Abstract

The principles of statistical analysis are well-established, but the development and practical application of scalable stochastic shale gas prospect analysis has remained elusive. Development of this integrated software package stemmed from a desire to quantify risk and uncertainty and create a universal program to easily do so for future prospects. An Excel model with Crystal Ball overlay was used for this design. This analysis is both easily implemented, and operates with the seamless addition of scalable Monte Carlo modeling.

Commercial production is a primary uncertainty in unconventional plays. Deterministic solutions do not reflect the uncertainty associated with input assumptions. This discussion presents a stochastic assessment program to evaluate the full range of commercial realization potential. The distinctive aspect is the use of stochastic simulation to calculate the risks of failure and the uncertainty of success for any or all project stages on the basis of subsurface and surface activity performance, cost and duration uncertainties. Land divestitures or acquisitions, monetization, seismic, etc may be modeled.

The results present economic, production, reserves and other performance indicators consistent with commercial software applications, with the additional insight of quantified statistical success uncertainty and failure risk, yielding probabilistic results with associated degrees of confidence. Further work is required to adapt this method for oil reservoirs, and to model tax structures outside of the US. Project-level application is illustrated using a case study from a US shale gas resource play.

This original analysis enables real-world, universal, repeatable application of well-established but theoretical stochastic prospect analysis. Practical application is now possible in-house, and is therefore user-friendly and customizable. Both inputs and outputs will be familiar to any engineer who uses commercial economic analysis software. Most of all, the ability to test the uncertainty of any input or output for any or all project stages grants unparalleled flexibility.

Introduction

The emergence of unconventional resource plays as a business model for sustainable development has necessitated a new generation of technical expertise in all aspects of the industry. The lion's share of attention is on shale gas plays, and for good reason. Seemingly a new prospect gets covered in industry news every month. Worldwide, likely recoverable shale gas reserves exceed 250 Tcf (trillion cubic feet) by some estimates, with over 10 times that speculated to be in place.1 With the depletion of many conventional reserves in North America, most shale gas prospects have been sought and discovered on the continent, but undoubtedly the rest of the world will discover even more plays. Compound this with demand outstripping supply, a technical knowledge generation gap, and the rise of natural gas autos, and there are the makings for a highly competitive race to master the unconventional shale gas play.

The need for rapid and accurate risk and economic analysis becomes paramount. Shale gas plays are typified by large yet uncertain areal extents, complex geological, petrophysical and geomechanical factors, and intense capital requirements for drilling, completing and producing. Lacking the conventional source-seal mechanism, there may be large room for error in estimating commercial viability of a prospect. No longer is it prudent to develop a single-point determination of a prospect's viability, nor does it do justice to the inherent uncertainty. Companies must be able to analyze risk in a way that yields meaningful insights. Doing so will identify key liabilities in the project and compel the company to determine if and how these liabilities may be mitigated to an acceptable degree. As the prize for shale gas grows, and global competition with it, flexible, quick and reliable risk quantification is a powerful asset.

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