Best Practices for Reserves Estimation in Unconventional ...

1 Best Practices for Reserves Estimation in Unconventional Reservoirs present and Future ConsiderationsTracy HECKMAN, Anadarko Petroleum CorporationGrant OLSEN, Pressler Petroleum ConsultantsKerry SCOTT, Pioneer Natural ResourcesBernard SEILLER, TotalMarcia SIMPSON, EXCO ResourcesTom BLASINGAME, Texas A&M UniversityAdvancement of KnowledgeSlide 2 Estimating Reserves in Unconventional Reservoirs: It s early It s different It s good to learn from others It s good to have guidance It s good to have a visionWe advance our knowledge by application of mathematics and physical science, trial and error, and (novice philosopher)( )"It's Early"(Use Caution)Tracy HECKMAN, Anadarko Petroleum CorporationGrant OLSEN, Pressler Petroleum ConsultantsKerry SCOTT, Pioneer Natural ResourcesBernard SEILLER, TotalMarcia SIMPSON, EXCO ResourcesTom BLASINGAME, Texas A&M UniversitySlide 4It's Early Horizontal Wells as the Enabler (1/2)Slide 5It's Early Horizontal Wells as the Enabler (2/2)Slide 6It's Early Tight Oil Will Dominate in 10-15 Years ( )From the Authorities: Oil Tight oil (shale and chalk) production projected to rise sharply over next decade.

2 Energy Information Administration (EIA) AEO 2013 Early Release Energy Information Administration(AEO 2013 Early Release Overview) domestic crude oil production by source, 1990-2040 (millions of barrels/day)Slide 7 From the Authorities: Gas Shale gas is projected to be the most significant growth play over the next ~30 years. Considerable uncertainty in size and economics of shale gas resources. Most shale gas wells have been drilled in the last few years, leaving considerable uncertainty regarding long-term productivity. Energy Information Administration (EIA) AEO 2013 Early Release 's Early Lots of Room to Grow ( ) Energy Information Administration(AEO 2013 Early Release Overview) Dry natural gas production by source,1990-2040 (trillions of cubic feet per year)For many Unconventional reservoirs, (particularly shales)it's early in Development life-cycle Production life-cycle Learning life-cycleWe are in a period of significant uncertainty!

3 Production forecasts and ultimate recovery Drilling and completion techniques Optimum well spacing (interference) Impact on company portfolio of opportunities Project financing, investor confidence, regulatory harmonyIt's Early There's 8"It's Different"(We May Not Know What We Don't )Tracy HECKMAN, Anadarko Petroleum CorporationGrant OLSEN, Pressler Petroleum ConsultantsKerry SCOTT, Pioneer Natural ResourcesBernard SEILLER, TotalMarcia SIMPSON, EXCO ResourcesTom BLASINGAME, Texas A&M UniversityIt's Different DefinitionsSlide 10 Conventional ReservoirsUnconventional Reservoirs(Shale) Localized structural trap "Continuous-type" deposit External HC sourcing Self-sourced HC Hydrodynamic influence Minimal hydrodynamic influence Porosity important Porosity may not be important Permeability > md Permeability << md Permeability f(p) Permeability = f(p) Traditional phase behavior (PVT) Complex (HP/HT) PVT Minimal extraction effort Significant extraction effort Significant production history Limited production history Often late development life-cycle Early development life-cycle Few wells for commerciality Many wells for commerciality Base Reserves on volumetrics Base Reserves on analogs Assess entire prospect before drilling Prospect driven by drilling Boundary-dominated flow (months)

4 Noboundary-dominated flow Traditional Reserves methods Traditional Reserves methodsSlide 11 Challenges: No industry standard tech-niques for assessing uncon-ventional exploration plays. Stimulation is the major challenge (cost/technology). Fractures (induced or natural) are critical producibility factors. Success is judged based on production 's Different Challenges and Methodology Methodology: Expect the unexpected. Well performance will vary, despite similar drilling/completion Practices , well spacing, etc. Unconventional plays are "statistical," many wells must be drilled to assess potential. Drilling too few wells is likely to lead to a bad decision." It s Good to Learn from Others "(Industry Survey: Development of "Most Likely" Production Forecasts from Unconventional Reservoirs)Tracy HECKMAN, Anadarko Petroleum CorporationGrant OLSEN, Pressler Petroleum ConsultantsKerry SCOTT, Pioneer Natural ResourcesBernard SEILLER, TotalMarcia SIMPSON, EXCO ResourcesTom BLASINGAME, Texas A&M UniversityIndustry SurveySlide 13 Objective of the Survey: Collect and communicate industry "Best Practices :" "Most Likely " forecast (expected technical outcome).

