- November 25, 2009
- Posted by: Art Berman
- Category: The Petroleum Truth Report
Anonymous says that there is no data to show because we only disagree about how to project existing data. That is partly true, but some of the rebuttals to our work dispute the reliability of Texas Railroad Commission production data for the Barnett Shale play. They claim that they have “other data” that somehow leads them to different conclusions, but will not show it.
That’s a really interesting tactic that I remember from the elementary school playground as “I know something you don’t know”.
I think that questioning Railroad Commission data is a red herring since production taxes and royalty payments are based on what operators report to the Commission. Those who claim that this data is no good imply that operators are improperly reporting production to the state. I would very much like people that doubt the reliability of Railroad Commission data take this issue to one of the Commissioners.
Beyond the “data” issue is the larger question of how the operators and financial advisory companies arrive at such high reserves. I can reproduce these high reserves by using absurd hyperbolic exponent b values, no terminal decline rate, or no economic limit.
When I use group vs. individual well-decline methods and b factors somewhat greater than 1.0, I can get to higher average EURs (more detail on this in a few days) than what I have published, though these reserves are still marginally commercial. Since I assume the integrity of the people who claim reserves that are 50-100% more than my most generous projections, I would like to understand how they reach those reserves.
In addition, we have always cautioned that without pressure data that only operators have, we may be too pessimistic in our EUR projections. Decline-curve analysis is only a part of the EUR evaluation process. Other factors include calculating a drainage area and running reservoir simulations to match production history with reservoir properties. These require data that we cannot get.
Operators are not required to report water production to the state of Texas. Water disposal can be a considerable cost, and the onset of water production may result in catastrophic production rate decline. This is data that we cannot get.
Some readers point out the current decline rates are much lower that we predict in some cases. This may be true because of the frequent workovers and re-fracs done in the out years of many shale years. In order to evaluate the result of lower decline rates due to human intervention, we need to know the cost. This is data that we cannot get.
Some operators claim that natural gas liquids provide uplift to their Barnett Shale economics. NGLs are not reported to the state because they are separated during gas treatment and processing in a plant. Only operators know the volume of NGLs and the gas shrinkage that results from their extraction. This is data that we cannot get.
While it is true that much of the EUR debate focuses on how to project future production from exiting data, it is hardly the entire story. A respectable EUR does not necessarily mean that the well is commercial.