Deterministic Reserves Assessment Methods

1. Deterministic Reserves Assessment Methods SPE/OERN Reserves ATW: Sharing the Vision John Lee Texas A&M University March 2011

2. Source of Presentation Materials • Draft version of new SPE/ AAPG/ WPC/ SPEE/ SEG (available free of charge on SPE Website) Guidelines for Application of the Petroleum Resources Management System Chapter 4

3. Uncertainty and Assessment Methods: What, When, Range of Uncertainty

4. Which Specific Method Is Most Appropriate? Depends on • Type, quantity, quality of geoscience, engineering, and economic data available and required for technical and commercial analyses • Geologic complexity, recovery mechanism, state of development, degree of depletion

5. How Should the Deterministic Procedure Work? • Conduct ‘scenario analysis’ to bracket uncertainty and sensitivity to estimated values of parameters • Scenarios should represent low, best (most likely), high cases for original in-place and associated recoverable hydrocarbons • Depending on stage of maturity, scenarios represent PRMS categories of reserves (1P, 2P, 3P), contingent resources (1C, 2C, 3C), or prospective resources (low, best, high)

6. Volumetric and Analogy Methods • Volumetric method uses static data to obtain estimates of petroleum initially in place • Analogy method used to estimate recovery efficiencies • Procedures useful during exploration, discovery, post-discovery, appraisal, and initial development stages of E&P life cycle for any petroleum recovery project

7. Technical Principles • best determined from analog reservoir • In absence of rigorous analog, near-analog may be used • Numerical simulation (even lacking history match, if production data limited) also possibility • Analytical methods common in petroleum literature, but rapidly being replaced by simulation • Empirical correlations also available, but usually less satisfactory than simulation

8. Example Illustrates Principles and Application • Example focuses on assessment of risk, uncertainty, classification, and categorization • Oil reservoir example: Various stages of maturity, over full life cycle

9. Example: Resource Estimates in Exploration, Appraisal, Initial Development Stages • Example represents typical accumulation in mature petroleum basin with • Extremely large structures • Well-established regional reservoir continuity • Numerous adjacent analog development projects

10. Pre-Discovery Structure, Net Pay Maps • Prospect developed with seismic, geological studies • 2D seismic defined structural spill point, provided no indication of fluid contact locations • Analog reservoir suggested 30-33o API crude oil

11. Pre-Discovery Resource Estimates • High estimate: Based on regional analogs, assume structure full to spill point at 6,410 ft SS • Low estimate: Assume oil down to only 6,120 ft SS • Best estimate: Assume oil to intermediate depth of 6,265 ft SS • Uniform net-gross ratio of 0.7 assumed, and net-pay maps prepared

12. Prospective Resource Estimates

13. Post-Discovery-Well Analysis • Wildcat well encountered significant oil column sufficient to declare “discovery” • Geologic model updated (figure), net-gross pay ratio 0.75, net pay 89 ft • OWC not identified, so LKH in well penetration taken as OWC for low estimate (6,155 ft SS)

14. Post-Discovery-Well Analysis • High estimate (3C): Assume structure full of oil to spill point • Alternative geological model indicates larger closure and higher recovery efficiency • Low estimate (1C): LKH defines 1C limit • Best estimate (2C): vertical limit set at 6,283 ft SS (intermediate depth) • Oil gravity found to be 32o API (PVT properties determined using this gravity)

15. Post-Discovery-Well Reservoir Maps

16. Post-Discovery-Well Volumetric Analysis

17. Post-Discovery-Well Analysis • Economic analysis encouraging, but chance of commerciality still estimated to be only 60% • Reclassification as Contingent Resources appropriate • Chance of gas above HKH not ruled out, but ignored in this analysis, awaiting detailed PVT and pressure gradient data • Owners unwilling to commit funds to a development project without additional data • Appraisal program designed for further evaluation

18. Appraisal/Delineation Stage • Appraisal program implemented • Two additional wells drilled, tested, samples taken for PVT analysis • 3D seismic data acquired • New wells established lower LKH depth to 6,240 ft SS • PVT analysis established that oil is undersaturated, eliminated potential for gas cap

19. Appraisal/Delineation Stage • Logs, well tests, PVT analysis established • Initial pressure, reservoir temperature, average porosity, initial water saturation, reservoir permeability, oil gravity and viscosity, bubble-point pressure, Boi, Rsi • Stabilized rates averaging 3,500 STB/D • More definitive net/gross ratio distribution throughout reservoir

20. Appraisal/Delineation-Stage Maps

21. Appraisal-Stage Volumetric Analysis

22. Recovery Project Implemented, Resources Classified as Reserves • Pressure maintained with peripheral water injection (well established in several analog reservoirs) • Project economics favorable • No market, legal or environmental contingencies identified • Management committed funds to project • Recoverable volume estimates refined, reclassified as reserves

23. Process Continued Through Stages of Greater Reservoir Maturity, Additional Projects • Continue to conduct ‘scenario analysis’ to bracket uncertainty and sensitivity to estimated values of parameters • Scenarios continue to represent low, best (most likely), high cases for original in-place and associated recoverable hydrocarbons • Later scenarios focus on continued refinement of reserves categories (1P,2P,3P) • Applications Guidelines (Chapter 4) highly recommended for additional reading

24. Deterministic Reserves Assessment Methods SPE/OERN Reserves ATW: Sharing the Vision John Lee Texas A&M University March 2011