The coronavirus pandemic and the unprecedented plunge in energy demand has forced oil companies to shut down wells by the thousands, providing another test for a shale industry that restored the U.S. as a leading global producer and spurred Houston’s economy for more than a decade.
Well shut-ins, as the closings are known, have never occurred on this scale during the shale industry’s short history, and that has sparked a debate over how — and if — shale drilling will recover from the oil crash. No one knows for sure what happens to a shale well when the spigot is turned off for several months or longer, raising the question of whether oil will flow freely again when wells are restarted or fizzle out like a bottle of stale soda.
The result will determine how quickly U.S. oil production and local economies that depend on it rebound from the steep downturn that has battered energy companies, bankrupted some and cost thousands of jobs. If shale output languishes when demand ramps up, the American oil industry could lose out on market share and money while oil-focused economies such as Houston’s surrender investment and employment.
“We’re in uncharted territory,” said Matthew Fitzsimmons, vice president of energy research at Norway-based Rystad Energy. “Operators can use downhole sensors to make an educated guess, but it’s going to be hard to tell. The truth is going to come out when they turn it back on.”
Operators that shut down rigs run several risks: Valves and well parts could corrode, allowing water and other sediment to enter the well shaft. The well also could lose pressure and the oil could move to a different part of the reservoir, lowering the expected total output.
“If you don’t protect the well integrity and pressure of the reservoir, the decline curve will be even more steep,” Fitzsimmons said, referring to the naturally declining lifespan of shale wells. “Pressure could be down so you don’t get the peak. You don’t get as much oil as you had expected.”
Not everyone in the industry believes there is a risk involved with shutting in wells. Several energy companies, including Continental Resources and Pioneer Energy Resources, have gone on the record saying they don’t expect any damage from shutting in wells.
“I think the statement of great risk and economic damage to wells is overblown,” said Ed Hirs, a petroleum economist with the University of Houston. “They’re temporarily closing off the valve….