AES/PE/11-42 Numerical Optimization of Hydraulic Fracture Stage

Placement in a Gas Shale Reservoir

December 7, 2011 Sam Holt

Title : Numerical Optimization of Hydraulic Fracture Stage Placement in a Gas
Shale Reservoir

Author : Sam Holt

Date : December 7, 2011

Professor(s) : J.D. Jansen
Supervisor(s) : O. Leeuwenburgh (TNO), F. van Bergen (TNO)
TA Report number : AES/PE/11-42

Postal Address : Section for Petroleum Engineering

Department of Geotechnology
Delft University of Technology
P.O. Box 5028
The Netherlands
Telephone : (31) 15 2781328 (secretary)
Telefax : (31) 15 2781189

Copyright 2011. Section for Petroleum Engineering.

All rights reserved.

No parts of this publication may be reproduced, stored in a retrieval system, or transmitted, in any
form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the
prior written permission of the section for Petroleum Engineering.

1
Acknowledgements

First and foremost, I would like to sincerely thank my family for their ever persistent love and
believing in me. I am grateful and much indebted to my mother, for her generosity and helpfulness
and providing me with a very solid base to operate out of, and my father for the invaluable lessons
about how to handle whatever life throws at you. Also my grandparents and uncle who have
supported me in various ways during my studies.
Many thanks to my dear friends and fellow students who inspired and motivated me to keep going.
Having fun while you are at it certainly makes becoming an engineer a lot less difficult.
In at the end of January 2011 I was kindly introduced by Prof. Jan Dirk Jansen to the master's
graduate research opportunities at the Petroleum Geosciences department of TNO in Utrecht. In the
beginning of March 2011 I started my graduate internship under the day-to-day supervision of Dr.
Olwijn Leeuwenburgh. Olwijn gave me the opportunity to work under his superb and diligent
guidance on this master's graduate research project. I am also grateful for the help and insights I
gained from Dr. Frank van Bergen on the geological aspects of gas shale reservoirs and the
passionate discussions about how to put the theory of these reservoir and the stimulation models to
practice. If there's one thing that you learn very quickly in the research business; it is that there are
many interesting ideas, but only so little time to fully develop them. I would like to thank my
colleagues at TNO for the very pleasant working environment and welcome stay at the office.
I would like to conclude with a bit of history. When I chose to start my bachelor's at Delft University
of Technology in the middle of 2006, I surprised a lot of people. Not in the least myself. Mathematics
and physics were certainly not my strong suits. I could, however, come up with many reasons to
support my decision. Those were based on the prospects of studying the very interesting aspects of
the dynamic upstream oil and gas industry at a respected university surrounded by new friends,
being a 'name' and not a 'number' at my faculty, the possibility of taking my knowledge abroad in
the future and the guaranteed job after graduation.
It turns out I was not mistaken about any of them.

2
Abstract

The upstream oil and gas industry focuses increasingly on unconventional gas resources to maintain
the level of its hydrocarbon reserves. To unlock the full potential of gas shale reservoirs, horizontal
wells are drilled and active stimulation of the reservoirs, in the form of multi-stage hydraulic
fracturing, is performed. This new technique has radically changed the energy future of the United
States and is on the forefront of changing it in Europe as well. The hydraulic fracturing treatment is a
costly, resource intensive and potentially environmentally dangerous procedure. The objective of
this thesis is to create a realistic and versatile gas shale reservoir model and optimize the placement
and number of hydraulic fracture stages along a horizontal well bore, thereby maximizing the
production of gas while minimizing the amount of money that is spent to do so. On the basis of the
computationally efficient ensemble based optimization of vertical well placement, an idea coined
and investigated by Leeuwenburgh et al. (2010), it is postulated that numerical optimization can aid
in finding the optimal placement of hydraulic fracture stages along a horizontal well bore in an
equally computationally efficient manner. Three gradient-based optimization algorithms (Ensemble
based Optimization: EnOpt (Chen, 2008), Simultaneous Perturbation Stochastic Approximation: SPSA
(Spall, 1998) and finite difference gradient estimation) that work with continuous variables, are used
to approximate the gradient. Because hydraulic fracture stage locations in a reservoir simulator are
commonly treated as discrete variables (well grid block indices), standard implementations of
gradient-based optimization are not applicable for optimal hydraulic fracture stage placement. We
propose three distinct variable parameterizing placement methods to overcome the inherent
continuous to discrete variables conversion issues. After the theoretical arguments about the
strengths and weaknesses of the proposed optimization routines, both single well and multiple well
scenario experiments are performed. Good results are obtained from the various experiments which
favor an optimization with the EnOpt algorithm in combination with the fracture stage interval
placement method.

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Table of Contents

Acknowledgements .......................................................................................................................... 2
Abstract ............................................................................................................................................ 3
1. Introduction .............................................................................................................................. 6
1.1. Objective............................................................................................................................ 6
1.2. Background information and literature review ................................................................... 6
1.3. Problem definition ............................................................................................................. 8
1.4. Hypothesis ......................................................................................................................... 8
1.5. Thesis outline ..................................................................................................................... 8
2. Contemporary gas shale reservoir modelling ............................................................................ 9
3. Optimization formulation and numerical optimization algorithms ......................................... 10
3.1. Optimization formulation ................................................................................................. 10
3.2. Steepest Ascent strategy .................................................................................................. 11
3.3. Ensemble based Optimization (EnOpt) ............................................................................. 12
3.3.1. Gradient estimation using the EnOpt algorithm ........................................................ 12
3.4. Simultaneous Perturbation Stochastic Approximation (SPSA) Optimization ...................... 13
3.4.1. Gradient estimation using the SPSA algorithm .......................................................... 14
3.5. Finite Difference Optimization.......................................................................................... 15
4. The gas shale reservoir model ................................................................................................. 16
4.1. Introduction ..................................................................................................................... 16
4.2. Gas shale grid model properties ....................................................................................... 16
4.3. Gas shale reservoir properties .......................................................................................... 18
4.4. Well lay-out and modelling the stimulation effort ............................................................ 21
4.5. Sensitivity analysis ........................................................................................................... 23
4.6. How the gas shale reservoir model could be included in the optimization process ........... 24
5. Placement algorithms ............................................................................................................. 25
5.1. Introduction ..................................................................................................................... 25
5.3. Gradient-based fracture stage elimination method .......................................................... 26
5.4. Fracture stage interval placement method ....................................................................... 29
5.5. Fracture stage selection placement method ..................................................................... 31
5.6. Optimization routine ........................................................................................................ 34

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6. Results .................................................................................................................................... 35
6.1. Introduction ..................................................................................................................... 35
6.2. Best engineering guesstimates ......................................................................................... 35
6.3. Basic model ...................................................................................................................... 37
6.3.1. Gradient-based fracture stage elimination method................................................... 37
6.3.2. Fracture stage interval placement method ............................................................... 40
6.3.3. Fracture stage selection placement method ............................................................. 44
6.4. More complex case .......................................................................................................... 47
6.5. Optimization of horizontal well placement ....................................................................... 48
7. Conclusions ............................................................................................................................. 50
8. Summary ................................................................................................................................. 52
9. Recommendations .................................................................................................................. 54
References ...................................................................................................................................... 55
Appendices ..................................................................................................................................... 59
Appendix 1: Line Search technique .............................................................................................. 59
Appendix 2: Perturbation overview per optimization algorithm ................................................... 59
Appendix 3: Input data for the gas shale reservoir model ............................................................ 60
Appendix 4: Rock compaction table ............................................................................................. 61
Appendix 5: Sensitivity analysis.................................................................................................... 61

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1. Introduction

1.1. Objective

The objectives of this thesis are I) to create a realistic and versatile gas shale reservoir model, and II)
to develop a numerical optimization framework to aid, and improve, the placement of hydraulic
fracture stages along a horizontal well bore. We aim to achieve the second objective by solving the
discrete variables problem using gradient-based algorithms and examine three distinct variable
parameterizing placement methods to overcome the inherent continuous to discrete variables
conversion issues.

1.2. Background information and literature review

Gas shale reservoirs

This thesis treats the unconventional gas shale reservoirs, containing a massive but securely trapped
natural gas potential (Curtis, 2002; Jenkins and Boyer, 2008; TNO, 2010). Widely known as the
source rock of conventional oil and gas reservoirs, shale reservoirs have a very low matrix
permeability and only a few small natural fractures which make it virtually impossible to drain the
reservoirs in a standard way (Arthur, 2008; GWPC and ALL Consulting, 2009). Unconventional
hydrocarbon rich reservoirs that were deemed to be unlikely, or even impossible, to ever make it
into a feasible and valuable asset, are now technologically and, as a result of the climbing energy
prices, economically attractive.
The technology to artificially create extra fractures in shale reservoirs, known as hydraulic fracturing,
which causes sufficient opening up of the tight formation to allow a proper pressure differential to
be applied and gas to be produced, has developed substantially ever since it was first widely used in
North America in the 1950s (Holditch, 2007). However, not until it was discovered how to stimulate
only certain intervals along the length of the well bore, this technique was hardly cost effective and
only applied in tight oil formations. The invention and application of multi-stage hydraulic fracturing
in horizontal wells did finally turn the table and made shale reservoirs into potentially lucrative
assets (King, 2010).
This new technique has radically changed the energy future of the United States (Energy Information
Administration, 2010), and is on the forefront of changing it in Europe as well. It has to be noted that
the hydraulic fracturing technique to stimulate gas production in the gas shale reservoirs is highly
controversial, certainly because of its environmental concerns and surface footprint (Rahm, 2011).

Numerical optimization of the recovery of hydrocarbons

Due to the controversial nature of gas shale reservoir development efforts, but at the same time the
highly promising revenues, there is much room for optimization of various aspects of the entire
development process.

6
The definition of optimization can be stated as the process of deriving the best possible value of a
chosen objective function by manipulating a given set of control variables. This thesis will focus on
how to numerically optimize and direct the production and stimulation effort to extract the largest
quantity of gas while minimizing the sum of money that is spent to do so. In consequence, the
required resources (such as water and chemicals) to develop the reservoir are automatically
minimized.
Closed-loop reservoir management is one of the trending topics in the application of numerical
optimization to the recovery of hydrocarbons. This workflow aims to convert the current practice of
reactive optimization into a proactive process, see e.g. Brouwer and Jansen (2004); Sarma et al.
(2005) and Jansen (2011). In three other papers, Wang, Li and Reynolds (2007); Zandvliet et al.
(2008) and Zhang et al. (2010), numerical optimization is applied to vertical well placement
problems. What all of these studies have in common is their use of gradient-based techniques to find
the optimum solution, where the gradient information is obtained with the aid of an adjoint
formulation. The adjoint approach is computationally very efficient but has the disadvantage that it
requires access to the simulation code to be implemented.
Naevdal et al. (2005) and Chen et al. (2008) introduced the Ensemble based Optimization algorithm
(EnOpt), which is computationally less attractive than the adjoint but does not require simulator
access and has proven to achieve good results when applied to smart wells and Inflow Control Valve
settings (Su and Oliver, 2010). Leeuwenburgh et al. (2010) showed that this method can also be used
to address well placement optimization problems. Because of these interesting developments this
work investigates if and how this algorithm can be applied to the optimization of hydraulic fracture
stage placement in a gas shale reservoir. The results of the EnOpt will be compared to the
Simultaneous Perturbation Stochastic Approximation (SPSA) gradient estimation introduced by Spall
in 1998 and the finite difference gradient estimation algorithm.
A major challenge of the application of gradient-based algorithms to problems such as the
placement of wells, or hydraulic fracture stages along the wells, is that the variables involved may be
discrete or even binary (i.e.: 0/1). Standard implementations of gradient-based optimization
algorithms are not directly applicable to such problems, so optimization of well placement problems
is commonly done with gradient-free algorithms, such as simulated annealing (Banghert et al.,
2006), genetic algorithms (Ozdogan and Horne, 2006) or Particle Swarm Optimization (Onwunalu
and Durlofsky, 2009). While stochastic gradient-free methods such as Particle Swarm Optimization
and genetic algorithms can deal with non-continuous control variables and are at least claimed to be
less likely to get stuck in local optima, they tend to be less efficient than gradient-based methods,
which may therefore be preferential in cases with many control variables or in robust optimization
problems. If we can find ways to parameterize the optimization problem such that it can be solved
with a gradient approach, it may be possible to benefit from this efficiency.

