Appropriately Characterizing Uncertainty in Estimated Ultimate Recovery for Unconventional Type Wells

Abstract

Abstract Building type wells is arguably the most important exercise in decision making for unconventional resource plays. The type well and its associated uncertainty are often the largest drivers behind whether a project will be economic, or not. However, appropriately characterizing type well uncertainty is not trivial, and is often overlooked. Recently, new methods have been developed to help estimate type well uncertainty; these methods include statistical aggregation, which reflects the idea that if more information is available, the type well uncertainty band should be narrower. Unfortunately, aggregation is often misapplied to Estimated Ultimate Recovery (EUR) estimates, ignoring the inherent uncertainty and bias in those estimates, which results in a type well uncertainty band that is too narrow. This paper demonstrates how to account for uncertainty and bias in EUR forecasts with a simple, practical Monte Carlo model. To develop proper type wells, it is critical to distinguish between measured data and estimated data. The type well should have a narrower band of uncertainty where information is measured and tangible (initial production rates) compared to where it is estimated and intangible (EUR).This paper presents a workflow to easily capture this dynamic between initial production rates and EUR in the context of type wells. The concepts of the workflow are first illustrated with a simple analogy of estimating the mass of a bag of marbles; next, the concepts are applied to build example type wells for a real unconventional play. A key implication of this work is that collecting new information (i.e. new well production data) does not always narrow the uncertainty band for type well EUR. The EUR uncertainty band depends not only on the number of wells with production data, but also on the P90-P10 ranges of individual well forecasts, bias of the evaluator,amount of production data, and consistency in well characteristics. Rules of thumb are developed to help integrate these factors into the final type well workflow and uncertainty assessment.