SOCIETY OF PETROLEUMENGHV’EERSOF AIME

6’200 North Central Expressway RR SPE 16

Dallas, Texas w?06

THIS IS A PIWPRINT --- SUBJECT TO CORRECTION

A Method to Determine Optimum Well Spacing

By

H. Tokunaga and B. R. Hise, Members AIM, Louisiana State U., Baton Route, La.
0 Copyright 1966
American Institute of Mining, Metallurgical aud Petroleum Engineers, Inc.

This paper was prepared for the California Regional Meeting of the Society of Petroleum
Engineers of AIME, to be held in Santa Barbara, Calif., Nov. 17-18, 1966. Permission to copy
restricted to an abstract of not more than 300 words. Illustrations may not be copied. The a
should contain conspicuous acknowledgment of where and by whom the paper is presented. Public
elsewhere after publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF PETROLEUM
ENGINEERS JOURNAL is usually gr%mted upon request to the Editor of the appropriate journal pro
agreement to give proper credit is made.

Discussion of this paper is invited. Three copies of any discussion should be sent tu th
Society of Petroleum Engineers office. Such discussion may be presented at the above meeting
with the paper, may be considered for publication in one of the two SpE magazines.

ABSTRACT are not well known. The legal considerati

are usually beyond the oil operator’s cont
The selection of the well spacing for the Therefore, the determination of the well s
development of an oil accumulation’requiresboth for a field is primarily an economic evalu
a reservoir and an economic aaalysis. This of the alternatives available.
paper is concerned with the economic aspects of
selecting the optimum well spacing for an oil The type of economic analysis necessa
field. Currently, the economics of the study called an acceleration project. The prese
are conducted by trial and error calculations. wortk has been shown to be a good economic
This paper introduces a new and more straight- criterion for this type of problem. Curre
forward method of determining the optimum. the optimum economic well spacing is deter
by trial-and-error calculations, hereafter
A relationship for the present worth of an called the conventional calculation. In t
oil field is expressed as a function of the method the present worth of the production
well spacing. The derivative of this function a reservoir is calculated for selected val
is used to find the point of maximum present the well spacing, and the results are plot
worth, which is designated as the optimum spac- present worth vs well spacing. The spacin
ing. The equations f..esolved graphically, and corresponding to the maximum present worth
the technique is quick and easy to apply. found by inspection, and is called the opt
Solution procedures are presented for single and well spacing. A schematic of the conventi
multiple completion programs, and example prob- calculation procedure is shown in Fig. 1.
lems are worked for each case.
A new method to determine this optimu
INTRODUCTION spacing is t-hesubject of this paper. The
method is developed by formulating a mathem
The well density for a field is selected statement of the present worth as a functi
after a study of the engineering, legal and well.spacing. A unique mathematical solut
economic considerations,which apply to the sit- the problem is found for a field with a si
uation. The engineering @spects of well spacing oil reservoir and one with multiple oil zo
have been the source of consitlerablecontroversy The method is illustrated by exemple probl
in the petroleum literature. The relationships each situation. The validity of the new me
are very difficult to eqress quantitatively and is proved by checking wtth conventional ca
References and illustrations at end of paper. tions of the optimum well spacing.
 A METHOD TO DETERMINE OPTIMUM WELL SPACING SPE-1673

THEORY -/’”
D=+.
The present worth is defined as the
present value of the future net income less
the present value of the capital expenditure, Eq. 1 now can be expressed in terms of the
when both are discounted at a preselected dis- well spacing as follows:
count rate. When all capital costs are
invested initially [no later capital], the
present worth of the total profit from an oil
reservoir may be expressed as;

pw=A~RD.cN.,,. .OOO .[1]

FW B present worth, dollars
A= reservoir area, acres
I= unit net income, $/STB
[assumed tobe constant over life]
R= unit recovery, S!J.B/acre[assumed to be
independent of spacing]
D = discount factor
c= capital cost, $/well
N = number of wells, wells
To investigate the relationship be;ween
present worth and well spacing, Eq. 1 must be
expressed as a function of spacing. There are
two factors in the equation which contain the
well spacing as an implicit term. They are
the number of wells N and the discount factor D
As the optimum s is defined as the point of
maximum PW, it can be found from Eq. 2 by
solving d PW[s]/ds ~ O for s.
APPLICATIONS
Single Reservoir
Analytical Derivative Approach
For the case of a single oil reservoir
where the reserve per acre R and the producing
rate p are not functions of the well spacing s,
the derivs.tiveof Eq. 2 with respect to s ts as
follows:

The number of wells in the reservoir may

be expressed in terms of the well spacing by: Let d PW[s]/ds = 0, and as A and S2 are not
zero, Eq. 3 reduces to:
N= A/s ,

where, s = well spacing, acres/well.