7
1.3. Problem definition

In an average gas shale reservoir, the accuracy with regards to the placement of hydraulic fracture
stages is bound by cost constraints and the large number of wells that need to be stimulated. That is
why the industry has a tendency to favor the speed and efficiency of repeating the stimulation
process in each well over carefully selecting individually optimized well lay-outs. Based on available
production data from previous wells and case-studies in published literature, decisions are made on
the placement of hydraulic fracture stages that are likely to be altered if the individual well
properties and laterally and vertically varying reservoir parameters and geological uncertainties are
more accurately taken into account. Much potential of the gas shale reservoir is thus left behind.

1.4. Hypothesis

"Gradient-based numerical optimization, in combination with variable parameterizing methods, is a

practical tool to select the optimal placement of hydraulic fracture stages in a gas shale reservoir."

1.5. Thesis outline

An overview of contemporary gas shale reservoir modelling is described in chapter 2. The

optimization algorithms that are used in this thesis are outlined in chapter 3. Chapter 4 explains the
specifics of the created gas shale reservoir model. In chapter 5, the placement methods that are
used to convert the optimization variables to input data for the reservoir simulator are introduced
and qualitatively assessed. The results from the combination of the optimization algorithms and the
placement methods are presented and commented on in chapter 6. Conclusions based on the
presented material in this thesis is given in chapter 7. Chapter 8 summarizes the theory of this thesis
and chapter 9 concludes with recommendations for future work.

8
2. Contemporary gas shale reservoir modelling

Extensive literature is available on how shale gas is formed and how unconventional gas shale
reservoirs come to be (see for example Jenkins and Boyer, 2008). An important, distinguishable,
property of gas shale reservoirs is the way in which the natural gas volumes can be stored. This
happens either in a local macro-porosity system (fracture porosity) within the shale, or within the
micro pores of the shale (matrix porosity), or it can be adsorbed onto minerals or organic matter
within the shale. Unconventional gas shale reservoirs contain large quantities of lower grade
hydrocarbons and were long considered to be uneconomical, for a good reason. Their matrix
-3 -8
permeability is very low, in the order of 10 milliDarcy to as low as 10 milliDarcy (Cipolla et al.,
2009; Warpinski et al., 2009), which prohibits almost any natural flow. The key to unlocking their
potential lies in the creation of stimulated reservoir volumes (King, 2010). One way of doing this is by
hydraulically forcing the formation open. Once existing natural fractures and newly formed fractures
are sufficiently opened, they are filled with proppant to keep them from closing again after the job is
done. By treating gas shale reservoirs this way, they are made susceptible to pressure differentials
being applied and as a consequence will allow gas to be produced along the newly created
permeability 'highways' (Holditch, 2007). But how are these phenomena modeled in a contemporary
reservoir simulator?
Well written, up-to-date and clear literature on dynamic gas shale modelling is somewhat thin
spread, but for example Rubin (2009), Warpinski et al. (2009), Cipolla et al. (2009) and Clarkson,
Jensen and Blasingame (2011) have provided a vast amount of insight into present-day techniques
and results. In general, the papers agree on the practice of modelling the significantly different
properties of the matrix and fracture subsystem, and their interaction, in a dual permeability
representation. To account for the hydraulic fracturing jobs, the induced fractures are explicitly
modelled at their true width, on the order of 0.001 ft., using local grid refinement in combination
with non-Darcy flow terms (Rubin, 2009). These simulations, with explicit fracture representation,
use large detailed grids and require significant execution times due to both the large number of grid
cells and the small size of fracture grid cells used. In the light of the second objective of this thesis,
the optimization of the placement of hydraulic fracture stages, simplifications can be made to the
simulation model to study and compare the efficiency and effectiveness of optimization routines.
We do not assume the results of these comparisons to be dependent on simulation aspects at a level
of detail that would justify more expensive simulation models, such as those with local grid
refinement. Furthermore, we assume our average gas production rate to be relatively low and
consist completely of dry gas, hence we do not deal with velocity specific relative permeabilities.
Because of these assumptions and the fact that fractures are not explicitly modelled in this work,
non-Darcy flow is believed to be negligible (Jos Maas, pers. comm.). Based on a sensitivity analysis of
dual permeability gas shale modelling, performed in the work of Moridis et al. (2010), the authors
also conclude that non-Darcy flow seems to have a secondary effect and does not seem to justify the
substantially larger complexity, conceptual and computational needs.
The gas shale reservoir model that is used in this thesis is explained in more detail in chapter 4.

9
3. Optimization formulation and numerical optimization algorithms

3.1. Optimization formulation

Project economics is often the decisive element in the feasibility study of any potential hydrocarbon
reservoir. It is the industry standard to find this objective using a so called Net Present Value (NPV)
calculation which relies on including the time value of money of the profits and costs associated with
the development of a reservoir.
In this thesis, the focus is on the quantity of gas that is extracted in a period of 10 years versus the
amount of money that is spent to do so. Because of this, many uncertain factors such as royalty
rates, variable operating expenditures and abandonment costs have not been included in the
equation. All capital expenditures that are made to bring the reservoir on stream, such as drilling the
wells and performing the hydraulic fracturing jobs, are in the NPV calculation but are assumed to
have happened prior to the first cubic meter of gas produced, on day zero. It has to be noted that
stimulated production wells in gas shale reservoirs tend to initially produce large quantities of gas,
but have a very steep decline in production of up to 85% in the first year alone (Holditch, 2007). It is
not uncommon though, to re-stimulate a gas shale reservoir after several years of production to
access more of its potential. Optimization of such secondary stimulation would require extensive
integration of geo-mechanical aspects which is not explored in this thesis.
The objective function J, being the NPV, used in this work consists of a combination of production
elements and capital- and operating expenditures and is defined as

K  P Qgk, j  rg  Qwk , j  rw  Oj   t k  P
J       Wj Cw  Bj Cb  H j C f ,
k 1  j 1  j1
t k /365
 (1  b )

where K is the number of time steps, P is the number of production wells, Qgk, j is the average gas
production rate of well j at time step k [m3/day], rg is the gas price [euro/m3], Qwk , j is the average
water production rate of well j at time step k [m3/day], rw is the water disposal cost [euro/m3], O j
is the operating cost of well j [euro/day], t k is the length of the time step k [days], b is the
discount rate [%/100/year], t k is the time at time step k in [days], Wj is a switch indicating whether
a well is drilled or not (only horizontal wells are considered in this thesis) [-], Cw is the base cost for
drilling the well to target depth [euro], B j is the number of grid blocks well j penetrates in the target
zone [-], C b is the cost per drilled grid block in target zone [euro], Hk is the number of hydraulic
fracture stages in well j and C f is the cost per hydraulic fracture stage [euro]. Input values for the
NPV calculation are given in table 1.

10
Property Units Value
Gas price Euro/m3 0.12
Water disposal cost Euro/m3 1
Discount rate %/100 0.15
6
Base cost for drilling the well Euro 1.5∙10
Cost per drilled grid block Euro 5∙103
5
Cost per hydraulic fracture stage Euro 1.15∙10
Operating cost per well Euro/day 100

Table 1: Input values for the NPV calculation. Based on the economic parameters of the Marcellus Shale in the
USA by Schweitzer and Bilgesu (2009).

The optimization problem is to find the optimal hydraulic fracture stage positions, which are
grouped together as variables in control vector u, that maximize the objective function based on the
dynamic gas shale model.
To solve the optimization problem we require four elements to be linked together in the
optimization workflow. First is a versatile gas shale reservoir model and the output information that
is obtained from running a simulation with it. Second is the parameterization of the control
variables. These are the hydraulic fracture stage positions, automatically translated from simple
single values into input data for the reservoir model. See chapter 5 on the setup of the
parameterization. Third is the implementation of a gradient estimator to provide the optimization
workflow with information about the search direction towards the optimum. The three different
gradient estimators, EnOpt, SPSA and finite difference gradient estimation, that are used in this
thesis are illustrated in the present chapter. And finally, a control vector update strategy is needed
to calculate where the next iteration of the control vector is placed within the search domain. The
steepest ascent strategy was chosen to fulfill this role, see the next paragraph.

3.2. Steepest Ascent strategy

The steepest ascent formula calculates an update for the control vector, to be used in the new
iteration, based on the gradient information vector g obtained in the present iteration
approximated by the EnOpt, SPSA or Finite Different gradient estimation method. The steepest
ascent formula is
ul1  l gl  ul ,

where  l is the step length at iteration l . This thesis works with the line search step length
calculation method, which is briefly summarized in appendix 1. Performing the line search can be
time-consuming and computationally exhaustive. Conversely, using a fixed small step length can
yield poor convergence. A more detailed description of both the steepest ascent formulation and
the line search method can be found in Nocedal and Wright (2006).

11
3.3. Ensemble based Optimization (EnOpt)

The ensemble optimization (EnOpt) technique was introduced by Naevdal et al. (2005) and Chen et
al. in 2008. In short, EnOpt can be explained as a stochastic gradient-based optimization method
which estimates a gradient based on an ensemble of control vectors. This method approximates the
gradient based on the sensitivity of the objective function J, averaged over the ensemble, with
respect to the control vector u.
The main features and characteristics of the EnOpt are outlined below (Chen et al., 2008):
 The search direction used in the optimization is obtained from a regression between the
ensemble of perturbed controls and resulting objective function values.
 It aims to produce a single optimal control vector.
 It is independent of the (reservoir) simulator being used, hence requires minimal simulator
specific code development.
 It can work with large control vectors, containing many control variables, each with its own
minimum and maximum values and standard deviation, see appendix 2.
 The formula can easily be extended to solve robust optimization problems, see for example
Fonseca (2011).
Approximating the gradient from the sensitivity of the ensemble enables the use of any type of
control variable without modification to the existing algorithm (Chen et al., 2008). Needless to say,
this is a powerful feature that makes EnOpt applicable to many multi-variable problems, such as
smart well and Inflow Control Valve settings, as was shown in Su and Oliver (2010). The ensemble
sensitivity generated by the EnOpt approximates the objective function derivative at the current
control solution, and therefore is in principle a local method. However, one could argue that due to
it being based on stochastic components, it would be less likely to become stuck in local optima than
methods based on exact gradients, and therefore may be more successful at navigating objective
function domains with a variety of local maxima and minima than accurate local gradients.

3.3.1. Gradient estimation using the EnOpt algorithm

Having explained EnOpt in words, this paragraph will go into much more detail and follow the exact
mathematical steps that are taken to calculate the gradient and to describe the EnOpt algorithm in
general. The following is taken from Leeuwenburgh et al. (2010) and Fonseca (2011) and is based on
the work by Chen (2008), slightly altered to account for the hydraulic fracture stage placement
problem at hand. Geological uncertainty is not considered in this thesis, hence the problem is
reduced to a deterministic optimization problem.
The dynamic control variables (hydraulic fracture positions) form a control vector.

u  (u1 ,...,uN )T ,

where N is the number of controls, u is the vector of control variables.

