SURVEY SHOWS SUCCESSES, FAILURES OF HORIZONTAL WELLS

June 19, 1995
W. Gregory Deskins, William J. McDonald Maurer Engineering Inc. Houston Thomas B. Reid U.S. Department of Energy Bartlesville, Okla. Industry's experience now shows that horizontal well technology must be applied thoughtfully and be site-specific to attain technical and economic success. This article, based on a comprehensive study done by Maurer Engineering for the U.S. Department of Energy (DOE), addresses the success of horizontal wells in less-publicized formations, that is, other than
W. Gregory Deskins, William J. McDonald
Maurer Engineering Inc.
Houston
Thomas B. Reid
U.S. Department of Energy
Bartlesville, Okla.

Industry's experience now shows that horizontal well technology must be applied thoughtfully and be site-specific to attain technical and economic success.

This article, based on a comprehensive study done by Maurer Engineering for the U.S. Department of Energy (DOE), addresses the success of horizontal wells in less-publicized formations, that is, other than the Austin chalk.

Early excitement within the industry about the new technology reached a fever pitch at times, leaving some with the impression that horizontal drilling is a panacea for all drilling environments.

This work gauges the overall success of horizontal technology in U.S. and Canadian oil and gas fields, defines the applications where horizontal technology is most appropriate, and assesses its impact on oil recovery and reserves.

SURVEY

Operators in the U.S. and Canada were surveyed on a formation-by-formation basis. Data were received describing horizontal well production in 58 formations in the U.S. and 88 in Canada. Operators' responses were analyzed for trends in technical and economic success based on lithology (clastics and carbonates) and resource type (light oil, heavy oil, and gas). The potential impact of horizontal technology on oil reserves was also estimated.

A questionnaire was sent to several hundred operators in both countries. Responses are summarized in Table 1 (11037 bytes).

Questionnaires were filled out on a formation basis, that is, not weighted by the number of wells. Each formation was counted once in each analysis. In this way, responses from the Austin chalk and other highly active formations did not overshadow other applications in less-active formations.

RESERVES INCREASES

Many operators have found that horizontal wells increase recoverable reserves (improve recovery factor) within their fields. An international consensus is growing about the potential of horizontal wells to allow significant additions to oil and gas reserves, with quoted levels ranging up to 2% of OOIP volumes.1

Various authors have estimated the impact on domestic reserves due to the widespread application of horizontal technology. Among them is Fisher, who predicted that horizontal wells could result in the addition of 10 billion bbl to U.S. oil reserves, that is, about 2% of OOIP.2 This 10 billion bbl represent a 38/e increase in recoverable reserves.

Saudi Arabia's Aramco estimated that its horizontal drilling program will amount to 50% of its drilling budget over the next 10 years.3 It expects horizontal wells to increase reserves by 5-10%. This translates into an additional 13-26 billion bbl to Saudi Arabia's 257 billion bbl of oil reserves.

Commonly mentioned situations where reserves increases are expected include:

  • Intersecting natural fractures that could not be technically or economically accessed with vertical technology.

  • Delaying the onset of water and/or gas coning so that more oil is economically produced before the well waters/gases out.

  • Improving production from thin and/or tight reservoirs.

  • Improving water-flood sweep efficiency.

Theoretical developments in horizontal well production decline models and reserves estimations are still in their infancy. One of the most important issues affecting economics, especially of reentries, is whether the production improvement will consist of accelerated production, an increase in reserves, or both (Fig. 1)(38156 bytes).

For a well with accelerated production only, net present worth is improved, although total revenue is not increased. A well that increases reserves will provide more total revenue and substantially increase net present worth.

In some applications, the field cannot be economically exploited with vertical wells, for example, many fractured carbonate and heavy-oil reservoirs. If horizontal technology can be economically applied for recovering these resources, the reserves increase for these fields is theoretically infinite.

U.S. WELLS

The horizontal drilling boom in the U.S. is now several years old, and over 4,600 wells have been drilled in over 100 reservoirs. Most of these wells are part of multiwell development programs that included drilling, completion, workovers, and analyses. Many of these wells have produced for several years.

