Estimating Resources and Reserves in Estimating Resources and Reserves in Estimating Resources and Reserves in Estimating Resources and Reserves in Unconventional Gas Reservoirs Unconventional Gas Reservoirs Creties Jenkins Creties Jenkins Vice President, P.E., P.G. Vice President, P.E., P.G. [email protected][email protected]
47
Embed
Estimating Resources and Reserves inEstimating Resources ...images.sdsmt.edu/learn/Creties Jenkins.pdf · Data to Quantify Resources and Reserves • Static Data – Core description
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Estimating Resources and Reserves inEstimating Resources and Reserves inEstimating Resources and Reserves in Estimating Resources and Reserves in Unconventional Gas ReservoirsUnconventional Gas Reservoirs
The opinions expressed in this presentation are those ofDeGolyer and MacNaughton alone These opinionsDeGolyer and MacNaughton alone. These opinionsrepresent D&M’s current understanding of the Securitiesand Exchange Commission’s “Modernization of Oil andGas Reporting; Final Rule” (the revised SEC reportingp g; ( p grules) in the Federal Register.
D&M’s OPINIONS DO NOT NECESSARILY REPRESENTTHOSE OF THE SEC.
D&M’s opinions are subject to revision after the SECissues clarifications and guidance to the new rulesissues clarifications and guidance to the new rules.
Reserves are the Basis of Corporate ValueReserves are the Basis of Corporate Value
•• Over 150 publiclyOver 150 publicly--owned U.S. oil and gas owned U.S. oil and gas producers file reserves data producers file reserves data pp
•• Their total reported oil and gas reserves are Their total reported oil and gas reserves are valued at over $3 trillionvalued at over $3 trillionvalued at over $3 trillionvalued at over $3 trillion
•• Proved reserves account of over 70 percent of Proved reserves account of over 70 percent of their total market valuetheir total market valuetheir total market valuetheir total market value
•• Inaccurate estimates cause serious problemsInaccurate estimates cause serious problems–– Reserve writeReserve write--downsdowns–– Poor planning and managerial decisionsPoor planning and managerial decisions
From B.G. Dharan, “Improving the Relevance and Reliability of Oil and Gas Reserves Disclosures,” Presented to U.S. House Committee on Financial Services
Resources and Reserves are Critical For…Resources and Reserves are Critical For…
•• Determining division of ownership Determining division of ownership
•• Calculating a fair market valueCalculating a fair market value
R i i it l f d l tR i i it l f d l t•• Raising capital for developmentRaising capital for development
•• Establishing sales contracts and pricesEstablishing sales contracts and pricesstab s g sa es co t acts a d p cesstab s g sa es co t acts a d p ces
•• Designing and constructing facilitiesDesigning and constructing facilities
Differentiating Resources and ReservesDifferentiating Resources and Reserves
•• Prospective ResourcesProspective Resources–– Those quantities of petroleum which are estimated, as of a given Those quantities of petroleum which are estimated, as of a given
date to be potentially recoverable from undiscovereddate to be potentially recoverable from undiscovereddate, to be potentially recoverable from undiscovered date, to be potentially recoverable from undiscovered accumulations.accumulations.
•• Contingent ResourcesContingent Resourcesgg–– Those quantities of petroleum estimated, as of a given date, to Those quantities of petroleum estimated, as of a given date, to
be potentially recoverable from known accumulations by be potentially recoverable from known accumulations by application of development projects but which are not currently application of development projects but which are not currently considered to be commercially recoverable due to one or more considered to be commercially recoverable due to one or more contingenciescontingencies
•• ReservesReserves•• ReservesReserves–– Those quantities of petroleum anticipated to be commercially Those quantities of petroleum anticipated to be commercially
recoverable by application of development projects to known recoverable by application of development projects to known accumulations from a given date forward under definedaccumulations from a given date forward under definedaccumulations from a given date forward under defined accumulations from a given date forward under defined conditions. conditions.