12
The control vector u, applied to the reservoir model, yields after evaluation a value J  J(u) . The
optimization goal is to maximize the expected value of the objective function, i.e. maximize given
by

1 M j
J J ,
M j1

where M is the amount of samples taken, i.e. the ensemble size, and j  1,...,M .

A stochastic gradient of J with respect to the control vector u is obtained by evaluating perturbed
control vectors uj where j  1,...,M . The perturbations are Gaussian with a zero mean and an
appropriate standard deviation σ. The standard deviation may vary for different types of control
variables. The ensemble matrices are formed by collecting the means of the control vector and the
objective function respectively
T
 u11  u1 u1M  u1   J1  J 
   
U  , and J    ,
 u1  u uNM  uN   JM  J 
 N N  
1 M j 1 M
where ul  
M j1
ul for l  1,..., N , J j  J j (u j ) , J   J j , for j  1,...,M . Applying linear regression
M j1
through the M points (u j  u , J j  J ) results in a regression coefficient vector β  (UT U)-1 UT J which
approximates the gradient J . Chen (2008) then argues that the resulting stochastic gradient g is
g  Cu-1  Cu,J(u) .

This translates to a deterministic case in the form of

1 M i
g  Cu1 (u  1u )(Jii  J ) ,
M  1 i 1

1 1 M j
where Cu  (UT U) and J   J , for j  1,...,M , and 1 is an M x 1 vector of ones. Note that the
M 1 M j1
stochastic gradient g involves M function evaluations J j , for j  1,...,M . The straightforward use of
the stochastic gradient in the steepest ascent formulation is not optimal in our case, as a small
ensemble size will result in some noise. A regularized gradient is proposed by Chen et al. (2008) by
pre-multiplication of g with a matrix R  Cu  Cu . An alternative explored here is to use an
exponentially weighted moving average strategy on the perturbations and/or the gradient instead,
with a set correlation length of the variables.

3.4. Simultaneous Perturbation Stochastic Approximation (SPSA) Optimization

The Simultaneous Perturbation Stochastic Approximation (SPSA) algorithm was first introduced by
Spall in 1998. In short, SPSA can be explained as a stochastic gradient-based optimization method
which estimates a gradient based on essentially two measurements of the objective function value
per sample per iteration, regardless of the dimension of the optimization problem.

13
These two measurements per sample are made by simultaneously varying all the variables of the
problem in a proper random fashion, in this work in a Gaussian way. Afterwards, the samples are
prepared to suit the SPSA algorithm. See chapter 3.4.1.
The main features and characteristics of the SPSA are outlined below (Spall, 1998):
 It uses a centered difference approximation to the gradient based on only two function
evaluations of the problem per sample, regardless of the dimension of the problem.
Typically, the perturbation vectors are drawn from the Bernoulli ± 1 distribution, see
appendix 2.
 It is originally designed for continuous optimization problems, although there have been
extensions to discrete optimization problems (Hill, 2005).
 It aims to produce a single optimal control vector.
 It is independent of the (reservoir) simulator being used, hence requires minimal simulator
specific code development.
 It can work with large control vectors, containing many control variables, each with their
own minimum and maximum values and standard deviation.
Both the SPSA and the EnOpt are methods that aim to significantly reduce the number of required
reservoir simulations in a classical algorithm such as the finite difference gradient estimation. Unlike
EnOpt's linear regression technique, SPSA uses a basic centered difference scheme to approximate
the objective function derivative at the current control solution and therefore is in principle a local
method.

3.4.1. Gradient estimation using the SPSA algorithm

The sample perturbations performed in the routine are Gaussian with a zero mean. These
perturbations are transformed in to exact -1 or +1 (or similarly scaled) values by a cut-off threshold
of zero, making them essentially Bernoulli variables. Once all the samples have been prepared, their
exact counterparts are constructed. If an optimization process was started with a 5 sample SPSA
algorithm, this would result in 10 reservoir simulations per iteration.
The gradient is estimated as follows

1 M J(uMk )  J(uk )
gi  
M k1 ui ,Mk  ui ,k
,

Where gi is the gradient vector element of control variable i  1,,N and M the chosen number of
samples. From the SPSA gradient estimation it is obvious that it will always need 2, or a multiple of 2
reservoir simulations.

14
3.5. Finite Difference Optimization

The finite difference algorithm is well known and is therefore only stated in formula form here. More
details can be found in Nocedal and Wright (2006).
In the case where an adjoint gradient is unavailable, the finite difference gradient estimation is
assumed to be the best approximation of the exact gradients.
This algorithm was included to compare it to the stochastic gradients obtained from the EnOpt and
the SPSA algorithm. The finite difference gradient estimation algorithm finds the gradient using the
following formula
T
 J J J  J J(u  ui )  J(u)
g  J   , ,,  and gi   ,
 u1 u2 uN  ui ui
where g is the gradient of the control variables vector u, J = J(u) is the objective function evaluation
and N is the number of controls with i  1,,N .

The gradient is approximated by the finite different gradient estimation via individually perturbed
control variables, contrary to the simultaneous perturbations of both the EnOpt and the SPSA, see
appendix 2.

15
4. The gas shale reservoir model

4.1. Introduction

To optimize the placement of hydraulic fracture stages in gas shale reservoirs, a suitable, powerful
and efficient reservoir simulator is required, in combination with a solid reservoir model. After
extensive testing of both SIMED® and Stanford's General Purpose Reservoir Simulator, the
conclusion was drawn that both these reservoir simulators have too much difficulty handling the
complexities of large scale gas shale reservoir models. In an optimization routine where
computational speed and the accessibility of reservoir input variables are highly important, our
choice fell on the well documented and widely used Schlumberger compositional ECLIPSE™ 300
reservoir simulator, version 2009.1.
ECLIPSE 300, version 2009.1, contains functionality to simulate gas shale reservoirs based on coal
bed methane modelling. To realistically model the placement of hydraulic fracture stages, the gas
shale reservoir model should have sufficient grid cells, populated by scientifically and experimentally
determined reservoir properties. A completely new gas shale reservoir model was tailor-made to
suit the needs of this thesis with the factory default SHALEGAS1.DATA ECLIPSE 300 input data file as
a starting point.
This chapter is structured in such a way that the important physics represented by the input
parameters of the gas shale reservoir model, with regard to accurate gas shale matrix- and fracture
flow and subsequent production of the gas, are outlined first. The grid and the reservoir properties
of a gas shale reservoir have been documented in various conference and peer-reviewed papers. As
a result of this, a table was drawn up in this chapter representing the findings and the resulting
values that will be used for our model. This is followed by an overview of the well lay-out and
stimulation effort. Finally, a quantitative assessment of the sensitivity of the reservoir model to
various reservoir and economic parameters is performed.

4.2. Gas shale grid model properties

In continuation of chapter 2's discussion on the modelling of the matrix and fracture subsystem
interaction in a dual permeability representation, the method itself is briefly discussed here.
The dual permeability representation allows flow from matrix to matrix cell, from fracture cell to
fracture cell, from matrix cell to its corresponding fracture cell and vice versa. It is the flow from
matrix to matrix cell that sets it apart from a dual porosity representation that is widely used in the
modelling of the assumed non-permeable matrix of coal bed methane reservoirs.
A dual continuum representation requires two cells per matrix-fracture coupled grid block, one for
the matrix properties and one for the fracture properties. ECLIPSE uses these two grid cells and
automatically merges them into one matrix-fracture coupled grid block. Because there is only one
grid block in the z-direction, gravitational effects are not taken into account in this thesis.

16
The dual permeability modelling option itself can be explained as allowing the matrix cell of a matrix-
fracture coupled grid block to act as a source term. The source, upon an applied pressure drawdown,
expulses the shale gas into the matrix porosity and subsequently the fracture network cell, linked
within the same matrix-fracture coupled grid block. The fracture network cell acts as a sink term in
this process.
Furthermore, the dual permeability modelling requires the shale matrix to have a fixed porosity and
permeability. The shale matrix desorbs the, assumed, pure methane gas at a rate determined by the
application of the Langmuir Isotherm. The Langmuir model assumes instantaneous equilibrium of
the sorptive surface and the storage in the pore space. In other words, there is no transient lag
between the pressure drop and the desorption response. Due to the very low permeability of the
shale matrix, flow through it is extremely slow, so instantaneous equilibrium is a good assumption
(see Gao et al., 1994). Also, the desorbed gas is taken to be directly in equilibrium with the present
free gas in the fracture and matrix pore networks. Water flow in or out of a matrix cell is not allowed
in this work, as Freeman et al. (2009) state that its interaction with the shale is poorly understood
and it would add a confounding influence to the results.
The transmissibility property of the dual permeability grid is used to specify the ability of a matrix
cell to communicate with its corresponding fracture cell. The transmissibility in ECLIPSE is defined as
TR = CDARCY ∙ K ∙ V ∙  v ,
3 2
where TR is the transmissibility [length ], CDARCY is Darcy's constant in appropriate units [length ],
K is the matrix permeability in the x-direction [-], V is the volume of the matrix grid block [length3]
and  v is the transmissibility multiplier [length-2]. The formula to define it is given as

 1 1 1 
v  4    
 L 2 L 2 L 2 
,
 x y z 

where Lx , Ly and Lz [m] determine the fracture spacing in the x-, y- and z- direction, respectively.
Only fractures in the x- and y- direction are considered in this work. Completing the transmissibility
multiplier formula with the given parameters, see table 2, would yield a value of 0.3244.
As methane is the single gas component in the reservoir, all methane parameters for viscosity,
density, Z-factor etcetera are put into the model. The general formula for the Langmuir Isotherm is

VL  P
V (P)  ,
PL  P

where V (P) [Standard m3/kg] is the adsorbed gas content at pressure P [Pascal], VL is the Langmuir
volume parameter [Standard m3/kg] which gives the storage capacity of adsorbed gas content at
infinite pressure, and PL the Langmuir pressure parameter [Pascal]. The specific Langmuir
parameters for methane in gas shale reservoirs are scarcely documented and were obtained from
collective measurements performed by Ross and Bustin (2009) and Freeman et al. (2009), at a Total
Organic Carbon value of 10% (Van Bergen, pers. comm.), see table 2. Figure 1 illustrates the findings.

17
The initial pressure of the reservoir, in an unperturbed situation without any fluids or gasses yet
produced, will determine the initial gas content of the matrix.

Figure 1: Langmuir Isotherm curve for pure methane gas in a 10% Total Organic Carbon rich gas shale. After
Ross and Bustin (2009) and Freeman et al. (2009).

To model the effect of reduced fracture conductivity (or closing of the fractures) at lower pressures,
i.e. when the reservoir is being depleted due to an applied pressure drawdown, the rock compaction
function is introduced (Rubin, 2009; Cipolla et al., 2010). This function has the ability to scale the
transmissibilities, introduced earlier, in correspondence with the reduced reservoir pressure. In
consequence it is used to represent the closing of fractures and results in a steeper production
decline. The rock compaction table that was used in this work is shown in appendix 5. An example of
this effect is visualized in Cipolla et al. (2010) on page 9, where a comparison between the effect on
the Barnett and the Marcellus shale is shown. The authors speculate that the lower Young's modulus
of the Marcellus, and its effect on the stress-dependent fracture network conductivity, could explain
the steeper production decline and lower ultimate gas recovery that is observed. Ozkan et al. (2010)
also touches upon this subject. The matrix compressibility is assumed to be negligible.
In this thesis, an equally spaced 53 by 51 by 1 grid (x, y and z) with grid block dimensions 20 by 20 by
30 meters is defined.

