Force and Petroleum Economics of IOR/EOR

General integrated work process for economic evaluation of IOR/EOR projects

- Reserve reporting and IOR/EOR projects
- Economic models of drilling versus IOR/EOR projects
- Effect of new tax system and possible other changes in the future
Arvid Elvsborg, Managing Director IPRES Norway
Tor Andersen, Senior Consultant Xodus Group
Lars Rustad, Senior Consultant Xodus Group

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Setting the Scene for IOR/EOR

Most of the worlds future oil and gas reserves wont come from new
discoveries, but by finding ways to get more oil from regions the industry
already has developed.
Weve probably reached the time, amazingly, when theres as much to be got
extra out of the oil fields we have discovered as there is to be found in new
fields,
David Eyton, BPs Group head of research and technology, said in an interview at the
Offshore Technology Conference in Houston 2014.

Setting the Scene for IOR/EOR

Based on existing technology the industry expects to leave more than half the oil it
discovers in conventional reservoirs.
BP, however, has embarked on a number of projects it believes will significantly boost
the amount of oil it can extract from its existing wells or oil fields, helped in part by its
new super computer in Houston that can make 2,200 trillion calculations in one second
The behemoth calculator is designed to create much better images of reservoirs in
places like the Gulf of Mexico, where salt canopies had forced oil companies to drill
almost blind for decades
Its the lab for seismic we do it in the virtual world. And then when we find out that
something works, we can build models and fields and geology. We can go out and try it
for real.
.
David Eyton, BPs Group head of research and technology, said in an interview at the Offshore
Technology Conference in Houston 2014.

Setting the Scene for IOR/EOR

BPs also planning on expanding a new water-flooding technique across its offshore
portfolio. One of BPs big ah-hah moments came two decades ago when it discovered that
injecting fresh water into offshore oil fields inexplicably harvested more oil.
High-salinity sea water the kind of water close at hand at offshore drilling sites doesnt get
the job done as well.
When we realized that fresh water in some occasions helps you to get more oil out, we set
out almost for 20 years to figure out why is that. That insight and advancements in nanoscale measurement techniques paved the way for BP to deploy its first low-salinity waterinjection technology to an oil field 200 miles north of the UK mainland.
The industry is still in the early stages of understanding the full potential of advanced
chemistry applied to water-flooding in oil and gas reservoirs.
Our focus is on low-cost techniques with water flooding to get more oil out.
Low-salination is well known. But actually, all the money were now spending on research
and development in this area is on things that nobody yet knows about. Theres a lot more
going on behind the scenes.
David Eyton, BPs Group head of research and technology, said in an interview at the Offshore Technology
Conference in Houston 2014.

Status IOR/EOR globally (World Oil Official publ. 2010, page 64)

Figure 2. Worldwide EOR Production Rates

Production (KB/d)

Number of Projects Worldwide

Thermal

Chemical HC Gas

CO2

Others

Status IOR/EOR globally (World Oil Official publ. 2010, page 68)
IOR/EOR Maturity and deployment globally

Technology Deployment

Steam

Gas injection

Smart water
flooding

SAGD

Pilots

Polymer

Commercial

Hybrids

Surfactant
Foam
R&D

In situ
combustion

Microbial

Maturity

Risks

General integrated work process for economic

evaluation applied to IOR/EOR projects

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Integrated Development Assessment

Secondary
Recovery

Tertiary
Recovery

PROBABILITY

Primary
Recovery

Reserves / Resources Drilling and Completion plans

Water
flooding

Chemical
Solvent

Artificial lift

PRODUCTION

Natural flow

RESERVES

TIME
Prod.start

Pressure
maintenance
Gas Water
injection
Investment/ Cash flow/Value

Thermal
Other

Nitrogen
CO2
Air
SAGD
Bacteria
Etc.

Results

Cash flow

CAPEX/OPEX/DRILLEX

Resource Group Classification on NCS

A Additional Resources from IOR/EOR
Resource
classes
NPD
0
1

Definition

Reserves in production

Reserves with an approved plan for development and production

Reserves which the licensees have decided to recover

A
A
A
A

Resources in the planning phase (approval within 4 years)

6
7

SPE/WPC/
AAPG

Historical production

SEC

Resources whose recovery is likely, but not clarified

Resources whose recovery is not likely
Resources that not have been evaluated, i.e. new discovery

Prospect. Not drilled

Lead

Developed
Reserves
Undeveloped
Reserves

Technical
Resources

Discovered
Commercial
(Reserves)

Discovered
Uncertain
Commerciality
(Contingent
Resources)
Undiscovered

Definitions based on Norwegian Petroleum Directorate (NPD). SPE-PRMS texts can be substituted.

