Nwaobi, Uladike V.; (2020) Economic Appraisal of Undeveloped Unconventional Gas: The Bowland United Kingdom Case. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

The estimation of production potential provides the foundation for commercial viability appraisal of natural resources. Due to uncertainty around production assessment approaches in the unconventional petroleum production field, an appropriate production estimation methodology which addresses the requisite uncertainty at the planning stage is required to guide energy policy and planning. This study proposes applying the numerical unconventional production estimation method which relies on geological parameters, (pressure, porosity, permeability, compressibility, viscosity and the formation volume factor) as well as the rock extractive index (a measure of technical efficiency) and develops a model that estimates the appropriate values for four of the parameters required based on a depth correlation matrix while a stochastic process guides the other parameters based on known data range. The developed model is integrated with a numerical model to estimate gas production potential and developed framework is eventually applied to undeveloped shale gas wells located in the Bowland shale, central Britain. The results account for below ground uncertainty and heterogeneity of wells. A sensitivity analysis is applied to consider the relative impacts of individual parameters on production potential. The estimated daily initial gas production rate ranges from 15,000scf to 319,000scf while estimated recovery over 12 years is approximately 1.1bscf in the reference case for wells examined. In relation to cost, A cost analysis is executed, which guides the identification of cost parameters. This study identifies key cost parameters and then develop a non-static model by examining the trends over the years as well as proposes a work break down cost estimation equation. In addition, a methodology in estimating the costs of developing unconventional gas resources based on the production technique is proposed. In addition, the sources of uncertainty in shale gas development cost estimation are examined and identified. It is found that there is an insignificant correlation of cost parameters with oil prices suggest that additional factors need to be analysed. These empirical model and results suggest that the market oil price impact on shale gas production cost although important but restrained by other factors which may include financial revenue hedging programs aimed at securing higher revenues or endogenous efficiency gains which direct production strategy in low oil prices situations. The results from the learning curve and innovation study shows that drilling technology has driven cost reduction and increased lateral lengths while the hydraulic fracturing technology has relied on more material use volumes. The additional demand in stimulation sand and other production materials as well as their disposal can lead to exogenous cost implications. Other expected exogenous cost implications are environmental, regulation and fiscal regimes which can aid or deter technology adoption in different regions. The overarching economic appraisal methodology is based on integration of the depth dependent correlation matrix, bottom up cost estimation and the undeveloped unconventional gas development decision models. Additionally, other input and output parameter scenarios are modelled as well as the impact of carbon emission regulation and mitigation.

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