From “Petroleum Resources Management System”, 2007, document at www.spe.orgFrom “Petroleum Resources Management System”, 2007, document at www.spe.org
From “Petroleum Resources Management System”, 2007, document at www.spe.orgFrom “Petroleum Resources Management System”, 2007, document at www.spe.org
Unconventional Reservoirs and PRMSUnconventional Reservoirs and PRMS
•• Unconventional resources exist in petroleum Unconventional resources exist in petroleum accumulations that are pervasive throughout a accumulations that are pervasive throughout a l d th t t i ifi tl ff t d bl d th t t i ifi tl ff t d blarge area and that are not significantly affected by large area and that are not significantly affected by hydrodynamic influences…hydrodynamic influences…
•• For these petroleum accumulations there typicallyFor these petroleum accumulations there typically•• For these petroleum accumulations, there typically For these petroleum accumulations, there typically is a need for increased sampling density to define is a need for increased sampling density to define uncertainty of inuncertainty of in--place volumes, variations in place volumes, variations in quality of reservoir and hydrocarbons and theirquality of reservoir and hydrocarbons and theirquality of reservoir and hydrocarbons, and their quality of reservoir and hydrocarbons, and their detailed spatial distribution…detailed spatial distribution…
•• Similar to improved recovery projects applied toSimilar to improved recovery projects applied toSimilar to improved recovery projects applied to Similar to improved recovery projects applied to conventional reservoirs, successful pilots or conventional reservoirs, successful pilots or operating projects in the subject reservoir or operating projects in the subject reservoir or successful projects in analogous reservoirs maysuccessful projects in analogous reservoirs maysuccessful projects in analogous reservoirs may successful projects in analogous reservoirs may be required to establish a distribution of recovery be required to establish a distribution of recovery efficiencies…efficiencies…
Types of Unconventional ReservoirsTypes of Unconventional Reservoirs
CoalbedCoalbedMethane
•• Deep Piceance BasinDeep Piceance BasinAlb t D B i (?)Alb t D B i (?)
•• Warrior BasinWarrior Basin
Hybrid
•• Alberta Deep Basin (?)Alberta Deep Basin (?)•• Wilcox SandsWilcox Sands
•• Dynamic data Dynamic data –– Drilling historyDrilling history
Well testingWell testing–– TOC and Rock Eval TOC and Rock Eval –– Sorbed gas capacitySorbed gas capacity–– Mechanical propertiesMechanical properties
–– Well testingWell testing•• Permeability, reservoir Permeability, reservoir
pressure, skin factorpressure, skin factor
–– Completion dataCompletion data–– Gas & water compositionGas & water composition–– Isotopic dataIsotopic data–– Maturity indicators (Ro, TAI, Maturity indicators (Ro, TAI,
Field Size DistributionField Size DistributionProspectProspect
Probability of Geologic Success (Pg)Probability of Geologic Success (Pg) ––the probability of discovering the probability of discovering reservoirs that flow petroleum at a measurable rate. reservoirs that flow petroleum at a measurable rate.
Probability of Economic Success (Pe)Probability of Economic Success (Pe)–– the probability that a given the probability that a given discovery will be economically viable.discovery will be economically viable.
From Bill Haskett, SPE 96879 From Bill Haskett, SPE 96879
spacing unitspacing unitEstimated Ultimate Recovery per Well (BCF)Estimated Ultimate Recovery per Well (BCF)
0.1 1.0 10 1000.1 1.0 10 100
Probability of ProductivityProbability of Productivity ––the probability that the play will produce the probability that the play will produce sustainable production somewhere within the play boundariessustainable production somewhere within the play boundaries
P b bilit f M t i litP b bilit f M t i lit th b bilit th t th t i d d tith b bilit th t th t i d d tiProbability of MaterialityProbability of Materiality---- the probability that the sustained production the probability that the sustained production will be large enough and consistent enough to constitute a viable playwill be large enough and consistent enough to constitute a viable play
From Bill Haskett, SPE 96879 From Bill Haskett, SPE 96879
A Shale Gas Prospective Resource AssessmentA Shale Gas Prospective Resource Assessment
Porosity (percent) 2 4 7Sa p e obab st c put ataInitial gas expansion factor (rcf/mscf) 220 244 270
Matrix gas saturation (percent) 30 50 80
Gas storage capacity (scf/ton) 10 30 75
Density of shale (g/cc), rho 2.25 2.37 2.61
R f 10 2Recovery factor, percent 5 10 25
•• You may also want to build in key dependencies such as a You may also want to build in key dependencies such as a positive correlation between matrix porosity and matrix gas positive correlation between matrix porosity and matrix gas saturationsaturation
Do Prospective Resources Have Value?Do Prospective Resources Have Value?
•• Expected Monetary Value (EMV) Expected Monetary Value (EMV) –– Can be calculated and used in investment /Can be calculated and used in investment /–– Can be calculated and used in investment / Can be calculated and used in investment /
drilling decisions, farmout decisions and internal drilling decisions, farmout decisions and internal rankingsrankings
–– Should approximate the real value IF enough Should approximate the real value IF enough similar opportunities are pursuedsimilar opportunities are pursued
Modified from Richard Moreton, Bell Exploration Ltd Modified from Richard Moreton, Bell Exploration Ltd
PRMS Gas Discovery FlowchartPRMS Gas Discovery Flowchart
• Prospective resources are undiscovered. In order to have contingent Prospective resources are undiscovered. In order to have contingent resources or reserves, we need to have a discovery!resources or reserves, we need to have a discovery!
