Fig 1 
In each of the cases presented below the start of the decrease in new well EUR is referenced with respect to June 30, 2013, so 6 months becomes Jan 2015 (or Dec 31, 2014) and 2 years to the start of the EUR decrease would mean June 2015.
Fig 1 
Fig 2
Case 2: EUR decrease begins in June 2015, the maximum
monthly rate of decrease in EUR is reached in June 2020 (C12=24 and C13=60 in
spreadsheet), note the lower maximum annual decrease in EUR of 6.3%( this is
the only change from case 1 to case 2.)
These two scenarios are quite optimistic, especially the
second which under reasonable economic assumptions never reaches breakeven and
thus all of these resources would be economically recoverable. Based on the estimates of the United States
Geological Survey(USGS), the chances of the technically recoverable resources (TRR)
being above 11.5 Gb are less than 5 %.
Even the first scenario with the lower TRR of 8.5 Gb (mean
USGS estimate) is fairly optimistic as it assumes that new well EUR does not
begin to decrease until June 2015 and then takes 5 years to reach the maximum
monthly rate of decrease in EUR. This
lower scenario reaches breakeven in 2021 and the economically recoverable
resources (ERR) would be somewhat lower than 8.5 Gb (likely about 7.5 Gb).
The cases that follow add 200 wells per month(which matches
the most recent two months of data) rather than 175 wells per month (as in case 1 and 2). Also there are
changes in when the new well EUR starts to decrease and the length of time it
takes to reach the maximum rate of decrease.
Fig 3
Case 3: EUR Decrease starts Jan 2014(6 months), maximum
monthly EUR decrease in June 2015(24 months), maximum annual rate of EUR
decrease is 12.5 %.
Fig 4
Case 4: EUR decrease starts in June 2015(2 years), maximum
monthly EUR decrease in June 2017(4 years), same as case 3 except for change in
start of EUR decrease (18 months later) and slower ramp up to maximum rate of
decrease (24 months instead of 18 months). Maximum annual rate of EUR decrease
is 12.5 %.
Fig 5
Case 5: EUR decrease starts in June 2016 (3 years), maximum
monthly rate of EUR decrease in June 2019 (6 years), otherwise same as case 3
and 4. The TRR is close the USGS F5
estimate of 11 Gb.
Fig 6
Case 6: EUR decrease starts in June 2016(3 years), maximum
monthly rate of EUR decrease in June 2019(6 years). The maximum annual rate of EUR decrease is 24 % in this
case, otherwise same as case 5.
Fig 7
Case 7: EUR Decrease starts Jan 2014(6 months), maximum
monthly EUR decrease in June 2015(24 months). Similar to case 3 except that the
maximum annual rate of EUR decrease is 24 % instead of 12.5 %. The TRR is close to the USGS F95 estimate of
6 Gb.
Fig 8
Case 8: This scenario assumes no decrease in new well EUR, cases 3 to 8 assume about 48000 producing wells in 2030 and no more wells added after reaching 48000 wells producing. This scenario is for those who ask, “what if technological advances allow us to keep new well EUR from falling?” A problem with the scenario presented in case 8 is that oil company profits per well would be very high at the point that new wells are no longer added which does not make sense. So I developed a more optimistic case.
Fig 9
Case 9: New well EUR decrease starts in June 2033(20 years), maximum monthly EUR decrease is reached in June 2038(25 years). The maximum annual rate of new well EUR decrease is 10 %. This scenario also differs from case 8 because wells are added at faster rate of 250 wells per month (3000 per year) and the total producing wells reaches almost 90,000 wells. Note that the xaxis scale has been changed for case 9 in order to show the rapid drop in output after 2040. The TRR is this case is 29 Gb almost 3 times higher than the USGS F5 (5 % probability) estimate. To call this scenario wildly optimistic would be an understatement.
Fig 10
Case 10: To balance the very optimistic case 9, I created the case 10 scenario. EUR decrease begins in Jan 2014 (6 months) and the maximum rate of EUR decrease is reached in Jan 2015 (18 months), the maximum annual rate of decrease is 40 % and new wells are only added for 180 months (15 years) and the rate that new wells are added is 175 wells/month rather than 200 wells/month. Total producing wells reaches about 38,000 wells compared to 48,000 wells in cases 3 to 8. Breakeven is reached in the middle of 2015 so fewer wells will be added beyond that date when economics are considered.
Fig 11
Case 11: This case
considers the economically recoverable resources (ERR) for case 10, note that
the future wells per month of 175 wells/month only applies up to Dec 2014. After that, wells added per month are reduced
by 10 each month in order to keep profits positive. From May 2016 to Aug 2040 only 9 new wells per
month are added and total producing wells reach about 13000 wells in 2040. At this point new wells are no longer
profitable unless real oil prices continue to rise. Note that as the wells added per month falls to
9 wells/mo, the rate of decrease in new well EUR also falls to an annual rate
of 2.5 % per year over the period of 2017 to 2040 from a maximum of 33 % in
2015.
The economic assumptions used for case 11 (all $ amounts are in May 2013 $) are: $9 million for Jan 2013 well cost falling by 8 % per year to $7 million (in Feb 2016) and remaining at that level in real $, real oil prices follow the EIA's AEO 2013 reference case, OPEX are $4/barrel, other costs are $3/barrel, transport costs are $12/barrel, royalty and taxes are 20 % of wellhead revenue (refinery gate price minus transport cost times number of barrels), and the annual discount rate is 12.5 %.
I think that cases 10
and 11 are implausible, but I am trying to cover both the pessimistic and optimistic
view points. I do think that that case
11 is more likely than case 9, but note that the TRR of case 10 is 67% of the
F95 USGS estimate (6 Gb) so it is also a low probability scenario (probably less than 1 % probability if the USGS estimates are correct).
The most realistic cases would have economically recoverable
resources between 6 and 10 Gb, with the best estimate around 8 Gb. Cases 1 and 3 are the most realistic
presented in this post, case 6 is overly optimistic in my view, I would expect
new well EUR decrease to begin sooner than 3 years and to reach its maximum
monthly rate of decrease more quickly than in case 6 where the maximum monthly
EUR decrease is not reached for about 6 years (in 2019).
Several other scenarios were explored and the data for these scenarios (figs 13 to 16) can be viewed here in an Excel spreadsheet.
All cases presented below add 175 wells/month for 250
months, total producing wells 49,900.
Fig 13
months from 6/2013 to
start of EUR decrease

