Reserves Definitions & Estimation Techniques

By
Harold L. Irby
May 1998

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 Reserves - Presentation Outline

1) Definitions
2) Companys Process
3) Categories
4) Uncertainties
5) Estimation Process
6) Estimation Techniques
7) Calculation Example

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 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.

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 Reserves Definition By Reserves Category

Proved Reserves -
Represents that portion of ultimate reserves which can be recovered with a high
degree 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 -
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 -
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.

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 Reserves Definition - SPE & SEC
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 Reserves: Proved oil and gas reserves are the
estimated quantities of crude oil, natural gas and natural gas liquids
which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from know reservoirs under
existing economic and operating conditions, i.e., prices and costs as of
the date the estimate is made. Prices include consideration of changes in
existing prices provided only be by contractual arrangements, but not on
escalations based upon future conditions.

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 Reserves Determination / Estimation Process
A COMPANY'S OIL & GAS RESERVES
SUPPORTING
DELIVERABLES
ORGANIZATIONS
Other Documents
Facility Scopes and
Cost Estimates Exploration Finding Cost &
(Facilities & Tecnology) Historical Reserves Update
(Finance)
Activities & Studies Ad Hoc Requests
Exploration Discoveries
For Deliverables. (E&P Management)
(Exploration Department)
Commerciality Studies
Publications
Exploration Finding Cost
Year-end
Development Discoveries Annual Update of Approval of Year-end Review of Reserves Report
& Pore Volume Maps OIL & GAS Reserves Reserves Report Reserves Report (Corporate, E&P
(Reservoir (E&P Management) with Management
Management)
Characterization)
Supplementary
Reserves Reports
Basic Reservoir (E&P Management)
Data Update
(Reservoir Management)

Computer Programming
Support & Maintenance
(Computer Support)
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 Summary of Reserves Inputs / Outputs
Input Parameters

Pore Volume (Pv)

Reservoir Basic Data

Reserves OOIP/OGIP
System Reserves

Production Data

Recovery Factors
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 Categorization of Reserves & Resources

Degree of Geological Assurance

Resource Category Economic Feasibility
and Engineering Certainty

R Proved Reserves A high probability Definite

E
S
E Probable Reserves A modered probability Definite
R
V
E
Possible Reserves A low probability Most Likely
S

R Poor estimates of hydrocarbons Marginal or

E Potential Resources in-place
S
Undetermined (limited by data)
O Well-defined or conceptual exploration Undetermined
U Conceptual Resources
R leads in a productive basin (limited data)
C
Undetermined
E Speculative Resources Exploration leads in an untested basin
S (lack of data)

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Adapted from SPE and World Congress Publications
 Reserves Uncertainties & General Categories

Technical Uncertainty -
Geological / Geophysical / Reservoir Engineering
Economic Uncertainty -
Facilities Cost Estimates / Future Market Prices
Geopolitical Uncertainty -
Fiscal Regime Change / Markets
General Categorizations -
Based upon combination of technical / economic
uncertainties and considerations:
Proved
Probable
Possible
Potential
Conceptual
Speculative

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 Reserves Estimation Process - Time Line

Development Stage Initial

Expl Dev. Production Operations

Risk Very High Moderate Low

High
Reserves Estimation Risk Analysis
Analogy
Methods / Techniques Volumetric

Possible
Model Studies
Performance/Material Balance
Decline Trend
Reserves Type Probable
Proved
Depletion Stage Plateau Decline
Rate (BPD)

Reserves
Production Profile
Economic Limit

Cumulative Production (STB)

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 Reserves Estimation Techniques

Risk Considerations
Volumetric
Deterministic
Stochastic
Reservoir Analogy
Material Balance Computations
Decline Curve Analysis

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 Reserves Estimation Risk Considerations
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 => Unfavorable

0.3 < Pg < 0.5 => Questionable
0.5 < Pg < 0.7 => Encouraging
0.7 < Pg < 1.0 => Favorable
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 Reserves Estimation Risk Considerations

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 -

Oil Prices
Development & Production Cost (CAPEX & OPEX)
Taxes and Royalties

Geo-Political Risk and Uncertainty -

is highly dependent upon the locale

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Deterministic Reserves Stochastic Reserves
Pore Volume SINGLE
(A, h & ) Deterministic RESERVES
Swi, Boi Model VALUE
Recovery Factor
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.

Pore Volume PROBALISTIC

(A, h & ) Stochastic RESERVES
Swi, Boi Model DISTRIBUTION
Recovery Factor

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.
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 Deterministic Reserves Volumetric Equation

Volumetric Reserves Equation (Oil) -

OOIP = A h (1 - Swi ) / Boi = Pore Volume (1 - Swi ) / Boi
Reserves = OOIP (STB) x Recovery Factor (fraction)

Recovery Factor or Efficiency -

Recovery Factor = Displacement Efficiency (Ed) x

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

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 Deterministic Reserves Sweep Efficiency

Illustration of Water Flood Displacement Efficiency

Producer

Injector
Areal Sweep, Ea = 90%

Zone 1 Ei = 70%
Zone 2 Ei = 100%
Oil
Zone 3 Ei = 50%
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%

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 Stochastic Reserves Probability Distribution
100
Recovery
Reserves Value Probability Factor
90 Category (MMSTB) (%) (%OOIP)
PROVED
80 Proved X = 677 80 50
Probable Y = 745 50 55
Potential Z = 880 20 65
70
where OOIP = 1,355 BSTB
60

