Economic appraisal of shale gas reservoirs

Natural gas produced from shale formations has increased rapidly in the past decade altering the oil and gas industry markets remarkably. The use of horizontal drilling and hydraulic fracturing has allowed previously unrecoverable shale gas to be extracted. Shale gas development is more expensive compared to conventional developments and as such, understanding the economic feasibility is of greater importance in successfully developing the resource. Using the estimated ultimate recoverable expressed in terms of P10, P50, and P90 from 2751 horizontal well production data (all starting production from 2008) from the Barnett shale, a discounted cash flow economic model (MS- Excel based) was used to quantify the effect of finding and development costs (F&DC) and gas prices on the economic viability of horizontal wells within four out of five basins (Strawn Basin, Ouachita Folded Belt, Forth-worth Syncline and Bendarch Basin) in the Barnett shale. The investment hurdle in the economic model was a rate return of 20% and a payback period of 5 years or less. This paper helps determine the percentage of wells within basins in the Barnett shale that would be economically viable at various F&DC and gas prices subject to satisfying the prescribed investment hurdle.