Total GIIPTotal GIIP
Penetrated by a well?Penetrated by a well? NoNoPenetrated by a well?Penetrated by a well?
After David Elliott, SPE 114160After David Elliott, SPE 114160YesYes MarginalMarginal
Economic?Economic?
Examples of Project ContingenciesExamples of Project Contingencies
•• Contingencies that impede productionContingencies that impede production–– Permeabilities that are too lowPermeabilities that are too lowPermeabilities that are too lowPermeabilities that are too low–– Insufficient porosity or gas saturationInsufficient porosity or gas saturation–– Structural or stratigraphic complexitiesStructural or stratigraphic complexitiesg p pg p p–– Ineffective fracture stimulationsIneffective fracture stimulations
•• Contingencies that impede developmentContingencies that impede development•• Contingencies that impede developmentContingencies that impede development–– Low gas pricesLow gas prices
Gas treatment and transportGas treatment and transport–– Gas treatment and transportGas treatment and transport–– Lack of approvals by partners or regulatory agenciesLack of approvals by partners or regulatory agencies–– Lack of financing or commitmentLack of financing or commitmentLack of financing or commitmentLack of financing or commitment
A Tight Gas Contingent Resource AssessmentA Tight Gas Contingent Resource Assessment
•• Application of any risk factor to Application of any risk factor to contingent resources does not equatecontingent resources does not equatecontingent resources does not equate contingent resources does not equate them with reserves.them with reserves.
•• There is no certainty that it will be There is no certainty that it will be commercially viable to produce any commercially viable to produce any portion of the contingent resourcesportion of the contingent resourcesportion of the contingent resources portion of the contingent resources evaluated. evaluated.
But who wants to believe an auditorBut who wants to believe an auditorBut who wants to believe an auditor…But who wants to believe an auditor…
…When You Can Believe an Investment Banker…When You Can Believe an Investment Banker
……Or a Political LeaderOr a Political Leader
“I believe in natural gas as a clean,I believe in natural gas as a clean, cheap alternative to fossil fuels”
From “Petroleum Resources Management System”, 2007, document at www.spe.org
Progressing Resources to ReservesProgressing Resources to Reserves
•• Unconventional Unconventional uncertainty is uncertainty is productionproductionproduction production dominated in a dominated in a typical gas playtypical gas playN d il tN d il t•• Need a pilot Need a pilot project to project to quantify rates quantify rates
d td tand costsand costs
From Bill Haskett, Decision Strategies From Bill Haskett, Decision Strategies
What’s the Purpose of a Pilot Project?What’s the Purpose of a Pilot Project?
1212
To determine how many wells must be
8
10
8
10
wel
l)w
ell)
To determine how many wells must be drilled before we are confident that the average development well will exceed
Estimate of Estimate of OriginalOriginal--GasGas--
InIn--PlacePlaceE ti t E ti t 15000
10000p/Z*
, psi InIn--PlacePlaceEstimate Estimate
of of Initial Initial
PressurePressure5000
PressurePressure
0 1000 2000 3000 4000
Gp, mmcf5000 6000 7000 8000
0
N dNeed…• Accurate estimate of current average reservoir pressure• Accurate estimates of reservoir properties (Porosity, PV Compress, etc)• Accurate estimates of water influx
From John Seidle
• Accurate estimates of water influx • Reservoir to be initially saturated with respect to the isotherm
•Solution at the cell nodesFinite Element Modeling
•Linear interpolation inside•Properties at boundaries•Need just a few cells to
•
Need just a few cells to represent linear gradients
Finite Difference Modeling•Solution at block centers•Properties discontinuous at bl k b d iblock boundaries
•Need lots of grid blocks for near-frac accuracy
Grid Mesh Adjacent to a Hydraulic Fracture
Hydraulic Fracture
WellboreWellbore
History Matching and ForecastingHistory Matching and Forecasting
0
5
0
5
e G
ase
Gas
SCF)
SCF) Make a Make a
productionproduction0
5
0
5
mul
ativ
em
ulat
ive
lum
e (B
Slu
me
(BS production production
forecast after the forecast after the history match is history match is
0
5
0 2500 5000 7500 10000 125000
5
0 2500 5000 7500 10000 12500
Time in DaysTime in Days
Cum
Cum Vo
lVo
l yycompletedcompleted
Assess theAssess the
yy
Assess the Assess the pressure pressure
distribution at distribution at EUREUR
SEC and PRMSSEC and PRMS
•• The SEC Rules have been modernized The SEC Rules have been modernized –– They go into affect at the end of this year They go into affect at the end of this year y g yy g y
•• Changes bring the SEC rules closer to PRMSChanges bring the SEC rules closer to PRMS
•• Some of the new SEC requirements…Some of the new SEC requirements…–– Optional disclosure of probable & possible reservesOptional disclosure of probable & possible reservesp p pp p p–– Disclosure of technologies used to establish reservesDisclosure of technologies used to establish reserves–– Must list qualifications of the person primarilyMust list qualifications of the person primarilyMust list qualifications of the person primarily Must list qualifications of the person primarily
responsible for overseeing the preparation or audit responsible for overseeing the preparation or audit –– Average year pricing instead of endAverage year pricing instead of end--ofof--year pricingyear pricing–– Use of Use of reliable technologyreliable technology to expand PUD’sto expand PUD’s
SEC Reserves under the “Old Rules”SEC Reserves under the “Old Rules”
•• Reserves on undrilled Reserves on undrilled acreage shall be limited to acreage shall be limited to ggthose drilling units offsetting those drilling units offsetting productive units that are productive units that are reasonably certain ofreasonably certain of
PUDPUD
reasonably certain of reasonably certain of production when drilled. production when drilled.
