The Oil Drum post

When The Oil Drum blog ceases to exist, I will start to add a stream of regular content to the ContextEarth blog. The time frame for The Oil Drum termination is early September, which puts it at next week.

The staff at The Oil Drum were gracious enough to allow me to post a final article on my thoughts and an example of the Oil Shock Model in action. The name of the post is Modeling Bakken Oil Production: The Oil Shock Model Explained.

I used the Dynamic Context Server to generate the Bakken production model

For modeling the Bakken ala the convolution-based shock model, the inputs are two time-series.
1. The forced input is the time series of newly available wells.
2. The response input is the time series of expected decline from a single well.
The convolution function takes the forced input and applies the response input and generates the expected aggregate oil production over time.

8 thoughts on “The Oil Drum post

  1. See this link for comments


    Calhoun on September 2, 2013 at 12:20 pm said:

    Does your graph mean that after 714 stays the same? In other words, for every well abandoned a new one is brought online? Since the key to continued production is the number of new wells brought online combined with the productivity of those wells (which I assume will be a declining function), have you ever thought about modeling those factors?

    btw, thanks for all your work. I’m a fan.

    Yes, the graph does mean that after 714 the number stays the same. Because of the data provided by the NoDak DMR, this also means that the number of new wells has to equal the number of old wells that are becoming “shut-in” or abandoned.

    In other words, this is the response to a cessation of Red Queen acceleration. The steady-state of replenishing wells one-for-one (new with abandoned) will cause a new level less than half the current Red Queen level.

    Rune Likvern shows what happens with a simple ramp of new wells with no acceleration


  2. Hi WHT,

    I have a new post on the bakken up on my blog, updating the scenarios based on new information about TRR for North Dakota which is likely to be about 8 BBO rather than the 5.5 BBO I had used previously, I also include some economic assumptions similar to Rune Likvern’s work, with an annual discount rate of 12.5 % used to calculate the NPV over 20 years, EIA reference scenario used for prices (from AEO 2013), real well costs falling at 8 % per year to $7 Million (May 2013 $) from $9 Million in Jan 2013, and transport costs of $9/barrel ($3 less than the figure Rune Likvern uses, I assume these will fall to this level by 2015).

    I am not sure about how to post an image here but a link to an image is below:

    Note that ERR=economically recoverable resources (which takes profitability into account, wells are not drilled if profit expectations are close to zero or negative) and TRR= technically recoverable resources. A full explanation can be found at my blog (link below):

    Dennis Coyne


  3. Hi WHT,

    I modified my model to compare with yours. I used a hybrid hyperbolic, OU diffusion model, hyperbolic as posted elsewhere on this blog over first 6 years, and a new OU diffusion model with a cumulative total for the hybrid of about 300 kb. I ended the simulation at 48000 total wells after 281 months with 150 wells per month added from Aug 2013, my model compares fairly well with yours at the end of the simulation the daily output is 1.3 MMb/d for your smodel and 1.4 MMb/d for mine, which is expected because your average well has a lower EUR od 275 kb.
    I assumed no decrease in average well EUR in my simulation to compare with yours. From 1953 to 2073 my model suggests 14.5 BBO if there are no economic constraints and no decrease in well EUR over the next 23 years. In reality there will be both decreases in average well EUR as the sweet spots get drilled up (Rockman suggests on the order of 20 to 40 % annual decreases in new well EUR at maximum, and economic constraints as these decreases kick in, URR for the North Dakota Bakken/Three Forks is likely to be about half of 14.5 Gb or between 7 and 8 Gb.

    I imagine it would be easy to add decreases in well productivity to your model, I just decrease the average well profile by 0.04 % each month starting in Jan 2014 and stop at 1.08 % decrease per month for a maximum 12.2 % decrease per year in new well EUR. This results in a TRR of 8.5 Gb from 1953 to 2073. Economic considerations would bring the ERR (economically recoverable resource) to between 7 and 8 Gb.



    • OU Diffusion Model has
      C0=15,000,000, D=4.23E-06, S=0.009907

      Also I made a mistake in the post above. EUR decreases to a maximum of 0.72 % per month or 8.3 % per year. (The higher numbers were based on an earlier OU Model with a cumulative about 350 kb, rather than the recent model with EUR of 300 kb.



    • DC,
      Yes, very good agreement. At 150 new rigs per month, the OU model will asymptotically reach 1.4 million barrels a day but no higher.

      We can add a decelerating or accelerating term to individual well productivity, but it would be even easier to apply this as a slowdown in new wells.

      I think I will add a short top-level post describing the simulation


  4. Pingback: Bakken Projections | context/Earth

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