"Extremely Dramatic Decline Curves" Hallmark Of Horizontal Shale Drilling: No $ Margin For Error

[hatrack]

EDIT

Working on the Barnett Shale in its infancy, Smith learned a great deal about the feasibility of shale oil recovery. “Geologically the reserves are there, but the economics of these shale zones make it next to impossible to recover the deposits,” Smith said. The problem boils down to money, Smith said.

With drilling costs close to $1 million — factor in another half-million dollars for completion — there is virtually no margin for loss in unconventional drilling. The curve of shale drilling is another big problem, Smith said. Shale play reserves are typically very thin in comparison to conventional wells, with layers of oil tightly sandwiched between layers of shale formation.

Horizontal drilling of a shale play means the operator is going after the oil deposit from the side, which quickly draws the reserve away from the recovery point. The result is what Smith calls “an extremely dramatic decline curve.” Operators ultimately end up chasing the deposit sideways constantly, and the cost of drilling horizontally in pursuit of the ever-retreating reserve quickly surpasses the recovered oil return.

“Eventually horizontal drilling is suspended because operators reach a point where they are just burning cash.” Smith said. The Eagle Ford Shale, which is currently 85 percent declined, is a perfect example of the limitations associated with horizontal drilling, Smith said.

EDIT

http://lubbockonline.com/business/2013-02-02/oil-industry-insiders-divided-over-longevity-feasability-shale-play?v=1359873091#.URBjjPJ9TKd

[Arctic Dave]

1. Shale oil recovery is like trying to squeeze the last of moisture out of a rag.

Once it's done, it's done.

[Nihil]

2. Or hunting around on the floor ...

... for those last grains of the drug that will kill you ...