UN Categories and Classes

E axis
categories

F axis
categories

G axis
categories

Project maturation pipeline

Volumetric based

3P

Possible
Best

Low

2C

2P

1C

1P

Probable
Proved

time

6. late
development

3C

Reserves

5. mature
development

3. appraisal

Contingent
Resources

4. early
development

volumetric
uncertainty

High

2. discovery

1.exploration

Prospective
Resources

Performance based

6,00

MAX
BASE
MIN
P100
P0
P90
Mean
P10

3,50

3,00

Oil (MSm3)

2,50

2,00

1,50

Oil (MSm3)

Typical Model Elements

and Schedule Challenges

4,00

5,00

4,00

Project
3,00

Newwell
Existing

2,00

1,00

0,00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Year

Midw ayProb.Disc.[Reserves]

1,00

0,72

C-structure[Reserves]

0,50

0,44

MProb.Disc.|Midw ayDisc.[Reserves]

0,40

LitProb.Disc.|Midw ayDisc.[Reserves]

0,00
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

K-2 Drill

K-8 D&C
P9 D&C
K-5 Interv.
P-17AH D&C
K-9 D&C

2030

Year

RIG B

Lit

0,11

OP1Drilling start date[Drilling]

0,10

Lit[Reserves]

0,10

OP1Duration of drilling[Drilling]

-0,2

RIG SCHEDULE

0,13

-0,13

Production Profiles C-structurePlateau production

rate[Production]

2007

0,13

Midw ay[Reserves]

LitProb.Disc.|Midw ayDry[Reserves]

0,10

-0,1

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

Sensitivity Coefficients

P-7 P&A

P-12 WO
P-7A D&C
P-6 Interv.
P-11AH Drill
P-8 D&C

RIG A
2007

RIG SCHEDULE
IOR/EOR PROJECTS
NEW WELLS

PIPELINE
CAPACITIES

PROCESS MOD.

K-2

FIELD AREA B
NEW WELLS

EXISTING WELLS

FIELD AREA A
EXISTING WELLS

-CAPACITIES
-REGULARITY
-SERVICE AVAILABILITY
-ETC

DISCOVERY
PROSPECT
PROSPECT

?
IOR/EOR PROJECTS
PUMP INSTALL.

-CAPACITIES
-REGULARITY
-SERVICE AVAILABILITY
-ETC

Development Project Uncertainties (offshore example)

Discovery

Prospect

Field

Dev. plan

Risks

CAPEX

OPEX

Uncertainties

Economics

Scenarios

Main Project
Development/
redevelopment
solution?
Processing
capacity/phasing ?

Drilling rig(s)?

New
Seismic ?

CAPEX?
OPEX?
Pipeline
capacity?
Pipeline
cost?

Pre-drilled
wells?

Seismic
reinterpretation?

# production
wells?

Depth
conversion?

Cost per well?

Production
rate per well?

Revise reservoir
model?
Petrophysical
Challenges ?

Oil price?
Regularity?

Reserves
Production Profiles?

Communication
between layers?

Drill
exploration
well?
Appraisal
well(s)?

Injection wells?

Fault
location?

GOC?
WOC?

Additional Projects

Schedule

# templates?
Cost per template?

Key elements in mature field development

PROS A
EOR A
DISC A
IOR A
FIELD B
FIELD A

2007

2030

2007

EXISTING WELLS

UPTIME
DEFERMENTS
PROCESSING CONSTRAINTS

PIPELINE CONSTRAINTS

SCHEDULE ITEM
SCHEDULE ITEM
SCHEDULE ITEM
SCHEDULE ITEM
SCHEDULE ITEM
SCHEDULE ITEM
SCHEDULE ITEM

2030

2007

NEW WELLS
G
F
E
D
C
B
A

NEW PROJECTS

WELL TRIGGER C
PROJECT TRIGGER B
WELL TRIGGER B
WELL TRIGGER A
PROJECT TRIGGER A

PROS A

OPERATIONAL RISKS
ENVIRONMENTAL RISKS

FIELD A
SCHEDULE

POLITICAL RISKS

2030

Integrated Petroleum Risk Management work approach

Product
prices

Fiscal
terms
Commercial
terms

Sub-Surface

RISKS

Schedule
Production

OPEX
Drilling
CAPEX

- Fast-tracking
- Studies with clear purpose
- Focus on relevant risks
- Integrated teams

