Kemp: Why The Shale Revolution Is Not About To End



Well Decline Curves

From a financial standpoint, rapid decline rates are not a problem. What matters is the EUR. But the relationship between IP, decline rate and EUR is fairly loose and notoriously difficult to pin down.

There is some evidence to suggest oil and gas wells that have high initial flow rates tend to decline fastest but yield the most oil and gas over their lifetime.

"In general, wells of small initial yearly production decline more slowly than those of large," Beal said of conventional fields. But the more barrels per day a well produced in its first year of production, the more it was likely to produce during its lifetime.

Still, it remains notoriously tricky to predict ultimate production accurately from initial flow rates because there is so much variability and the data is not readily available.

(There is a clear data availability bias in much of the published research. Most analysis uses commonly available data on the total number of wells and average daily production for large aggregates, such as whole states, and then tries to draw conclusions about the sustainability of shale production, even though such numbers are not really relevant.)

For individual wells and plays, forecasters use "decline curves" based on the average of past experience to estimate how much oil and gas a well might eventually produce.

Even so, the forecasts can be out by a wide margin. "Estimates of future production based on the first few months of initial production can differ significantly from later estimates for the same well," according to the U.S. Energy Information Administration (EIA).


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