4.3. Gas shale reservoir properties

This subsection deals with the elementary gas shale reservoir properties chosen to populate the
model. The reservoir properties and their corresponding values are all taken from literature and
carefulness to avoid taking average values is essential, as no two shale gas plays are believed to be
alike. As a matter of fact, large differences are common, as can be seen from the range of values
given for each property in table 2. In the proposed basic gas shale model in this thesis, no
heterogeneities are introduced. However, in chapter 6, experiments are performed that do take into
account the effect of heterogeneity on the optimized placement.

18
The top reservoir lies at a depth of 2071.2 meters. The depth was chosen in accordance with known
gas shale formations in The Netherlands (Zijp, 2010) and active gas shale plays in The United States
(Curtis, 2002; Cipolla et al., 2009).
Values for the porosity of the matrix and the fracture (both bulk porosities) are set to be 0.03 and
0.00005 respectively. The fracture porosity may seem incredibly low, which can be attributed to the
fact that there is no fracture porosity as such in this shale gas model. The fractures are thought of in
the dual permeability grid as very narrow laterally extensive hollow (porosity equals 1) spaces. One
fracture in the x- and y-direction is implemented every 5 meters, with a fracture aperture of only
0.000125 meter. The combined volume of these 'pores' is then divided by the bulk volume of the
fracture grid block to form the fracture bulk porosity.
The permeability of the matrix in the shale is chosen to be in the range of common gas shale plays
and is given the value of 100 nanoDarcy. It can vary from extremely low (sub nanoDarcy scale) to
very low (microDarcy scale). Assuming an initial presence of some natural fractures in the reservoir,
the fractures in the un-stimulated grid blocks, see chapter 4.4 on well lay-out and stimulation, are
given a permeability of 1 milliDarcy. Inside the Stimulated Reservoir Volume (SRV), the fracture
permeabilities vary widely. To obtain the bulk permeability of the fracture network, which is the
required input parameter for the ECLIPSE reservoir simulator, this value is multiplied by the
corresponding fracture porosity.
The capillary pressure curves and the depth of the GWC (gas-water contact) determine the initial
saturations. The relative permeabilities of both phases decide the ability of a specific phase to flow
through the pores of both the matrix and the fracture network. Being in a gas-water gas shale
system, the rock is expected to be extremely water-wet, making the gas the non-wetting phase.
Based on experimental data of very tight sandstones by Maas (2011), several input variables such as
minimum and critical saturations, end-point relative permeabilities and Corey exponents are used to
construct the relative permeability curves. These are displayed in figure 2, for more details see
appendix 3. The capillary pressure curves are constructed using different values for the sorting factor
λ (0.5 for the matrix and 0.7 for the fracture network). The results are displayed in figure 3, for more
details see appendix 3.

Figure 2: Relative permeability curves, to serve as input data for the gas shale reservoir model.

19
Figure 3: Capillary pressure curves, to serve as input data for the gas shale reservoir model.

Property Units (Metric) Value Range Model Value

(1)(2)(5)
Reservoir Thickness m 6 – 300 30
(1)(2)(3)
Reservoir Depth m 180 – 4600 2071.2
(1)(3)(6)(8)(9) -8
Matrix Permeability mD 0.001 – 10 0.0001
(1)(2)(3)(5)(8)
Matrix Porosity - 0.01 – 0.1 0.05
Shale Rock Density (Grain) (6) kg/m3 2600 2600
(6)(9)
Fracture Spacing m 10 – 100 5
(6)(8)
Fracture Aperture m 0.0003 – 0.004 0.000125
Fracture Permeability (8) mD 100 – 10000 [1, 50, 1000, 5000]
(9)
Fracture Porosity (bulk) - 0.00001 0.00005
Adsorbed gas content/
(2)(3)(4)(5) % 20 – 85 71
Total gas content
Langmuir Pressure (7)(11) Bar 25 – 100 45
(7)(11)
Langmuir Volume Standard m3/kg 0.0001 – 0.0012 0.001
Reservoir Temperature (function of the
K 297 – 422 335.25
Geothermal gradient) (2)(5)(10)
Gas Shale Reservoir Life-Span (4)(5) Year 25 – 30 10
Literature
(1) Caineng et al. (2010) (7) Ross and Bustin (2009)
(2) Curtis (2002) (8) Ozkan et al. (2010)
(3) Cipolla et al. (2009) (9) Warpinski et al. (2009)
(4) Jenkins and Boyer (2008) (10) Cipolla, Lolon and Mayerhofer (2009)
(5) Zijp (2010) (11) Freeman et al. (2009)
(6) Moridis et al. (2010)

Table 2: Overview of gas shale reservoir properties and literature values, to serve as input data for the gas
shale reservoir model.

20
4.4. Well lay-out and modelling the stimulation effort

Recent developments of gas shale reservoirs all over the world show increased favor towards
hydraulically fractured horizontal well field development, over traditional hydraulically fractured
vertical wells. Certainly because of the environmental footprint, the required well spacing and the
added reservoir contact area (Rahm, 2011). New techniques in hydraulic fracturing have been
developed that can stimulate more and larger sections of the horizontal wellbore, while at the same
time improving accuracy with respect to placement of the stimulations (King, 2010).
To quantify the stimulation of a hydraulic fracture stage, the industry works with the dimensionless
fracture conductivity ratio term. This is the ratio of the permeability of the fracture multiplied by its
propped fracture width and the permeability of the formation multiplied by the fracture half length
(Economides and Martin, 2007).
In formula this reads

kf  w f
FCD  ,
k  Xf

where FCD is the dimensionless fracture conductivity [-], k f is the fracture conductivity [mD], w f is the
width of the fracture [m], k is the reservoir permeability [mD] and X f is the fracture half length [m].

In ECLIPSE v. 2009.1, there is no direct option to include the fracture conductivity in the reservoir
model. Instead we model the hydraulic fracturing stimulation effort as one that enhances the
fracture permeability in the zone of influence, the SRV (Stimulated Reservoir Volume). The
transmissibility variable, which includes a permeability term, can also be interpreted as an indirect
measure for the enhanced fracture conductivity. Note that modelling of the hydraulic fracture
network is frequently performed using local grid refinement (Rubin, 2009), see the discussion in
chapter 2.
A hydraulically induced fracture network, mostly growing out perpendicular to the well bore is
assumed in this work. This is valid as long as the minimum in-situ stress (  3 ) is in the direction along
the well bore (Weijermars, 2009; Dusseault and McLennan, 2010). A graphical representation of said
statement is depicted in figure 4. Furthermore, the SRV is characterized by different zones of
enhanced fracture permeability. A three-zone rectangular shaped SRV was set up to handle this
characteristic, and has a 5000, 1000 and 50 milliDarcy enhanced fracture permeability zone
respectively, see figure 5. The zones are created to mimic the effect of varying fracturing fluid
densities used throughout the treatment and the ability of the proppant to flow through the fracture
network. Fracture permeabilities in the x-, y- and z- direction are considered to be identical in this
work. Naturally, the effect of the stimulation effort is highest near the well bore. The effect
diminishes further out into the reservoir. When two stimulated reservoir zones overlap, the highest
enhanced fracture permeability is selected for the reservoir model. The un-stimulated part of the
reservoir was assigned a naturally occurring fracture permeability of 1 milliDarcy. Specially designed
fracture simulators, such as GOFHER™, MFRAC™ and FRACPRO™, are computer based mathematical
software packages to model the size and shape of a hydraulic fracture stage.

21
An interesting combination of hydraulic fracture stage modelling, micro-seismic measurements, gas
shale modelling, based purely on case study work, was performed by Taylor et al. (2010).

Figure 4: The minimum in-situ stress (  3 ) and the resulting hydraulic fracture propagation. After Dusseault
and McLennan (2010).

Figure 5: 2D (x, y) top-view of a typical horizontal well, which starts at the top-middle of the picture and
penetrates 40 grid blocks in the y-direction and has 4 hydraulic fracture stages. The image shows the size of
the SRV zones (grid cell size 20 by 20 in the x- and y-direction) as well as the values of the enhanced fracture
permeability zones, as a result of the stimulation effort. These are stored in ECLIPSE as bulk values, hence the
fracture porosities are multiplied by the designed fracture permeabilities (in milliDarcy). Fracture
permeabilities in the x-, y- and z- direction are considered to be identical in this work. Image created in
Schlumberger Floviz™ version 2009.1.

22
4.5. Sensitivity analysis

To get a better understanding of the sensitivities of the basic gas shale reservoir model to various
important reservoir and economic parameters, a small analysis was performed. In this analysis, the
matrix porosity, fracture porosity, SRV fracture permeabilities, transmissibility multiplier, interest
rate and gas price are varied. The basic gas shale reservoir model is based on the properties of table
2, has one well with a well bore length of 40 grid blocks and stretching this length are 9 evenly
spaced hydraulic fracture stages. The NPV after 10 years of production of this scenario is 5.245
million euros. See figure 6 for the Tornado plot that was constructed to rank the sensitivities on their
NPV. The black circles in the graph display the NPV value of the basic gas shale reservoir model. The
high and low values used to measure the sensitivity are chosen in accordance with what could
reasonably be observed in the subsurface or on the energy market in a politically and economically
stable country.
Clearly, the gas price is the most influential on the profitability of the multi-stage fractured
horizontal well that is proposed. The volatility of the gas price is an aspect that the industry is
struggling with and is also one of the main reasons for gas shale projects world-wide to not be
produced, even if technology permits. Second comes the sensitivity of the model to the matrix
porosity, although sharing almost the same ranking with the SRV fracture permeabilities and
fracture porosity. These are highly important parameters that change the production curve of a gas
shale well dramatically and can turn the tide on a gas shale project. The interest rate and the
transmissibility multiplier seem to have a lower impact on the outcome of the objective function
value calculation.

Figure 6: Tornado plot ranking the sensitivities. The individual sensitivity analysis plots can be found in
appendix 5. The black circles represent the NPV value of the basic gas shale reservoir model with one
hydraulically stimulated horizontal well.

23
4.6. How the gas shale reservoir model could be included in the optimization process

To run the optimization process efficiently, the proposed gas shale reservoir model described in this
chapter was integrated in the MATLAB™ optimization framework. This framework initializes and
updates the required input files for the ECLIPSE reservoir simulator. Next to certain fixed parameters
like the Langmuir Isotherm parameters or the rock compaction tables, the MATLAB code documents
prescribe automatic adjustment of horizontal well locations, well trajectories, number and location
of hydraulic fracture stages, spacing in between them and the enhanced fracture permeability zones
in the fracture network due to the hydraulic fracturing treatments.

