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Well economics across ten tiers in low and high Btu (British thermal unit) areas, Barnett Shale, Texas

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  • Gülen, Gürcan
  • Browning, John
  • Ikonnikova, Svetlana
  • Tinker, Scott W.

Abstract

We evaluate the economics of drilling new wells in the Barnett Shale, Fort Worth Basin, Texas. The analysis is the most granular public study to date because it is based on 10 productivity tiers and it treats low and high Btu (British thermal unit) segments of the play differently. The study is unique in its use of transient linear drainage production profiles that match the physics of the system and fit the production history in the Barnett very well. Average low Btu wells in the top two tiers are viable at $4/MMBtu, whereas average high Btu wells in the same tiers are economic at $2/MMBtu. Dry gas wells are the most sensitive to fluctuations in the price of natural gas whereas high Btu wells are also sensitive to the prices of oil and natural gas liquids. There is a distribution of productivity within each tier, with better wells requiring a much lower price to be viable than the average well. The granular subdivision of productivity, low versus high Btu, and intra-tier quality variation help to explain historical drilling patterns and also allow us to predict future development patterns in the field accurately as demonstrated for 2011 and 2012 in Browning et al. [4].

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  • Gülen, Gürcan & Browning, John & Ikonnikova, Svetlana & Tinker, Scott W., 2013. "Well economics across ten tiers in low and high Btu (British thermal unit) areas, Barnett Shale, Texas," Energy, Elsevier, vol. 60(C), pages 302-315.
    • Handle: RePEc:eee:energy:v:60:y:2013:i:c:p:302-315
    DOI: 10.1016/j.energy.2013.07.041
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    References listed on IDEAS

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    1. Kaiser, Mark J., 2012. "Profitability assessment of Haynesville shale gas wells," Energy, Elsevier, vol. 38(1), pages 315-330.
    2. McGlade, Christophe & Speirs, Jamie & Sorrell, Steve, 2013. "Unconventional gas – A review of regional and global resource estimates," Energy, Elsevier, vol. 55(C), pages 571-584.
    3. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    4. Kaiser, Mark J., 2012. "Modeling the horizontal well severance tax exemption in Louisiana," Energy, Elsevier, vol. 40(1), pages 410-427.
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    Citations

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    Cited by:

    1. Saussay, Aurélien, 2018. "Can the US shale revolution be duplicated in continental Europe? An economic analysis of European shale gas resources," Energy Economics, Elsevier, vol. 69(C), pages 295-306.
    2. Philipp M. Richter, 2015. "From Boom to Bust? A Critical Look at US Shale Gas Projections," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    3. Svetlana Ikonnikova and Gürcan Gülen, 2015. "Impact of low prices on shale gas production strategies," The Energy Journal, International Association for Energy Economics, vol. 0(Adelman S).
    4. Yuan, Jiehui & Luo, Dongkun & Xia, Liangyu & Feng, Lianyong, 2015. "Policy recommendations to promote shale gas development in China based on a technical and economic evaluation," Energy Policy, Elsevier, vol. 85(C), pages 194-206.
    5. Ikonnikova, Svetlana & Gülen, Gürcan & Browning, John & Tinker, Scott W., 2015. "Profitability of shale gas drilling: A case study of the Fayetteville shale play," Energy, Elsevier, vol. 81(C), pages 382-393.
    6. Sheridan Few & Ajay Gambhir & Tamaryn Napp & Adam Hawkes & Stephane Mangeon & Dan Bernie & Jason Lowe, 2017. "The Impact of Shale Gas on the Cost and Feasibility of Meeting Climate Targets—A Global Energy System Model Analysis and an Exploration of Uncertainties," Energies, MDPI, vol. 10(2), pages 1-22, January.
    7. Shakya, Shishir & Li, Bingxin & Etienne, Xiaoli, 2022. "Shale revolution, oil and gas prices, and drilling activities in the United States," Energy Economics, Elsevier, vol. 108(C).
    8. Chen, Yan & Xu, Jintao, 2018. "The Shale Gas Boom in the US: Productivity Shocks and Price Responsiveness," EfD Discussion Paper 18-17, Environment for Development, University of Gothenburg.
    9. Chi Kong Chyong and David M. Reiner, 2015. "Economics and Politics of Shale Gas in Europe," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    10. Apergis, Nicholas & Ewing, Bradley T. & Payne, James E., 2016. "A time series analysis of oil production, rig count and crude oil price: Evidence from six U.S. oil producing regions," Energy, Elsevier, vol. 97(C), pages 339-349.
    11. Tunstall, Thomas, 2015. "Iterative Bass Model forecasts for unconventional oil production in the Eagle Ford Shale," Energy, Elsevier, vol. 93(P1), pages 580-588.
    12. Yuan, Jiehui & Luo, Dongkun & Feng, Lianyong, 2015. "A review of the technical and economic evaluation techniques for shale gas development," Applied Energy, Elsevier, vol. 148(C), pages 49-65.
    13. Kemal Sarıca & Wallace E. Tyner, 2016. "Economic Impacts of Increased U.S. Exports of Natural Gas: An Energy System Perspective," Energies, MDPI, vol. 9(6), pages 1-16, May.
    14. Tan, Siah Hong & Barton, Paul I., 2015. "Optimal dynamic allocation of mobile plants to monetize associated or stranded natural gas, part I: Bakken shale play case study," Energy, Elsevier, vol. 93(P2), pages 1581-1594.

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