Much published information exists on drilling, completion, and workover systems, and tools and techniques for these wells. Little has been presented describing overall production and economic success of horizontal technology in various formation types.

Questionnaires were sent to over 120 operators who have drilled horizontal wells in U.S. formations. Data were returned on 58 formations. The location of horizontally exploited formations is shown along with survey responses in Fig. 2 (66600 bytes). Most states with activity show about a 50% response rate to the survey.

TRENDS

The pace of drilling horizontal wells in the U.S. remains high at about 1,000 wells/year (Fig. 3a)(212957 bytes). Most of these wells have been drilled in three formations: the Austin chalk in Texas (79%) the Bakken shale in North Dakota (5%), and the Niobrara in Colorado/Wyoming (2%). Wells in other formations currently constitute about 14% of the total.

High activity in the three most popular formations has been accompanied by numerous technical publications and presentations discussing many aspects of horizontal technology in these fields. Much less discussion has taken place on the other fields, that is, the NANB (non-Austin chalk, Niobrara, Bakken) formations.

NANB formations, including those previously drilled and those not yet drilled horizontally, will undoubtedly play an increasingly significant role in the future of horizontal technology.

The number of wells in NANB formations increased from about 20 before 1987 to 674 by May 1994, with almost 140 wells drilled in 1993 alone (Fig. 4)(36301 bytes).

LITHOLOGY

About 90% of all U.S. horizontal wells have been drilled in carbonate formations. This lithological distribution for horizontal wells contrasts sharply with the domestic resource base, in that only 24% of U.S. reservoirs are carbonate, and only 30%, of reserves are in carbonate formations.

NANB wells are distributed in a manner more reflective of the resource base. More than 56% of NANB wells were drilled in clastic formations. Based on the large proportion of elastic formations in the domestic resource base and the success of horizontal applications in these formations, the percentage of horizontal drilling in clastic formations should continue to increase.

Of the 58 survey responses, 60% cover clastic formations and 40% carbonate. The Austin chalk, Niobrara, and Bakken are included in this formation count, as well as in the results reported in the following sections. Because every formation gets one equal "vote," results are not skewed by high levels of activity in any field.

APPLICATIONS

The most common applications for horizontal technology in the U.S. include intersecting fractures (53% of all formations) and minimizing water and/or gas coning (33%) (Fig. 3a)(212957 bytes). Least-used applications are for water drive (9%), EOR (9%), and to avoid surface restrictions above the target formation (7%). Multiple responses were the rule; thus, the results sum to more than 100%.

In elastic formations, the most common applications are favorable economics (46%) and minimizing coning (40%), followed closely by intersecting fractures (37%). In carbonates, not surprisingly, the most common application by far is intersecting fractures (almost 80%). The next most popular applications in carbonates are in low-permeability formations and in thin beds, both at just over 25%.

COSTS

Production and cost ratios, which compare horizontal well results to those of vertical wells within the same field conditions, are often used as indicators of general success for individual wells. Even though they are not ideal, production and cost ratios have become widely accepted as a first estimate of success in a specific application.

Ratios reported on the industry survey have generally been favorable for horizontal wells. The average horizontal/vertical production ratio for all U.S. horizontal wells is 3.2. The average cost ratio is 2.0 (Table 2)(10098 bytes). Average horizontal benefit index (production ratio divided by cost ratio) is also reported.

When lithology is considered, carbonates have been more economically attractive than clastics. Note that these average ratios are based on one formation/one vote.

Cost ratios calculated on a well-by-well basis would be less than 2.0, given the learning curve benefits in the most active formations. The average Austin chalk cost ratio is around 1.4, based on the responses of several operators.

SUCCESSES

Operators reported on the technical and economic successes of their projects. Survey questions were added to allow the field operator to judge the "bottom line" of the overall project, and include the effects of factors not accounted for in a simple cost ratio.

Technical success has been achieved in almost all reservoir settings. Operators report a 95% technical success rate overall (Fig. 3e)(212957 bytes), providing clear evidence that the implementation of horizontal drilling techniques has become almost routine.

Economic success of horizontal projects has not been as widespread as technical success. Only 54% were reported as economically successful. Projects in clastics were more economically successful than those in carbonates: 59% vs. 45%, respectively.