~~(i+~s)(e~s)-~ +C =0 ..,4,
The value of the discount factor depends
on the well life [t, years] and the discount
rate i. The well life may be found from:
I or,

t= RA/PN = sR/P

where P = oil production rate, STB/well/year.

The producing rate is one of the most important
factors in the analysis. In the United States
this rate is usually determined by proration
law or well capability. In most cases the well
allowable is based on the reservoir depth
[Louisiana Order No. 29-E], or a combination of
depth and well spacing [Louisiana Order No. The solution of Eq. 6 for s yields the
29-I-I]. The methods discussed in this paper do optimum well.spacing. A graphical technique
not apply to the case where the well allowable was selected for the solution and Eq. 6 was
Is dependent on the well spacing. Furthermore, divided as follows:
tn this study the producing rate is assumed to
be constant over life [no decline]. The dis-
count rate may be expressed as an effective i
or nominal j anmal rate. For continuous
compounding these are related by:
f(dog (Am .. [,]
J =ln[l+ i]. f(s) = ~+p●
●

If we assume continuous compounding and a

continuous rate of income, the discount factor
may be expressed as; + log fl-~$). * ● [8
W-1673 H. TOKUNAGA and B. R. HISE

where; f[s] = function of spacing.
The dotted curve on Fig. 2 is a plot of
Eq. 7 and the solid lines represent Eq. 8 for
different values of Cj/IP from O to 1.
The intersection of these two curves
satisfies the jRs/P common to both equations.
When jRs/P is known, the optimum spacing can be
determined from known values of j, R and P.
corresponding to each be PWl and PW2, respec-
tively. If the spacings [s1, s2] are selecte
close together, the condition which produces
maximum present worth should satisfy APW or
[Pwl-l=wpl =0.
From Eq. 1, L&W is:
APW = (AIRD-C~)l

Example 1 - The following data pertain to ~

a well to be drilled in onshore Louisiana, and -(AIRD-C :)2. ● [91
completed in an oil reservoir at 10,500 ft.
The allowable has been established by ‘thestate As the area A is conrnonto both terms an
as 33 per cent of the March, 1953, schedule not zero, M = O yields:
[Rule 29-E applies].
[Data]
C(S2 - Sl)
1 = $2/ST?B I R(D1 - D2) - = o
R= 10,000 STB/acre ‘1s2
P= 37,200 S!?B/acre
C = $155,000/well . . . . . . . . . . . . . . . . . . . [1
i = 10 per cent
or
[Sollltion]

Step No. 1: Convert i to j.

‘2 - ‘1 IR
J = In [l+i] = ti 1.1 = .0954
‘1 - ‘2 = — --z.
‘1s2 / ● .[
Step No. 2: Using Fig. 2, determine the jRs/P
that satisfies Eq. 5. The solution of Eq. 11 fGr s. or SQ is t
optimum spacing. To apply the grkphica? solu
CJ 155,000 x .0954 = * 199 tion technique, Eq. 11 was divided as follows
1P = 2.00 X 37,200 “

From Fig. 2, jRs/P = 0.81.

f(s) =D1-D2 . . . . . . . ..[1
Step No. 3: Determine s from jRs/P.
PX .81 37,200 X .81
s n
jxR = .0954 x 10,000
‘2 - ‘1 IR
f(s) = ●
= 31.6 acres/well. -Z””*”
‘1s2 /
Therefore, the optixmm”spacing for this
reservoir is 31.6 acres/we~. Fig. 3 is a where
graph showing the determination of optinn.u?
well spacing by the conventional method. The
Dl - D2 = (+) - (~;~-d’) .
optimum value in Fig. 3 agrees with the one . .
determined by the analytical derivative tech-
n~que. Replacing t by [R/P] S:

Numerical Derivative Approach

This approach offers an alternative method

to determine the optimum spacing. It is intro-
duced at this point for the single completion.
later, it will be extended to the multiple
completion, which is too complex to be solved
by the analfiical method.
. . . . . . . . . . . . . . . .,*,,
If [s2 - Sl] is designed to always be 1,
equations become:

Consider two values of the well spacing,

‘1 and s2 [sl#s2], and let the present worth
..**.. . . . . . . . .
 A METHODTO DETERMINE OPTIMUM WELL SPACING SPE-167

with i = 1, 2, 3 .......n[where~ n = number of

completions].
f(s) = =*- / —,.
~c~ * ● ** [17]
t
As the dual completion is the most cormnon
problem In practice, and as it is the simplest
case of this equation to demonstrate, the method
The terms Rj/P and IR/C are the constant will be introduced for this situation. Assume
groups involved in the above equations. In
two productive zones, u and v, which have the
preparing the graphical solution, the discount sme productive area and are to be developed in
rate i is fixed at 10 per cent. Substituting
a dual-completion program.
values of S1 [sl = 1, 2, 3 ....] into the
equations the values of f[sl are computed for The present value of the net income for
the different values of R/P and IR/C using a each reservoir may be expressed as follows;
digital computer.
Pvu = A I Ru Du
Fig. b shows the relationship between f[s]
and s. The dotted lines are the plot of Eq. 16
and the solid lines are the plot of Eq. 17 for Pvv =AIRVDV
different values of R/P and IR/C, respectively.
where: PV = present value, dollars.
The intersection of the dotted curve with the
solid curve satisfies the common s, which is
Then, the total present value from both
the optimum spacing.
zones is
Example 1- [Data] = [sane as Example 11. Pv
u+ v
s A I (RUDU + RVDV).
[Solution]
The present worth for a dual-completion
Step No. 1: Calculate IR/C program can be expressed as:

g._ 2 x 10,000 = ~ 129 Pw =A I(RUDU -I- RVDV) - ~ ●

u-l-v
c– 155,000 “ 1
‘{
. . . . . . . . . . . . . . . . . . [191
Step No. 2; Calculate R/P
Let an arbitrary difference of the present
worth for different spacings be as follows:

R 10,000 = 0.269 APWU+V = (Pwu+v)l - (PWU+V)2,

‘=
P 37,200

Substituting from Eq. 19 and rearranging

Step No. 3; Find s from Fig. h. yieldsg
s = 32.5 acres.
APWU+V = A I RU(D -D)
The 32.5 acres/well obtained for the ‘1 ‘2
optimum value of s is in good agreement with [{
the 31.6 acres/well obtained from the
analytical method.
+ RV(D D)
Multiple Completion VI - V2
1

..
d
When a field has more than one zone, the

1
C(S2 - Sl)
optimum spacing for a multiple completion
program is an important consideration. The [20]
general equation to solve this case for the ‘1s2
optimum spacing is found by using the numerical
derivative approach as follows: or,
V-7
U-A”
K-7X
,,
U.
. . .
JTTWHiVARA
--. .”------
s.nd
—-
R. R. HTSli!
-- --- ---—

RU(DU1 - DU2) + RV(D - DV2) the left-hand side of Eq

VI as follows:
+Rv)
{
RU+R
v }
s mu ADv %%’%%
%’%
—
C(S2 - Sl)
. . . . . . . . ..*. [21] 10 .018 .0235 .0221
.015 .0148
‘1s2 1 20
30
40
.014
.0107
.0082
.0098
,0066
●0100
.0070
Let Wu+v be zero, then 50 ,0064 .0047 .0051
Step No. 3: Plot the values of the le
RU(D - DU2) -tRV(D - :“2) hand side of Eq. 22 from
U1 V1 No. 2 on semi-log paper.
Refer to dotted curve in
Ru + RV
5*

