Economic Optimization of Horizontal-Well

Completions in Unconventional Reservoirs

T his paper presents methods

for production forecasting that
give reasonable post-treatment
predictions that have been found to
be useful for economic planning. The
proposed methodology provides an
economically viable plan for optimizing
lateral length, fracture spacing, and
treatment design. The methodology
focuses on the post-simulation effective
reservoir volume. Results show that
increasing apparent fracture length
rarely affects long-term recovery.
Likewise, adding more fractures
within the same reservoir volume may
increase early-time production rate and
decline rate without contacting more
reservoir volume or adding to long-
term recovery.
Poor vertical permeability and
fracture continuity. Flow downward, cocurrent
at any rate, assisted by gravity.
Very low pressure gradients
away from well. Lower water saturation, better
recovery and gas permeability.
Results: limited flowing Possible water coning around
length and height. well causing further damage?
Flow upward, cocurrent at
high rates, countercurrent at
low rates, hindered by gravity.
Higher water saturation, poor load
recovery, and low gas permeability.
Fig. 1—Diagram of a vertical fracture in a horizontal well showing effects of
convergent flow and gravity-driven fluid segregation.

sign. However, core permeabilities do beliefs is used by the industry to ex-

Introduction not represent the overall reservoir flow plain the observed production behavior
Industrywide, there appear to be several capacities, something that diagnostic in many models. In other words, belief
basic assumptions that govern expecta- fracture injection tests (DFITs) or pro- in one requires belief in the other. How-
tions about recovery generated through duction analysis does achieve by mea- ever, field observations and many years
horizontal-well stimulation in unconven- suring the integrated-system permea- of laboratory work strongly support the
tional reservoirs. Depending on the basic bility, including any secondary fracture conclusion that effective fracture length
belief system applied, dramatically dif- enhancement, including existing natural is much smaller than the created or im-
ferent, even diametrically opposed, rec- fractures and shear and extensional frac- aged length and that fracture cleanup is
ommendations result. The first belief is ture enhancement developed during the driven by the reservoir flow capacity. In
that core-derived permeability values, stimulation process. very-low-permeability and low-pressure
usually from crushed samples, represent The assumption that crushed-core- systems, the effective fracture length is
overall reservoir flow capacity accurate- derived matrix permeability describes limited by cleanup (flowing length) rath-
ly. This assumption frequently controls the system flow capacity is generally er than by conductivity.
post-treatment expectations regarding accompanied by the industry’s second
treatment size, spacing of perforation belief, that created or seismically im- Cleanup Mechanisms
clusters (fracture-initiation points), or aged fracture length represents the ef- and Fracture Effectiveness
number of treatment stages and most fective flowing length of the hydraulic Fig. 1 shows the expected configuration
significant aspects of completion de- fractures. The combination of these two of a transverse fracture in a horizontal
well. At shutdown, the fracture is full of
fracturing fluid, generally water, assum-
This article, written by Special Publications Editor Adam Wilson, contains highlights
ing that a slickwater treatment has been
of paper SPE 168612, “Economic Optimization of Horizontal-Well Completions in
conducted. When drawdown is applied
Unconventional Reservoirs,” by R.D. Barree, SPE, Barree & Associates; S.A. Cox, SPE, to the system, gas or oil enters the frac-
PetroEdge Energy III; J.L. Miskimins, SPE, and J.V. Gilbert, SPE, Barree & Associates; ture and moves to the wellbore, where
and M.W. Conway, SPE, Core Laboratories, prepared for the 2014 SPE Hydraulic it can be produced. Hydrocarbon (HC)
Fracturing Technology Conference, The Woodlands, Texas, USA, 4–6 February. The entering the upper section of the frac-
paper has not been peer reviewed. ture, above the lateral, flows downward

For a limited time, the complete paper is free to SPE members at www.spe.org/jpt.

