Reserves Definitions & Estimation Methodology · relatively low degree of certainty and/or a minimal level of confidence (e.g. 15%). Possible Reserves represent the maximum ultimate

1

Reserves Definitions & Estimation Techniques

ByByHarold L. IrbyHarold L. Irby

May 1998May 1998

PARES Petroleum Engineering Services Sdn. Bhd.

2

Reserves - Presentation Outline

1)1) DefinitionsDefinitions2)2) Company’s ProcessCompany’s Process3)3) CategoriesCategories4)4) UncertaintiesUncertainties5)5) Estimation ProcessEstimation Process6)6) Estimation TechniquesEstimation Techniques7)7) Calculation Example Calculation Example


3

Reserves Definition – General

Hydrocarbon Reserves -are the estimates of technically recoverable quantities of crude oil, natural gas and natural gas liquids from naturally occurring accumulations which have been delineated and characterized by a combined analysis of available geo-scientific data (geological, geophysical, petro-physical and reservoir engineering etc.). To be developed, reserves must economically viable under the current and prevailing business environment. All reserves estimates involve some degree of uncertainty for which a reasonable assessment should be attempted.


4

Reserves Definition – By Reserves Category

••Proved Reserves Proved Reserves --Represents that portion of ultimate reserves which can be recovered with a highdegree of certainty and/or a level of confidence based on actual or similar field performance (e.g. 80%) and using primary recovery, pressure maintenance and enhanced oil recovery (EOR) methods where their successes have already been demonstrated for that type of reservoir in that geological basin.

••Probable Reserves Probable Reserves --Represent that portion of additional reserves which can be recovered through a better than expected reservoir performance and/or reservoir engineering methods. Probable Reserves have a reasonable degree of certainty and/or confidence (e.g. 50%). Recovery and production methods are based on the same technology available for Proved Reserves.

••Possible Reserves Possible Reserves --Represent the ultimately recoverable resources which can be recovered with a relatively low degree of certainty and/or a minimal level of confidence (e.g. 15%). Possible Reserves represent the maximum ultimate recovery estimated for a known hydrocarbon accumulation once all testing, delineation and evaluation of this accumulation has been completed. Possible reserves are also incremental EOR Reserves not booked previously. Recovery and production methods are based on the same technology available for Proved Reserves.


5

Reserves Definition - SPE & SEC

••Reserves (SPE) Reserves (SPE) --““Reserves are estimated volumes of crude oil, condensate, natural gas, natural gas liquids and associated substances/products anticipated to be commercially recoverable from known accumulations from a given date forward, under existing economic conditions, by established operating practices and under current government regulations. Reserve estimates are based on interpretation of geologic and/or engineering data available at the time of the estimate.”

•Reserves (SEC) -““Proved Oil and Gas ReservesProved Oil and Gas Reserves: Proved oil and gas reserves are the : Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas lestimated quantities of crude oil, natural gas and natural gas liquids iquids which geological and engineering data demonstrate with reasonablwhich geological and engineering data demonstrate with reasonable e certainty to be recoverable in future years from know reservoirscertainty to be recoverable in future years from know reservoirs under under existing economic and operating conditions, i.e., prices and cosexisting economic and operating conditions, i.e., prices and costs as of ts as of the date the estimate is made. Prices include consideration of the date the estimate is made. Prices include consideration of changes in changes in existing prices provided only be by contractual arrangements, buexisting prices provided only be by contractual arrangements, but not on t not on escalations based upon future conditions.”escalations based upon future conditions.”


6

Reserves Determination / Estimation ProcessA COMPANY'S OIL & GAS RESERVES


Review ofReserves Report

with Management

Approval of Year-endReserves Report

(E&P Management)

SUPPORTINGORGANIZATIONS

Computer ProgrammingSupport & Maintenance

(Computer Support)

Basic ReservoirData Update

(Reservoir Management)

Development Discoveries& Pore Volume Maps

(Reservoir Characterization)

Facility Scopes and Cost Estimates

(Facilities & Tecnology)

Exploration Discoveries(Exploration Department)

Commerciality Studies

Exploration Finding Cost

Annual Update ofOIL & GAS Reserves

Other Documents

Exploration Finding Cost & Historical Reserves Update(Finance)Ad Hoc Requests(E&P Management)

PublicationsYear-endReserves Report(Corporate, E&P Management)

SupplementaryReserves Reports(E&P Management)

DELIVERABLES

Activities & StudiesFor Deliverables.