Integrated Project Development Work Process to screen

and rank IOR/EOR alternatives a consistent approach
Rock & Fluid
Characteristics

Recovery
Factor

PROBABILITY

Rock Volume
Parameters

Oil and Gas Reserves / Resources

CAPEX

OPEX

Production Profiles

Revenue

Tariff

PRODUCTION

Capacity Constraints
Facilities & Wells, Schedule

RESERVES

TIME

Prod.start

Cash flow
Cash Flow

Cut
off
Probability
Plots

Time
Plots

Decision
Trees

P&A
Abandonment
Tornado
Plots

Fiscal
Regime
Summary
Tables

NPV

Compare and rank

IOR/EOR alternatives

Decision tree analyses

for structuring

Analyses
Compare
and rank

Optimize and
update

A
H

C
B
F

Projects

D
G

E
E

E
HIGHEST
EMV

Drilling Campaign portfolio evaluation necessary to optimise

production and recovery
W2

W1

W6

W3

W4

W5

W2

Screening simulations of all well

options to evaluate data quality
check for Inconsistencies
Well options to include pilot wells
for IOR/EOR ?

Simulations with several different

portfolio scenarios (well projects)
to optimise drilling campaign
Several scenarios of wells for
IOR/EOR projects
Needs aggregation capability for each
well scenario !

Timing of wells critical for all development economics !

Normally huge range from P10 to P90 estimates of number of wells and effect
on production profiles
W1
A-52A

W2
A-26A

A-2W3

W4
A-33A

W5
A-46A

W6
A-19A

W7
A-7A

W8
A-21

W9
A-30B

31.mar.15
P10
30.okt.14

Mean
28.jul.14

P90

31.mar.14

20.mar.14

08.mar.14

Op-2010 plan
23.des.13

22.nov.13
08.sep.13
26.jun.13

23.jul.13
03.jun.13

31.mar.13
20.jan.13

11.mai.12

31.mar.12

26.feb.12
02.jan.12
13.nov.11

25.sep.12

23.sep.12

18.jun.12

19.jun.12

04.apr.12

25.mai.13
27.feb.13

28.jan.13

18.feb.13

12.des.12

23.nov.12

25.okt.12
29.aug.12

25.jul.12

12.mai.12

08.mar.12

02.jan.12

26.aug.11
22.jul.11

01.apr.11
A-52A
W1

A-7A
W7

A-19A
W6

A-26A
W2

A-30B
W9

A-46A
W5

A-33A
W4

A-2
W3

A-21
W8

Well planning and decision making: Status and future

Actual Troll 6 branch well overlain picture of Rio de Janeiro

Multiple reservoir targets defined

Single wells, Bi-laterals, Advanced multilateral wells
How many branches in the future: 7 now and 25+ in 2030 ?

IOR/EOR Project Challenges to obtain

acceptable economic results

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Integrated Development Assessment

Secondary
Recovery

Tertiary
Recovery

PROBABILITY

Primary
Recovery

Reserves / Resources Drilling and Completion plans

Water
flooding

Chemical
Solvent

Artificial lift

PRODUCTION

Natural flow

RESERVES

TIME
Prod.start

Pressure
maintenance
Gas Water
injection
Investment/ Cash flow/Value

Thermal
Other

Nitrogen
CO2
Air
SAGD
Bacteria
Etc.

Results

Cash flow

CAPEX/OPEX/DRILLEX

PRODUC
TION

PROBABILITY

Primary, Secondary and Tertiary recovery

RESERVES

Cash flow

CAPEX/OPEX/DRILLEX
Well Established DECISION-MAKING PROCESS Primary Secondary Recovery
DG1

DG2

DG3

DG4

DG5

Integrated work approach

Geology
Geophysics

Economics

Economic analysis
Commercial
premises

Production
Reservoir
engineering

Rules
Regulations

oil

Tax
Drilling
engineering

Field
Development

Market

gas

Cost elements

Qualification of important IOR/EOR data for economic evaluation

for one field, group of fields operational area
Screening of Subsurface criteria

Geoscience, petrophysical: rocks, liquids, gases

Reservoir technical: injection of gases & liquids, production delta performance

STOOIP, RECOVERY FACTOR, RESERVES, PRODUCTION PROFILES

IOR/EOR well planning

Existing wells, New wells for production and injection

NUMBER, TYPE OF WELLS, SCHEDULE - DRILLEX

Facility modifications, new technology

Platform, subsea, pipeline modifications

Process and transport enhancements by new technology

CAPEX, OPEX
Combination of several fields, area planning

Synergies between fields with similar possibilities for EOR methodology

Area plan to optimise technical and economic solutions over field life time

CAPACITY CONSTRAINTS, TARIFFS , LOGISTICS, OTHER SERVICES ?

