A Practical Guide to Unconventional

Petroleum Evaluation
Boyd Russell

Petroleum Club
November 28, 2012

Reservoir Evaluation Production Optimization Special Interest Group

Outline

Issues with Unconventional Plays

Declines

How much production data is needed?

Which decline method to use?
Auto-forecastingwhy its critical.

Creating Type Wells

Type well mechanics & sequence

bias
Percentile type wells
Grouping Issues

Recap

Issues with Unconventional

Plays

Issues with Unconventional Plays

What are Shale Plays?

Production from tight shale which requires hydraulic
fractures to be productive.

Shale plays are game changers.

New technologies.
Modify existing technologies.
Move from exploration to manufacturing.

Declines
How Much Production Data is Needed?

How much production data is needed?

Back casting study on 58

ideal Barnett Shale gas wells

6 & 7 years of history for all

wells

Individual well forecasts can

be unreliable, even with 5
years of data.

Mean EUR can be very

accurate with 2 to 3 years of
data.
The EUR of individual well
forecasts is pessimistic in
the first years.

100%
Mean Well

Percent Variation
0%

Individual Wells

-100%
0

Time, Years
Unconventional Road Show

Declines
Which Decline Method to Use?

Choice of decline equation

Traditional forecasting methods use Arps equations.
For shale plays, Arps uses a super hyperbolic period with
a smooth transition into an exponential or shallow
hyperbolic tail.
Arps offers no information as to when this transition
occurs.
The transition to exponential may be abrupt. Would
require both the limiting decline and time when it
commences.
Choice of Transition Methods
Limiting decline
Elapsed time from start of history
Elapsed time from start of prediction (5 Year Equation)

5 Year Equation How It Works

Choice of decline equation

Shale production is characterized by a Transient Flow
Period followed by Boundary Dominated Flow (BDF).

Stretched Exponentials were created to replace the

combined use of two Arps equations.

Unfortunately, they are no better than Arps in predicting

the start of BDF.

These Stretched Exponentials have their problems:

Difficult to solve.
Difficult to match both early and late time simultaneously.
Require longer history than Arps.
Difficult to manipulate.

Comparison of Decline Methods

Unconventional Road Show

Declines
Auto Forecasting Why Its Critical

Auto Forecasting Why Its Critical

Resource plays are statistical

Need to forecast 1000s of wells accurately.

Manual forecasts are not practical

Too time consuming and subjective.

10,000 Barnett Shale gas wells were forecast for this

study.
Would take an evaluator 5 months to forecast manually

Manual Forecasting is not easy for unconventional plays

Hard to get a unique super-hyperbolic fit.

Achieving Accurate Auto-Forecasts

Multiple decline trends embedded in
history

Most recent trend is

inclining

Cannot forecast from start to end of production with one segment

Expect multiple internal trends and be able to identify them all

Rate all identified trends based on proximity to today, length of

trend and error

Cannot just use last x number of years for your forecast.

Achieving Accurate Auto-Forecasts

Multiple bad data

points

Forecasts need to automatically reject bad data points

Not based on fixed %, but well specific based on data volatility

Need automatic fail-safes

Forecast inclining
Recent rates differ from trend
Every other abnormal event
Unconventional Road Show

Creating Type Wells

Type Well Mechanics & Sequence Bias

Type Wells Why Are They

Important?
Traditional petroleum exploration and development relies
on what the author describes as nearology

With unconventional wells, many factors other than

geology can have as much or more of an impact on EUR

Thus analog or type wells forecasts are used extensively,

especially during a wells early production period

The main uses for type wells

Predicting reserves to obtain financing
Valuating project to make investment decisions
Determining future production and cash flow

Type Wells How Are They Built?

The Industry Standard Practice (ISP) of creating type

wells is to average the production rate from contributing
wells

Rarely includes individual well forecasts and relies solely

on production

This ISP is defective

Using combined historical production with reliable

production forecasts remedies the defect

Type Wells Flawed Methodology?