92 JPT • DECEMBER 2014

 THERE ARE
A LOT OF
WAYS TO
MAKE HOLES.
Fig. 2—Commonly assumed linear-flow geometry for parallel transverse
fractures. Fractures are yellow, and the horizontal well is white.
along with the fracturing fluid, assist-
ed by gravity drainage. Flow of HC and
water are cocurrent, and water is held up
only by relative permeability and capil-
lary forces. Final residual water satura-
tion in this fracture limb is expected to
be low, and the ultimate HC permeability
will be high. HC entering the lower limb
of the fracture must overcome the capil-
lary entry pressure and will then begin to
move at saturation greater than the criti-
cal saturation of the nonwetting phase in
the proppant pack. If the HC migrates at
low saturation, its permeability will be
small and the water relative permeability
will remain high. Therefore, liquid dis-
placement from the lower fracture limb is
expected to be inefficient, which results
in very low load recovery and poor effec-
tive HC conductivity.
Experiments were conducted to in-
vestigate this phenomenon. These exper-
iments consisted of vertical upward and
downward cocurrent and countercurrent
flow over a range of potential gradients
and velocities. Load recovery, pack sat-
uration distribution, and effective con-
ductivity have been determined for vari-
ous conditions. The experimental results
confirmed the expected adverse produc-
ing condition of the lower limb of a verti-
cal fracture.
Decline-Curve vs.
Rate-Transient Analysis
With the understanding that effective
fracture length in unconventional reser-
voirs may be limited, a method must be
developed to forecast production decline
and derive economic value of a given
completion design. The methods cur-
rently available and most widely used in-
clude decline-curve analysis (DCA) and
www.perf.com
rate-transient analysis (RTA). A method
must then be developed to predict the
performance of a horizontal well with
multiple interfering fractures so the frac-
ture size, fracture spacing, and overall
well design can be evaluated.
Methods used to determine esti-
mated ultimate recovery and in-place
reserves are based on conventional
reservoir-performance assumptions.
In unconventional reservoirs, these
assumptions may not be valid or may
only be valid so late in the reservoir
life as to be useless. To be used effec-
tively for prediction of future perfor-
mance, the decline-curve model must
assume that the current flow regime
will continue through the forecast-
ing period. The decline-curve extrapo-
lation also requires that the reservoir
be in pseudosteady-state or boundary-
dominated flow, producing at capacity,
and producing at constant bottomhole
flowing pressure. In general, uncon-
ventional reservoirs are not producing
under pseudosteady-state conditions
and may not adhere to the remaining
assumptions. For permeability in the
range of several hundred nanodarcies,
the decline-curve extrapolation will not
be valid until after approximately 100
years of production. As a result, only
RTA, which can allow for variable flow-
ing pressure and transient flow regimes,
holds some hope for a valid result.
Application of the
Linear-Flow Model
A popular and commonly used model
used by many companies for forecast-
ing the performance of a multiple-
fractured horizontal well is the
linear-flow model proposed by Arevalo-
JPT • DECEMBER 2014
Villagran et al. in their 2001 paper “Some
History Cases of Long-Term Linear Flow
in Tight Gas Wells.” Several mechanisms
ONLY ONE COMPANY
are presented that can lead to appar-
ently linear-flow behavior, including
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infinite-conductivity fractures extending
to the drainage-area boundary, aniso-
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tropic reservoir-system permeability, or
linear deposition channels. While all of
INCREASE PRODUCTION.
these are possible, for some reason, the We have more data from natural formations
industry has, in general, taken the first than all the industry combined, with
mechanism (infinite-conductivity frac- over 5,000 shots in natural formation cores.
tures with no inflow beyond the frac-
ture tips) as the reason for the presumed
linear-flow signature observed in some
production analyses. This is probably the
least-realistic and -acceptable cause for
any linear-flow signature. ® Reactive® perforating charges
The common application of this that deliver unmatched fow
technique is based on two important and ®
and injectivity performance in
the formation.
limiting assumptions: (1) that flow is lin-
ear and normal to the face of induced
hydraulic fractures, the fractures have
high conductivity, and no production is
derived from beyond the tips of the frac-
tures; (2) that a straight line on the plot
of pseudopressure drawdown divided by
flow rate vs. equivalent flow time always
indicates a linear-flow regime.
Fig. 2 shows the assumed flow geo- Premium perforating charges
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metry for this model. The model is pop- engineered to deliver best-in-
ular because it predicts reservoir perme- class penetration and entry
ability values that are consistent with hole diameter.
crushed-core permeability measure-
ments in shale and predicts that pro-
duction can be improved significantly
with much larger fracture treatments.
The assumption that fracture conduc-
tivity is not a limiting factor also drives
stimulation choices to slickwater frac-
tures with low concentrations of small
proppants. These assumptions, especial- Perforating charges designed
ly the required fracture length to sup- ™
and manufactured using
port production from such low perme- technology that delivers
abilities, are totally inconsistent with industry-standard results at
field observations and the more than 25 a low price point.
years of laboratory work conducted by
the Stim-Lab Proppant Consortium to
understand flow and cleanup of prop-
pant packs under realistic field produc-
ing conditions. Everything known about
multiphase flow in propped fractures
strongly indicates that the assumed flow ®
geometry is not physically possible. The
assumptions of the model lead to incor-
rect interpretations of production per-
formance and ineffective stimulation
and development planning.
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JPT • DECEMBER 2014