7

Summary of Reserves Inputs / Outputs


Pore Volume (Pv)

Reservoir Basic Data

Production Data

Recovery Factors

ReservesSystem

OOIP/OGIPReserves

Input Parameters

8

Categorization of Reserves & Resources

Adapted from SPE and World Congress Publications

Degree of Geological Assuranceand Engineering Certainty

Marginal or

Undetermined (limited by data)

Well-defined or conceptual exploration Undetermined

leads in a productive basin (limited data)

Undetermined

(lack of data)

Conceptual Resources

Speculative Resources

Proved Reserves A high probability

Possible Reserves A low probability

Probable Reserves A modered probability

Exploration leads in an untested basin

Poor estimates of hydrocarbonsin-placePotential Resources

Definite

Most Likely

Definite

Economic FeasibilityResource Category

RESERVES

RESOURCES

9

Reserves Uncertainties & General Categories

••Technical Uncertainty Technical Uncertainty --Geological / Geophysical / Reservoir EngineeringGeological / Geophysical / Reservoir Engineering

••Economic Uncertainty Economic Uncertainty --Facilities Cost Estimates / Future Market PricesFacilities Cost Estimates / Future Market Prices

••Geopolitical Uncertainty Geopolitical Uncertainty --Fiscal Regime Change / MarketsFiscal Regime Change / Markets

••General Categorizations General Categorizations --Based upon combination of technical / economicBased upon combination of technical / economicuncertainties and considerations:uncertainties and considerations:

ProvedProvedProbableProbablePossible Possible PotentialPotentialConceptualConceptualSpeculativeSpeculative


10

Rat

e (B

PD)

Economic Limit

Cumulative Production (STB)

Reserves

Depletion Stage

Production Profile

Development Stage ExplInitial Dev. Production Operations

Plateau Decline

Risk Very High

Moderate LowHighRisk AnalysisReserves Estimation

Methods / TechniquesAnalogy

VolumetricModel Studies

Performance/Material BalanceDecline TrendReserves Type Po

ssib

leProbable

Proved

Reserves Estimation Process - Time Line


11

Reserves Estimation Techniques

•• Risk Considerations Risk Considerations •• VolumetricVolumetric

DeterministicDeterministicStochasticStochastic

•• Reservoir AnalogyReservoir Analogy•• Material Balance Computations Material Balance Computations •• Decline Curve AnalysisDecline Curve Analysis


12

Reserves Estimation – Risk ConsiderationsGeologic Risk and Uncertainty Geologic Risk and Uncertainty --Geologic uncertainty depends upon four mutually exclusive variables:

Presence of Mature Source Rock (Ps)Present of Reservoir Rock (Pr)Presence of Hydrocarbon Trap (Pt)Structural / Migration Dynamics (Pd)

The risk associated with Geologic Uncertainty (Pg) can be assessed by these four mutually exclusive factors:

Pg = Ps * Pr * Pt * Pd

Qualitatively:

0.0 < Pg < 0.3 => Unfavorable0.3 < Pg < 0.5 => Questionable0.5 < Pg < 0.7 => Encouraging0.7 < Pg < 1.0 => Favorable


13

Reserves Estimation – Risk Considerations

Engineering Risk and Uncertainty Engineering Risk and Uncertainty --depends mainly on the amount and quality of geo-scientific / reservoir engineering data and is also affected by geological complexity, stage of development and degree of reservoir depletion.

Economic Risk and Uncertainty Economic Risk and Uncertainty --•• Oil PricesOil Prices•• Development & Production Cost (CAPEX & OPEX)Development & Production Cost (CAPEX & OPEX)•• Taxes and RoyaltiesTaxes and Royalties

GeoGeo--Political Risk and Uncertainty Political Risk and Uncertainty --is highly dependent upon the locale


14

Deterministic Reserves – Stochastic Reserves


Pore Volume(A, h & Φ)

Swi, BoiRecovery Factor

DeterministicModel

SINGLERESERVESVALUE

Pore Volume(A, h & Φ)

Swi, BoiRecovery Factor

StochasticModel

PROBALISTICRESERVESDISTRIBUTION

Deterministic: Each INPUT and OUTPUT is determined as a single numerical value (usually average reservoir parameter values) and a single reserves number (i.e. an average) is derived.

Stochastic: Each INPUT and OUTPUT parameter is assumed to be a random variable and can be represented by a probability distribution curve by use of Monte Carlo or Latin Hypercube simulation.

