Feature Article: Geology trumps technology, how improved technology is not enough to increase lifetime production of new wells in the Shaunavon Formation

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Release date: 2018-05-02

Steadily improving technology in the oil and gas sector means that newer tight oil wells should produce more than older tight oil wells, all else being equal. However, the Shaunavon Formation is an exception to the rule. While the newest tight oil wells in the Shaunavon are initially producing more oil than older wells, they’re expected to produce much less oil later in their lives. This results in recent wells that will produce less oil over their lifetimes than wells drilled ten years ago.

Source and Description

Source: IHS Markit with permission

Description: This map shows the location of the Shaunavon Field in southwest Saskatchewan. Wells are indicated by the green dots.

The Shaunavon Formation in southwest Saskatchewan has been producing conventional oil from vertical wells since the 1950s. Over the past 10 years, companies have been using horizontal drilling and multi-stage hydraulic fracturing to develop tight oil where reservoir quality is too poor to develop with conventional oil wells. These unconventional wells are drilled southwest of Swift Current in an area of about 2 000 km².

When production data is gathered and averaged by the years wells were drilled, peak production rates in 2007 are amongst the highest at 145 barrels per day (b/d). After 2007, peak rates fell until 2010, bottoming out at 94 b/d. Beginning in 2010, peak production per well increased until it reached 164 b/d in 2016, higher than in 2007. This is because, since 2010, technology steadily improved and companies fractured newer Shaunavon wells in increasingly more places. Newer wells produced more oil, at least in the short term, because they had more fractures to produce from.

Source and Description

Source: IHS Markit with permission

Description: This line graph shows the average annual decline curves for horizontal wells drilled into the Shaunavon Formation by year from 2007 to 2016. Curves for all years peak in the first 2 or 3 months of production before decreasing sharply over the next 18 months. After 18 months, rates decline at a much slower rate. Older wells tend to peak at lower rates than newer wells, but have higher rates of production after the first year. Production in 2007 peaked at 145 b/d per well in the first month of production, then decreased to 48 b/d after 12 months. Production in 2016 peaked higher at 164 b/d, however declined faster to reach 34 b/d after 12 months.

Peak production is only one way to look at well performance. Another is to look at the total amount that wells are expected to produce over their lifetimes, or their Estimated Ultimate Recoveries (EURs). Wells drilled in 2015 and 2016 have higher peak rates than other years, but their production declines much faster. This means that wells drilled in 2015 and 2016 could produce less oil over their lifetimes than wells drilled in prior years. The average well drilled in 2007 is expected to produce slightly over 100 000 barrels of oil. Meanwhile, a well drilled in 2016 is expected to produce just over 80 000 barrels of oil, 20% less.

Source and Description

Source: IHS Markit with permission

Description: This graph shows the average EUR by year in the Shaunavon Field. The year with the highest average EUR is 2007 with 100 653 barrels, subsequent years show an overall decrease to 78 920 barrels in 2012. In 2013 to the EUR increases to 87 831 barrels, but this falls back down to 69 622 barrels in 2014 which is the lowest value in the timeline. Both 2015 and 2016 show recovery with EUR’s of 79 355 barrels and 81 399 barrels, respectively.

Something is preventing improving technology from increasing the amount of oil Shaunavon wells will produce over their lives even though peak production rates have been increasing since 2010. A previous Feature Article about the Montney Formation discussed how companies first focus on areas with the best reservoir quality. Once these areas are fully drilled, companies must start drilling areas with lower reservoir quality. The main area of drilling in the Shaunavon Formation is about 2 000 km², which is small compared to other tight oil and tight gas plays in Canada. Companies likely drilled up their best reservoirs relatively early and, since then, have been drilling reservoirs that are increasingly poor.

Thus, because earlier wells are drilled into better reservoirs, their fractures are more easily replenished with oil from the formation and their long-term production is expected to be relatively high even though each well has fewer fractures to produce from. Because later Shaunavon wells are drilled into much worse reservoirs, their fractures are very poorly replenished with oil from the formation, which means their long-term production is expected to be relatively low even though they have more fractures to produce from. In other words, in this instance, geology is more important than technology when it comes to long-term production.

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