Initial Production Rate

What Is the Initial Production Rate?

The initial production (IP) rate measures the number of barrels of crude oil a day another oil that well creates. It is utilized as a proxy for an oil well's future productivity and to estimate the amount of recoverable reserves there are. Recoverable reserves are oil and gas reserves that are monetarily and technically plausible to remove at the existing price of oil.

In the initial production phase, the flow of oil or gas remains moderately consistent, as pressure remains almost steady. After pressure fabricates, the rate of production builds up to the well's pinnacle production, after which the flow of oil or gas declines quickly as the quantity of recoverable assets and pressure in the wellbore diminishes.

Understanding the Initial Production Rate

The initial production rate is important in light of the fact that it is utilized to extrapolate a well's total production, its pinnacle production level, and the rate at which production will decline - utilizing decline curve analysis to think of a well's estimated ultimate recovery (EUR).

Without an estimated ultimate recovery, oil companies wouldn't have the option to settle on judicious venture choices. Like all projects, management should have the option to estimate accurately the net present value (NPV) of an oil drilling project. This valuation exercise requires several data sources, similar to the cost of carrying the main barrel to production, the cost of capital, the long-term price of oil, and the ultimate amount of oil that will be delivered, or EUR. Without an EUR, it wouldn't be imaginable to arrive at an accurate valuation of the potential oil reserves.

The exploration and production industry gives guidance to investors on average IP rates, and how that production is expected to rise/decline over the course of the next two years. Initial production rates are reported conflictingly, however companies progressively utilize 24-hour, 30-day, 60-day, and 90-day initial production rate periods.

Computing the decline curve includes a curve-fitting exercise to add the future rate of production in light of past production levels. Consequently, a to some degree extensive timeframe series data is expected to estimate the projected trend.

Special Considerations

Oil wells ordinarily have an initial production rate that is genuinely small compared to top production, since oil production follows a bell curve. However, shale oil wells decline considerably more quickly after the initial flood. Production can fall to 50-85% of the IP rate in no less than a year, and under 10% of their IP rate following three years.

Given these rates of decline, a few analysts contend that U.S. shale production could hit peak oil sooner than expected and that shale oil fields like the Bakken Shale and Eagle Ford Shale have proactively seen top production rates.

Features

• The initial production rate is utilized with decline curve analysis to assist a producer with assessing the quantity of oil reserves that can emerge out of a well over its lifetime.
• The initial production rate is ordinarily lower than top production, and will rely upon the type of well and oil being extricated.
• The initial production rate is the amount of crude oil that is siphoned from another well when it starts operations.