Choking Back Gas Wells Signals Change in Shale-Field Operations

HOUSTON (Dow Jones)--Natural gas producers are choking back production from wells in the Haynesville Shale, a prolific natural gas-bearing rock formation in Texas and Louisiana, as a way of boosting the overall efficiency and life span of those wells.

The technique represents an important shift in the exploitation of gas from the dense sedimentary rock formations known as shales. Frenzied development flooded the natural gas market last year with, shale gas and the recession cut deeply into natural gas demand, pushing prices to a 7 1/2-year low last September. Now more measured growth from shales could help mitigate future gas gluts and allow for more orderly development of these gas-rich assets.

The progression could help support a recent upswing in prices, which have more than doubled from last year's lows due, in part, to the prospect of hot summer weather, which increases demand for gas-fired electricity, and a busy storm season, which increases the potential of supply disruptions.

Natural gas producers such as Petrohawk Energy Corp. (HK) and Devon Energy Corp. (DVN) have begun limiting initial production from their Haynesville wells. Petrohawk has cut its average initial production rate in half to about nine million cubic feet of natural gas a day. The Houston-based energy company will constrain production on all 110 operated wells it drills in the Haynesville shale this year, ultimately increasing the life and output of each well. However, the company hasn't yet provided an indication of how much more gas each well will eventually produce.

"Production management practices are one of the efficiencies to be gained in the development of an asset, and it's the one we are focused on at this time," Joan Dunlap, vice president of investor relations at Petrohawk, said in an interview.

Shale gas wells can produce huge amounts of gas initially, but the wells decline quickly. In some cases, the rate of production can fall by 80% or more in the first year. The rapid decline rates require producers to drill more wells to keep up the pace of production. Shale wells involve drilling into the formation and then sideways through the rock. A mixture of water, sand and chemicals is then injected into the well under high pressure--breaking the rock apart and releasing the gas trapped within.

By choking back the well, producers are extending the life of those fractures, which will close more rapidly when gas is produced at higher rates.Shales are a relatively new source of natural gas, and big initial production rates were commonplace as these companies attempted to understand the formation and demonstrate the worth of their assets to investors.

Greg Kelleher, senior vice president of Devon Energy Corp's (DVN) southern division, said the company has been experimenting with producing gas at lower initial rates as part of evolving practices at its East Texas Haynesville acreage.

"We are trying to optimize the reservoir," Kelleher said, noting that the company is trying to come up with the best "economic case" for the Haynesville shale. Devon will drill as many as 30 shale wells in the Haynesville area this year.

Companies have used other techniques to slow production from these fields such as drilling wells without completing them so they can bring production online at a later date and, perhaps, at better commodity prices.

"Producers are starting to think about using these producing assets as a surrogate for storage," said Rusty Braziel, managing director for BENTEK Energy, which tracks energy-market data. Braziel notes that these techniques have an added advantage of allowing companies to manage through volatile swings in natural gas prices.

-By Jason Womack, Dow Jones Newswires; 713-547-9201;

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What, pray tell, about Chesapeake?
Not sure why that's here.

Chesapeake has used the drilling wells without completing them so they can bring production online at a later date approach on a well in 34-17N-12.

And I thought it was going to make for a good Christmas check. Oh well, I can wait.
JHH, several operators including EXCO, EnCana, Chesapeake, Goodrich, Comstock, etc have not adopted the Petrohawk approach.
What is the Shell approach?
Jack Blake hopes it's to pinch back the chokes.
Jack has worked offshore for 30 years and he sees how quickly the wells there are killed by pulling them so hard. It seems the oil companies want the money NOW. They can't take it easy and get more money in the long run.
Big long lasting royalty checks for all was the rallying cry of the day!
Jack, I believe Shell like EnCana is not taking the Petrohawk approach.

Offshore wells will "sand up" is produced too hard due to the unconsolidated nature of the GOM sandstone formations and tendency to produce water with the oil or gas. This is not an issue for the Haynesville Shale.
The Shell wells reported to date are all on tight chokes, so they may be adopting the same approach as Petrohawk.
What Shell wells are on tight chokes? Please post the relevant well info. I can not find any Shell wells on tight chokes. Maybe I am missing something....
I was looking at: Dicoese of Shreveport (#238761) which is on 8/64 choke;
Lafitte (#238826) on a 15/64 choke; and Sustainable (#239246) on 8/64 choke.

Les, according to SONRIS, the McCoy 14 and McLemore are both being operated by Encana. Am I misreading this?
qwert, you are not misreading. Shell & EnCana keep switching and I still had them listed under Shell because they drilled both wells.

Some of the EnCana & Shell wells placed on production last year were restricted in flow due to downstream capacity issues so I am looking for either some more recent data or statement by Shell.
I've tried to keep up with Shell, but it's not easy -- well information is very limited on SONRIS for Shell wells, and the company presentations hardly even acknowledge the Haynesville. You are usually ahead of SONRIS on a lot of this, and I appreciate your contributions to this site.
Qwert, here are two recent results for Shell which reflect the same approach as EnCana - not Petrohawk.

Shell, Mary McCoy 14 #H1 Well, Serial #240330, S14-T13N-R10W, Red River Parish, 23236 Mcfd, 26/64" Choke, 7980 psi Flowing Pressure
Shell, McLemore 7 #H1 Well, Serial #240249, S7-T14N-R9W, Red River Parish, 24152 Mcfd, 26/64" Choke, 7900 psi Flowing Pressure


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