6

15

30

45

72

months to max EUR decrease
(from start of EUR decrease)

6

15

30

45

72

TRR(Gb)

6

7

8.4

10

12

Maximum Annual Rate of
Decrease of EUR

17%

17%

17%

17%

17%

Fig 14
months from 6/2013 to
start of EUR decrease

24

24

24

24

24

months to max EUR decrease(from start of EUR decrease)

24

24

24

24

24

TRR(Gb)

6

7

8.4

10

11

Maximum Annual Rate of
Decrease of EUR

30.0%

20.0%

15.0%

10.0%

7.5%

Fig 17
months from 6/2013 to
start of EUR decrease

6

15

27

45

72

months to max EUR decrease(from start of EUR decrease)

6

15

27

45

72

TRR(Gb)

4.5

6.5

8.4

11.5

14

Maximum Annual Rate of
Decrease of EUR

30.0%

20.0%

16.0%

10.0%

7.5%

Note that the low (TRR=4.5 Gb) and high (TRR=14 Gb) cases in Fig 17 are both very unlikely.
Fig 16
months from 6/2013 to
start of EUR decrease

60

36

12

months to max EUR decrease
(from start of EUR decrease)

60

36

12

Maximum annual rate of decrease of EUR

40.0%

19.0%

11.3%

TRR (Gb)

8.5

8.5

8.5

Hi Dennis,
ReplyDeletethanks for this amazing work.
I tried my own spreadsheet last year,but not as sophisticated as yours
Best regards from Germany
Chris
hi Chris Thanks did you try to download the spreadsheet I'm curiously to see if it works
ReplyDeleteDennis Coyne