American Oil and Gas Reporter - November 2018 - 40

Industry In Motion
termine the average break-even oil price
for each productivity tier. Expressed in
terms of oil prices, these tiers represent
price tranches.
The model estimates future well completions based on past history and considers three different drill models, depending on drilling aggressiveness (conservative, moderate or aggressive) and
oil prices. Indeed, future drilling rates
and future oil prices are uncertain. An
important aspect of this effort is to show
how these variables affect basin performance.
The model does not directly consider
infrastructure or equipment limitations
such as pipeline capacity or rig availability.
Instead, the model treats these factors
implicitly through the drilling rate. If
pipeline bottlenecks occur, for example,
presumably the drilling rate will decelerate
(the term drilling rate more accurately
refers to completion rate, since wells that
are drilled but uncompleted are not included in the completion rate).
Model calculations were carried out
for three probability scenarios: likely
minimum, most likely and likely maximum. These probability scenarios depend
on risk and the aggressiveness of drilling.
Two attractive features of this model

are its relative ease of construction and relatively low data requirements. For these
and other reasons, the model is a good precursor to more elaborate modeling efforts.
Model Validation
Results of the unconventional model
were validated by using it to predict the
basin's actual unconventional oil production
between 2005 and 2017. The results of
this "hindcasting" exercise are illustrated
in Figure 3 for a "most-likely" case with a
future oil price of $70/bbl, moderate
drilling, and a risk factor of 80 percent.
The solid curves show the model's prediction while the dots show the actual history. This graphic is a composite of two
separate figures. The lower figure shows
the oil producing rate, cumulative produced
oil (recovery), and cumulative horizontal
well completions. All oil volumes are expressed in stock tank units. The upper
figure shows the annual average WTI oil
price and annual well completions.
Hindcasting pertains to only the past
results in the bottom figure, and not forecast future results. The past results include
curves and data points. The curves represent model results and the circles (data
points) represent actual results. Actual
data are reported for the annual average

TABLE 1
Permian Tight Oil ERR and Total Number of Wells Required
Minimum
Peak Oil Price
($/bbl)

ERR
(billion bbl)

70
100

Most-Likely

Maximum

Wells

ERR
(billion bbl)

Wells

ERR
(billion bbl)

Wells

99,000

132,000

165,000

238,000

318,000

Risk Factor

60%

80%

397,000
100%

production rate and annual well completion
count. The past model production rate is
calculated and based on the actual prevailing oil price. It is not simply a curve
through the data, although it may appear
as such.
As the figure shows, the model and
actual producing rates agree very well.
The good agreement provides confidence
that the model is reasonable. Because
the hindcasting exercise covered a period
of time that included a dramatic price
collapse beginning in late 2014 and at
least a partial rebound in 2017, it is considered a rigorous test of the model.
Under the most-likely case, the model
predicts a peak tight oil production rate
of 4.5 MMbbl/d and a recoverable resource
of 36 billion barrels, requiring 132,000
horizontal well completions. The oil rate
increase begins to significantly decelerate
by 2023-25, although tight oil production
still exceeds 1 MMbbl/d in 2043. These
results are combined with the conventional
model to yield an entire basin forecast.
Forecast Results
Figure 4 shows the Permian Basin
forecast for all three cases: most-likely
for $70/bbl, most-likely for $100/bbl,
and likely maximum for $100/bbl. Each
case corresponds to a risk factor of 80
percent. The most-likely cases correspond
to moderate drilling, and the likely maximum case corresponds to aggressive
drilling. These three cases yield economically recoverable unconventional resources (ERR) of 36 billion, 70 billion
and 71 billion barrels of oil, respectively,
and peak oil rates of 5.1 MMbbl/d, 5.6
MMbbl/d, and 6.9 MMbbl/d, respectively.

TABLE 2
Minimum

Most Likely

Maximum

Peak Oil Price
($/bbl)

Peak Rate
(MMbbl/d)

Peak Annual
New Drills

Peak Rate
(MMbbl/d)

Peak Annual
New Drills

Peak Rate
(MMbbl/d)

Unconventional

3.1

4,300

4.5

6,200*

5.4

7,500*

Unconventional

100

3.6

6,200

5.0

8,700

6.5

11,200

Unconventional

130

4.3

8,350

6.4

12,500

8.5

Source

Conventional

0.59

0.55

Total Permian

3.7

5.1

Drill Model
Notes:

16,700
1

0.51
6.0
B

* Model C enhanced.
1
Approximate conventional oil producing rate corresponding to the peak unconventional producing rate.

40 THE AMERICAN OIL & GAS REPORTER

Peak Annual
New Drills

American Oil and Gas Reporter - November 2018

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