Beginnings in the Barnett
Using statistics to help get things right
Richard Scherer, VP Engineering at LNG Energy Ltd, is a numbers man.
Speaking to delegates at Shale Gas Results in Europe 2011 in Warsaw, Poland, he emphasized that drillers in Poland should not shy away from statistical analysis to help them in their investment decisions.
In a talk entitled Examining Shale Gas Development and How Learnings Will Be Incorporated Into Driving Profitable Shale Gas Results in Poland, Scherer began by explaining where shale gas had started, the motivations, and the evolution.
“Most people know all this,” he said, showing a United States Geological Survey map of the shale developments in the lower 48 states of the US. Scherer pointed out the Fort Worth Basin and zoomed into where it all began in the Barnett shale.
“This was Mitchell Energy’s very first shale gas well bore within a Gas Contract Area that started it all.”
But what was the driver for pushing unconventionals development in the Barnett shale?
Mr. Scherer showed a graph of conventional gas field decline from 1982 – 2004. “It was about 50% over 16 years within that gas contract area. Contract obligations was a significant motivator,” he said.
And things didn’t look so bright for an initial vertical well.
“In 1982,” he recalled, production came on at 127 MCF/day – it was gravely uneconomic. A traditional gel frac was pumped.”
“Fifteen years later, in 1997, we see a 4-fold improvement,” said Scherer. “It was pumped with slick water, which was developed through time. In 2000 that well bore was re fracked and the interesting thing is, almost 20 years later it comes on five times the initial rate.”
The areas of potential within the drilling area changed, and had spread out, he showed. In 2005, at one of the original horizontals, which had been un-stimulated, toe stage fracks and heel stage fracks gave huge increases, he said, which had spurred the interest.
One slide showed the time period when Mitchell Energy sold its Barnett Shale assets to Devon Energy. He said, “It had 5BCF/day, and there was a gradual increase but then a few years later a huge increase.” Then, the average rate was over 3,000 MCF/day, for over five months.
Based on more than 7500 wells – both horizontal and vertical - drilled in the Barnett, Mr. Scherer offered lessons learned from a statistical analysis. Questions he sought to answer included: “Are there areas of the Barnett Shale that perform differently?” “Does thicker shale correlate to better production & reserves?” and “Are horizontal wells better producers than vertical wells versus time?”
He put up a slide on “Basin Economic Ranks,” which showed the darkest green areas of the map, which were mostly in the north-eastern section, were the most economic.
While comparing graphs of hydraulic and vertical drilling in the Barnett made it look like horizontal wells were clearly more productive, over time increasingly more horizontals were being drilled than verticals; meanwhile new techniques and strategies were being developed for horizontal drilling.
“Re fracturing does work without a doubt,” Scherer commented. “This clearly demonstrates that it has an upside for vertical wells and for horizontal.”
“Being able to discriminate,” he said, “was important.”
On a map he pointed out the Ardmore basin in Oklahoma, which was very close to the Barnett. Scherer discussed a well bore there that LNG had participated in with XTO.
“Our question was, ‘should we make an investment in a horizontal well bore in this area?’” He pledged to show the methodology for making a decision, showing an outline of the completion strategy, which included a plan to stage frack 10 times.
He showed the relationship between IP rates and estimated ultimate recovery (EURs).
“I’m trying to be able to use those statistics to make investment decisions,” he said.
“The decision was made to observe well production – we needed more data,” he explained. “The well performed very un-expectedly. We compared the first six moths versus the first 15 months.”
Other considerations included the NYMEX Commodity Price, the scarcity of drilling rigs, rising costs for small operators, etc.
“We sold the asset,” Scherer concluded.
Then he told delegates in Warsaw about the opportunity they had to “Leap Frog the Learning Curve for Polish Shale Gas Development.”
First, he presented a picture of a rig in Alberta, Canada, explaining, “It’s a rig which physically walks, slowly – it’s pneumatic and hydraulic. You can use it as a means of being able to put together a multi well program. You have a pad on which you can have 16 well bores.”
Within that context he discussed microseismic as a means of being able to define fracture networks and showed how geophones were set out in an array pattern.
In reference to minimizing the amount of water that was being used at a drill site, Scherer showed a “before and after” example of minimizing the environmental impact: a photo of two bell jars, one filled with dark, murky water, the other with crystal clear.
“Necessity is the mother of all inventions,” he said, especially in terms of financial liability.
“The first vertical shale gas wells were economic failures,” he noted, adding that one ignored statistical study at their financial peril. “Using statistically derived rules of thumb are critical to minimizing costly errors.”
One delegate from the audience offered his insights on hydraulic fracturing to Mr. Scherer. “You always have an improvement when you frack wells. I am also aware when they have a detrimental effect.”
“On average in this particular area, it was successful,” replied Scherer. “But there is no question that there would be failures. The failures there were a very small proportion. There are definitely areas in the Barnett where it doesn’t work technically or economically.”