About half of the operators stimulated their horizontal wells by fracturing, matrix acidizing, washing, etc. Stimulation had no discernible effect on economic success rates. Economic success was reported for only half of the projects that included stimulation.

FUTURE PLANS

Operators' future plans were used as an additional gauge of the overall success of the technology. A total of 56% of all operators plan the same or increased future activity (Fig. 3g)(212957 bytes).

The categories of "same" and "increase" reflect a vote of confidence for horizontal technology in each particular application. In clastics, 60% of operators plan the same or increased levels of drilling activity in their fields. Only 50% of operators in carbonates responded similarly.

The industry's overall plans are likely to be more positive than indicated by these results. For example, an operator's plans for decreased future horizontal activity may reflect other factors not related to the success of this technology.

A drilled-up field may be slated for decreased activity in the future, even though horizontal technology was technically and economically successful.

RESERVES

An estimate was developed of the impact of horizontal technology on U.S. reserves. Operators were asked to quantify the increase in reserves in their own specific fields. Reserves increases were given as a percentage increase of current proven reserves.

On the U.S. survey, 47% of the responses listed some increase in reserves (Fig. 3i)(212957 bytes). The overall average increase is 8.7%. Extrapolation of this to the total U.S. oil reserves base results in an additional 2.3 billion bbl of reserves. In terms of incremental recovery, this translates to 0.5% OOIP.

U.S. clastic formations had an average increase in oil reserves of 8.4%. Clastic oil reserves total about 18 billion bbl; therefore, the increase would be equivalent to about 1.5 billion bbl. Reserve increases in carbonate formations had an average of 9.2%. Carbonate reservoir oil reserves in the U.S. total about 8 billion bbl. Thus, 0.74 billion bbl is the estimated addition to carbonate reserves.

Reserves increase percentages and corresponding oil volumes are summarized for U.S. reservoirs in Table 3 (9549 bytes).

About 30% of all horizontal projects indicated that the technology provided no increase in reserves. These data were evaluated to determine whether any of these projects were still considered economic successes even though reserves were not increased.

Of the 14 formations with 0% reserve increase, 13 (93%) were not economic successes. This suggests that an increase in reserves is important to the economic success of a horizontal program.

When lithology is considered, horizontal technology increases reserves more often in carbonate reservoirs. About 24% of carbonate operators reported no increase in reserves, compared to 33% of clastics operators.

CANADA

The pace of drilling horizontal wells in Canada has increased substantially. Canadian operators drilled over 900 wells in 1993, and activity in 1994 was even greater.

Fig. 3b(212957 bytes) illustrates the consistent increase of horizontal well technology applications in Canada over the last several years, along with a projection for 1994.

It is anticipated that the exponential growth seen in the late 1980s and early 1990s is not sustainable. A limit will soon be reached in the supply of appropriate rigs, trained personnel, specialized equipment, and capital. As a consequence, growth in horizontal drilling is projected to be less dramatic in 1994 and beyond.

Horizontal technology has been applied in more diverse formation types in Canada than in the U.S. There is no Canadian "Austin chalk," that is, a particular formation where the majority of activity is centered. About 55% of Canada's horizontal wells were drilled in Saskatchewan, 40% in Alberta, and 5% in British Columbia and Manitoba.

Questionnaires were sent to over 150 operators who have drilled horizontal wells in Canadian reservoirs. A total of 110 responses were returned, with multiple responses for several reservoirs. The 88 unique reservoirs described represent about 40% of total Canadian reservoirs with one or more horizontal wells.

LITHOLOGY

A breakdown of the distribution of horizontally exploited Canadian reservoirs by resource and lithology is presented in Fig. 5 (38157 bytes). These data are based on questionnaire responses and are assumed to be generally representative of the Canadian industry as a whole. As can be noted, a significant number of Canada's horizontal applications have been in heavy-oil reservoirs, which are considered separately from conventional light-oil clastics due to important differences in the economics and implementation of horizontal technology.

APPLICATIONS

The most common applications for horizontal technology in Canada include:

  • Minimizing water/gas coning (48% of all reservoirs)

  • Favorable economics (48%)

  • Intersecting fractures (27%).