50 PROVED + PROBABLE

40

30
PROVED+PROBABLE+POTENTIAL
20

10
X Y Z
0
0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1350 1450
ORIGINAL RESERVES (MMBSTB)
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Reserves Estimation 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 -

Reservoir Analogy: (data shown in graphical form follows)

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

Facies Analogy: (data shown in graphical form follows)

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

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Recovery Factor vs. Reservoir Transmissibility
80

Legend
70 Field 1 Reservoir A
Field 2 Reservoir A
Field 3 Reservoir A
60
Field 4 Reservoir A
Field 5 Reservoir A
Field 6 Reservoir A
50

40

30

20
Recovery Factor Correlation Developed by Using
Carbonate Reservoir Data ( Under Water Injection / Drive )
RF = (%OOIP) = -18.97 + 14.08 * ln ( kh / oi )
10 2
with r = 0.98 & Standard Error of Estimated = 5% @ 95% Confidence Level
and it may not be valid for (kh / oi ) < 50.

0
10 100 1000

TRANSMISSIBILITY, kh / ( darcy - ft/cp )

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Recovery Factor vs. Reservoir Transmissibility
80
2
Legend
Reservoir 1 Facies A
2B
70 Reservoir 2 Facies A
2B 2B
Reservoir 3 Facies A
3
Reservoir 4 Facies A 2A 2A
60 Reservoir 5 Facies A
Reservoir 6 Facies A UD 1 UC
2A
2 1
50 3A
3A LC
3A
3B 3
40
3B

30
5

20
3B

Recovery Factor Correlation Developed by Using

1 Carbonate Reservoir Data ( Under Water Injection / Drive )
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RF = (%OOIP) = 31.41 + 7.15 * ln ( kh / oi )
2
with r = 0.87 & Standard Error of Estimated = 13% @ 95% Confidence Level

0
0.1 1 10 100 1000

TRANSMISSIBILITY, kh / (darcy-ft/cp) 20
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 API Correlations Field / Reservoir Analogy

1. Water Drive Reservoirs (70 Sandstone Fields c. 1867 API)

0.0422 0.0770 0.2159
(1 S wi ) K wi 0.1903 Pi
RE (%OOIP) = 54.898 (S wi )
B oi
oi Pa
with r 2 = 0.92 & Standard Error of Estimate = 32% @ 95% Confidence Level.

2. Solution Gas Drive Reservoirs (Sandstones and Carbonates

- 80 Reservoirs with 13 on Carbonates c. 1967 API)
0.1611 0.0979 0.1741
(1 S wi ) K 0.3722 Pb
RE (%OOIP) = 41.815 (S wi )
B ob
ob Pa
with r 2 = 0.87 & Standard Error of Estimate = 40% @ 95% Confidence Level.

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

0 . 4068 0 . 0337
(1 S wi ) K oi
(S wi )
0 . 04096
RE (% OOIP ) = 52 . 70
B oi wi
with r 2 = 0.58 & Standard Error of Estimate = 20% @ 95% Confidence Level.

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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.
Recovery Factor (Primary) Material Balance
Sg(v/v) So(v/v) Sw(v/v) Np/N(v/v)

120% 0.60
Solution Gas Drive Reservoir
OOIP 1.84 MMBbls
100% Pres 1350 psia 0.50
Pb 850 psia
Rec. Fac. 19 %
Reserves 350 MBbls
80% 0.40

60% 0.30

40% 0.20

20% 0.10

0% 0.00
1350 1160 960 760 560 360 310 260 210 160 110
P(psia)

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 Deterministic Reserves Decline Curve Analysis
100

M ODEL OOIP : 2 0 .7 3 BS TB
DATA : Long-Te rm P re dic tion
(w ith Ga s Lift)
M e thod : De c line Curve Ana lys is
(Ha rm onic )
ECONOM IC LIM IT : 5 % Oil Cut
10
RES ERV ES : 1 5 .2 BS TB
RECOV ERY FACTOR : 7 3 .3 % OOIP

Re se rv e s

1
7000 8000 9000 10000 11000 12 000 13000 14000 15000 16000

N p, C U M U LA TIV E P R O D U C TIO N (M M S TB ) 23
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 Calculation of Oil In Place - Example
Step 1: Calculate Original Oil In Place
OOIP = Pore Volume x Oil Saturation x Oil Shrinkage = Oil Volume x Oil Shrinkage

BULK VOLUME =
ORIGINAL END OF
Rock & Fluid
CONDITIONS WATERFLOOD
Volumes
OIL
WATER
ROCK ROCK
PORE VOLUME =
Oil & Water Volumes

EXAMPLE
Bulk Volume BV (MM Barrels) 100 (assumed) 100
Rock Volume RV (MM Barrels) 80 80
Pore Volume PV (% BV=Porosity) 20 % 20 %
Pore Volume (MM Barrels) 20 20
Water Volume (% PV=Water Saturation) 15 % 70 %
Water Volume (MM Barrels) 3 14
Oil Volume (% PV=Oil Saturation) 85 % (initial) 30 % (residual)
Oil Volume (MM Barrels) 17 6
Oil Gravity ( API ) 36 API 36 API
Oil Shrinkage (Fraction) 0.67 0.67
OOIP (MM Stock Tank Barrels) 11 4 (EOR)24
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 Calculation of 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

Volumetric Sweep Efficiency (Ev)
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% OOIP

OIL RESERVES = (11 x 0.47) = 5 MM Stock Tank Barrels

Summary of Example Calculation:

VOLUME : Bulk Pore OOIP Reserves
MM BBL : 100 20 11 5

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 Thank You

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