A Flexible Design Approach to Improve Economics of Shale Well Pads: A Case Study from the Appalachian Basin

Abstract

Abstract Unconventional oil and gas projects are long-term, capital-intensive investments with significant risks due to various unknowns. The main uncertainties include reserves, reservoir quality, expected production, and commodity prices. Operating companies need to make decisions at the start of the project to design wells/facilities that impact production and economics throughout the project life. The system may be severely constrained at the start of production and have excess capacity in late field life based on design decisions often taken at the beginning with limited information. A novel approach to improve economic returns from shale pads is presented here using a flexible design concept. A physics-based integrated model is coupled with an economics model to demonstrate the system via a field example from the Appalachian Basin. A typical pad in Appalachia has fixed capacity gas processing units (GPUs) installed for each well. The current design does not allow for expansion or reduction of processing capacity if the reservoir quality or commodity prices are different from expectations. A flexible design allows operators to redeploy processing capacity to other pads under favorable technical and market conditions (reservoir conditions and product prices), thus, decreasing average costs and increasing profitability. An integration platform was used to couple an economic model with a physics-based integrated production model consisting of a pad's reservoir, well and surface network. The coupled models were used to generate short-term forecasts (2-3 years). Scenarios were run on the integrated model based on defined uncertainties such as reservoir characteristics and economics. We evaluated two flexible options, rental GPU and in-house GPU augmentation which were compared with the current fixed design. The results demonstrate that flexible designs result in higher (>5%) net present values (NPVs) for the project compared to fixed designs. Also, the flexible designs reduce the economic risk if the future market and operating conditions turn out to be unfavorable.