Step No. b: Calculate the dual reserv

I(RU + Rv equivalent of ZR/C.
‘2 - ‘1
= . . . [22] X(RU+RV)
c — 2 x (10,000+30,000)
‘1s2 / = =
c 170,000
Step No. 5: Replot the appropriate cu
The similarity of Eq. 22 to Eq. 11 is of IR/C from Fig. 4 on Ff
apparent. If IR/C of Eq. 11 is replaced by Refer to Fig. 5.
1[~+ Rv] C, the solution to the right-hand
side of Eq. 22 [for the assumption that S2 - S1 Step No. 6: Read the opttium well spa
= 1] is shown on Fig. h as the solid family of at the intersection of Fi
curves. Fig. 4 [dotted curves] can be used to
find & and ~ by knowing RU/Pu and ~/Pv, optimum
s ~10 acres/wel
respectively. However, further operations must The extension of this technique to th
be carried out on these differences as indi- case of a triple-completion progrsm [or mo
cated by the left-hand side of Eq. 22. The is apparent from inspection of Eq. 22. We
solution procedure for multiple completions cea additional AD terms, weighted with respect
best be explained by an example problem~ their reserve, on the left-hand side and t
appropriate R terms on the right-hand side
Example 2 - I = $2/sTB solution procedure follows the outline for
~ = 10,000 STB/acre dual-completion case.
Rv = 30,000 STB/acre
Pu = 18,972 STB/yr./well CONCLUSION
Pv = 37,212 ST’B/yr./well
C = $170,000/well A new method for the determination of
i = 10 per cent. optimum well spacing from the economic sta
point has been developed. This solution t
[Solution] problem is more direct and is easier to us
a trial-and-error approach. The two most
Step No. 1: Calculate R/P tant limitations to the new method are tha
oil recovery and production rate must be i
pendent of the well spacing. Where these
RU ditions are satisfied, the technique devel
10,000
= 0.527 in this paper should be useful in the dete
‘=Pu 18,972
nation of optimum well spacing.

I NOMENCLATURE
Rv PV ~ present worth, dollars
30,000 = 0.805 A = reservoir area, acres
~“ 37,212 I = unit net income, $/STB
I?= unit recovery, STB/acre
Step No. 2: Using Fig. 4 and results from D = discount factor.
Step No. lZ find AD for each C = capital cost, $/well
R/P and for several values of N = number of wells, wells
the well spacing. Calculate
 A METHOD TO DETERKUtE OPTIMUM WELL SPACING SpE-l

= well spacing, acres/well

~ = well life, years
i= effective annual discount rate
j = nominal annual discount rate
P = 011 production .ra’ce,
STB/well/year
PV present value, dollars
❑

u = subecrip% denoting reservoir u

v = mbscript denoting reservoir v

ACKNOWLEDGMENT

The authors gratefully acknowledge the

I
financial support of Lauisiana State U. through
the Division of Engineering Research. The
encouragement of M. l?.Hawkins, Jr., Head of
the Lkpartment of Petroleum Engineering at LSU,
%s appreciated. This work was done by El.
Tokunaga In partial fulfillment of the require-
ments toward a graduate degree at Louiciaua
State U. ,

REFERENCES
I
1. Wooddy, L. D. and Capshaw, T. D.: “Invest-
ment Evaluation by Present-Value Profile”,
Jour. Pet. Tech. [June, 196o] 15. “
2. Brons, 3’.and McGarry, M. W., Jr.: “Methods
for Calculating llrofitabilities”,Oil and
Gas Property Evaluation and Reserve
Estlmat&, Pet. Trans. Reprint Series No. 3
[1960] 152.
3. Miller, C. C. and Dyes, A. B.: “Maxhum
Reservoir Worth - Proper Well Spacing”.
Trans., A13tE [1959]2i6, 334. - -
k. Russell. J. E.: “Ec~mics of Well
Spacing;’)Prod. Monthly [Nov., 1963].
 FI GIJRE 1 FIGURE 2

CONVENTIONAL CALCULATION ANALYTICAL SOLUTION

OF OPTIMUM WELL SPACING o

31 , MAXIMUM PRESENT WORTH I

2-

iRs

4 -

i oPTIMUM
I
t , 1 t 5- ,
,
!
WELL SPACING, ACRES / WELL \

L
o .2
I
.4
i
,6
J
.8
FUNCTION OF +

FIGURE 3

CHECK C: EXAMPLE 1
5[ FIGURE 4
[
NUMERICAL SOLUTION

0.
u)

8
---
Z
g
rJ
I , , I
I g
‘o 50 100
*
WELL SPACING, ACRES / WELL ;?’

t
.001 I

0 10 20 30 40
FIGURE 5 WELL SPACING, ACRES / WELL

SOLUTION OF EXAMPLE 2
(DUAL COMPLETION)
r -% \

1
.001 I I I I
10 20 30 40 !
WELL SPACING, ACRES / WELL