5 Reasonable " Low Side " forecast. Criteria: Survey of individuals. Anonymous. Independent of regulatory classification SurveySlide 14 Administration of the Survey: Design: Designed by project team. Applicable to Unconventional reservoirs. Vetted and previewed survey with all participants. Focused on current Practices in developed areas. Intended participants selected from all facets of E&P sector. Structure: Survey delivered by secure, web-based system. 13 core questions (rate-time analysis/forecasting). 17 optional questions (confidence/risks/undeveloped Reserves /probabilistics)."User name and ""My opinion? Are you sure I'm supposed to have one?"Industry SurveySlide 15 Participation: Survey Particulars: 39 surveys submitted. Survey responses: [33 responses] Shale Gas ( , Eagle Ford, Marcellus, etc.)

6 [17 responses] Shale Oil ( , Bakken, etc.). [17 responses] Tight Gas ( , Cotton Valley, etc.). [12 responses] Tight Oil( , Spraberry, etc.).Slide 16 Primary Techniques for Forecasting Existing Shale Gas Wells:Industry Survey Arps' Method: Single most often used method. Often limited with a maximum value of the Arps' b-factor. Combination: Arps' method with alternative cross-check. Implementation varies, but general practice is to constrain EUR. RTA: Relatively uncommon, need for higher quality data. Requires time-rate-pressure 17 Forecasting UndevelopedShale Gas Wells:Industry Survey Analog Type Curve: Most popular approach. Need a relevant analog. Need a big database. Simulation: Either basic or exhaustive datasets can be used. Tailor model to needs: Basic model for screening studies.

7 Full "mechanistic" models for evaluating well completion, well spacing, PVT, 18 Time-Rate Analysis:Industry Survey Comment: (from survey) Arps' DCA methodology can be aggressive if unconstrained. "Work-around" is the "Modi-fied-Hyperbolic" (hyperbolic-exponentialmodel), Other models mentioned: "Stretched-Exponential" "Duong" (early-time) model Suggestions: (from survey) Double hyperbolic model (with terminal exponential). Attempt to represent physical behavior of well- reservoir system (SRV + non-SRV). Last Words: What we have works (when constrained). Some users want more models and better 19 Best Practices :Industry Survey New Wells: Require 3-24 months of production performance. Exception maintain "shape" of type curve and fit to actual IP. EUR: Cross-check estimates against various/alternate methodology(s).

8 Ensure "reasonableness" of results (confidence limits). Reserves Methodologies: Time-Rate (DCA/Arps) existing plays. Time-Rate-Pressure (RTA) existing plays. Analogs new plays. reservoir simulation (mechanistic) existing and new plays. Probabilistic (stochastic simulations) existing and new plays."It s Good to Have Guidance"(Statistical Analysis of Public Production Data Dry Horizontal Shale Gas Wells ONLY)[all data obtained from publicly available sources]Tracy HECKMAN, Anadarko Petroleum CorporationGrant OLSEN, Pressler Petroleum ConsultantsKerry SCOTT, Pioneer Natural ResourcesBernard SEILLER, TotalMarcia SIMPSON, EXCO ResourcesTom BLASINGAME, Texas A&M UniversityStatistical Analysis of Public Production DataSlide 21 Objectives of the Public Data Study: Use Arps' "Modified Hyperbolic" relation: Establish analysis limits: < b< Dlim= 10 percent (terminal exponential).

9 Abandonment Rate = 50 MSCF/D. Regression Approach: Automated data fitting using constraints given above. All results quality-checked, outliers discarded. Provide guidance and limits with graphical results: P50 rate vs. time with observations to generate confident EUR. Comparison of P10/P50/P90 EURfinal-values. )( ]exp[)( )1()(limexp,/1hy p,t*ttDqt*ttbDqtqibii[all data obtained from publicly available sources Dry Horizontal Shale Gas Wells ONLY]Slide 22P50 Well Gas Rate Trends:Comment: Left plot yields time required to estimate EUR(~12-32 months). The "hyperbolic" (or "constant b") flow regime is required to estimate Analysis of Public Production Data[all data obtained from publicly available sources Dry Horizontal Shale Gas Wells ONLY]Slide 23P90/P50/P10 EUR Comparisons: (Modified Hyperbolic Model with 30 year max life)Comment: Results are auto-fitted and should be considered reasonably accurate.

10 Results will vary when data are segregated by geological area, completion Practices , spacing, etc. Analyses represent an attempt to quantify the RANGE of values. Statistical Analysis of Public Production Data[all data obtained from publicly available sources Dry Horizontal Shale Gas Wells ONLY]"It s Good to Have a Vision"(Vision for Reserves Estimation The Next 10 Years)Tracy HECKMAN, Anadarko Petroleum CorporationGrant OLSEN, Pressler Petroleum ConsultantsKerry SCOTT, Pioneer Natural ResourcesBernard SEILLER, TotalMarcia SIMPSON, EXCO ResourcesTom BLASINGAME, Texas A&M UniversitySlide 25 Models for Production Forecasting: Most likely scenarios: Statistical models will remain an alternative to reservoir models. Analytical and numerical models will focus on SRV/beyond SRV.