U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov

Forecasting technology improvements for U.S. crude 

oil production

For

EIA Conference 2018

June 04, 2018 | Washington, DC

By

Danya Murali, Mathematical Statistician, Exploration and Production Team
Big Questions

• How quickly can we identify technological changes in data?

• How can we capture the timing and intensity of the market penetration of 

new technologies in our modeling?

• Volatile prices incentivize technology – how do we anticipate volatility?

• How do we use signals in available data to categorize types of technology?

Danya Murali, Washington, DC, 

June 04, 2018 2
Appalachia natural gas production

Bcf/d rigs

Permian crude oil production

million b/d rigs

Danya Murali, Washington, DC, 

June 04, 2018

Why do we care? The relationship between rigs and production started 

decoupling in key regions in 2015

Source: EIA, Short-Term Energy Outlook, Baker Hughes

3

0

100

200

300

400

500

600

0.0

0.5

1.0

1.5

2.0

2.5

2011 2012 2013 2014 2015 2016 2017

oil production

rigs

0

100

200

300

400

500

600

0.0

0.5

1.0

1.5

2.0

2.5

2011 2012 2013 2014 2015 2016 2017

rigs

gas production
Danya Murali, Washington, DC, 

June 04, 2018

There are 20 regions in the STEO Lower 48 model

Source: EIA, Short-Term Energy Outlook

4
Danya Murali, Washington, DC, 

June 04, 2018

0

1

2

3

4

5

6

7

8

9

10

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Pre-2016 well production

2016-latest 

well production

New well 

production

forecast

Lower 48 crude oil production (excludes federal Gulf of Mexico)

million barrels per day

Source: EIA, Short-Term Energy Outlook February 2018

The forecast for Lower 48 crude production comes from 3 cohorts

5
Danya Murali, Washington, DC, 

June 04, 2018

0

1

2

3

4

5

6

7

8

9

10

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Pre-2016 well production

2016-latest 

well production

New well 

production

forecast

Lower 48 crude oil production

million barrels per day

Source: EIA, Short-Term Energy Outlook

The forecast for Lower 48 crude production comes from 3 cohorts

6

Technology improvements affect the rate of 

growth for new well production
Danya Murali, Washington, DC, 

June 04, 2018

Technology penetrates the market in four stages

7

-0.1

0.1

0.3

0.5

0.7

0.9

1.1

R&D

phase

market acceptance

market saturation

demonstration

percent of industry 

using technology

100%

0%

time
Technological improvement manifests through EUR increases and cost 

reduction

• Improvements to EURs (through technology)

– Combining horizontal drilling and hydraulic fracturing to extract oil and natural gas 

– Optimizing horizontal drilling techniques specific to the geology of different plays

• Improvements to EURs (through operational improvements)

– Optimizing lateral lengths 

– Increasing volume and sand per foot

– Optimizing the cross linked gel and slick water ratios

• Reducing costs 

Danya Murali, Washington, DC, 

June 04, 2018 8
Operational improvements in recent years has changed the relationship 

between production and prices

• Longer laterals with more fracture stages

• Multi-well pad drilling

• Increased initial production (IP) per foot 

• Lower service costs per unit

• More efficient sand and water handling

• Reduced distances for sand and water

Danya Murali, Washington, DC, 

June 04, 2018 9
2009

horizontal well

vertical well

existing well (post-2009)

0

1

2

3

4

5

6

7

Lateral

length

thousand feet

0.0

0.5

1.0

1.5

2.0

2.5

Crude oil

production

million b/d

0

3

6

9

12

15

Natural gas

production

Bcf/d
0

1

2

3

4

5

6

7

Lateral

length

thousand feet

0.0

0.5

1.0

1.5

2.0

2.5

Crude oil

production

million b/d

0

3

6

9

12

15

Natural gas

production

Bcf/d

2010

horizontal well

vertical well

existing well (post-2009)
0

1

2

3

4

5

6

7

Lateral

length

thousand feet

0.0

0.5

1.0

1.5

2.0

2.5

Crude oil

production

million b/d

0

3

6

9

12

15

Natural gas

production

Bcf/d

2011

horizontal well

vertical well

existing well (post-2009)
0

1

2

3

4

5

6

7

Lateral

length

thousand feet

0.0

0.5

1.0

1.5

2.0

2.5

Crude oil

production

million b/d

0

3

6

9

12

15

Natural gas

production

Bcf/d

2012

horizontal well

vertical well

existing well (post-2009)
0

1

2

3

4

5

6

7

Lateral

length

thousand feet

0.0

0.5

1.0

1.5

2.0

2.5

Crude oil

production

million b/d

0

3

6

9

12

15

Natural gas

production

Bcf/d

2013

horizontal well

vertical well

existing well (post-2009)
0

1

2

3

4

5

6

7

Lateral

length

thousand feet

0.0

0.5

1.0

1.5

2.0

2.5

Crude oil

production

million b/d

0

3

6

9

12

15

Natural gas

production

Bcf/d

2014

horizontal well

vertical well

existing well (post-2009)
0

1

2

3

4

5

6

7

Lateral

length

thousand feet

0.0

0.5

1.0

1.5

2.0

2.5

Crude oil

production

million b/d

0

3

6

9

12

15

Natural gas

production

Bcf/d

2015

horizontal well

vertical well

existing well (post-2009)
0

1

2

3

4

5

6

7

Lateral

length

thousand feet

0.0

0.5

1.0

1.5

2.0

2.5

Crude oil

production

million b/d

0

3

6

9

12

15

Natural gas

production

Bcf/d

2016

horizontal well

vertical well

existing well (post-2009)
0

5

10

15

20

25

30

2000 2010 2020 2030 2040 2050

U.S. crude oil and natural gas plant liquids production

million barrels per day

2017

history projections High Oil and Gas 

Resource and 

Technology

Reference

Low Oil and Gas 

Resource and 

Technology

Danya Murali, Washington, DC, 

June 04, 2018

In the AEO, resource and technology assumptions have a strong effect 

on the total U.S. liquids and natural gas projections

18

Source: EIA, Annual Energy Outlook 2018
Concluding questions

• EIA’s goal is improve our ability to understand the present and better our 

forecasts: What techniques can we leverage to achieve this?

• What is the next landmark or step change?

• How much more value can we get from optimization?

Danya Murali, Washington, DC, 

June 04, 2018 19
U.S. Energy Information Administration home page | www.eia.gov

Annual Energy Outlook | www.eia.gov/aeo

Short-Term Energy Outlook | www.eia.gov/steo

Drilling Productivity Report | www.eia.gov/petroleum/drilling/

Danya Murali, Washington, DC, 

June 04, 2018 20

For more information