24
5. Placement algorithms

5.1. Introduction

Accurate placement of hydraulically fractured stimulated reservoir zones is a key-factor in producing

the very tight gas shale reservoirs more efficiently, economically and potentially more
environmentally safe. It is in everyone's best interest to save energy and millions of gallons of fluids
and particles needed to stimulate the reservoir, whilst maximizing profits with fewer uneconomic
and possibly redundant fracture stages.
Understanding the reservoir and its properties, such as, but not limited to: porosity and permeability
distribution, natural fracture network properties and gas-water-contact, is vital to realistically
optimize the number and the location of both production wells and hydraulic fracture stages in gas
shale and other very low permeable reservoirs. While engineering common sense and basic
calculations may determine these parameters for simple cases, computer-assisted production well
and hydraulic fracture stage placement methods automatically perform the often tedious
calculations for basic as well as complex reservoirs or multiple well scenarios. In this work,
computer-assisted hydraulic fracture stage placement is investigated which may prove to be a very
powerful tool that can be used to predict important parameters in the stimulation process.
The gradient-based methods that are used in this thesis, and are discussed in more depth in chapter
3, suffer from a major drawback when applied to problems such as production well or specifically
hydraulic fracture stage placement in a simulation grid. The step size along the search direction has
to be chosen such that each function evaluation point corresponds to well grid block indices in the
simulation grid system. Zhang et al. (2010) postulate that a remedy to this problem is to convert the
discrete optimization problem into a continuous optimization problem so that traditional
optimization algorithms can be applied for faster convergence. Another issue with these kind of
problems is that the number of control variables may vary during the optimization process. For
example, it could turn out that it may be more optimal to remove or add production wells or
fracture stages, thus changing the dimension of the control vector.
In this thesis we investigate the applicability, strengths and weaknesses of three different placement
methods, in combination with the optimization algorithms, that use continuous secondary, dummy,
variables as a possible solution to represent the real discrete control variables. In our case, these real
control variables consist of well grid block indices that we want to initiate a fracture stage in.
Extensive use is made of a work-around in the form of a so called ‘kMultiplier’ variable. The
kMultiplier matrix tells the reservoir simulator which well grid blocks the hydraulic fracture stages
should be initiated in, see figure 5 and 7.
This chapter explains the three different placement methods in full detail. The methods are
presented both in text and illustrated graphically for convenience. Practical applications are
performed in chapter 6.

25
The placement methods are used for the placement of hydraulic fracture stages along the horizontal
production wells only. A possible extension to the placement of horizontal wells is also investigated
in chapter 6.

Figure 7: Lay-out of a horizontal well that penetrates n grid blocks, therefore giving n hydraulic fracture stage
initiation possibilities.

5.3. Gradient-based fracture stage elimination method

At the basis of the first of three methods that is used to place hydraulic fracture stages along the
horizontal well bores, lie two papers from Wang, Li and Reynolds (2007) and Zhang et al. (2010).
Both papers focus on oil production and water injection. The authors of these papers have
succeeded in finding a solution to convert a discrete variables problem, in their case the well grid
block indices of vertical water injectors wells, to a continuous variables problem. To do so, they have
introduced new differentiable continuous variables that control the water injection rate of these
individual injector wells and assumed the total water injection rate to be a constant. Vertical injector
wells are initially positioned within every grid block of the 2D model, except for the grid blocks that
contain a vertical producer well. The locations of the producer wells remain fixed. The values of the
continuous differentiable variables are, with respect to their total injection rate and non-negative
constraints, arbitrarily chosen and fed into the reservoir simulator. The simulator then runs these
scenarios and computes a gradient based on the resulting objective functions, using the accurate
adjoint algorithm. Details on the calculation of the gradient of the objective function with respect to
well controls using adjoint gradients can be found in Brouwer and Jansen (2004) and Sarma et al.
(2005).
The optimization routine is written in such a way that during each iteration of the optimization
algorithm, one of the well injection rates goes to zero, effectively eliminating the injector well and its
associated terms (such as drilling costs) from the Net Present Value (NPV) calculation. Furthermore,
redistribution of the individual injector rates, based on the gradient, is then applied to each of the
remaining injector wells. Because the total rate of water injection is fixed, there must be at least one
injection well left at the end of the iteration process.
This method can not immediately be applied to the gas shale production plan that is envisioned in
this thesis.

26
First, there are no injection wells proposed to maintain the reservoir pressure or provide a more
efficient sweep of the equally absent oil. This implies that the continuous differentiable variables
element and the constraint on the total injection rate of the routine that was described above
cannot directly be applied to gas shale reservoirs. Second, instead of optimizing the placement of
vertical injector wells, the purpose of this work is to optimize the placement of multi-stage hydraulic
fractures along a horizontal well bore. Third, no adjoint formulation is available for this problem.

If so many of the basics are fundamentally different, how does it work?

The gradient-based fracture stage elimination method proposed in this thesis finds its origin in the
routine proposed by Wang, Li and Reynolds (2007). The following adaptation of their idea is
proposed.
Initially, all grid blocks penetrated by the well in the horizontal direction are enabled as stimulated
reservoir zones and contain one hydraulic fracture stage. A crucial part of this approach is that these
hydraulic fracture stages are represented in the vector of control variables as a series of 0.5's (a
dummy control that is continuous, instead of discrete), having the length of the amount of grid
blocks that are penetrated. Any value in the control variable vector larger than zero, indicates the
presence and location of a hydraulic fracture stage along the horizontal well bore. The location is
simply taken from the position of the non-zero elements in the control variable vector. The control
variables are independent of the each other.
The control variables can, when fed to the reservoir simulator, only assume values of zero or one. A
zero/one value depicts the absence/presence of a stimulated reservoir zone initiated at the grid
block position of the control variable, i.e. a hydraulic fracture stage. However, during the Gaussian
perturbation process, the variables collected in the sample vector can take on any value between
the minimum of zero and the maximum of one. These values are rounded off to their nearest integer
at the end of the perturbation process, when they are transformed into a so called kMultiplier
variable.
In this thesis we propose to find the gradient based on the perturbed controls as accurately as
possible, albeit with a different stochastic gradient-based optimization algorithm such as the EnOpt,
SPSA or finite difference gradient estimation instead of the adjoint algorithm. Once the gradient is
found, the element that has the most negative (or else smallest) value will be selected. The selected
element is subsequently put to zero when the next control variable vector update takes place and
the other elements are put back to their initial value of 0.5. These values are rounded off again,
providing us with an updated kMultiplier matrix for the control variable vector. The new control
variable vector is then evaluated to determine whether the updated control variable vector yields a
higher objective function value. If this is the case, then the update is accepted and the element that
has been put to zero, is stored. Storing the element that is put to zero ensures that in the next
iteration, this control variable will not play a role anymore and will not allow for a new hydraulic
fracture stage to be placed at its location. If it is not an improvement, then the control variable
vector will take on its previous values, the removed fracture stage will not be stored, and the
iteration process continues.

27
 0.5  0.6  1     0.1   0.5
0.5  0.47  0     0.12  0.5
           
0.5   0.52   1   2.1   0.09    0  ,
           
0.5  0.55 1     0.02 0.5
0.5 0.38  0     0.05   0.5

Column Meaning Mathematics

1 Control vector, iteration k uk  (uk ,1 ,...,uk ,5 )T

2 Sample vector j, iteration k uk j  (uk ,1 j ,...,uk ,5 j )T

3 kMultiplier variable, sample j -

4 Objective function, sample j Jj

gk
5 Gradient, iteration k

6 Control vector, iteration k+1 uk1  (uk1,1 ,...,uk1,5 )T

Figure 8: Random valued example of the gradient-based fracture stage elimination method.

A random valued five variable problem with sample size j was chosen to illustrate the method in
figure 8. The first column depicts the control variables, put together in the control variable vector at
iteration step k when no fracture stage has yet been eliminated. These variables are slightly
perturbed in the second column, in a specific way which varies per optimization algorithm, such that
the variables either become larger or smaller than 0.5. The figure shows just one vector of perturbed
control values, namely the perturbed sample j . In the next step, the kMultiplier variable rounds-off
the perturbed values to their nearest integer values. Simulations are subsequently run with these
different hydraulic fracture stage placements and the resulting objective function values can be
found in column four. Together with the perturbed control variables the objective function values
are used to calculate the gradient, which is displayed in column five. From this gradient, the most
negative (or else smallest) element is selected and subsequently put to zero in the new control
variable vector. The new control variable vector is evaluated and if it is determined that it is an
improvement over the previous iteration step, the new control variable vector is stored.
The gradient-based fracture stage elimination placement method does not benefit from the inner
iterations principle of step length reduction. Fixing the most negative (or else smallest) elements of
the control variable vector to zero rules out the option to change the step length and possibly find
an increase in the objective function.

What are the strengths, weaknesses and the applicability of this placement method?
An obvious strength of this placement method is its power to select how many fracture stages it
likes to place along a horizontal well bore, without the user selecting this number a priori.

28
The gradient-based fracture stage elimination method benefits from a gradient of the highest
quality, to make the right decision on which fracture stage to remove. Especially at early iterations,
when removing almost any fracture stage will results in a higher objective function value, a
qualitatively poor gradient might eliminate the 'wrong' fracture stage. Once the fracture stage is
removed, it cannot be reintroduced.
The gradient-based fracture elimination method does not support the user to define smoothing
criteria to generate regular fracture stage intervals.
As it is implemented in the code used in this thesis, removing more than one fracture stage per
iteration is possible and works fine, at least in combination with the EnOpt and SPSA algorithm (see
chapter 6 on the experiment results), until most of the fracture stages are gone and only a few are
left. At this point in the optimization, the method will once again try to remove the specified and
fixed number of fracture stages but will run into a worse objective function value every time. We will
refer to this as the critical point. The method will not store the locations of the fracture stages it
wants to remove and instead proceed with the next iteration. This process will not converge and the
optimum may never be reached. A solution to this problem is to only remove a single fracture stage
per iteration. For efficiency purposes, it would be interesting to see how a scheme would perform
that does initially remove more than one fracture stage at a time but reduces the number of fracture
stages it removes once the optimization has reached its critical point.

5.4. Fracture stage interval placement method

A method that does not involve gradient manipulation is the fracture stage interval placement
method. The name fits the method, as it deals with a pre-selected number of hydraulic fracture
stages that are positioned along a horizontal well bore with non-stimulated intervals in between.
The fracture stage interval placement method optimizes the lengths of those intervals. The method
adds another constraint to the equation in comparison with the other placement methods, which is
a fixed maximum number of hydraulic fracture stages per well, next to the existing control bound
constraints.
The number of controls is determined by the total amount of hydraulic fracture stages to be placed
along the well bores. The controls are variables that change the interval in between the hydraulic
fractures, are defined in discrete grid block units and are independent of each other.
Initially, the specified amount of hydraulic fracture stages per well are located next to each other,
spaced evenly, as is defined as an input argument. However, this is not obligatory and any initial
fracture stage placement is valid. Efficiency of the various initial fracture stage placements is
investigated in chapter 6.
The elements of the control vector can take up any integer value within the range of the minimum
and maximum specified interval value. For example, if two hydraulic fracture stages are designed to
be 3 grid blocks apart, the control variable responsible should have value 3.

29
The method was implemented in such a way that, as is illustrated In figure 9, a control variable
inserts the non-stimulated interval first, before placing the hydraulic fracture stage in the
appropriate location. The locations of the fracture stages are once again stored in the kMultiplier
matrix.

Figure 9: Example horizontal well bore lay-out of a four variable fracture stage interval placement scheme, the
control variable values determine the lengths of the intervals. By chance, both the first and the last grid block
are stimulated, this is not always the case.

The objective function is evaluated for the initial control variable vector values and the output is
stored, to be compared with the perturbed and updated controls later on in the optimization
process.
By perturbing the controls, within the active bound constraints and as a function of the specified
control variable variance, new sets of sample variables are created and subsequently rounded-off to
integers. These integers are used by the placement method to be adequately stored in the
kMultiplier variable.
The new sets of sample variables are evaluated through the kMultiplier variable to find the gradient.
In contrast to the gradient-based fracture stage elimination method, the interval method uses all
gradient elements to compute the step length and update the control variable vector. The control
variable vector is then evaluated to determine whether the updated control vector yields a higher
objective function value. If this is the case, then the update is accepted and the iteration process
continues. If it is not, then step length is reduced by a factor defined in the input variables and the
control variable vector is updated and evaluated again. This process repeats itself until either the
maximum number of inner iterations is reached, or the objective function has increased.
Note that no constraint has been placed on the total, summed, length of all the intervals. Therefore,
it is possible for a fracture stage to fall ‘outside’ of the well bore. When a fracture stage is indeed
placed outside of the well bore, its cost is naturally removed from the NPV calculation.

