The Role of Pilot Projects in the Development of Unconventional Resources

Abstract

Abstract This paper addresses the challenges that sub-surface and asset managers face when evaluating shale and tight gas developments during the E&A stage of a project, of having limited confidence in the production predictions, and consequently the potential revenue stream, whilst needing to quantify the sub-surface uncertainties through the commitment of a large number of wells—and costs—to assess and develop the resource. Conventional field developments rely upon both well production tools and dynamic reservoir models to estimate the production from development wells through the life of the field. In sharp contrast, the development of unconventional resources, in practice, is less reliant on these models as they currently lack the underlying physics and functionality to model the additional complexity associated with unconventional resources. Additionally, much of the required input data for these models (such as the desorption isotherms, the hydraulic fracture geometry and performance as well as the natural fracture geometries and conductivities) are absent particularly during early appraisal and development. The approach commonly used to reduce the uncertainty of these developments at the evaluation stage is a modification of the stage-gate process, through the inclusion of structured pilot projects. This provides a commercial basis for full field developments in the absence of reliable ‘class A’ production models. The paper also considers key technical uncertainties for shale gas and tight gas developments which can be assessed through pilot projects, in order to quickly evaluate the viability of a development: Of primary importance in these unconventional resources is the absence of a significant natural permeability and lateral and vertical heterogeneity, the economic consequences of which affect the methods by which these resources are assessed and developed. Sub-surface and project uncertainties that may impact the viability of developments are discussed including; water and fluid management and environmental impact assessments. Data gathering and monitoring and surveillance requirements are reviewed based on current technology in the context of reducing project and development uncertainties. The paper describes the approaches through which the production potential for an unconventional resource is evaluated through a multi-well commitment, while limiting the risk and cost exposure for the operating company.