media inches covering the “coming glut of oil”) and unconventional oilfields slowly replace conventional oilfields (as suggested by Daniel Yergin), then we must remain mindful of what happens towards the end of these field’s life. Currently the world’s conventional oilfields are declining at around 4-7% per annum. This allows the industry, and the global economy, time to find additional reserves to replace the decline and/or think about alternatives. As the decline rate increases, the time available for us to find additional supply or transfer to alternate fuels shortens. We could be saving up quite a bit of trouble for the future…
David Hughes of the Post Carbon Institute has published an analysis of Unconventional Production called Drill, Baby, Drill. Whilst some in the oilfield and on the Right may suspect this work simply based on its association with the Institute (and its somewhat political title) it is a serious analysis and contains a number of interesting illustrations. Currently it is one of the best documents in the public domain describing Unconventional decline rates from various plays, and it indicates some significant decline rates.
One example of Unconventional oilfield decline is illustrated by wells drilled in the Haynesville play. (Note: Haynesville is a unconventional GAS play).
Wells drilled in the Haynesville play prior to 2011 exhibit an overall decline rate of 52% to 2012. This is an order of magnitude faster decline than conventional fields. It means that, in the absence of subsequent drilling, the Haynesville play would today only produce half of its 2011 production.
The result of these incredibly fast decline rates is that the industry needs to keep drilling, at pace and scale, for the play to continue to deliver hydrocarbons. And of course, in reality this is exactly what is happening today. Drilling did continue at Haynesville, and production continues to increase, but eventually the industry will simply run out of new wellsite locations, there will be no more wells to drill, and in the absence of some kind of re-fracking technology, the field will effectively switch off, with very little warning for the local economy or, in aggregate with other unconventional fields, the global one…
So, is the Haynseville an outlier? It appears not to be, with average decline rates for US Shale Gas plays, again analysing wells drilled prior to 2011, yielding similarly fast decline rates.
In case you wondering if this is only applicable to unconventional gas plays, let’s take a look a liquids rich unconventional oil plays.
A recent example from an Encana presentation shows a rapid decline from Tuscaloosa Marine Shale (note the log graph axis). The average 5200ft TMS 70 completion went from ~1000bpd to ~100bpd in a year.
A similar story is illustrated for Shale Oil plays such as the Bakken, which shows a 40% decline rate for pre-2011 wells.
How many more wells can be drilled in the Bakken, with well spacing already as close as it is?
And what happens then?
In short, the decline rates for Unconventional “fields” are significant in the absence of drilling.
These plays are contributing significant volumes into the US and world energy markets, but the industry and the economy should be mindful that the boom can quickly turn to bust.