Shale’s doubters point to the faster decline rates on horizontally drilled and fractured wells bored into shale compared with conventional wells drilled into more-permeable reservoirs to suggest the replacement problem is much worse for unconventional oil and gas plays.
But there are plenty of reasons to think the focus on decline rates is misplaced and is unlikely to constrain North American oil and gas output in the next decade.
First, oil and gas producers have learned to drill and fracture wells much faster, using mass production techniques borrowed from manufacturing, so the same number of rigs and crews can drill many more wells than before.
Second, the skeptics focus too much on the decline rate rather than the total amount of oil and gas recovered from a well over its lifetime, which is more relevant to the sustainability of the shale revolution.
The relationship between initial production (IP), the decline rate (DR), and the estimated ultimate recovery (EUR) is subject to tremendous uncertainty. It varies significantly from play to play, county to county and even well to well.
But in general, producers want oil and gas wells with a large EUR and high IP, because that means they receive more revenue overall, and more of it in the first few months after the well is completed rather than having to wait for years.
Wells cost millions of dollars to drill and fracture, and all the costs must be paid up front, either by the producer using their own funds or with borrowed money. The faster the oil and gas are produced, the faster the costs are covered and the more profitable the well will be.