It's Time To Talk About the 'D' Word

Here is a good chart of 2007-2015 HZ wells drilled in the Delaware Basin. You can click the little thingy upper right to enlarge. This is the oldest data set of HZ shale oil wells in the Permian as things did not start boomin' out there until 2015, when other people's money start raining down from heaven.

These first wells were mostly Wolfcamp benches and by 2014 the Bone Spring was being evaluated. They were short laterals, mostly, and the frac learning curve was just beginning. The sector had not delineated its sweet spots yet.

By the end of 2022 these 4,870 wells had declined approximately 84% in seven years and averaged 19 BOPD, mostly condensate, 900 MCFPD gas and over 100 BWPD. GOR of this data set rose from a little over 3 in 2016 to a little under 5 by 2022.

For the record, that decline rate is actually way better than today's wells being completed that decline 84% in a little over 2 years.

This chart is a good example of how depletion occurs in shale oil wells, in gas depletion mudstone. The shale oil media does not like to talk about depletion, it just focuses on growth.

But now that the Permian Basin as a whole, and the Delaware Basin in particular, has peaked and likely won't be coming back... short of another deluge of other people's money, its time to begin discussing depletion, or what happens next. It is physically not possible to keep drilling one $8.5 MM dollar Bone Springs 2 well after another forever in what amounts to a small area in four to five counties in New Mexico and Texas. I know that is hard to accept but its reality.

Depletion is not happy stuff so you will likely only hear about it here.

In this 2007-2015 data set wells appear to be entering the door to bubble point in 2015. GOR begins to increase, oil production declines and a few months later associated gas falls with oil. Above, look how associated gas production from these tight oil wells has accelerating decline rates at year 7.

If I could see this same data set today, GOR would have reversed and be going down. In other words as oil declines, gas begins tos decline later. Think of it as a closed system temporary juiced up with induced energy from a frac that eventually all poops out.

If this chart at the very top of the post looks like this model description of a gas depletion mechanism of tight shale stimulated reservoir volumes (SRV'), or that imaginary radius around a horizontal lateral goosed with hydraulic frac'ing, below, you are absolutely correct. 2007-2015 HZ wells drilled in the Delaware Basin, by 2022, were deep into Stage 4 death and on their way to Hospice Care. 19 BOPD and over 100 BWPD is less than 3.5 years from economic limits (at $75 oil prices) and the 'ol cement tombstone.

Below is the same thing happening in Saudi America, the place where Exxon just paid 60 plus billion dollars for Pioneer, including Pioneers long term debt. Associated gas is declining in what appears to be possible bubble point moment in the Midland Basin, mainly because of Midland County, where Pioneers well productivity was on the express elevator down at the Exxon-Pioner acquisition closing. Sheffied is trout fishing in New Mexico these days. Smart fella.

“We’ve observed that decline curves, meaning the rate at which production falls over time, are getting steeper as well density increases. Summed up, the industry’s treadmill is speeding up and this will make production growth more difficult than it was in the past,” Gregoris, a research analyst with Enverus said.

Got Gas?

Lot's today, not much tomorrow. The hoopla about always abundant, infinite gas supplies in America is a lie.

In the chart on the left note that most natural gas production in the U.S. before 2007 came from conventional sources and new, tight gas plays like that of the Appalachain Basin. Then, beginning 2014, associated gas from tight oil wells enters the picture and annualized decline rates begin to steepen, not insigifcantly.

Today most U.S. gas production is associated with shale and declines 25% per year and accelerating.

Don't buy into the gas abundance crap from tight oil basins; gas lags oil decline and does not decline as quickly as liquids do, but it does decline. Depending on the size of the SRV being drained along a horizontal lateral, it can deplete fairly quickly. Be weary of the push by the Permian tight oil sector to build more pipe and more LNG export facilities. The pay back time on stuff like that can often be 15-20 years and in 20 years this shale oil thing, including is gas, will be long gone. The people that say differently don't understand how shale depletes.

I'd read this, above, by clicking on it. I don't believe usable associated gas production from shale oil wells will not be as abundant as this article implies. This is a Hart publication and they are in the business of cheerleading.

AI and a transition to EV's will require a tremendous amount of electricty. Natural gas is the answer. Which makes the estimated associated gas volumes of 345 BCF flared gas in all U.S. tight oil basins since 2013 (EIA) very stupid, and very low, in my opinion. The number is likely 30% more than that, including venting. So, a half trillion, wasted, I'd say.

Now the shale oil sector is on a mission from God to export associated gas where they can make more money selling it in Europe. It seems to be a matter of flaring it, or exporting it.

Pressure depletion of tight, impermeable mudstone, or shaley carbonates, because of drilling wells too close together, is a stupid way to deplete a resource play. The American oil and gas industry has done it again and again over the past 120 years and it knows better. The great East Texas Field (conventional Woodbine) was developed with over 40,000 wells, it has since been proven UR would have been more with only 17,000 wells.

The U.S. is the greatest industrialized nation the world has ever known, with more gas gathering pipe in the ground than any other country in the world. Yet it is ranked number 4 in the world for flaring associated gas, behind Russia, Iran and Iraq.

183,000 HZ Tight Oil Wells Have Been Drilled In the U.S. Since 2007

Depletion of the last of our hydrocarbon resources in America is sitting on our collective faces; we need to start talking about what happens next and make a plan.