A better way to forecast unconventional resource plays

To drill or not to drill? That is the question. The single most important success factor for unconventional resource plays is getting an accurate, reliable production forecast on which to base go/no-go decisions.

Resource plays are game changers – for companies, for the industry and for nations. Right now approximately 75 percent of all oil and gas investment in North America is focused on unconventional resources. But traditional evaluation methods are not capable of providing an acceptable level of forecast accuracy for a single well, let alone an entire play. This can result in forecast errors greater than 50 percent!

In a 2010 Society of Petroleum Engineers white paper (SPE 135208), Haskett and Brown identified the main sources of uncertainty that companies face in determining the Net Present Value (NPV) of a shale gas play. As shown in the pie chart below, fully two-thirds of the uncertainty around the NPV of shale gas plays can be attributed to the reliability of the production profile, while variations in CAPEX (capital and operating costs) would have relatively little impact. This illustrates the critical role of the production forecast in decision making and the ultimate success of the play.

Factors Influencing Uncertainty in NPV

A new methodology with proven results

Energy Navigator believes in always seeking a better way to navigate engineering workflows and make better decisions. After many years and tens of thousands of hours, we’ve developed a completely new, methodology for type well analysis and reserves evaluation that results in nearly 100 per cent accuracy.

Our methodology is proven, it’s built into our Value Navigator evaluation tool, and it eliminates the uncertainty inherent in traditional methods. It also eliminates the potential for sequence bias – the tendency to drill the best wells first and then base forecasts on those wells, resulting in a grossly over-optimistic production forecast. We tested and adjusted our methodology with an extensive study, back-casting some 10,000 wells with known results.

We’ve published our approach and our results in a recent SPE white paper (SPE 158867). And we’ve been making presentations to industry associations around the globe. This is information we think needs to be shared. It will change the way investors look at unconventional reserves, and have an immense impact on the level of success that companies can achieve in unconventional plays. When the industry benefits, we all benefit.

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