 Registration is
This paper proposes a different
now open! model, which assumes a reservoir en-
hanced permeability consistent with
DFIT results and a fracture length con-
sistent with all the physics currently un-
derstood about fracture cleanup and
conductivity. In this case, the pressure
transients from adjacent fractures will
begin to interfere early in the produc-
ing life. As the drawdown areas coalesce,
a linear drainage pattern forms, with
flow from the reservoir to the combined
fractures and lateral. In this case, the as-
sumed linear-flow period represents the
formation linear flow rather than the
fracture-face linear-flow regime.
Suggested Method
for Determining Optimum
Fracture Size and Spacing
On the basis of the evidence that the
production from a system of interfer-
ing fractures on a lateral well can be pre-
dicted with available methods, once the
average reservoir and fracture proper-
ties are defined, it is possible to develop
a consistent methodology to optimize
­horizontal-well-treatment design. The
method is to describe statistically res-
ervoir kh (product of permeability and
thickness), drainage area, aspect ratio,
and effective fracture length for histori-
cal wells on the basis of DFITs, produc-
tion analysis, or history matching with
an appropriate simulator. Once these pa-
SPE Digital Energy rameters have been fixed, or described
Conference and over a statistical distribution in case the
method is applied to Monte Carlo analy-
Exhibition sis, then the production from a lateral
with any number of similar fractures
Exchanging Ideas on Digital
can be predicted. This requires that the
Energy Challenges, Opportunities, following assumptions can be made: All
and Solutions fractures will behave similarly; system
permeability can be determined from a
3–5 March 2015 properly designed, conducted, and ana-
The Woodlands, Texas, USA lyzed DFIT; drainage area can be esti-
mated from observed production data;
The Waterway Marriott Hotel
and effective fracture length can be esti-
www.spe.org/go/regDEC mated from available reservoir produc-
ing conditions and experimentally sup-
ported fracture-cleanup data.
Once the best fracture design
has been determined for a single frac-
ture on a vertical well, one should run
production-decline forecasts for the
­ al reservoir systems. JPT
With the support of the SPE Digital Energy
Technical Section and the SPE Gulf Coast Section
specified lateral length and a range of
transverse-fracture spacing, accounting
for overlap of fracture drainage areas
and time to interference of adjacent frac-
tures. Next, one computes the net pres-
ent value (NPV) for 5 years of production,
with an assumed product price and dis-
count factor, including the drilling and
completion cost for each case to identify
the highest-value completion design.
The biggest uncertainty in this
analysis is the expected drainage area
that each fracture can contact. Geolog-
ic complexity, stratigraphic permeabil-
ity boundaries, grain-size variability, clay
content, wettability, and other factors
not discernible from log, core, or seismic
data can create limited drainage com-
partments within a resource volume. A
practical effective economic limit to the
useful drainage area of a fracture can
be estimated by use of the radius-of-
investigation equation and the system
(DFIT) permeability.
Once system permeability and static
reservoir pressure are defined from di-
rect field measurements, preferably DFIT
analysis, the NPV of production derived
from various propped-fracture lengths,
and therefore job costs, can be deter-
mined by a production model tied to an
effective-fracture-cleanup simulation.
When the incremental cost of the
additional fractures and the increased
decline rate are incorporated in the
NPV calculations, a different picture can
emerge. Considering the rapid changes in
drilling and completion costs, it may be
more effective to examine the discount-
ed present value of production using a
required internal rate of return, or dis-
count rate, to determine optimum com-
pletion design.
The optimum number of fractures
will obviously depend on gas price and
treatment costs, and possibly econom-
ics of scale, allowing a decreased cost per
fracture with more-efficient multistage-
completion designs. It is also worth not-
ing that the maximum NPV is generated
in approximately 5 years of production.
In general, comparing NPV after 5 years
is the best way to identify the optimum
completion value for most unconvention-
JPT • DECEMBER 2014