30
This strategy enables the method to come up with both an optimized amount of fracture stages and
their locations, based on any initial pre-selected amount of fracture stages.

What are the strengths, weaknesses and the applicability of this placement method?
The fracture stage interval placement method handles a pre-selected number of hydraulic fracture
stages and has no flexibility to increase this amount once the optimization has started. However, the
optimal amount of fracture stages to be placed may vary from the pre-selected amount, due to the
method's strategy for placing fracture stages inside and outside of the well bore.
In this method, the accuracy of the gradient is of somewhat lesser importance, erroneous placement
of fractures can be repaired in subsequent iterations. Furthermore, because this method uses fewer
control variables, less samples may be needed to compute a reasonable gradient. As is mentioned in
the beginning of this paragraph, the method does not manipulate the gradient and continuously
uses all control variables to come up with a gradient. That includes those control variables that
represent fracture stages that may be located outside of the well bore.
Regularization of the gradient, e.g. by smoothing the differences between the subsequent intervals
and or the gradient, is possible.
Contrary to the previously mentioned gradient-based fracture stage elimination method, step length
reduction to prevent overshooting the objective is applicable to the fracture stage interval method.

5.5. Fracture stage selection placement method

The third and final method was invented to try and combine the strengths of the two previous
methods. Just like the fracture stage interval placement method, the fracture stage selection
placement method does not involve gradient manipulation. What sets it apart from the previous
method is that no pre-selection of the number of hydraulic fracture stages per well needs to be
made.
The fracture stage selection placement method works with as many control variables for hydraulic
fracture stages as there could potentially be hydraulic fracture stages along the horizontal well bore,
i.e. the number of grid blocks along well. The initial spacing between the different hydraulic fracture
stages is determined by the initial fracture spacing input element. For example, if the initial fracture
spacing element is 2, every second element of the control variable vector is chosen as the position
for a hydraulic fracture stage. However, this is not obligatory and any initial fracture stage placement
is valid. The locations of the fracture stages are stored in the kMultiplier matrix. The objective
function is evaluated for the initial control variable vector values and the output is stored, to be
compared with the perturbed and updated controls later on in the optimization process.
By perturbing the controls, within the active bound constraints and as a function of the specified
control variable variance, new sets of sample variables are created and subsequently rounded-off to
integers.

31
The values of the control variables translate into a measure for the distance to the next fracture. In
other words, the values of the control variables determine which control variable is next in line to
correspond to a hydraulic fracture stage. Therefore, it differs from the interval method, where each
element of the control variable vector is used and no controls are ‘skipped’. A clarifying sketch is
shown in figure 10 to visually illustrate this process. The generated integers are used by the
placement method to be adequately stored in the kMultiplier variable.
The new sets of sample variables are evaluated to find the gradient. In contrast to the gradient-
based fracture elimination method, the fracture stage selection placement method uses all gradient
elements to compute the step length and update the control variable vector. The control variable
vector is then evaluated to determine whether the updated control vector yields a higher objective
function value. If this is the case, then the update is accepted and the iteration process continues. If
it is not, then step length is reduced by a factor defined in the input variables, the control variable
vector is updated and evaluated again. This process repeats itself until either the maximum number
of inner iterations is reached, or the objective function has increased.

Figure 10: An overview of the fracture stage selection placement method.

The nature of the presented method and the way of stochastically perturbing the control variables
may lead to noise along the length of variable vectors and subsequently the gradient. This is an
unwanted effect that negatively impacts the optimization algorithm to find an optimum with the
given ensemble size. An exponentially weighted moving average strategy is proposed to impose a
specific correlation length for the perturbed control variables and or the calculated gradient.

32
What are the strengths, weaknesses and the applicability of this placement method?
The method does not manipulate the gradient and continuously uses all control variables to come
up with a gradient. The accuracy of the gradient is of somewhat lesser importance than for the
gradient-based fracture elimination method as erroneous placement of fractures can be repaired in
subsequent iterations.
An obvious strength of this placement method is its power to select how many fracture stages it
wants to position along a horizontal well bore, without the user selecting this number a priori.
A possible weakness of the method is the noisiness of the control variables around those that are
used to position the fracture stages. While the 'idle' variables are not used in one iteration, but do
change in value due to the control vector update, they may be in the next, likely giving the
optimization algorithm a completely different fracture stages lay-out; out of which it needs to
calculate a new gradient.
Regularization of the gradient, e.g. by smoothing the perturbations and or the gradient is possible.
Step length reduction to prevent overshooting the objective is applicable to the fracture stage
selection placement method.

33
5.6. Optimization routine

Figure 11: Flow chart of the entire optimization routine.

34
6. Results

6.1. Introduction

This chapter serves to bring together the optimization algorithms and the placement methods. A
best 'guesstimate' of the fracture stage placement in the given gas shale model is shown first, to
provide a comparison and reference between the output of the optimization process and the
expected results.
Immediately following the best guesstimates are the results of running the optimizations on the
basic reservoir model which are used to analyze the behavior of the different combinations of the
before-mentioned tools. If not specifically mentioned otherwise, the basic reservoir model used in
this chapter is the one that was described in chapter 4. Important reservoir properties are listed in
table 2. Recall that the objective function J is the discounted cash flow over 10 years of production.
The objective function includes costs for operational and capital expenditures, such as the number
of hydraulic fracture stages to be placed, as well as the profit that is made from the production of
gas. The economic parameters that are used to evaluate the simulations are tabulated in table 1.
The results of the optimizations are sorted per placement method.
The most promising combination is then applied to a more complex scenario, which takes into
account two closely placed and interfering horizontal wells. Finally, the optimization of horizontal
wells in the basic gas shale reservoir model is attempted by introducing a small form of
heterogeneity.

6.2. Best engineering guesstimates

In this paragraph, a single production well that penetrates 40 grid blocks in the horizontal segment is
placed inside the basic gas shale reservoir model that was built in chapter 4. Placement of multiple
hydraulic fracture stages in the selected homogeneous, isotropic gas shale reservoir model should,
intuitively, proceed at a regularly spaced interval along the horizontal well bore. Four different
scenarios are investigated to give the reader an overview of the results of a simulation and the
associated objective function value, see figure 12.
(a)

35
 (b)

(c)

(d)

Figure 12: In all four graphs, the x-axis corresponds to the grid block indices along the length of the horizontal
well bore section and the first drilled grid block is situated at the origin of the graph. The red stars indicate
whether or not a fracture stage is initiated at a grid block.

These four investigated fracture stage placement scenarios show that the size of the Stimulated
Reservoir Volume (SRV) is clearly of large influence on the optimum density of the fracture stages.
For the given economic parameters, the highest objective function value occurs when there is an
interval of four grid blocks in between fracture stages. These grid blocks in between are affected by
the SRV created by the hydraulic fracture stages that are placed in their vicinity. Given the size
parameters of the SRV and its enhanced fracture permeability property, this effectively means that
all grid blocks along the well bore have an enhanced fracture permeability of at least 1000
milliDarcy.
Another interesting observation is the relatively small difference in objective function value between
the second and third investigated scenario (b and c), whilst the former even has two extra fracture
stages. More fracture stages create extra highly permeable zones, resulting in the extraction of more
gas. However, because of the symmetric nature of the SRV size, the second scenario is slightly less
attractive because of the relatively ineffective overlapping of the enhanced permeability zones. The
same can be concluded when comparing scenario (c) and (d). Scenario (d) also suffers from the
relatively ineffective overlapping of the enhanced permeability zones.

36
6.3. Basic model

6.3.1. Gradient-based fracture stage elimination method

Presented in figure 13 are the results of the 41 variables optimization problem, performed on the
basic gas shale reservoir model. Of these 41 variables, 40 are allocated to the placement of fracture
stages and one for the location of the horizontal well, which remains fixed throughout the
optimization process.
The gradient-based fracture stage elimination method performs slightly better in combination with
the EnOpt algorithm, than it does with the SPSA algorithm. Even though the computational effort for
the SPSA is double that of the EnOpt, due to the algorithms inherent sample preparation
characteristics, the result is worse. The way the gradient is calculated in the EnOpt therefore seems
to out-perform the same procedure in the SPSA, see figure 13 (a) and (e).
What is remarkable, is that a higher number of samples taken, which should directly influence the
quality of the gradient, does not seem to improve the objective function value nor provide us with a
more regular pattern of placed fracture stages in the first simulation, see figure 13 (a) and (b). It is
statistically less likely, but certainly not impossible that if the few samples, randomly drawn from a
Gaussian distribution, attribute to larger objective function values then say the 10 extra samples of
the larger ensemble, it will lead to a 'better' control variable vector update and hence a larger
objective function value. In general, more samples will lead to more data points to fit the regression
curve to in the EnOpt and hence give a better correlation. A second simulation was run to prove this
theory, see figure 13 (c).
(a)

(b)

37
 (c)

(d)

(e)

(f)

Figure 13: Results of the optimization processes, using the gradient-based fracture stage elimination method,
on the basic gas shale reservoir model. Optimization specifics are stated above the fracture stage graphs.

Both the EnOpt and the SPSA have difficulty dealing with the gradients that arise during later
iterations, when the few control variables that are left after the elimination process are once more
perturbed. All gradient values displayed in figure 14 are positive, indicating that we are close to a
(local) optimum. Hence it is very unlikely that removing any of the fracture stages will result in an
increased objective function value. It has to be noted that we can never be completely certain of the
accuracy of the values of the gradient elements. This is inherent to the optimization algorithms,
because the gradient is estimated and is not an exact one.

38
Figure 14: Calculated gradient at the last iteration. Graph taken from the optimization process of figure 13 (a).

Finite difference gradient estimation is computationally very exhaustive in combination with the
gradient-based fracture stage elimination method, as the algorithm requires it to have as many
perturbed samples, plus one control sample, per iteration as there are control variables. During the
first few iterations, it eliminates fracture stages in such a way that a very regularly spaced fracture
stages placement is observed, exactly like the fourth scenario of the best guesstimates, see figure
12. At later iterations, the importance of finding the best objective function value takes over and
more irregularities are introduced, resulting in higher objective function values but more variation in
the spacing of the fracture stages. These two distinct characteristics can be explained by the
algorithm's way of perturbing the samples one by one and estimating the gradient. Due to this, the
finite difference gradient estimation algorithm is bound to find a highly symmetrical gradient which
has many elements that have the same values, except for those near the eliminated fracture stage
locations, see figure 15 (a). It is therefore unclear which fracture stage should be removed, and by
default the first value from the top of the vector is chosen that represents the most negative or
otherwise lowest value. Even though the quality of the gradient is not necessarily higher, both the
EnOpt and the SPSA algorithm provide a better motivated choice for the placement method to
eliminate a specific fracture, see figure 15 (b), because they are based on perturbations of multiple
controls at the same time which breaks the symmetry.
(a)

39
 (b)

Figure 15: (a) Gradient at the end of the first iteration using finite difference gradient estimation. Notice that
all elements of fracture stage control variables are equal, except the first and the last and the control variable
on the right, which is the well location variable that is kept zero throughout the optimization process. (b)
Found gradient at the end of the first iteration using EnOpt gradient estimation of the optimization process of
figure 13 (a).

