Wednesday, October 16, 2013

Cool Tools for considering Future Bakken Output


Webster Hubble Telescope (WHT) has a new blog called Context Earth with a cloud hosted server with some of his oil reserve models. See the Red Queen tight oil model 2.  This inspired me to create an interactive spreadsheet which does something similar. 

The spreadsheet is called bakken2.xlsx and can be found here on Google Drive.

One difference between WHT’s “red queen tight oil model 2” and my bakken2 model is that the EUR of new wells is about 280 kb in his model and 340 kb for my model at 30 years. 

A second difference is that my model allows the new well EUR to decrease at any annual rate from -0.1 to .99 (10 % increase to a 99 % decrease) starting in Jan 2014 and rising to the maximum monthly rate by June 2015.



How to use this spreadsheet:                                                                                    

The blue highlighted cells can be changed. Cell C6 is an estimate of the new well estimated ultimate recovery (EUR). The EUR will decrease as the better drilling locations become scarce.  Values between 5 and 20 percent (0.05 to 0.20) are suggested. 
Cell C10 is wells added per month, cell C11 is the number of months new wells are added                
Notes:                                                                                 

The model assumes that new well EUR starts to decrease in Jan 2014 and attains the maximum monthly rate of decrease by June 2015. Wells are added at the North Dakota Industrial Commission (NDIC) expected rate of 2000 wells per year until the total producing wells reach 48,000 wells in 2034.  The NDIC expects between 45,000 and 50,000 producing wells as the maximum expected total.               

As a final note, an EUR decrease of 10.3 % per year matched the USGS mean estimate for the Bakken/Three Forks in North Dakota of 8.5 Gb for the TRR (technically recoverable resource.) 

An EUR decrease of 6 %/year is close to the F5 USGS estimate and an EUR decrease of 19 %/year is close to the F95 USGS estimate when 168 wells per month are added from Sept 2013 to mid 2034.

Red Queen Tight Oil Model 2


Bakken2 Model (x-axis scaled to match Red Queen 2 Model above)

 

 
 
 
The chart above is scaled in a similar way to WHT's Red Queen 2 Model so they can be compared. Both models add 150 wells per month for 280 months,  my ND Bakken/Three Forks scenario includes a 1 % annual decrease in new well EUR to adjust for the higher well EUR in my model.
 
The x-axis scaling in my spreadsheet will be from Jan 2009 to Jan 2039, the chart above is shown below with different x-axis scaling, TRR=15 Gb from 1953 to 2073:
 
Annual decrease in new well EUR is 1 %, 150 wells added per month for 278 months
The scenario below has a maximum annual new well EUR decrease of 10.2 %, adds 168 wells per month for 249 months(see lower right part of the chart), and has a TRR of 8.5 Gb from 1953 to 2073 matching the mean USGS estimate for the North Dakota Bakken/Three Forks.
 
Annual Decrease in new well EUR 10.2 %, 168 wells/month added for 249 months
 
Also in the spreadsheet is a chart tab called breakeven, for the scenario above it looks like this:
 

 
When economics are considered, the rate that new wells are added will be less than 168 wells per month as profits approach zero, in my previous modeling I assumed the rate that new wells are added would gradually be reduced once profits fall to about half of their peak value, I have not yet figured out a way to automate this process because as fewer wells are added, the rate of decrease in new well EUR will be smaller so there are a lot of moving parts.  If the wells are simply added at a constant rate new wells will stop being added in 2022, but reality is more complex, wells can be added at any rate between 0 and 168.  I may add the ability to adjust the rate that new wells are added so other more complex scenarios can be created. 
 

Dennis Coyne
 

 

2 comments:

  1. DC, I think the analyses are converging.

    As a bottomline, it really does depend on the diminishing return rate and how large a set of reservoirs we can draw from.

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  2. WHT,

    Yes the reservoir size is uncertain. I make no claim that 280k is incorrect, I am just presenting a slightly different perspective from yours, at 340k for the EUR. The well profile I use is a hybrid hyperbolic-OU diffusion profile with a hyperbolic used over the first 3 to 4 years and and OU diffusion model used in the later years. Also I use a lower profile for 1953 to March 2008, which also has this hybrid hyperbolic/ou diffusion profile (about 160 kb for 30 year EUR). A final difference is my estimate of the number of wells is different (I sent you an e-mail on this, not sure if you saw it.)

    A quick question on your 1981 to 2004 data for the Bakken, your data over this period seems to be a little high, are you using the usual ND Bakken data for oil output? (I realize you are using different data for the number of wells.)

    Dennis

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