Least-used applications from the choices given are: water drive (5%) and to avoid surface restrictions above the target zone (5%). Again, note that multiple responses cause the sum to be greater than 100%.

When lithology is considered, there are important differences in the types of horizontal applications. In Canadian light-oil clastic reservoirs, the most common applications are favorable economics (58%), followed by minimizing coning and low-permeability reservoirs (33% each) (Fig. 3d)(212957 bytes).

Canadian carbonate reservoirs are not dominated by applications in connecting fractures as in the U.S. In carbonates, the application listed most often is for minimizing coning (54%). The next most popular are in low-permeability reservoirs and in thin beds, both at just over 25%.

In heavy-oil reservoirs, horizontal wells most often serve to avoid/delay coning and because of favorable economics (52% each). As expected, EOR was another significant application for heavy oil at 41%. Thin beds and gravity drainage were the only other applications mentioned to any significant degree.

COSTS

Production and cost ratios reported for Canadian reservoirs generally are comparable to those for U.S. fields. The average horizontal/vertical production ratio for all Canadian horizontal wells is 4.1. The average cost ratio is 2.2 (Table 4)(11689 bytes).

When lithology is considered, light-oil clastics have tended to be more economically successful than carbonates. Heavy-oil applications report the highest benefit index.

SUCCESSES

Canadian operators were asked to judge their technical and economic success. As in the U.S., technical success has been achieved in almost all reservoir settings (Fig. 3f)(212957 bytes). Over 90% of light-oil clastic, carbonate, and heavy-oil horizontal projects have been technically successful.

When considering economic success, there has been more variation by resource type. Economic success rates in light-oil clastic reservoirs are very similar in the U.S. and Canada (59% and 58%).

Carbonate economic success has been more widespread in Canada than in the U.S. (79% vs. 45%, respectively). The economic success rate in Canadian heavy-oil reservoirs is 92%, significantly greater than other reservoir types in both Canada and the U.S.

FUTURE PLANS

Canadian horizontal drilling plans reflect significantly more optimism than was observed in the U.S. survey. In Canada, 75% of operators plan the same or increased activity levels (Fig. 3h)(212957 bytes).

Canadian light-oil clastics are the most positive group. In this group, 90% plan the same or increased levels of drilling activity in their fields. Positive responses were received from 70% of operators in carbonates and 74% in heavy oil.

RESERVES

Various publications address the impact of horizontal drilling on Canadian reserves. The most significant was prepared by the National Energy Board of Alberta, which details the potential impact of horizontal wells on reserves and supply.1 NEB calculated increases in reserves for most clastic and carbonate fields in Alberta and Saskatchewan. It estimated an overall average incremental recovery factor of 1.0% of OOIP, representing a 9.8% increase in reserves.

The present survey for Canada was compared with published values. Canadian operators indicated an increase of 9.5% for all formations (Fig. 3j)(212957 bytes). The largest group of responses came in the 1-5% range (39% overall), while 19% were in the range greater than 25% .

The average reserves increase for all Canadian reservoirs of 9.5% compares very favorably with NEB's value of 9.8%. Applied to the Canadian conventional resource base of about 12 billion cu m (75 billion bbl),1 this increase in recovered OOIP represents an additional 120 million cu m (0.75 billion bbl) in reserves as a result of horizontal technology across the Canadian industry.

ACKNOWLEDGMENTS

This survey of horizontal technology applications was supported by DOE Contract DE-AC22-93BC14861. Robert Knoll (H Tech Petroleum Consulting) and Selwyn Springer (Springer Consulting Services) were responsible for interfacing with Canadian operators, and performed much of the analysis of Canadian data.

REFERENCES

  1. National Energy Board, "Horizontal Oil Wells: Economics and Potential impact on Reserves and Supply of Canadian Conventional Oil," working document prepared by horizontal well committee of the National Energy Board, Alberta, June 18, 1993.

  2. "News Horizons," Popular Horizontal, January/March 1991.

  3. Aalund, L.R., and Rappold, K., "Horizontal drilling taps more oil in the Middle East," OGJ, June 21, 1993.
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