15

Deterministic Reserves – Volumetric Equation

••Volumetric Reserves Equation (Oil) Volumetric Reserves Equation (Oil) --OOIP = A h Φ (1 - Swi ) / Boi = Pore Volume (1 - Swi ) / BoiReserves = OOIP (STB) x Recovery Factor (fraction)

••Recovery Factor or Efficiency Recovery Factor or Efficiency --

Recovery Factor = Displacement Efficiency (Ed) x Recovery Factor = Displacement Efficiency (Ed) x Vertical Sweep Efficiency (Vertical Sweep Efficiency (EiEi) x) xArealAreal Sweep Efficiency (Ea)Sweep Efficiency (Ea)

where:where:Displacement Efficiency, Displacement Efficiency, Ed = (Soi - Sor) / SoiVolumetric Sweep Efficiency, Ev = Ei x Ea


16

Deterministic Reserves – Sweep Efficiency

Illustration of Water Flood Displacement Efficiency Illustration of Water Flood Displacement Efficiency


Injector

Areal Sweep, Ea = 90%

Zone 1

Zone 2

Zone 3

Ei = 70%

Ei = 100%

Ei = 50%

Producer

Oil Water

Vertical Sweep Efficiency: Ei = 0.25 x 0.70 + 0.5 x 1.0 + 0.25 x 0.5 = 0.80 or 80%

Volumetric Sweep Efficiency: Ev = Ei x Ea = 0.80 x 0.90 = 0.72 or 72%

17

Stochastic Reserves – Probability Distribution


ORIGINAL RESERVES (MMBSTB)0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1350 1450

0

10

20

30

40

50

60

70

80

90

100

PROVED

PROVED + PROBABLE

RecoveryReserves Value Probability FactorCategory (MMSTB) (%) (%OOIP)

Proved X = 677 80 50Probable Y = 745 50 55Potential Z = 880 20 65

where OOIP = 1,355 BSTB

PROVED+PROBABLE+POTENTIAL

X Y Z

18

Reserves Estimation – Field/Reservoir Analogy

Field / Reservoir Analogy Field / Reservoir Analogy --For undeveloped reservoirs without detailed reservoir engineering studies but with minimal geological / geophysical and petro-physical data then correlations established from model results and/or production histories of adjacent and/or similar fields within the geological basin may be used to estimate recovery factors and reserves.

Example Field / Reservoir Correlations Example Field / Reservoir Correlations --Reservoir Analogy: (data shown in graphical form follows)

RF = ( % OOIP ) = -18.97 + 14.08 * LN ( kh / μoi )

Facies Analogy: (data shown in graphical form follows)

RF = ( % OOIP ) = +31.41 + 7.15 * LN ( kh / μoi )


19

Recovery Factor vs. Reservoir Transmissibility


0

10

20

30

40

50

60

70

80

10 100 1000

TRANSMISSIBILITY, kh / ( darcy - ft/cp ) μο

Recovery Factor Correlation Developed by UsingCarbonate Reservoir Data ( Under Water Injection / Drive )

RF = (%OOIP) = -18.97 + 14.08 * ln ( kh / )μoi

with r = 0.98 & Standard Error of Estimated = 5% @ 95% Confidence Level and it may not be valid for (kh / ) < 50.μoi

±2

LegendField 1 Reservoir AField 2 Reservoir AField 3 Reservoir AField 4 Reservoir AField 5 Reservoir AField 6 Reservoir A

20

Recovery Factor vs. Reservoir Transmissibility

PARES Petroleum Engineering Services Sdn. Bhd.ο

80

TRANSMISSIBILITY, kh / (darcy-ft/cp)μ

☺ ☺

☺

0

10

20

30

40

50

60

70

0.1 1 10 100 1000

2

2B

2B2B

2A2A

2A

3

UC

1

1UD

2

LC3A

3

3A

3A

3B

3B

5

3B

1

with r = 0.87 & Standard Error of Estimated = 13% @ 95% Confidence Level±2

Recovery Factor Correlation Developed by UsingCarbonate Reservoir Data ( Under Water Injection / Drive )

RF = (%OOIP) = 31.41 + 7.15 * ln ( kh / )μoi

LegendReservoir 1 Facies AReservoir 2 Facies AReservoir 3 Facies AReservoir 4 Facies AReservoir 5 Facies AReservoir 6 Facies A

☺

21

API Correlations – Field / Reservoir Analogy

1.1. Water Drive ReservoirsWater Drive Reservoirs (70 Sandstone Fields (70 Sandstone Fields –– c. 1867 API) c. 1867 API)

2. Solution Gas Drive Reservoirs (Sandstones and Carbonates - 80 Reservoirs with 13 on Carbonates c. 1967 API)

3. Water Drive Reservoirs (Carbonates - 19 Reservoirs - c. 1983)

Source: A Statistical Study of Recovery Efficiency, API Bulletin D14, October 1967. Based on limited number of reservoir case histories in U.S.A. only.

with r 2 = 0.92 & Standard Error of Estimate = ± 32% @ 95% Confidence Level.

