Barnett Shale Production Model and Economics

John Browning¹, Svetlana Ikonnikova¹, Gürcan Gülen¹, Eric Potter¹, Ken Medlock³, Frank Male², Susan Horvath¹, Tad Patzek⁴, Qilong Fu¹, Forrest Roberts⁵, and Scott Tinker¹
¹Bureau of Economic Geology, University Station, Box X, Austin, TX 78713
²Department of Physics, The University of Texas at Austin, 1 University Station, Stop C1600, Austin, Texas 78712
³Rice University, MS–40, P.O. Box 1892, Houston, TX 77251
⁴Department of Petroleum and Geosystems Engineering, The University of Texas at Austin, 200 E. Dean Keeton, Stop C0300, Austin, TX 78712-1585
⁵Department of Geological Sciences, The University of Texas at Austin, 2225 Speedway, Stop C1160, Austin, TX 78712

In this paper, we present a model of predicting future production of natural gas from the Barnett shale and evaluate financial viability of past and future Barnett natural gas production for the whole field. We use output from several other studies undertaken as part of a major interdisciplinary project at BEG funded by the Sloan Foundation: the decline analysis via a new approach, Rock Exposure Index, or REI (an index that reflects decline profiles for Barnett wells better than Arps equations), spacing analysis, inferred-refracturing analysis, interference analysis, well economics, panel analysis of production behavior and geologic mapping of reservoir properties. Most of these analyses are based on production, completions and other data on roughly 16,000 vertical and horizontal wells drilled in the Barnett over its history of production until June 2011. Well data such as logs and cores were limited for the geologic variables.

Historical production data are used to group roughly 3,300 square-mile blocks into 10 tiers, from best (Tier 1) to worst (Tier 10) performers. The contribution from the average well has steadily improved over time for all tiers owing to technological improvements, including the switch to horizontal drilling and fracturing enhancements, but the increase in production is higher for better tiers. The high natural gas price environment before 2008 encouraged development of all tiers. The price collapse in 2008 resulted in drilling focused in the better tiers. Hence, we used 2010 average well production profile of each tier as the baseline for our forecasts by tier.

The model is driven by the pace of drilling activity in our forecast, which is determined based on the remaining areas suitable for drilling (derived from the spacing study, adjusted for logistical constraints) and the breakeven economics relative to natural gas price (derived from the well economics analysis). The model tracks the remaining drillwell prospect inventory in each tier on untested acreage and throttles drilling pace as each tier becomes fully developed (i.e., economic resources depleted). Results from the model indicate that drilling opportunities in the better tiers will be constrained within the next decade. The many remaining prospects in poorer tiers are not viable at current or even higher natural gas prices.

AAPG Search and Discovery Article #90158©2012 GCAGS and GC-SEPM 6nd Annual Convention, Austin, Texas, 21-24 October 2012