ABSTRACT

The business of unconventional resource extraction is inherently tied to short time scales, which are dictated by rapid decline curves in oil and gas bearing shale formations. In particular in the current operating framework of hydraulic fracturing, capital extensive decisions associated with well placement and construction, completion and treatment have to be made on a frequent basis to sustain ongoing cash flow obligations, oftentimes at low margin rates, and historically not always at profit. Non-optimal decisions, when compounded over many of those short investment cycles, can expose a business to significant risk of poor, even problematic, economic performance.

Unfortunately, making optimal decisions on unconventional reservoirs remains challenging. The combination of uncertainties in formation properties, numerous options for completion and treatment designs, and oil price volatility, frames a cross-disciplinary optimization problem with a large number of independent variables that existing tools are not equipped to solve.

This paper presents a methodology that goes beyond accepting the fate of inherent uncertainty, massive parameter space and market volatility; instead, it embraces uncertainty and leverages ambiguity to extract value for everyday decisions. At the core of this methodology is the concept of holistically modeling unconventional development. The approach integrates subsurface characterization, well placement and spacing, completion and treatment designs, production forecasts and economic considerations. We leverage scientific computing and modeling technology to cover relevant parameter space and utilize approximations and response surfaces to estimate metrics of statistical nature.

The application of uncertainty, sensitivity and optimization techniques allows us to move past isolated technical and economic decisions, e.g., from estimating propped fracture dimensions at a single stage to quantifying the probability of success for entire pad or field developments. Adopting this methodology furthermore leads to a shift in mind-set, in which assets are no longer considered as individual investments, but as constituents of a managed portfolio. This methodology enables businesses to transform their modus operandi by predicting the probability of persistent profit

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