For those who may be wondering what the future of the Eagle Ford shale is, Rosetta Resources may have given us a good indication of what is to come in a recent report. Rosetta is experimenting with well spacing of as little as 50 acres on the Gates Ranch in Webb county Texas. There on 29,960 acres, the company expects to drill 441 wells as infill drilling continues for years. Rosetta Resources estimates that there will be over 25 years of rig time on the Gates Ranch alone. Below is a map showing the end result of infill drilling on the Gates Ranch. Each black line represents the footprint of a horizontal well. Now try to imagine this many wells across the entire play and you can get an idea of how long drilling in the Eagle Ford shale will continue.
EOG Resources has already made a request to the Texas Railroad Commission for 80 acre spacing in the Eagleville field. If that was applied to the 550,000 acres they hold in the oil and condensate windows we could ultimately see 6,875 wells drilled by EOG alone.
Number Of Ultimate Eagle Ford Shale Wells Grossly Underestimated
In a study of the economic impact of the Eagle Ford shale published in Feb, 2011 by the University Of Texas At San Antonio’s Institute For Economic Development, it was estimated that 4,890 wells would be drilled in the Eagle Ford shale between 2010 and 2020. The study estimated that 305 oil wells and 102 gas wells would be drilled in 2011. If we are to believe company reports, EOG Resources alone plans to drill 250 wells this year, Hess (25), Petrohawk (85), Rosetta Resources (25), ConocoPhillips (150), Chesapeake (undisclosed but probably around (200) with 17 rigs running), SM Energy (70), Murphy Oil (29). That’s an estimated 834 Eagle Ford shale wells to be drilled in 2011, and that doesn’t include Marathon Oil, Apache and a half dozen other companies who are active in the play. The UTSA study has vastly underestimated the number of Eagle Ford shale wells which will be drilled due to a simple mathematical error. The study based the number of future Eagle Ford shale wells on the following calculation:
Ln(Drilling)=1.61+E*Ln(HenryHubprice). E= Price Elasticity Of Drilling = 1.
(Don’t ask me how the formula works. I’m just reprinting it here from the published study.)
The study used the Henry Hub price of natural gas as the basis of drilling activity. The Eagle Ford shale is now an oil play, with natural gas drilling in the dry gas window only being done to hold leases. The formula may apply to the dry gas window, but definitely not to the rest of the play. Wells in the volatile oil window have proven to be far more productive than was imagined even a few months ago.
Had the study been based on the price of oil instead of natural gas, it might have been more accurate. Rather than 305 wells we should see somewhere around 1000 new Eagle Ford shale oil and gas wells drilled in 2011.
How Much Oil Will The Eagle Ford Shale Produce?
Another thing that the UTSA study severely underestimated was Eagle Ford shale oil production. Bentek, an energy consulting firm, reported in August of 2011 that Eagle Ford output had more than doubled in the last two months to 160,000 barrels per day and was on track to grow fivefold by 2015. The current rate of production would equal 58 million barrels a year. Five times that, what Bentek forecasts for five years down the line, would be 292 million barrels of oil a year from the Eagle Ford shale. That’s quite a bit more than the 8.7 million barrels the UTSA’s study forecast for 2011, and about 242 million barrels more than what it predicted for 2015. As each month goes by, Eagle Ford shale production figures continue to blow all of the previous forecasts out of the water. Just wait until the network of pipelines currently being constructed in the Eagle Ford shale area is completed and see what happens to daily production figures! Takeaway ability is currently hampering production and some wells are on restrictive chokes waiting for pipelines to be ready.
The Texas Railroad Commission has already issued 2,301 permits for Eagle Ford shale wells (as of August 1, 2011.) Where this play goes from 2011 is going to be mind boggling. The price of oil doesn’t appear to be going lower in the long term due to demand by China and the rest of the developing world. By the end of it all, a wide swath of South Texas’s underground landscape is going to look like the illustration of the Gates Ranch above.
Update: In 2013 EOG Resources will testing dry natural gas injection, along with reduced well spacing to increase the recovery factor of Eagle Ford shale well. For more details see Eagle Ford Shale Gas Injection