shaleprofile + 242 October 27, 2023 There’s been a lot of talk about Gas-Oil Ratio (GOR) in the Permian. But GOR in the Permian has been VERY stable compared to the other unconventional plays, rising only 29% there vs. 164% in the Williston or 74% in the DJ. What’s going on, and what does this mean for supply outlook? Wind back the clock 10 years, and you’ll find the Permian producing just over 3 MCF/bbl, compared to just under 4 mcf/bbl today. Unconventional oil wells naturally produce comparatively more gas to oil as they get older, so we should expect the aggregate GOR of a basin to rise with time as its wells become, on average, older. The question for rising GORs, then, is what explains the steeper rise in the other basins? Peeling it back, we see three very different causes. The Williston has had the most dramatic rise of all the major plays, so we’ll start there. Across the Bakken-Three Forks play, newer wells produce more gas than older wells. With thinner reservoirs and higher permeability, the Bakken is at higher risk of pressure depletion effects causing a higher fraction of gas production (perhaps due to dropping below the bubble point locally on fracture surfaces?). Let’s call this phenomenon the “secular rise”. In the DJ, GOR has risen 74% in 10 years, but the GOR pattern has a very distinct “double peak” with big ramps during activity lulls in 2015-16 and 2020-2021. DJ wells, compared to the other plays have by far the biggest per-well GOR increase over time. Despite starting off around 2 MCF/bbl, DJ wells ramp up to an average of 10 MCF/bbl by year 3. Without new wells coming online, the older wells dominate the GOR. Let’s call this the “average well age effect”. In the Eagle Ford, GOR has risen “only” 50% over 10 years, but much of that increase has been since 2020. Here, the driving factor has been “changing development focus areas”, with operators drilling more in the gassier parts of the play like Webb County. It’s a logical response to higher gas prices in one of the few plays to offer the full spectrum of fluid windows. Looking forward in the Permian, what can we expect? With no regional evidence of a significant “secular rise” or “average wells age effect”, we’re left to speculate about the potential impact of “changing development focus areas.” The Permian DOES have gassier areas: the western Delaware and southeastern Midland, for instance, could see increased activity in response to high gas prices (and improved offtake). Operators have also been exploring deeper zones like the Barnett (which does continue into the Permian!), which could be another huge lever to gas supply. In summary, absent a shift in operator focus areas, I do not expect the Permian to suddenly get much gassier; instead it should follow a slow, steady rise as its wells get older. But there is latent potential for a big increase in gas production, though that would be driven by external factors (price, offtake) rather than intrinsic reservoir properties of the Wolfcamp/Spraberry/Bone Spring plays. Curious about how GOR trends might impact your operations? Visit our blog to read the full post and use the interactive dashboards to gain more insight: https://novilabs.com/blog/why-is-gor-relatively-stable-in-the-permian/ 1 Quote Share this post Link to post Share on other sites
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