PNGE 411 - Petroleum Property Valuation

2016/2017 Fall
Project - Part 1: Engineering Analysis (Solution)

1. Decline Curve Analysis:

Plotting production histories of all wells indicate varying behaviors. Although Well-1 indicates a continuously
declining behavior from the beginning of the production, changes in the decline characteristics were observed
during the last 3-4 months of Wells 2 and 3. Therefore, it is better to start fitting the decline curve by focusing
on recent characteristics in Wells 2 and 3. Setting a spreadsheet that utilizes the hyperbolic decline curve
equation:

qi
q= 1
(1 + btDi ) b
Adjusting the decline curve parameters b, qi , and Di resulted in following curves (note that logarithmic scale
on the y-axis was used for better visualization, but trends could have been visualized using a Cartesian scale,
as well):

1000
Well-1
qi = 325 STB/d
b = 0.9
Di = 0.4 1/month

100

10
27.12.1415.7.15 31.1.16 18.8.16 6.3.17 22.9.17 10.4.1827.10.1815.5.19 1.12.19 18.6.20

1000
Well-2
qi = 50 STB/d
b = 0.5
Di = 0.3 1/month
100

10

1
27.12.1415.7.15 31.1.16 18.8.16 6.3.17 22.9.17 10.4.1827.10.1815.5.19 1.12.19 18.6.20

1000 Well-3
qi = 550 STB/d
b = 0.2
Di = 0.2 1/month
100

10

1
27.12.1415.7.15 31.1.16 18.8.16 6.3.17 22.9.17 10.4.1827.10.1815.5.19 1.12.19 18.6.20

1
2. Probabilistic Volumetric Reserves Estimation:
The original-oil-in-place can be calculated from the following equation (assuming Vb is in ft3 , Bo is in rb/STB, N
is in STB):
Vb φ(1 − Swi )
N=
5.615Bo
Since the initial pressure is given as 1,500 psi, from fluid properties Boi is 1.215. To calculate the bulk vol-
ume using Area vs Thickness plot, first contour areas at real scale were calculated using the Planimeter unit
conversion ( 1 unit = 1,500,000 ft2):

Contour line (ft) 0 10 20 30 38

Area (planimeter units) 21.8 16.4 5.9 2.7 0
2
Real area (ft ) 32,700,000 24,600,000 8,850,000 4,050,000 0

Plotting Area vs. Thickness:

Area vs. Thickness

35,000,000

30,000,000

AT1
25,000,000

20,000,000
Area, ft2

15,000,000 AT2
AR1
10,000,000

AT3
5,000,000
AR2R
AR3R AT44
-
0 5 10 15 20 25 30 35 40
Thickness, ft

Calculating area under the curve (rectangles, AR ’s and triangles, AT ’s):

AR1 = 10 × 24, 600, 000 = 246, 000, 000 ft3

AR2 = 10 × 8, 850, 000 = 88, 500, 000 ft3

AR3 = 10 × 4, 050, 000 = 40, 500, 000 ft3

32, 700, 000 − 24, 600, 000

AT 1 = 10 × = 40, 500, 000 ft3
2
24, 600, 000 − 8, 850, 000
AT 2 = 10 × = 78, 750, 000 ft3
2
8, 850, 000 − 4, 050, 000
AT 3 = 10 × = 24, 000, 000 ft3
2
4, 050, 000
AT 4 = 8 × = 16, 200, 000 ft3
2

2
Summing all areas would give us the total bulk volume:

3
X 4
X
Vb = ARn + AT n = 246, 000, 000+88, 500, 000+40, 500, 000+40, 500, 000+78, 750, 000+24, 000, 000+16, 200, 000
n=1 n=1

Vb = 535, 450, 000 ft3

phi and Sw are given as uncertain parameters with specified distribution functions. φ has a triangular distribu-
tion and can be input to the Monte Carlo Simulation using the following distribution:

1. Calculate xr :
xm − xl
xr =
xh − xl
2. Generate 1000 rows of random numbers between 0 and 1 (can be done by using =RAND() formula in
Excel)

3. For each random number, rn , calculate xn which will result in 1000 values of each variable with a trian-
gular distribution:  p
xl + (xm − xl )(xh − xl )(rn ) if rn < xr
xn =
x − p(x − x )(x − x )(1 − r ) if r >= x
h h m h l n n r

Sw has a normal distribution and 1,000 numbers with a normal distribution can be obtained from Excel’s random
number generator using the given mean and standard deviation values. The resulting distributions are given
below:
250 250

200 200
Number of Occurances

Number of Occurances

150 150

100 100

50 50

0 0
0.275
0.280
0.285
0.290
0.295
0.300
0.305
0.310
0.315
0.320
0.325
0.330
0.335
0.340

Water Saturation Porosity

By inputting the calculated Vb and Bo as constants and inputting the generated Sw and φ values for 1,000
simulations, the resulting distribution for OOIP is the following:

3
 Expectation Curve for OOIP
100%
90% P10 = 3,429,268 STB
80%
70%

Probability
60%
50% P50 = 4,310,478 STB
40%
30%
20%
P90 = 4,927,324 STB
10%
0%
3,000,000 3,500,000 4,000,000 4,500,000 5,000,000 5,500,000 6,000,000
OOIP

3. Material Balance Analysis:

From the fluid properties given, it is understood that the bubble-point pressure is 750 psia, at which forma-
tion volume factor for gas appears for the first time, solution gas oil ratio starts to decrease, and formation
volume factor for oil reaches to its peak value. It is given that the production resulted in an average pressure
decrease from 1500 psia to 1250 psia (∆p = 250 psia). Since there is negligible water and gas production and
no information about existence of an aquifer or gas-cap support, we can conclude that this reservoir can be
characterized as an undersaturated volumetric reservoir above the bubble-point pressure. Therefore, we can
ignore all the gas-cap, free-gas production and water-influx/production related terms from the general material
balance equation (m =0, We =0, Rs =Rsi , Wp =0) , which would result in the following equation:
 
Boi Bo − Boi (cw Swc + cf )
Np = N + ∆p
Bo Boi 1 − Swc
Substituting the P50 OOIP value, as N = 4,310,478 STB, average of maximum and minimum Sw values from
the Monte Carlo simulation as 0.306, given compressibilities and formation volume factors for 1500 and 1250
psia, cumulative recovery, Np , from 1500 psia (pi ) to the current pressure (p), 1250 psia can be calculated
from:

1.215 1.254 − 1.215 (3 × 10−6 × 0.306 + 3 × 10−6 )

 
Np = N + (1500 − 1250)
1.254 1.215 1 − 0.306
Np = 139,952.4 STB

Comparison with observed production: We can sum observed daily averaged rates for each month, n, with
*30.4 days/month to obtain the cumulative recovery from the wells:

3 X
X 22
Np = qoin = 142,436 STB
i=1 n=1

Less than 2% error compared with the material balance calculation indicates consistent results.
At the bubble-point pressure, the recovery would be:

1.215 1.305 − 1.215 (3 × 10−6 × 0.306 + 3 × 10−6 )

 
Np = N + (1500 − 750)
1.305 1.215 1 − 0.306
Np = 314,266.8 STB