A method for calculating economic critical depth of shale gas resources in China via break-even analysis

Abstract Target depth is a key measure of the commercial viability of a shale gas prospect. Although much research has been conducted in the shale gas techno-economic appraisal field, no reports are available on the economic critical depth (ECD) of shale gas resources. The present work aims at establishing a model for calculating the ECD using the break-even analysis—the reverse of calculating the net present value (NPV)—such that the break-even ECD occurs at zero NPV. The ECD is sensitive to production uncertainty, depending on the initial production (IP) rate and the production decline rate. Examples indicate that these have a marked effect on ECD based on current technology, gas price and exploitation policy, with the IP rate having the more pronounced effect. When the IP rate varies between 2.5 and 5.5 × 10 4  m 3 /day based on the fitted production decline trend from a pilot area in China, the corresponding ECD varies from 898 m to 3997 m. The ECD is thus able to rule out non-commercial shale gas prospects quickly.