Finally, in a hypothetical scenario where the method is given the command to eliminate more than
one fracture stage per iteration, which is an improvement already implemented using the adjoint
algorithm in Zhang et al. (2010), the highly symmetrical nature of the finite difference estimated
gradient would immediately start to cause severe misjudgements regarding the selection of which
fracture stages to eliminate. The method presented in this thesis is programmed to eliminate an x
number of gradient elements that have the most negative or smallest values. In case it is presented
with a gradient that has many elements with the same negative or small values, it will select and
eliminate the first x elements. In other words, finite difference gradient estimation perturbs one
control variable per sample, and cannot accurately assist in the elimination of more than one
gradient element at a time.

6.3.2. Fracture stage interval placement method

Presented in figure 16 are the results of the 21 variables optimization problem, performed on the
basic gas shale reservoir model. Of these 21 variables, 20 are allocated to the placement of fracture
stages and one for the location of the horizontal well, which remains fixed throughout the
optimization process. As the theory behind the fracture stage interval placement method prescribes,
it requires a pre-selected maximum number of fracture stages. Because the best guesstimates all
show 14 fracture stages or less to be ideal for this problem, a safe value of 20 was assumed.
It is expected that as long as a sufficient number of fracture stages is selected, the final result will
not be heavily influenced. Two simulations with the EnOpt optimization algorithm were run to test
this, one with 40 fracture stages and another one with 12, both with an ensemble size of 15. Figure
16 (b), (c) and (d) prove this thought. Remember that the perturbation for both the EnOpt and the
SPSA are random Gaussian ones, therefore some small fluctuations in the results are expected.

40
If a comparison is made between using EnOpt or SPSA in combination with the fracture stage
interval placement method, one can see from figure 16 (b) and (h) that again EnOpt performs
relatively better, at half the computational cost.
Another simulation run was performed to test the flexibility of the method to find a reasonable
estimate for optimum objective function value, at a different initial fracture spacing condition. In
other words, a different initial fracture interval. Instead of the standard initial fracture interval of
one, an initial interval of three and an initial interval of 7 were tried and compared to the standard
choice in figure 16 (b), (e) and (f) respectively. The number three was chosen because it represents a
more realistic interval length if one were to select where to place fracture stages along a well bore.
In the basic gas shale model, this would mean a gap of 60 meters between subsequent fracture
stages. No clear difference in the objective function value end result was observed, nor in regularity
of the placement of fracture stages along the well bore. Furthermore, starting off at a more plausible
solution does not seem to determine how quickly the optimization scheme finds a reasonable
estimate for the optimal fracture stage positions. This can be seen in figure 17 (a) and (c). Again, this
might be contributed to the random Gaussian nature of the perturbations. The initial interval of 7
does affect the optimization process in a negative way. The curve in figure 17 (b) clearly depicts that
the optimization is struggling to find an update that improves the objective function value of the
control variable vector. Shrinking the intervals between the fracture stages requires extra fracture
stages to be placed along the well bore. Passing the threshold to do so only occurs when the samples
are sufficiently perturbed in the right direction, in this case of decreasing value. Because of the
random stochastic nature of the perturbations, a few samples do this. However, the EnOpt
approximates the gradient based on the sensitivity of the objective function J, averaged over the
ensemble, making it in this case less likely to receive an update that makes the intervals smaller.
During the 25 iterations that were performed in this experiment, the optimization process proposed
to increase the number of fractures from 6 to 7, see figure 16 (f).
For this single well problem in a homogeneous and isotropic gas shale reservoir model, the method
tested in this paragraph works computationally very efficiently with the finite difference gradient
estimation optimization algorithm. Only a few iterations are needed and the 22 samples required for
this scheme is almost equal to the number of samples used in the EnOpt or SPSA, which is 15. In
contrast to the control vector updating in the gradient-based fracture stage elimination method, the
steepest ascent method is applied here which is why a regular fracture stages lay-out is proposed
within only a few iterations, albeit with a poor objective function value, see figure 16 (i). Again, this
can be attributed to the way the control variables are perturbed and the gradient is calculated.
Please review the discussion in chapter 6.3.1. on the matter and see figure 18, which shows the
exact symmetric nature of the gradient obtained using finite difference gradient estimation and the
fracture stage interval placement method. In chapter 6.4, a more complex case with two horizontal
well is investigated using the fracture stage interval method in combination with either the EnOpt or
the finite difference gradient estimation. Results are shown in figure 21.

41
(a)

(b)

(c)

(d)

(e)

(f)

42
 (g)

(h)

(i)

Figure 16: Results of the optimization processes, using the fracture stage interval placement method, on the
basic gas shale reservoir model. Optimization specifics are stated above the fracture stage graphs.

Figure 17: Comparison between the objective function value versus iteration number of the experiment with
initial interval value of 3 on the left, initial interval value of 7 in the middle and standard initial interval value of
1 on the right.

43
Figure 18: Gradient at the end of the first iteration using finite difference gradient estimation and the fracture
stage interval placement method. Notice that all elements of fracture stage control variables are equal, except
the first and the last and the control variable on the right, which is the well location variable that is kept zero
throughout the optimization process.

6.3.3. Fracture stage selection placement method

Presented in figure 19 are the results of the 41 variables optimization problem, performed on the
basic gas shale reservoir model. Of these 41 variables, 40 are allocated to the placement of fracture
stages and one for the location of the horizontal well, which remains fixed throughout the
optimization process.
The experiments illustrated in figure 19 (a) and (b) were performed to show that finding the gradient
with more samples generally leads to a better objective function value. The EnOpt seems to have
benefitted from a higher quality gradient. The SPSA experiment with only 5 samples (figure 19 (c))
has slightly out-performed the experiment with 15 samples (figure 19 (d)) although the latter has
come up with a more regularized fracture stages placement.
Contrary to the fracture stage interval placement method, the fracture stage selection placement
method does not use all control variables to come up with the optimal lay-out for the fracture
stages. Instead, based on the value of the control variables it comes across, it selects the location of
the next control variable to place a new fracture stage. In a homogeneous and isotropic gas shale
reservoir, this intuitively means that fracture stages should be placed at a regular interval and the
neighbouring control variables should have values that are much alike. Hence the idea was coined
that perturbing the controls should be performed with some measure of correlation between the
control variables. Different experiments were performed to investigate the use of this theory. In
figure 19 (f), an exponentially weighted moving average scheme with correlation length 8 was
applied on the perturbation process itself. Basically, this smooths the random perturbation values
drawn from the Gaussian distribution and equalizes the different sample realizations. The result was
not satisfactory, as the objective function value at the end of the optimization process was lower
than the experiment without any correlation being applied, see figure 19 (b). Another experiment
was then performed where the perturbations were not correlated but the calculated gradient was,
see figure 19 (g). Finally, both the perturbations and the calculated gradient were correlated using
the same exponentially weighted moving average scheme with correlation length 8. Figure 19 (h)
shows the result of this experiment. Figure 20 is shown to compare the smoothing effect of the
exponentially weighted moving average scheme on the gradient with another experiment where the
gradient has not been smoothed, both depicted after the first iteration.

44
The combination of the finite difference gradient estimation and the fracture stage selection
placement method is an interesting alternative, see figure 19 (e). Although the iterations are
computationally exhaustive due to the amount of required samples, the algorithm is quick to find a
rather reasonable estimate of the objective function value and the placement of the fracture stages.
After only 5 iterations its optimum value was reached. Although the objective function value is
nowhere near the theoretical optimum ascertained in the best engineering guesstimates chapter,
the proposed solution seems to have a very regular character to it.
(a)

(b)

(c)

(d)

45
 (e)

(f)

(g)

(h)

Figure 19: Results of the optimization processes, using the fracture stage selection placement method, on the
basic gas shale reservoir model. Optimization specifics are stated above the fracture stage graphs.

46
 (a)

(b)

Figure 20: Comparison of the smoothing effect of the exponentially weighted moving average scheme with
correlation length 8 on the gradient in (a) and an experiment where the gradient has not been smoothed (b),
both after the first iteration using the EnOpt algorithm with 15 samples.

6.4. More complex case

In the more complex case, two horizontal wells, of 40 grid blocks in length each, are introduced
which are both placed in the y-direction of the basic gas shale reservoir model and positioned 5 grid
blocks (in the x-direction) apart. With the grid block size of 20 by 20 by 30 meters (x, y and z), this is
only 120 meters apart. Because the wells are positioned so close to each other, interference of
production and stimulation is likely to occur. In this scenario, we investigate what the optimum
placement of 6 hydraulic fracture stages per well is. In total we have 14 controls, of which 12 are
hydraulic fracture stages and two represent the fixed x-direction locations of the horizontal wells.
The fracture stage interval placement method is chosen in combination with either the EnOpt or the
finite difference gradient estimation algorithm. It is expected that the optimum placement of the
hydraulic fracture stages along the horizontal well bores will assume some form of a zigzag pattern
that is well-known in the hydraulic fracturing industry (King, 2010). By forming a zigzag pattern, the
interference and overlapping of the stimulated zones is minimized and in return, a larger part of the
reservoir is being stimulated. Recall that when stimulation zones overlap, their highest enhanced
permeability value is chosen. Overlapping zones with the same enhanced fracture permeability
retain their permeability value.

47
Figure 21 (a) shows the result of the combination of the fracture stage interval placement method
and the EnOpt optimization algorithm. Clearly, a zigzag pattern can be defined.
Due to the stochastic nature of perturbations and the finite number of samples taken, the proposed
pattern is not perfect but most certainly conveys the idea. In figure 21 (b), that displays the results of
the combination of the fracture stage interval placement method and the finite difference gradient
estimation algorithm, a symmetric pattern of hydraulic fracture stages is observed. An explanation is
given in chapter 6.3.2.
When expressed in the NPV, EnOpt yields 4.7858 million euros versus the finite difference gradient
estimation at 4.3471 million euros.

Figure 21: (a) Result of the combination of the fracture stage interval placement method and the EnOpt
optimization algorithm with 15 samples, showing a zigzag pattern. (b) Result of the combination of the fracture
stage interval placement method and the finite difference gradient estimation algorithm, showing a symmetric
pattern. For an explanation of the various colours and shapes, please refer to figure 5.

6.5. Optimization of horizontal well placement

While the focus of this thesis is on the optimal positioning of hydraulic fracture stages along a
horizontal well bore, the optimization of horizontal wells placement is in itself also very interesting
and easy to implement and is therefore briefly introduced in this paragraph. The optimization of
horizontal well placement requires only the use of optimization algorithms and does not need the
placement methods. The EnOpt algorithm was chosen to fulfil this role.
Two cases are investigated with three horizontals wells, all in the y-direction, both with fixed
positions for the hydraulic fracture stages and fixed well lengths of 40 grid blocks.
The positions are selected in accordance with the best engineering guesstimates of a single well, see
chapter 6.2. and specifically figure 12 (c). The starting position of the horizontal wells can be any x-
direction value between 0 and 22. The position values represent the grid blocks in the positive x-
direction.

48
In the first case, a fully homogeneous and isotropic gas shale reservoir model is used. The initial
starting positions of the horizontal wells are 1 grid block apart, with the first well starting at value 0.
It is assumed that the placement of wells will find an optimum where the wells are as far away from
each other as possible. In the ideal case their gas production and pressure draw-down would not be
influenced by another well. However, the applied constraint of choosing a value in between 0 and 22
will restrict the movement of the wells and allows us to predict the optimum well placement to be at
value 0, 11 and 22. Figure 22 (a) shows the optimization process, with just 5 samples taken for the
estimation of the EnOpt gradient, and it proves the prediction.
The second case of the horizontal well placement optimization is much like the first one, the only
difference is that this case has one high transmissibility and fracture porosity streak (3x as high as
the other grid cells) along the y-direction at x-direction coordinate 8. While the first case places the
wells very symmetrically and as far away from each other as possible, it is theorized that the
introduction of the high valued streak would alter this placement. More likely, the well that was
placed at x-direction value 11 will now move to value 8. Figure 22 (b) proves this. In this figure one
can see that well 2 deviates from the optimum position in case 1 (cross line) and instead moves to
the location of the high valued streak (diamond line).

