Taking a closer look at Forecasting shale oil production
IP learning curve
Bakken statistics show an average increase of 24-hour initial production rates from 600 to 800 boed/d over 2009-2012 as the completion techniques were fine-tuned (Fig 3). The average number of stages increased from 19 to 27 over the same period, while the average rate of production per stage decreased from 36 to 25. Also, the frack intensity for each stage and the fracking pressure increased, proppants and fluids were improved, and accurate microseismics provided better understanding of the fracture dynamics. The IP learning curve has now apparently peaked, the technology is optimized, and some of the sweetest locations have already been drilled. Over 2012 and 2013, the average IP rate has decreased from 800 to 700 boe/d. The decreasing IP comes from down-spacing wells in the Mountrail (EOG), drilling on the shallower Bakken in the west (Continental), experimental wells in the deeper and high-permeability/low-pressure wells in the southern part of the play (Whiting). We expect IP rates to fall by 5% p.a. after the drilling activity peaks on the acreages.
By fine tuning their drilling and fracking techniques they managed to get their initial 24 hour rates up from 600 boed to 800 boed in 2012. But from the down-spacing of wells and other problems initial production has falling to 700 boed. That is a drop of 12.5 percent. But now they expect initial production rates, per well, to fall only 5% per year. I think they are being a little optimistic.
There were, according to the Directors Cut, 143 new wells added in May. The “wells producing” figure did not increase by this many because several wells were shut down. This will happen every month and we are dependent upon Lynn Helms to tell us how many new wells were added each month. Anyway it is my best guess that it takes about 125 new wells per month just to keep production level. But as production increases this number will increase also because there is more oil to decline. So if that number was 125 in May then it would be over 127 in June because production increased by 2.1 percent in May.
That is one thing most Bakken cheerleaders don’t understand. That is, due to the very high Bakken decline rate, as production increases the number of new wells needed to keep production flat increases also. So doing a little fuzzy math, if North Dakota should increase production to 1,000,000 barrels per day, up from the 800,000 today, it would take 156 new wells per month just to keep production flat. Also, if initial production keeps falling, as predicted, it will take even more wells just to keep production flat.
It is for these reasons that I don’t expect North Dakota production ever to reach one million barrels per day.