( )2159.0

1903.00770.00422.0

)1(898.54)(%−

−

⎟⎟⎠

⎞⎜⎜⎝

⎛∗∗⎥

⎦

⎤⎢⎣

⎡∗⎥

⎦

⎤⎢⎣

⎡ −∗=

a

iwi

oi

wi

oi

wi

PPSK

BSOOIPRE

μμφ


( )1741.0

3722.00979.01611.0

)1(815.41)(% ⎟⎟⎠

⎞⎜⎜⎝

⎛∗∗⎥

⎦

⎤⎢⎣

⎡∗⎥

⎦

⎤⎢⎣

⎡ −∗=

a

bwi

obob

wi

PPSK

BSOOIPRE

μφ


( ) 04096.00337.04068.0

)1(70.52)(% −∗⎥⎦

⎤⎢⎣

⎡∗⎥

⎦

⎤⎢⎣

⎡ −∗= wi

wi

oi

oi

wi SKB

SOOIPREμμφ

22

Recovery Factor (Primary) – Material Balance


0%

20%

40%

60%

80%

100%

120%

1350 1160 960 760 560 360 310 260 210 160 110

P(psia)

0.00

0.10

0.20

0.30

0.40

0.50

0.60

Sg(v/v) So(v/v) Sw(v/v) Np/N(v/v)

Solution Gas Drive ReservoirOOIP 1.84 MMBblsPres 1350 psiaPb 850 psiaRec. Fac. 19 %Reserves 350 MBbls

23

Deterministic Reserves – Decline Curve Analysis


1

10

100

7000 8000 9000 10000 11000 12000 13000 14000 15000 16000

Np, CUMULATIVE PRODUCTION (MMSTB)

MODEL OOIP : 20 .73 BSTBDATA : Long-Term Prediction

(w ith Gas Lift)Method : Decline Curve Analysis

(Harm onic)ECONOMIC LIMIT : 5% Oil CutRESERVES : 15 .2 BSTBRECOVERY FACTOR : 73 .3% OOIP

Re se rv e s

24

Calculation of Oil In Place - Example

Step 1: Calculate Original Oil In Place Step 1: Calculate Original Oil In Place ––OOIP = Pore Volume x Oil Saturation x Oil Shrinkage = Oil Volume x Oil Shrinkage


ROCKROCK

BULK VOLUME =Rock & Fluid

Volumes

OILWATER

PORE VOLUME =Oil & Water Volumes

ORIGINALCONDITIONS

END OFWATERFLOOD

EXAMPLEBulk Volume BV (MM Barrels) 100 (assumed) 100Rock Volume RV (MM Barrels) 80 80Pore Volume PV (% BV=Porosity) 20 % 20 %Pore Volume (MM Barrels) 20 20Water Volume (% PV=Water Saturation) 15 % 70 %Water Volume (MM Barrels) 3 14Oil Volume (% PV=Oil Saturation) 85 % (initial) 30 % (residual)Oil Volume (MM Barrels) 17 6Oil Gravity ( API ) 36 °API 36 °APIOil Shrinkage (Fraction) 0.67 0.67OOIP (MM Stock Tank Barrels) 11 4 (EOR)

25

Calculation of Recovery Factor and ReservesStep 2: Calculate Recovery Factor and Reserves Step 2: Calculate Recovery Factor and Reserves ––OIL RESERVES = OOIP (barrels) x Recovery Factor (fraction)

Recovery Factor = Displacement Efficiency (Ed) x Recovery Factor = Displacement Efficiency (Ed) x Volumetric Sweep Efficiency (Volumetric Sweep Efficiency (EvEv))

Ed = (Soi - Sor) / Soi or= (Original Oil Vol. – Remaining Oil Vol.) / Original Oil Volume= (0.85 - 0.30) / 0.85 or (17 - 6) / 17 = 0.65 or 65% OOIP

Ev = Vertical Sweep Efficiency x Areal Sweep Efficiency= 0.80 x 0.90 = 0.72 or 72% (see illustration of water flood figure)

Recovery Factor = 0.65 x 0.72 = 0.47 or 47% OOIPOIL RESERVES = (11 x 0.47) = 5 MM Stock Tank Barrels

Summary of Example Calculation:VOLUME : Bulk Pore OOIP ReservesMM BBL : 100 20 11 5


26

• Thank You