One of the most crucial decisions in any new oil field development project is to decide how many wells to drill. The optimal number of wells, of course, is a matter of economics. In this blog we are going to look at a quick method, based on analytical exponential theory, to answer that question by maximizing the net present value (NPV). Although the method is simple, it is surprisingly accurate, practical and useful. It has proven to provide excellent starting points in many actual studies and projects. Try it out yourself, retrospectively, on any existing oil field developments - you will likely find the answers remarkably precise.
In the video at the bottom of this blog we will present the method in much more detail, and provide a graphical method to estimate the optimal number of wells.
Use the chart near the bottom to estimate the optimal number of wells. All you have to do is to calculate two terms, A and B, and read the well count directly from a chart at the point specified by (A,B). Just make sure that if the NPV discount rate, r, is the yearly discount rate, then the flow rates should also be yearly flow rates (i.e. multiply daily flow rates by 365.25).
UR = the ultimate volumetric recovery. The ultimate recovery is governed by the drive mechanisms, not by the number of wells. The reservoir is assumed to be connected, not compartmentalized, so a single well could in principle produce the UR. Many wells would not produce more than a single well, just faster.
r = NPV discount rate. It typically ranges from 0.05 to 0.15 and is normally set by management.
qp = the plateau rate.
Oilprice = the price of one volume unit (stb or Sm³) oil.
Costwell = the cost of drilling and completing one well.
Opexwell = The annual operating costs of one well.
To find the optimal number of wells, calculate A and B from the formulas above (also shown in the axis titles on the chart itself). Mark the point (A, B) in the chart below and identify the number of wells by selecting the representative colored curve. Alternatively, you can find the exact number of wells by iteration, as explained in the text-box in the chart itself.
The following video explains the method in greater detail. Enjoy!
You can find this video and many more at our YouTube channel.