Is energy independence a fantasy?
Can America's vast shale oil and gas reserves – combined with fracking and drilling technlogies – drive the U.S. to complete energy independence? It looks doubtful, according to OilPrice.com and a report from Credit Suisse.
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The first key to this prospective boom is the initial production (IP) rates for the country's major shale oil fields -- the amount produced at each well over the first 30 days. (The industry shows this number in print as the “IP30” rate.)Skip to next paragraph
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These numbers are often the most important, since the greatest output comes in the first few months before declining rapidly. CS estimates IP30 rates for each of the major shale plays using production numbers at the end of the fourth quarter of 2011.
Some of these assumptions are set far above what actual production numbers are today. For example, actual output in the Utica shale and Mississipian formation was close to nil—so almost no data on which to guesstimate the future. But CS expects wells to eventually reach around 600 and 400 boepd, respectively, as the plays mature.
Other young plays that lack any production data like the Brown Dense limestone and the Woodford shale are projected to top 300 boepd based on the limited data of those regions.??The biggest producers - the Granite Wash and Eagle Ford shale - are already close to their CS assumptions. (RELATED: What Does the Future Hold for Natural Gas Prices?)
On the whole, CS estimates average a 21%-25% bump over actual output numbers from last year. Only the Granite Wash and Cana Woodford oil plays are projected above the CS exploration and production team's numbers.
The report backs up its optimistic IP30 rates with strong early numbers in some of the developing unconventional plays. Over three years, IP30 rates in the well-developed Barnett formation more than doubled.
But in the Bakken and Marcellus shale plays, IP rates tripled in 13 months and nine months, respectively. The Eagle Ford is the only exception, and those numbers are skewed somewhat by an early focus on natural gas over liquids.
A large part of rising IP rates is the assumption that oil and gas companies will eventually learn the nuances of each region. But CS also notes the increased use of pad drilling—where four wells can be drilled from one, two-acre pad—should keep more oil rigs online for longer during the first 30 days, as they don’t need to be moved around as much from well to well.
Pad drilling will also play a role in lowering the spacing between unconventional oil wells.??CS projects the U.S. will need to increase its total oil wells by 27% in order to prevent a decline within the next four years. In order to meet the report's production numbers, the country would have to increase the number of new wells being drilled each year by 39% through 2022.
These estimates are all a bit voodoo—they depend on tight spacing and a lot higher flow rates than now. However, CS says recent experiments in downspacing in the Eagle Ford shale play should help boost production.
The big question when you downsize your wells is—are you just cannibalizing existing production from existing wells or are you able to recover more oil overall (the Recovery Factor) by draining parts of the reservoir that you wouldn’t have gotten otherwise.
If it’s the former, the impacts on the US production outlook would be dramatic.