Cash flow
CAPEX/OPEX/DRILLEX

PRODUCTION

PROBABILITY

Stepwise Implementation of Tertiary recovery:

Laboratory, Field Pilots, Production in Phases?
RESERVES

Phase 1(part of field)

Phase 2 (full field)
Pilots

Cash flow

CAPEX/OPEX/DRILLEX

Stepwise implementation and integration of R&D, technology, staff to move projects from
laboratory scale tests, single well tests, pilot tests and on to full field scale implementation
reduces risks, but add time and complexity to decision process and reduce NPV.

Typical IOR/EOR evaluation applied on Booster Pump Case

PRESSURE

Pwh

FLOWLINE

Ps

Booster
pump
MPC

TUBING

Pressure profile
with and without
booster pump.

Without
pump
With pump

Pwf
RESERVOIR

PR

Typical IOR/EOR evaluation applied on Booster Pump Case

Technical recov.
Res (10^6 Sm3)

Service intervent. Pump module (Mill

USD)

Power consumption
(Mill USD/year)

Service intervent SCM/PVR (mill USD)

Hydrate prevention/
Auxiliary fluids (mill
USD/Y)

Expected project NPV: 5,55 mill USD

Development of Discovery with IOR/EOR ( Project)

Oil production Mean profiles

P10

Mode

P90

14 MSm3

20 MSm3

40 MSm3

Recovery factor Rf

21 %

30 %

45 %

Additional EOR Rf *

3%

10 %

15 %

STOIIP

* Negative correlated

Effect of Fiscal Regime

Net cash flow after tax for Project; before tax for Discovery/EOR

New 2013 NCS tax rates vs. Pre 2013 tax rates
NPV distribution with full uncertainty

< 2013

2013

Company tax

28 %

27 %

Special tax

50 %

51 %

Allowance

130 %

122 %

Mean

Mode

P10

P90 Unit

Tax consolidation post 2013

5655

4095

2683

9242 10^6 NOK

Tax consolidation pre 2013

5826

4704

2863

9372 10^6 NOK

Tax changes and EOR projects

New tax rates and reduced uplift increase downside risk in general
EOR projects, will normally have higher uncertainty than initial
development phase
Low return on capital combined with higher risk will not be an
incentive to invest in EOR projects on a stand alone basis
If the oil company goes out of tax position during the initial
development phase, this increases the downside risk of the EOR
project

DPIR:
Discounted Profit to Investment Ratio
Tax calculated on Discovery and EOR
project

Corporate Project portfolio

Rank IOR/EOR projects and compare with conventional projects
Overview of total project portfolio economics NPV, EMV for ranking of all projects
Resource/ reserve/production/revenue/CAPEX/OPEX for long term forecasting scenarios

Ranking of IOR/EOR projects within the portfolio

Area plan to optimise technical and economic solutions of IOR/EOR over field life time
Initial field development planning of IOR/EOR projects for Stepwise decisions from
laboratory tests, pilots in field to full field deployment to establish realistic project
implementation schedule

Comparison between IOR/EOR projects within different fiscal regimes

Comparison with NPV, EMV on conventional projects including drilling of new, more
advanced development wells and exploration/appraisal wells for tie in of new satellites

Summary
EOR investment projects are complex and challenging:
Decision process require high level of expertise in a large number of technical, economic
and management professions to perform an integrated economic modelling with advanced
uncertainty/risk handling to satisfy management.
Stepwise implementation and integration of R&D, technology, staff to move projects from
laboratory scale tests, single well tests, pilot tests and on to full field scale implementation
reduces risks, but add time and complexity to decision process and reduces NPV.

EOR compete with Primary development and IOR

- Improved reservoir modelling combined with infill drilling, improved injection of gas
and water, and upgrade of process ( capacity, pumps, compressor) adds easy reserves.
- Several new discoveries for tie back on most fields at the NCS.

Effects of fiscal regime

- So far no special incentives regarding IOR/EOR in the fiscal regime for NCS.
- Latest changes in fiscal regime has a negative effect.

Future changes?

To achieve more EOR projects it is necessary to plan these projects in an early

phase, when developing the Primary Secondary recovery.
With simultaneous maturation of EOR knowledge from reservoir, drilling,
process, transport and logistics can be directly applied.

Coordination of field operations can probably increase EOR projects, in

particular in business areas where it is similar drainage strategies and technical
infrastructure solutions.

Companies need to specialise in building capabilities on certain types of EOR

projects to be able to successfully implement EOR projects economically. This
will require both technical, economic and management top expertise.

Selective Fiscal incentives can probably boost the activity / production from
EOR.

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