Figure 22: (a) Illustration of case 1, optimization of horizontal well placement in a homogeneous gas shale
reservoir. (b) Illustration of case 2, optimization of horizontal well placement in an inhomogeneous reservoir
with a high transmissibility and fracture porosity streak (3x as high as the other grid cells) along the y-direction
at x-direction coordinate 8.

49
7. Conclusions

By comparing the best engineering guesstimates in a homogeneous gas shale reservoir, the size of
the Stimulated Reservoir Volume (SRV) is of large influence on the optimum density of the hydraulic
fracture stages.
It was confirmed that a higher quality of the approximated gradient in the EnOpt and SPSA increases
the accuracy of placing the fracture stages in their ideal positions and hence see an increase in the
resulting objective function value. A higher quality gradient is obtained via a larger ensemble size
which means longer computational times. A trade-off must be made to ensure that a high quality
gradient is achieved whilst maintaining computational efficiency. A disadvantage of using the
gradient approximation strategies, as compared to finding a true gradient with the ad joint
formulation, are the small variations in the objective function value end results that are observed,
due to the nature of the Gaussian random perturbation effect on the gradient.
Running the experiments on the basic gas shale model also confirmed that the gradient-based
fracture stage elimination method is continuously out-performed by a combination of the
optimization algorithms with either of the other two placement methods. This is due to its inability
to reintroduce fracture stages that were previously eliminated.
The fracture stage interval placement method yields similar results for a pre-selected number of
fracture stages that is very high and a number that is just sufficient to find a possible optimum with.
The initial positioning of the available fracture stages does influence the efficiency of the
optimization process. The optimization process is much more proficient in expanding the interval
length than shrinking it. A small deviation from the minimum initial fracture spacing is negligible to
the optimization process.
Applying smoothing in the form of an exponentially weighted moving average strategy on the
perturbations and/or the calculated gradient, used in the fracture stage selection placement
method, does not place the fracture stages at more regular intervals. Nor does it improve the
objective function value.
Based on the computational efficiency, the proposed regular pattern of hydraulic fracture stages and
the objective function value at the end of the optimization process, the EnOpt in combination with
the fracture stage interval placement method was chosen to tackle the more complex case.
In the more complex case, the interference of two horizontal wells, placed relatively close to each
other, proved that a zigzag pattern of fracture stages is most beneficial and can be achieved by
simultaneous stochastic perturbation methods such as the EnOpt. The finite difference gradient
estimation can, due to the way it perturbs the control vector, only come up with a symmetric
pattern of fracture stages that yields a lower objective function value.
The optimization of hydraulic fracture stage placement can be slightly modified to optimize the
placement of horizontal wells. For this to work, one only requires a gradient-based optimization
algorithm and no placement method.

50
In a homogeneous reservoir, the optimum is found when the horizontal wells are positioned as far
away from each other as possible, thereby minimizing their interference. When a sufficiently high
transmissibility and fracture porosity streak is introduced in a non-optimal position, one of the
horizontal wells will move there.
The results of the numerical gradient-based optimization of hydraulic fracture stage and horizontal
well placement confirm the hypothesis.

51
8. Summary

The placement of both horizontal wells and hydraulic fracture stages in gas shale reservoirs is an
interesting problem with many aspects to it. Recent papers have demonstrated that modelling these
reservoirs is most accurately done by applying the dual permeability approach, in combination with
local grid refinement near the hydraulic fracture stage jobs and the option to account for the non-
Darcy flow effect near the created fractures and the well bore (Cipolla, 2009; Cipolla, 2010; Rubin,
2009). In the light of the second objective of this thesis, the optimization of the placement of
hydraulic fracture stages, simplifications can be made to the simulation model to study and compare
the efficiency and effectiveness of optimization routines. We assume that the results of these
comparisons are not dependent on simulation aspects at a level of detail that would justify more
expensive simulation models, such as those with local grid refinement. However, the created dual
permeability reservoir model and its associated reservoir properties are based on a comprehensive
literature study and are likely to capture the typical production behavior of a gas shale reservoir.
The gradient-based optimization algorithms studied in this work, the Ensemble based Optimization
(EnOpt), SPSA and finite difference gradient estimation are put to use to optimize a discrete
variables – hydraulic fracture stage placement – problem. The objective function J, being the NPV,
used in this work consists of a combination of production elements and capital- and operating
expenditures. Three different variable parameterizing placement methods are introduced to serve as
a translation tool between the continuous variables of the optimization problem on the one hand,
and the discrete position values of the reservoir model on the other. The main reason for the
formulation and the theoretical study of the three placement methods is the inability to directly
apply existing gradient-based optimization schemes to the problem proposed in this work. The
absence of injector wells and their differentiable water injection rates, as well as the usage of
horizontal production wells and the unavailability of the ad joint formulation prohibit the usage of
the scheme proposed by Wang et al. (2007) and Zhang et al. (2010).
The gradient-based fracture stage elimination method shares the most similarities with the existing
gradient-based optimization schemes. The nature of the optimization process will only allow for the
removal of one fracture stage per iteration, making it computationally very exhaustive. Furthermore,
fracture stages that were removed in previous iterations cannot be reintroduced, implying that a
high quality gradient is mandatory. In this method, the gradient is manipulated which manifests
itself in the form of certain gradient elements being put to zero, effectively eliminating them.
The fracture stage interval placement method does not manipulate the gradient. It is also more
robust because it allows for both the removal and reintroduction of the fracture stages during the
optimization process, therefore the accuracy of the gradient is somewhat less important and the
number of samples taken to calculate it can be lower. It does however suffer from an extra
constraint in the form of a pre-selected number of hydraulic fracture stages to be placed, a
shortcoming which can easily be dealt with by choosing a sufficiently high number.

52
The fracture stage selection placement method steers the selection of the fracture stage locations
based on the values of the control vector. In its pure form, this method does not manipulate the
gradient. However, it can be used in conjunction with a smoothing scheme in the form of a
exponentially weighted moving average strategy, applied to either the perturbations and or the
calculated gradient. Like the second placement method, it allows for both the removal and
reintroduction of the fracture stages during the optimization process, therefore the accuracy of the
gradient is somewhat less important and the number of samples taken to calculate it can be lower.
The ensemble Gaussian random perturbations of the control variables that steer the gradient
estimation process of both the EnOpt and SPSA, replace the need to individually perturb the control
variables in the finite difference gradient estimation and save computational time by reducing the
number of reservoir simulations. Due to the way the SPSA operates, it requires twice as many
reservoir simulations, for the same number of samples, per iteration as the EnOpt.

53
9. Recommendations

To make the simulation of gas shale reservoirs even more realistic, future work would benefit from
including local grid refinement (LGR), non-Darcy flow in the fractures and around the well bore and
geo-mechanical coupling to accurately model hydraulically induced fractures. This last item consists
of fracture job specific fracture half-length estimation and overall dynamic SRV modelling using the
appropriate software and input of real field data on fracture conductivity versus pressure tables.
These fracture simulations in turn provide input data for the reservoir simulator, giving fracture
dimensions, conductivity as well as productivity dependent saturation changes in the fracture face.
For the numerical optimization part of this work, future work should focus on the parameterizing of
the control variables and the use of placement methods to convert the continuous to discrete
variables and vice versa. A comparison to a the adjoint gradient-based method or a gradient-free
method such as PSO or genetic algorithm would be interesting, both in terms of computational
efficiency and objective function value.

54
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Appendices

Appendix 1: Line Search technique

In optimization, the line search technique is one of the basic iterative approaches used in finding a
maximum control vector u of an objective function J(u).
When a gradient estimator has come up with a descent search direction along which the objective
function J(u) could be improved, a step size needs to be computed to determine how far the control
vector should move in that direction. The update for the control vector can be computed by various
methods, of which we have selected the steepest ascent in this work.
The step size can be determined either exactly or inexactly. We have implemented bound criteria for
the step size based on the distance to minimum and maximum value of the controls, the maximum
allowable change in objective function value and the relative change in the controls between
successive iterations. The minimum of these three bound criteria is accepted as the step size. The
exact method for determination of the step size is usually computationally expensive thus we have
used a common inexact method based on the Armijo rule for the line search. The Armijo rule is one
of several inexact line search methods, which guarantees a sufficient degree of accuracy to ensure
convergence. For a detailed description of the line search technique and the Armijo condition refer
to Nocedal and Wright (2006).

Appendix 2: Perturbation overview per optimization algorithm

(a) (b)

(c)

Figure 23: (a) Example of a finite difference perturbation sample. All controls are varied individually. For this
particular problem 40 samples, plus one control sample, are needed compute the gradient. (b) Example of a
SPSA perturbation sample. All controls are varied simultaneously and obtain a Bernoulli value of +/- 1. For each
sample a counterpart is constructed that has the exact opposite values. (c) Example of an EnOpt perturbation
sample. All controls are varied simultaneously based on a Gaussian distribution with mean 0.

59
Appendix 3: Input data for the gas shale reservoir model

Figure 24: Correlation between Total Organic Carbon and methane sorption capacity of moisture equilibrated
shales. After Ross and Bustin (2009).

Table 3 contains all the variables that were used to construct the relative permeability and capillary
pressure curves. The values are taken from experimental work on very tight sandstones by Maas
(2011). The relative permeability curves were constructed by applying the Corey functions for a
gas/water system
Cg
 Sw max  Sw  Sg min 
Cw
 Sw  Swcr 
krw  krw (Sg min )   and krg  krg (Sw min )   .
 Sw max  Swcr  Sg min   Sw max  Swi  Sg min 
The Van Genuchten relation was used to construct the capillary pressure curves

1/ 1
 S S  
Pc  Pentry   w wcr
 
  Sw max  Swcr 
1 .

 

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Property Units (Metric) Value
Minimum water saturation [-] 0.1
Critical water saturation [-] 0.1
Minimum gas saturation [-] 0.3
Relative water permeability at minimum gas saturation [-] 0.3
Relative gas permeability at minimum water saturation [-] 0.7
Maximum water saturation [-] 1
Initial water saturation [-] 0.1
Corey exponent for water [-] 5
Corey exponent for gas [-] 2
Entry Pressure Matrix [Pa] 1∙106
Entry Pressure Fracture [Pa] 0.5∙106
Sorting factor (λ) Matrix [-] 0.5
Sorting factor (λ) Fracture [-] 0.7

Table 3: Variables used in the relative permeability and capillary pressure curves construction. Based on
experimental values on very tight sandstones by Maas (2011) and Jos Maas (pers. comm.).

Appendix 4: Rock compaction table

Below are the rock compaction table entries, as used for fracture subsystem of the grid.

Pressure [bar] Pore volume multiplier [-] Transmissibility multiplier [-]

0 1 0
20 1 0.15
40 1 0.3
60 1 0.4
80 1 0.5
100 1 0.6
120 1 0.7
140 1 0.8
160 1 0.9
180 1 1
200 1 1
220 1 1

Appendix 5: Sensitivity analysis

Presented in this appendix are all the plots that serve as input for the Tornado sensitivity analysis
plot that was constructed in figure 6 in chapter 4.5. The high and low values used to measure the
sensitivity are chosen in accordance with what could reasonably be observed in the subsurface or on
the energy market in a politically and economically stable country.

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62
Figure 25: Sensitivity analysis plots.

63