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Chapter 11
Introduction
To identify, select, and design the
optimum stimulation treatment for a
well under a given set of conditions,
engineers must perform a detailed
economic analysis of all available
options. This analysis generally
consists of three steps:
identifying the stimulation
treatment options and estimating the costs for each treatment
option
predicting the incremental
hydrocarbon production rates
and ultimate recoveries
attributable to each stimulation
treatment option and estimating
the resulting revenue streams
selecting the optimum stimulation treatment where the net
income (revenues minus costs)
maximizes economic returns
The optimum stimulation treatment is
based on the net increase in value that
the treatment is expected to achieve as
compared to the unstimulated wells
production. If the difference between
the additional production from the
treatment and the treatment costs
meets or exceeds company-specific
economic criteria, the stimulation
treatment is warranted. The stimulation treatment that meets or exceeds
the economic and production goal by
the greatest amount will be the
optimum treatment.
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Economic
Optimization
of Stimulation
Treatments
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NPV Calculation
When evaluating a horizontal well stimulation program
on the basis of economics, we must maximize the ROI or
minimize the total cost for the project. Since revenues
from the well will be realized over time, they must be
discounted to time zero, which is usually the time when
the job is actually executed. With the following equation,
the net present value (NPV) for a specific treatment is
calculated from the treatment and treatment-related costs
as well as the present value of anticipated revenues and
future expenses attributed to the treatment:
N
NPV =
n =1
pn Rn
C
( 1 + i )n
(11.1)
where
N = total number of periods considered
pn = probability of realizing net revenues Rn in
period n
Rn = net revenues for period n attributed to the
treatment
i = discount or interest rate per period
C = total treatment and treatment-related expenses
incurred at time 0
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Net Revenues
The net revenues for any period resulting from the
stimulation treatment are the difference between the
revenues from the sale of the additional production
resulting from the treatment and any additional expenses
associated with the treatment (such as additional disposal
or operating costs). In situations where future production
revenues are uncertain, net revenues for the period should
be multiplied by pn, a factor less than unity that represents
the probability of obtaining the net revenue in that period.
Net revenues are defined by
Treatment Costs
The treatment and treatment-related costs (C) are
associated with the stimulation treatment being evaluated.
They include both fixed and variable costs. Examples of
fixed costs are location preparation, rig costs, tubular
rentals, perforating, logging, testing, mobilization
charges, basic equipment charges, special equipment
charges, technical support, and some transportation
charges. Variable costs include the cost of the stimulation
fluid, additives, proppant (in hydraulic fracturing treatments), and chemicals as well as pumping charges, tank
rentals, disposal charges, and some transportation and
hauling charges.
Increasing treatment volumes will usually result in
increased costs and production. The added cost of
increasing the treatment size has to be justified by the
increase in expected future revenues, and it has to satisfy
applicable economic criteria. In treatments where fixed
costs are much greater than variable costs, the greatest
return will be realized by the treatment that maximizes
production. In treatments where variable costs signifi-
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Additional Considerations
When considering how to optimize completions and
stimulation treatments in horizontal or deviated wells, the
engineer must also consider partial treatments.4,5 When
stimulating a well, one generally assumes that the stimulation fluid can be distributed at will, and that it will
completely remove any damage present. This result is
usually not the case, and it should be considered an ideal
situation, perhaps useful only in sandstone reservoirs and,
by default, in openhole or slotted-liner completions.
Engineers can adapt the NPV calculations to select and
optimize completion and stimulation designs for partial
completions. First, they must calculate the revenues for
the well (fully stimulated in every perforated segment).
They then compare revenues to those for the unstimulated
well where the whole length of the horizontal portion is
perforated. The incremental revenues are balanced against
the stimulation and completion costs. The NPV for partial
completions and stimulations (NPVpc) can be calculated
with the following equations:
NPV pc =
n =1
(11.3)
where
Rn = Rk ,n , stim Rn ,unstim
k =1
Ck
204
M
Rn
( 1 + i )n k =1 k
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8,700 psi
Wellbore radius
0.4 ft
Formation thickness
280 ft
Wellbore length
2,700 ft
2,700 ft
Porosity
12%
0.01 md
0.01 md
Fracture half-length
215 ft
Fracture conductivity
430 md-ft
Skin factor
Wellhead temperature
100F
Bottomhole temperature
285F
Figure 11.1Schematic showing drainage area configuration for horizontal well completed with transverse hydraulic
fractures.
-1
52.25E-6 psi
0.03378 cp
0.00315 RB/STB
Gas saturation
59%
Water saturation
41%
Chapter 11
Horizontal Well
om000549
Transverse Fracture
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60
50
5 Fractures
40
30
3 Fractures
20
2 Fractures
Open Hole
om000550
10
1 Fracture
0
0
10
15
20
25
60
50
40
Number of
Transverse Fractures
8
6
30
5
4
20
om000552
10
1
0
0
10
15
20
25
206
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Number of Fractures
8
7
6
5
12
10
6
2
4
1
om000553
0
0
10
20
15
25
18.00
16.00
Discount Rate
10%
15%
20%
14.00
12.00
10.00
8.00
6.00
4.00
0.00
0
om000554
2.00
Figure 11.5Net present value for different numbers of transverse hydraulic fractures.
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4.00
Discount Rate
10%
15%
20%
3.00
2.00
om000555
1.00
0.00
0
8.00
Discount Rate
10%
15%
20%
Benefit/Cost Ratio
6.00
4.00
om000556
2.00
0.00
0
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References
1. Gidley, J.L., Holditch, S.A., Nierode, D.E.,Veatch Jr.,
R.W.: Chapter 17: Economics of Fracturing, Recent
Advances in Hydraulic Fracturing, Textbook Society of Petroleum Engineers Monograph Series,
1989, pp. 357-375.
2. Economides, M.J., Nolte, K.G.: Reservoir Stimulation, Textbook - Prentice Hall, Englewood Cliffs, NJ,
07632, Second Edition, 1989, pp.8-15 and 8-16.
3. Economides, M.J., Frick, T.P.: Optimization of
Horizontal Well Matrix Stimulation Treatments,
SPEPF, May 1994, pp. 93-99 (SPE 22334).
4. Frick, T.P., Economides, M.J.: A Case Study for the
Matrix Stimulation of a Horizontal Well, paper
SPE 23806 presented at the 1992 SPE International
Symposium on Formation Damage, Lafayette, LA,
Feb. 26-27.
5. Retnanto, A., Economides, M.J., Ehlig-Economides,
C.A., Frick, T.P.: Optimization of the Performance
of Partially Completed Horizontal Wells, paper
SPE 37492 presented at the 1997 SPE Production
Operations Symposium, Oklahoma City, OK,
Mar. 9-11.
6. Soliman, M.Y., Hunt, J.L., Azari, M.: Fracturing
Horizontal Wells in Gas Reservoirs, paper
SPE 35260 presented at the 1996 SPE Gas Technology Symposium, Calgary, Canada, Apr. 28 - May 1.
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Chapter 11