Texas production data show rapid gas depletion

Gary S. Swindell
Gary S. Swindell & Associates
Dallas

Gas-well producing rates in Texas from newer wells have a significantly sharper decline in the early years compared to wells completed in the 1970s and 1980s.

This suggests that increased drilling will be necessary to sustain the state's gas production.

These results are from a study made to gain insight on how U.S. production-decline rates have changed in the last 30 years. This understanding on deliverability from new wells is important for determining how many new wells have to be completed to sustain U.S. gas production rates.

Although natural gas reserves' information available from the Energy Information Administration (EIA) and other sources reflects relatively constant or slowly increasing numbers, the rate of depletion from newer completions is a topic not adequately addressed.

Concern over deliverability

Concern over the decline in the number of new gas wells in the U.S. and falling production resulting from low oil and gas prices throughout 1998 and early 1999, has caused new attention to be focused on depletion rates.

Recent articles have commented on the decrease in U.S. production and the need for an increase in new gas wells to sustain reserves and productivity. Studies have reported decline rates of more than 45% in the Louisiana Gulf of Mexico and even higher decline rates in Kansas.^{1 2}

The U.S. has a 10.4-year reserves-to-production ratio for oil and a 9.1-year ratio for natural gas. These ratios have been sustained for over 30 years by drilling new wells and reserves growth in existing fields (Fig. 1 [37,662 bytes]).

According to EIA data, 78% of the natural gas reserves added in 1997 came from new discoveries and field extensions vs. only 22% from revisions in existing fields.³ This is the opposite of the crude oil reserves situation where revisions in older fields play a much larger part.

Texas gas wells

Texas has been the source of 37% of the cumulative natural gas produced in the U.S. Presently, the state contributes 32% of U.S. daily gas production, and holds 26% of U.S. proved gas reserves ( Fig. 2 [34,600 bytes]). In 1997, only Canada and China exceeded the number of wells drilled in Texas.

Although Texas' natural gas production has been remarkably constant over the past 15 years (Fig. 3 [34,488 bytes]), the rate has been sustained through extensive drilling, application of advanced technologies, and discovery of new trends.

To look at how Texas gas wells completed in each year since 1971 performed over time, the study grouped wells by year of first production, then each "vintaged" group was analyzed for average initial production rate (usually the first complete month of production), decline rates, and average projected reserves. A total of 113,930 gas completions started producing during the study period.

Operators report oil well production to the Texas Railroad Commission on a lease basis rather than by well, as is the case for gas wells. Because of this, new infill-well oil and associated gas production is often combined with older, existing production. This aggregation makes it difficult to study the behavior of new-vs.-old wells. For this reason, the study was limited to wells classified as gas only (Table 1 [25,693 bytes]).

The number of gas-well completions has varied over time, generally in accordance with gas prices. But the 10-year survival rate, or those wells still active 10 years after the initial production, has remained surprisingly constant during the study period.

A slight increase in these wells has been noted in recent years, likely due to the effect of higher product prices.

Initial production rates

Initial gas production rates have changed dramatically ( Fig. 4a [138,373 bytes]). Wells completed in 1971 averaged 52.3 MMcf/month (1.72 MMcfd) in their first full month. Average initial rates dropped significantly to a low of 15.6 MMcf/month in 1983, but then began an increasing trend through 1998 (Fig. 4b). Other individual field studies have shown similar increases. ⁴

The increases, beginning in 1989, correlate to accelerated completion of horizontal wells in the Giddings and Pearsall Austin chalk fields. Increases prior to 1989 are likely due to improved, high-volume fracturing technology and high productivity of South Texas wells.

Decline rates

Although well initial rates have improved in recent years, production decline rates have dramatically changed for the worse. In the 1970s, the first-year decline averaged 16%/year, and the 5-year overall decline rate averaged about 15%/year (Figs. 4c and 4d).

But in the late 1980s the first-year decline rate began a sharp increase to the present 56%/year. Furthermore, the 5-year average decline also increased to 28% by 1994.

The sharply higher decline rates were influenced by the Austin chalk horizontal wells and other factors. Bob West and Bob West North fields in Starr and Zapata counties (combined, this would be the second largest gas field in Texas during 1997) were discovered in the early 1990s in the Wilcox trend.⁵ Gas production from these fields did increase through 1996 but has fallen sharply since, even as new wells were completed.

McAllen Ranch (Hidalgo County) and Double A Wells (Polk County) fields show similar sharp declines in the face of added wells.

Fig. 5 [38,654 bytes] shows three selected production-decline profiles for 1971, 1980, and 1996. It is clear that although the initial well productivity increased from 1980 to 1996, depletion is taking place at a faster rate, and the expected life of the newer wells will be much shorter than older vintage wells.

The newer wells consistently show more hyperbolic tendencies but with significantly steeper decline rates in the early years. This pattern is evident throughout each vintage of gas wells.

Decline plots for each year studied and major Texas fields can be seen on the internet site http://oil.server4.com.

Ultimate reserves

The average rate-vs.-time plot for each group of vintaged wells was used to project an ultimate gas recovery ( Fig. 6 [36,273 bytes]). The estimate assumed a $1,600/well/month operating costs, a $2/Mcf gas price, and an 80% NRI (net revenue interest).

Average projected recovery declined sharply from 6.2 bcf/well in 1971 to 1.7 bcf/well in 1980. After 1980, the decline trend slowed and the present estimate of ultimate recovery is 1.0 bcf/well.

These figures for Texas wells are in fair agreement with the latest EIA data that indicate additions from extensions and new discoveries in the entire U.S. of 15.7 tcf in 1997 as a result of completing 10,443 gas wells, for an average addition of 1.5 bcf/well.⁶

The EIA data include Gulf of Mexico wells with large reserves.

Study results

The study shows that there have been substantial changes in the decline profiles of wells completed in Texas over the last 30 years. For new Texas gas wells, the decline rates in the first years are now on the order of 50%/year.

Reserves developed per completion are about 1 bcf/well and show a continuing slow decrease.

Using the average reserves/new well, replacement of Texas's annual gas production requires the completion of about 6,400 new wells compared with only 4,048 new gas wells completed in 1998. Associated gas from oil wells also contributes to additional gas.

The sharp early decline rates suggest that significantly increased drilling will be necessary in the near future to sustain the state's gas production. A rig count that remains below the present 200 for the entire state will make it impossible to maintain present gas production rates in the future.

Clearly the industry needs higher prices to sustain production with additional new wells.

The methodology employed in this study is applicable to other states. Many other states also require the reporting of oil wells on an individual basis rather than a lease basis and in those states a similar analysis could be developed for oil wells as well.

References

1. Simmons, M.R., and Pursell, D.A., "Depletion: The Forgotten Factor in Supply and Demand," Offshore, February 1999, p. 30.
2. Lohrenz, J., and Williams, C.W., "Disaggregated Remaining Reserves to Annual Production Ratios," Paper No. SPE52944, Hydrocarbon Economics and Evaluation Symposium, Dallas, Mar. 20-23, 1999.
3. "California leads '97 U.S. oil reserves growth," OGJ, Oct. 12, 1998, p. 42.
4. Swindell, G.S., "Reserves and Performance of Canyon Sand Gas Wells 1970-1994," Paper No. SPE35204, Permian Basin Oil & Gas Recovery Conference, Midland, Mar. 27-29, 1996.
5. Kim, E.M., "Further Growth lies ahead for South Texas Wilcox Plays," OGJ, Mar. 1, 1999, p. 79.
6. DeGolyer and MacNaughton, Twentieth Century Petroleum Statistics, December 1998.

The Author