Development projects in unconventional reservoirs can require capital expenditures of several hundred million to several billion dollars. Therefore it is essential that the assessment of these projects be as objective and unbiased as possible – that begins with the selection of analog production type curves.
Economic analysis of any development project is highly dependent on the production schedule incorporated into the cash flow model. For unconventional resource plays, project production schedules are often based on the aggregation of production type curves for an average, or representative, well within the defined project area. In general, we rely on the most representative analog wells available to define the production type curve. In established projects, these analogs typically come from the most recent wells within the project area; for new plays, the “best” analogs may be located in a different basin or play. But regardless of the data used to build type curves, the question emerges, “How do I know if my analog production type curve is representative?”
This paper presents methods for building aggregation models using Monte Carlo simulation to:
Create confidence curves to evaluate the confidence of meeting pilot objectives as a function of the type curve uncertainty and the number of wells in the pilot;
Generate Sequential Accumulation plots which project cumulative initial production rates for pilot projects onto a forecast envelope consisting of a cumulative P10-P90 envelope. By plotting the cumulative initial rates as pilot wells are brought online, the evaluator can assess whether the modeled type curve is appropriate or if it is conservative or optimistic.
Included in the paper are several examples comparing pilots that validate the selected type curve with pilots showing potential bias in the analog type curve. An important observation from these curves is the impact of sample size (e.g. the number of pilot wells) on the predicted confidence of meeting pilot objectives and the assessed validity of the analog type curve.