In the early days of the boom I had strong opinions on the "decline rate." In the big picture, my thoughts were completely wrong, but I learned a lot in the process. Having said that, I wouldn't change a thing that I wrote about decline rates at the beginning. Things have changed.
The collapse of oil prices has killed off any appetite that the oil industry had for megaprojects that cost tens of billions of dollars. With scarce resources, oil companies have shifted their focus, pouring resources into short-cycle projects, which often means shale drilling.
The Reuters analysis found that wells in the Permian Basin in West Texas had decline rates of 18 percent between their point of peak production and the fourth month of operation. That decline rate may seem substantial when compared to conventional wells, but it is way down from 2012 when Permian wells suffered from a 31 percent decline rate over the same period.
More staggering were the decline rates in early stages of the shale revolution a decade ago, which saw output decline by upwards of 90 percent in just a few months.
A more modest drop off in output will put a lot of marginal wells into profitable territory.
It also means that shale drillers can cycle cash more quickly.
"You can have cash flow without having to expend a lot of capital,” Mukul Sharma, a professor of petroleum engineering at the University of Texas at Austin.Much more at the link.
Drillers seem to be able to slow decline rates by keeping up high surface pressure, which slows initial production but extends the life of the well, ultimately leading to more overall output. Years ago, companies did the reverse – squeezing out as much oil as possible in the first few weeks, which ended up leading to sharp decline rates and less oil recovered in total.
In short, shale companies continue to tweak drilling practices, which should improve well economics. That will ensure that fracking shale wells continues to see more interest from oil companies than the megaprojects of years past.