Factors influencing shale gas production forecasting: Empirical studies of Barnett, Fayetteville, Haynesville, and Marcellus Shale plays

Ikonnikova, Svetlana; Browning, John; Gülen, Gürcan; Smye, Katie; Tinker, Scott W.

doi:10.5547/2160-5890.4.1.siko

Cited by 20 publications

(16 citation statements)

References 8 publications

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“…This dataset of 40,571 wells covers the entire distribution of well performance across the six plays that have accounted for 93% of U.S. shale gas production over the period considered. In this respect, this analysis also extends the existing literature on U.S. shale gas plays economics (Gülen et al, 2013;Ikonnikova et al, 2015aIkonnikova et al, , 2015b.…”

Section: Introductionsupporting

confidence: 56%

Can the US shale revolution be duplicated in continental Europe? An economic analysis of European shale gas resources

Saussay

2018

Energy Economics

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Over the past decade, the rapid increase in shale gas and shale oil production in the United States has profoundly changed energy markets in North America, and has led to a significant decrease in American natural gas prices. The possible existence of large shale deposits in continental Europe, mainly in France, Denmark, the Netherlands and Germany, has fostered speculation on whether the U.S. shale revolution could be duplicated in Europe. However, a number of uncertainties, notably geological, technological, regulatory, and relating to public acceptance make this possibility unclear. We present a techno-economic model of shale gas production amenable to direct estimation on historical production data to analyze the main determinants of the profitability of shale wells and plays. We contribute an in-depth analysis of an extensive production dataset covering 40,000 wells and accounting for nearly 90% of shale gas production in the six main plays of the continental United States from 2004 to 2014. We combine this analysis with a discussion of the main differences between the American and European contexts to calibrate our model and conduct Monte-Carlo simulations. This enables us to estimate the distribution of breakeven prices for shale gas extraction in continental Europe. We find a median gross breakeven price before taxes and royalties of $10.1 per MMBtu. This would make extraction unprofitable in Europe in the current natural gas price environment, with b47% of the well distribution reaching breakeven at the mean 2011-2016 price. Sensitivity analysis reveals that the breakeven price is most sensitive to initial production rate, drilling and completion costs, and decline rates. We also find that the economic outlook would be slightly better if the productivity of European shale gas plays was comparable to that of U.S. plays of similar depth, but not significantly so. We conclude that under assumptions calibrated on existing shale gas production data, it is unlikely that the U.S. shale revolution can be duplicated in continental Europe.

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Section: Introductionsupporting

confidence: 56%

Can the US shale revolution be duplicated in continental Europe? An economic analysis of European shale gas resources

Saussay

2018

Energy Economics

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“…Conversely, considering more pessimistic assumptions could lead to a more moderate scenario in which US shale gas production peaks around 2030 (EIA, 2014). Even more dramatic scenarios in which production peaks between 2015 and 2020 have been generated and reported (Ikonnikova et al, 2015;Richter, 2015). The large uncertainty reflected in these extreme scenarios is a great burden to energy policy makers, investors, and infrastructure planners.…”

Section: Introductionmentioning

confidence: 98%

Boom or bust? Mapping out the known unknowns of global shale gas production potential

2015

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“…This high productivity, though, can only partially overcome the high capital cost. Kaiser and Yu (2011) assumed an economic limit of 0.09 MMcf/D for Haynesville wells in Louisiana, but also tested for sensitivity given a previous assumption of 0.041 MMcf/D by Kaiser (2010). They concluded that the EUR was insensitive to reasonable changes in economic limit (a 10% change in the EUR in response to a 10-fold change in economic limit).…”

Section: Well Economicsmentioning

confidence: 96%

Production Scenarios for the Haynesville Shale Play

Gülen

Ikonnikova

Browning

et al. 2015

SPE Economics &Amp; Management

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The Haynesville shale gas play has significant potential, with an estimated original gas in place larger than that of the Barnett with roughly 63% of the Barnett's acreage. However, the drilling and completion costs of Haynesville are approximately three times as much compared with the Barnett. We present a production scenario for the Haynesville on the basis of wells existing by the end of 2012 and wells to be drilled over the next 3 decades and quantify uncertainties around it. The scenario is underpinned by geologic, engineering, and well-economics analyses, which reveal the important differences between the Haynesville and two other plays we analyzed previously, Barnett and Fayetteville. The production profiles are developed by use of data from 2,131 wells drilled between 2008 and 2011 in both Louisiana and Texas, and a transient-linear-flow model. We run sensitivity analyses on reasonable ranges for natural-gas price, remaining-developable acreage, improvements in technology and well-cost performance, and economic limit for shutting in a well. Our analysis indicates a cumulative production of roughly 46 Tcf in the base case, subject to many uncertainties. IntroductionThe Haynesville play is the third shale formation analyzed by our interdisciplinary team of geologists, petroleum engineers, and energy economists. Browning et al. (2013) and Gülen et al. (2014) reported the production outlooks for the Barnett and Fayetteville plays, respectively. As those studies indicated, shale plays are heterogeneous in geology within and across plays. The differences in geology can influence drilling and completions costs. The geography, topography, and proximity to natural-gas infrastructure and consumers also affect well economics and the pace of drilling activity. Differences in states' tax policies, local environmental policies, and permitting processes; existence of basic infrastructure, such as roads; and acceptance by local communities also play a role in modifying well costs and wellhead-netback pricing for revenue calculations.The geology of the Haynesville shale leads to wells with much-higher productivity than those in the Barnett and Fayetteville, but at a much-higher cost of drilling and completion because of the depth and high pressure of the formation. We divided the play into six productivity tiers. Because of the higher cost structure, drilling slowed down significantly in the play across all six tiers, from 970 completions in 2011 to 396 in 2012 when the natural-gas price averaged approximately USD 2.70/million Btu, the lowest price in real terms since the late 1990s. The breakeven price of an average well even in the best tier (Tier 1) is slightly more than the average Henry Hub gas prices of 2011 and 2012. As a result, many top-tier locations have been drilled only to the extent necessary to meet lease obligations. With the price recovering from that low level, the activity in 2013 and 2014 has been stabilized but still low (roughly 250 completions in 2013 and 160 for the first three quarters of 2013), b...

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Factors influencing shale gas production forecasting: Empirical studies of Barnett, Fayetteville, Haynesville, and Marcellus Shale plays

Cited by 20 publications

References 8 publications

Can the US shale revolution be duplicated in continental Europe? An economic analysis of European shale gas resources

Can the US shale revolution be duplicated in continental Europe? An economic analysis of European shale gas resources

Boom or bust? Mapping out the known unknowns of global shale gas production potential

Production Scenarios for the Haynesville Shale Play

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