This article, written by JPT Technology Editor Chris Carpenter, contains highlights of paper IPTC 17739, “A Comparison of North American and International Risks in Unconventional Resource Plays,” by D. Nathan Meehan, SPE, Baker Hughes, prepared for the 2014 International Petroleum Technology Conference, Kuala Lumpur, 10–12 December. The paper has not been peer reviewed.

Unconventional resources include coalbed methane, tight gas, and source-rock-based (often shale-based) reservoirs. In this paper, a consistent method for gathering data is proposed to minimize excess costs and maximize net present value. Approaches to optimize development are applied to shale plays with synthetic properties established on observed heterogeneities but with reservoir characteristics for some international shale prospects.


The commercialization and widespread development of shale resources in North America is dramatic and substantial, reversing longstanding declines in oil production and reserves and yielding sharp increases in natural-gas production. However, massive risks are associated with commercializing international resources; approximately three million new wells must be drilled to translate the level of technically recoverable resources (TRR) into producing reserves. If every active onshore drilling rig in the world were converted to drilling shale oil and gas wells, it would take nearly 40 years to develop the TRR as identified by the US Energy Information Administration.

Risks Associated With Shale Plays

Shales, for the purposes of this paper, include a substantial subset of unconventional resources, including extremely tight reservoirs that must be developed with long horizontal wells and multiple hydraulic fractures. For the purposes of the paper, tight gas includes gas wells that must be massively hydraulically fractured to be commercially productive.

For the purposes of evaluating shale plays and for use in the term “derisking,” a definition of “risk” more akin to the financial definition (with respect to the variability of return) is used. Multiple studies demonstrate the high variability of return in virtually all shale plays with a sufficient number of wells drilled.

To address the risks of shale-gas and shale-oil exploitation, three primary areas of concern must be addressed: shale heterogeneities at all levels (this aspect is discussed in detail in the complete paper); drilling, completion, and evaluation processes; and risk taking and risk mitigation.

Evaluation and Exploitation Procedures.

The parameters associated with assessing the quality of a conventional reservoir are, generally speaking, relatively straightforward to measure. Shale resources are often laterally continuous with minute variations in thickness. However, drainage areas are very difficult to estimate for shales, and they are ultimately the major determinant of well spacing, which, in turn, drives the total number of wells drilled. It is often unclear what constitutes net pay, and the cutoff values evaluated in shale reservoirs do not often translate into values that, in turn, are obvious drivers of material-balance and fluid-flow equations.

Seismic evaluation estimates properties that are important to shale performance. Correlation of computed properties to total organic carbon or even to well performance is promising, especially when integrated with hydraulic-fracture design and other tools to optimize reservoir evaluation.

Shale-well-performance heterogeneity is very large, leading to speculation that it is essentially a stochastic process within a geologically similar area. Well-performance distributions often have a wide coefficient of variance and an apparent correlation range that is not much greater than well spacing, leading some to conclude that petrophysical measurements have little value in development applications.

According to manufacturing theory, the more identical items produced, the lower the unit cost. Similarly, the greater the number of custom-built products in a given factory, the slower the cost reduction. As applied to a “drilling factory,” there may be a tendency to eliminate measurements and evaluations in hopes of drilling a large number of wells and accepting the statistical variations in performance. However, it is better to apply the correct measurements and optimize locally.

Risk Taking and Risk Mitigation. Risk Examples. In a recent SPE-sponsored Applied Technology Workshop (ATW) in Chengdu, China, participants rated numerous potential risks to the successful widespread, cost-effective, safe, and environmentally acceptable development of shale resources in China. The following is a list of the potential risks identified by participants. These were meant to be applied to China; however, the issues are relevant in many countries outside North America.

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