•• Proved reserves for otherProved reserves for otherPDPPDP
•• Proved reserves for other Proved reserves for other undrilled units can be undrilled units can be claimed only where it can be claimed only where it can be demonstrated with certainty demonstrated with certainty that there is continuity of that there is continuity of productionproductionpp
Possible Scenario Under the “New Rules”…Possible Scenario Under the “New Rules”…
•• Reserves on undrilled acreage Reserves on undrilled acreage shall be limited to those directly shall be limited to those directly offsetting development spacing offsetting development spacing
PUDPUDg p p gg p p g
areas that are reasonably certain areas that are reasonably certain of production when drilled, unless of production when drilled, unless reliable technologyreliable technology establishes establishes
bl t i t f ibl t i t f ireasonable certainty of economic reasonable certainty of economic producibility at greater distances. producibility at greater distances.
•• Reliable technologyReliable technology is a grouping is a grouping PDPPDPgygy g p gg p gof one or more technologies of one or more technologies (including computational (including computational methods) that has been field methods) that has been field tested and has been demonstratedtested and has been demonstratedtested and has been demonstrated tested and has been demonstrated to provide reasonably certain to provide reasonably certain results (90% accuracy) with results (90% accuracy) with consistency and repeatability inconsistency and repeatability inconsistency and repeatability in consistency and repeatability in the formation being evaluated or the formation being evaluated or in an analogous formation.in an analogous formation.
Some Examples of Reliable Technology Some Examples of Reliable Technology
•• Producing gas and water ratesProducing gas and water ratesg gg g
•• 33--D seismic dataD seismic data
•• Well correlation sections Well correlation sections
•• Structure contour and thickness mapsStructure contour and thickness maps
•• Core descriptions and analysesCore descriptions and analyses
A Statistical Approach to Reliable Technology
2.0
1 0
1.5
0.5
1.0
A Cautionary Tale from a CBM Pilot A Cautionary Tale from a CBM Pilot
Given the huge permeability variations in the four closely-spaced offset wells below, how can PUD’s be b k d t i ifi t di t f th t ll?
Seam 4 = 2 md6
booked at significant distances from the center well?
Seam 4 = 4 mdSeam 8 = 62 md
Seam 8 = 39 mdSeam 9 = 14 md
57
9 Seam 4 = 1 mdSeam 8 = 7 mdSeam 9 = 2 md
Seam 4 = 1 md
Seam 4 = 3 mdSeam 8 = 9 mdSeam 9 = 4 md
Seam 8 62 md
8
9
Scale in Meters
Seam 4 1 mdSeam 8 = 450 mdSeam 9 = 150 md
0 200 400 600 800
Key Steps in Unconventional Gas Growth Key Steps in Unconventional Gas Growth
•• Understanding the fundamentals Understanding the fundamentals –– How do these reservoirs work?How do these reservoirs work?
•• Choosing where to playChoosing where to play–– What are my prospective resources?What are my prospective resources?
•• Drilling appraisal wellsDrilling appraisal wells–– What data do I need to gather and analyze?What data do I need to gather and analyze?
•• Quantifying what’s been foundQuantifying what’s been found–– What are my contingent resources?What are my contingent resources?
F l ti th d l t lF l ti th d l t l•• Formulating the development planFormulating the development plan–– What type, spacing, and number of wells do I need?What type, spacing, and number of wells do I need?
•• Reaping the bountyReaping the bounty•• Reaping the bountyReaping the bounty–– What are my reserves and how do I report them?What are my reserves and how do I report them?
Estimating Resources and Reserves inEstimating Resources and Reserves inEstimating Resources and Reserves in Estimating Resources and Reserves in Unconventional Gas ReservoirsUnconventional Gas Reservoirs