Shale Oil Fracking

shale-oil-frackingShale Oil Fracking. . . To Boom or Not to Boom. . .

Recent debates have surged over the statistical declines in oil production in the continental United States. Some experts say that oil production in the Continental US is on the decline, while others say that oil production has not nearly reached its peak.  Due to the continuing advancement in hydraulic fracturing and other drilling advancements, it would seem that the favor is on the side of the optimists.

Those who tout that it is on the decline center their beliefs based on the rapidly declining output of oil and natural gas shortly after the shale wells are initially drilled.  But that is not the only variable in determining the potential future of oil production in the states.

For nearly 100 years, experts like U.S. Geologist Carl Beal voiced their concerns about declining oil production, revealing that there are often limits to scientists abilities to accurately asses the scenario.  Contemporary shale doubters voice that the faster decline of output from horizontal drilling and fractured wells as compared to conventional well output tells the future, because these non-conventional methods are far more challenging to produce for oil and gas plays.  

In other words, if the oil that is easy to recover is on the decline, then the challenge magnifies for unconventional methods whereby the margins are smaller.

Although conventional play and recovery decline is 1 factor, there are several other factors to suggest that the North American oil production is far from its peak.

Firstly, technologies gained and borrowed from manufacturing advancements have allowed the same number of rigs and workers to drill more wells in the same amount of time.

Also, the skeptics focus heavily on the decline rate, while there are other factors that must be taken into account.  

Essentially, there are at least 3 major factors to consider when trying to forecast the oil future of America.  Those are: Decline Rate (DR), Initial Production (IP), and Estimated Ultimate Recovery (EUR).

The EUR is a vital factor in the prediction, because it is a much more accurate measurement of the ultimate oil available.  The DR and IR are often used to indicate the potential value of a play, but these do not give the complete picture.

To understand the ROI for an oil drilling company, time is a factor in recovery of invested monies.  Therefore, it is more favorable for drilling companies to have wells with a high IP and EUR.  Simply put, these wells have a high Initial Production, meaning that funds are recovered earlier in the project, while they have a longer life span of production.   Most wells with a high IP, however, usually have a high DR meaning that they quickly decline in production, so the revenues from the well quickly diminish over time.

Although there are mounds of data across states, formations and wells, the prediction of the performance of wells is still an in-accurate science, with wide margins of variance.  The U.S. Energy Information Administration (EIA) states that “Estimates of future production based on the first few months of initial production can differ significantly from later estimates for the same well,” making it apparent that the predictory abilities for wells is not extremely accurate or precise.

There is a lot of evidence that suggests that oil production and extraction is improving and increasing.

The EIA analyzed the Estimated Ultimate Recovery (EUR) from over 5,000 wells in Texas, in the Eagle Ford Shale between 2008 and 2013.  The average EUR in that 5 year span averaged about 170,000 barrels, but had risen steadily over that period of time.

And although there is tremendous variability in production across formations and across different formations in the U.S., there is a consistent rise in overall EUR for shale wells.

Many drillers are utilizing more horizontal or "laterals" where oil is trapped in the shale in layers.  Well spacing is also being performed more efficiently, allowing wells to be drilled more closely together without overlapping recovery areas, therefore increasing production from each formation.

With the constant push for innovation enhancements in drilling techniques and technologies, spacing efficiency, and experimentation with more laterals, well extraction per capital continues to rise, giving many experts the impression that shale oil fracking and recovery is still in its infancy within the continental United States.

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