Journally Speaking: Reality meets the type curve

June 6, 2022

“No one is coming to help.” This is what I told my friend who was bemoaning the $75 it took to fill her tank. “But they are making a gajillian dollars off oil right now!” she exclaimed. “Yes,” I replied, “but they lost a gajillian-plus dollars over the past 6 years and Wall Street wants its money back.”

The war in Ukraine is putting tremendous pressure on production to replace lost Russian oil, but investors, inflation, labor constraints, and supply-chain bottlenecks are exerting more than equal pressure to slow drilling. Pioneer Natural Resources Co. chief executive officer Scott Sheffield, for example, says that US oil output will rise only moderately, maybe by only 600,000 b/d this year.1

Although US rig count is up 270 rigs from last year, the pace has not increased since the war began. Refracs and EOR are options to increase production beyond drilling, but these techniques are also not free, and executives will have to determine where best to apply constrained resources to maximize production. Huff and puff, gas flooding, and waterflooding are well-established in areas where they work. They do not work in all areas. Surfactant application, either mixed into fracturing fluids for increased primary recovery or injected into existing wells for secondary recovery, is increasing in popularity (see July 4, 2022’s OGJ Permian Operations special for more information).

The wells are going to need all the help they can get. Unconventional shale wells decline rapidly. Everyone knows this, but the rate of decline is generally underappreciated and not discussed much outside of analysts and investors. You certainly won’t get much on the subject out of operators.

Justin Hayes from Bedrock Energy Partners lays out limitations and oversimplifications of the “typical” unconventional type curve used to estimate decline, and these limitations usually bias reserves and late-time production to the optimistic side.2 Other analysts have since chimed in, and it can get personal. As Hayes put it “If you ask them… investors will tell you a simple answer: The unconventional business destroyed way too much capital and lied too much through the type curves.”

Scott LaPierre, who was a geoscience advisor for Pioneer, published short articles on LinkedIn analyzing published long-term shale well production data. He shows where production hits a proverbial wall, and that this tends to happen much faster than a “typical” unconventional type curve would suggest. These shorts have been fleshed out into a complete article on page 32.

Colloquially, this production wall is known as “bubble-point death,” and it came up in an unrelated conversation I had with an industry executive. I was describing differences in stimulated reservoir volume (SRV) between two fracturing techniques, and he stopped me and said “I shut down whenever someone mentions SRV. We only care about headspace; the gap between initial reservoir pressure and bubble-point pressure. If the gap is high, we get a lot of oil, if it’s low, we don’t.” From this viewpoint, quality of completion, spacing, well length, etc. are all secondary concerns.

Bubble point wasn’t mentioned once in my 2 days at a recent industry conference. The attendees were professionals in the unconventional world working at the highest level, and it simply wasn’t on their radar. And why would it be? They are tasked with reducing well costs and increasing initial production, not extending well life. One hopes late-term production will soon be one of their targets.

  1. Hampton, Liz, “Pioneer Natural CEO Sheffield says oil growth forecasts too high,” Reuters, May 5, 2022.
  2. Haynes, Justin, “Spacing Ourselves to Death,” Journal of Petroleum Technology, Sept. 21, 2021.