Death of Shale Postponed… Again

Guest “oils well that ends well ” by David Middleton

The Red Chinese coronavirus has led to a lot of wishful thinking on the part of “journalists” over the past few months…

Shale May Not Recover From Pandemic
by Nick Cunningham | July 15, 2020

The U.S. oil industry may have already peaked, with an all-time high in production reached just a few months ago.

The U.S. shale boom was already slowing down heading into 2020. The global pandemic and macroeconomic hit will leave permanent scars, from which shale drilling will be unlikely to recover.

[…]

The Fuse

Setting aside the fact that Nick Cunningham is perhaps the most ridicule-worthy regular contributor to OilPrice.com, there was genuine concern that production would not recover from the unprecedented shut-in (~1 million bbl/d) of wells since April.

Reservoir Commentary: Potential Implications of Long-Term Shut-Ins on Reservoir
SPE Reservoir Advisory Committee (RAC) | 28 May 2020

Orientation

From a completions, production, and facilities perspective, there are significant, and potentially devastating, effects for the long-term shut-ins of wells. Everything we leave in the well and the surface facilities will be subject to corrosion, deterioration, and other chemical/mechanical effects. Perforations and the well itself may become plugged and deformed and the pumps and bottomhole assemblies may be rendered dysfunctional due to the settlement of sand and other debris/contaminants. Moreover, scale buildup and wax and asphaltene precipitation in and around the wellbore are well-known potential problems during shut-ins.

The oil and gas industry has a very long history of well surveillance, well maintenance, and well remediation—but as an induction, we have not had any circumstances on the scale of the current situation. Simply put, we may not be able to bring these wells back on line without workovers and, in some case, restimulation. Furthermore, recompletions, restimulations, chemical treatments, workovers, etc. may not be viable solutions in many cases, particularly for poorly (and very poorly) performing wells, of which there will be many. The impact on supply chains may be/will be challenging in regards to the material, expertise, and timing to complete efforts for restimulation. These facts are indisputable, and have been recently documented in a JPT article by King and Garduno (2020) and in an SPE Live interview of George King by David Gibson (2020).

The purpose of this commentary is to address the consequences of long-term well shut-ins from the reservoir-performance perspective. It is also important to emphasize that this question has more critical implications—and far more unknowns and uncertainties—for unconventional wells than those for conventional wells. Therefore, while we will comment on the impact of long-term shut-ins for conventional reservoirs, we mostly focus on unconventionals in this article. The goal of this article is to engage the technical community in an effort to capture experience and expectations, as well as to provide guidance to the industry on issues and opportunities that may arise from large-scale shut-ins of wells on multiple scales (single well to multiwell designs), in particular for unconventional reservoirs.

[…]

Society of Petroleum Engineers

In the Gulf of Mexico, conventional reservoirs are often temporarily shut-in for mechanical, weather and/or economic reasons. There has been little evidence of reservoir damage from these shut-ins and the wells often come back on at higher production rates than prior to being shut-in. This is due to stabilization of the fluid contacts and/or re-pressurization of the reservoir. But, there were little, if any, historical data on the effects of a massive shut-in of unconventional reservoirs, until now (H/T to CTM)…

A Happy Ending for Shale Shut-Ins
Stephen Rassenfoss, JPT Emerging Technology Senior Editor | 18 August 2020

Nearly all the shut-in unconventional US wells will be back in production in September, according to a report from Rystad Energy.

Based on early reports the wells are producing at about the level they were before the shut-in, plus a bit extra after operators open them up.

“Nearly all operators said they did not face any issues in bringing volumes back on line as per schedule, as they had already worked on issues such as maintaining reservoir pressure and well integrity even before they began moderating output or shutting in wells,” said Veronika Akulinitseva, vice president, North American Shale and Upstream for Rystad.

While there was talk about shut-ins reducing production, the opposite has often been the case.

“When operators shut in those wells in April–May, the downhole pressure started building, and when the wells are coming back on line now, operators are seeing short periods of increased oil productivity [and] also marginally lower gas/oil ratios in some cases,” Akulinitseva said. Based on the limited data the gains could be 10–15% for a few days up to a couple weeks.

The operator talking about the subject has been EOG, which discussed the added output it calls “flush production” during its second-quarter investor call.

[…]

Society of Petroleum Engineers

While overall production will decline this year due to the drop in drilling activity, almost all of the curtailed production is expected to be back online by September.

Figure 1. US onshore curtailed oil production. Society of Petroleum Engineers

And it appears that the shut-ins did not adversely affect production rates.

Figure 2. Decline curves unaffected by shut-ins. Society of Petroleum Engineers

And, as an added bonus, we get another smack-down of “financial observers” opining on reservoir engineering…

“They would have done better if they had not shut them in, in terms of cumulative oil production;” said John Thompson, the president of the unconventional reservoir training firm Saga Wisdom.

At the time those decisions were made, maximizing oil production was not the goal. Prices then were flirting with zero and oil demand was so low it was hard to find buyers or storage space. Since then prices recovered surprisingly fast, which has speeded the return of those shut-in wells.

What is not surprising to Thompson are the well results. Based on a petroleum engineering career spent modeling thousands of unconventional wells, many of which had been shut in, these results are in line with what he would have expected.

Despite the “hyperbole” from some financial observers, “what we are seeing here is completely representative of wells in these kinds of plays,” Thompson said.

Society of Petroleum Engineers

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August 19, 2020 at 08:47PM

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