Forecasts are
implicit to the
ISP method

Implicit
forecasts are
usually
inaccurate

Type well
quality is
compromised

Better forecasts
yield better
type wells

Type Wells Sequence Bias

Wells without production (gap wells) are not filled with

representative rates

Profit Optimization
Best wells drilled first
Implicit forecasts for the newer wells created from older,
better wells
Type wells are optimistic

Technical Play
Wells improve as technology develops
Implicit forecasts for the newer wells created from older,
poorer wells
Type wells are pessimistic

Unconventional Road Show

Sequence Bias In The Hugoton Field

The Winter Field

26 Depleted Cummings Wells Drilled From 1988 to 1993
Data to Dec 1994

200

History 70%
cutoff
History 50%
cutoff

150

100

Oil Rate, bbl/d

50

0
0

50

100

150

Cumulative Oil, mbbl

200

250

Observed trends using only history are

exponential type well inaccurate

Observed trends from history are

hyperbolic type well inaccurate

Accurate type well using history and

prediction

Accurate type well using history and

prediction

Type Wells
Percentile Type Wells

Percentile Type Wells

Evaluators need EUR percentile type wells (P10 - P50 P90)

Two methods are used to build percentile type wells

1. Time Slice

2.

Sort rate for each month

For each month, select the target percentile rate
Determine EUR based on constructed well
Requires strong correlation between rate and EUR (rarely the
case)
Designed for history only, but prediction required (sequence
bias)

Selected Wells
. Select wells with EUR similar to the desired percentile ranking
. Build a type well using the selected wells

Unconventional Road Show

P75 Type Well For The Hugoton Field

Selected Well Method

matches EUR from
probability
distribution
Rate truncated to
economic limit causes
slight drop in EUR

Time slice Method

No visible trend with
only history
Predicts only 50% of
EUR when created
with history and
prediction

Unconventional Road Show

P75 Type Well For The Hugoton Field

P75
Time Slice uses of wells and full probability range

P75 Type Well For The Hugoton Field

Black line 45o

The exact answer
desired = actual

Red Dots
EUR distribution for
Hugoton wells

Blue Dots
Time slice EUR
Deviates significantly
from desired EUR
Not reliable, even
when prediction is
used
The Time Slice method will not reliably return the desired EUR

Type Wells
Grouping Issues

Use of Cross-plots to Create Groups

Statistically valid groups
of wells will exhibit a
lognormal distribution.
There is rarely a strong
correlation between IP
and EUR.
Grouping wells or
creating type wells
based on IP or rate can
lead to erroneous
answers.
Time slice type wells are
examples of the rate
based method.

Dealing With Bias

Barnett Vintage Bias
In order to maximize profit,
the best wells are drilled
first (profit bias).
After 2006, the EUR
continually increases
(technical bias).
Barnett Operator Bias
Despite overall
improvement in field
recovery, Company 1
shows little improvement.
Company 4 exceeds
industry average.

Recap
Resource plays are statistical.
Resource plays are game changers that require new technologies.
Decline Curve Analysis requires a minimum two to five years of
historical data to be reliable.
Individual well forecasts are not reliable when based on early
production data.
Stretched exponentials, were developed to replace Arps and
address transient flow issues.
Stretched exponential characteristics:
Complex and difficult to solve.
Data manipulation is convoluted.
Do not handle multiple flow regimes.
Not better at forecasting than using Arps with a five year or other
suitable transition.

Recap
Easy and accurate auto-forecasting is required to perform large
resource studies.
Auto forecasting algorithms must handle multiple flow regimes,
bad data, operational issues and any other eventuality and select
the most appropriate segment for the forecast.
Auto fit algorithm must converge and provide the best fit.
Building analogs requires statistically valid groups and proper
type curves.
Always combine history with an accurate forecast when creating
type curves.
When creating percentile type wells, the selected well approach
should be used and the time slice method should be avoided.