Despite the promise of energy independence, cheap oil, and widespread job creation, the American shale revolution has received its fair share of skepticism. Many disapprove of the environmental impact of new drilling techniques, while others fear that lower energy prices will prolong our use of fossil fuels. The most pragmatic concern about America’s energy resurgence, however, is related to its sustainability.

Shale's low permeability leads to higher decline rates. Image source: Schlumberger

The problem with shale wells is that production declines much more rapidly than with conventional wells. Hydraulic fracturing, a technique used to increase the flow of oil and gas from shale, creates an initial production spike, but the low permeability of shale means that this flow quickly trails off afterwards. The result is that many shale wells see decline rates upwards of 60% within their first year of production.

The Red Queen
So far, producers have been able to avoid this problem by drilling more wells. But the reality is that for shale to continue to drive growth in U.S. oil and gas production, decline rates need to be addressed from a long-term perspective. The issue isn’t necessarily that shale resources are running out -- the EIA estimates that U.S. shale holds 58 billion barrels of technically recoverable oil and 665 trillion cubic feet of natural gas -- but that it’s becoming infeasible for new wells alone to sustain growth in production as existing wells mature.

This conundrum has been described as the “Red Queen” effect, referencing the character in Lewis Carroll’s Through the Looking Glass who tells Alice, “it takes all the running you can do, to keep in the same place.” Producers are having to drill more and more wells just to sustain production, let alone grow it.

So is this the beginning of the end for the shale revolution? Probably not. Although unconventional wells peak early, there’s a long tail of stable production afterwards, potentially lasting for decades. Aside from drilling new wells to keep up with the decline curve, producers are finding more ways to flatten the curve and make the most of this “long tail.” As the number of mature wells grows, this will be crucial to keeping shale’s emerging roll in the energy narrative intact.

“It’s a priority to understand how to best explore and exploit low permeability and shale plays around the globe,” ConocoPhillips CTO Ram Shenoy says. “I expect we will mature our understanding of unconventional reservoirs to the same level as conventional reservoirs. This will require fundamental improvements in our understanding of hydrocarbon transport in shale rock at the nanoscale level and in our understanding of the geomechanics of shale reservoirs.”

Brains before brawn
Oil services firms such as Halliburton (NYSE:HAL), Schlumberger (NYSE:SLB), and Baker Hughes (NYSE:BHI) bear much of the responsibility for delivering productivity and efficiency gains, in both shale plays and maturing conventional wells. While much of the recent discussion around shale pertains to the difficulties posed by decline rates, relatively less attention has been paid to the methods being used by these companies to improve the economics of unconventional production.

One encouraging result of their efforts is that new shale wells are becoming more productive. While steep decline rates are certainly still in play and will become increasingly important as these new wells mature, achieving higher production in a well’s earlier years can boost its ultimate recovery. This also explains why even in the Bakken and Eagle Ford, where decline rates are some of the highest, producers are still seeing gains in overall productivity as new wells are drilled: 

Source: EIA

Why are new wells seeing higher productivity? Because shale is becoming more predictable. Producers can now use seismic imaging to determine where to drill and how to complete their wells – technology that oil services firms like Halliburton are perfecting. This allows producers to both choose the best drilling sites and squeeze more oil and gas out of the same sites. To put the potential of this technology in perspective, Halliburton’s CYPHER Seismic-to-Stimulation Service has improved production by an average of 20% in the North American basins where it has been tested.

And these practices can be applied to existing projects as well. In one Eagle Ford field, simply changing the spacing of fracturing stages to address the geological characteristics of the reservoir boosted average 3-month cumulative production by 50%.

The key to making shale work is using a scientific approach to integrate all available data, at every step in the process – in this case, knowledge really is power.

Can it last?
If we truly want to tap the full potential of our shale resources, maximizing our understanding of these plays is the first step. The only way to offset high decline rates and the complementary “Red Queen” effect is to translate our growing knowledge of shale to greater efficiency and the development of new technology.

If recent history has taught us anything, it’s that producers (and the companies that provide them support) can and will figure out a way to continue growing shale production. As long as oil and gas prices are high enough to keep the incentives in place, the technology to extract it will follow. In the end, the biggest threat to America’s energy resurgence isn’t that we can’t produce enough to meet our needs – it’s that there will be cheaper options elsewhere.