1. The SPE Foundation through member donations
Primary funding is provided by
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and a contribution from Offshore Europe
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Society of Petroleum Engineers Distinguished Lecturer Program

2. Incorporating Numerical Simulation Into Your Reserves Estimation Process: A Practical Perspective
Dean C. Rietz, P. E.
Society of Petroleum Engineers Distinguished Lecturer Program

4. Outline Introduction A Look at Reserves
Combining Reserves and Simulation
Immature Reservoirs
Mature Reservoirs
Examples
Conclusions

5. Introduction
Any estimate of future recovery does not necessarily qualify as an estimate of reserves.
Specific criteria must be met to qualify estimated recoverable volumes as reserves.
These criteria are generally defined in the form of “reserves definitions.”

6. Background on the Subject
SPE (2001)
Intended to start a dialog
SPE (2005)
Reviewing History Matches
SPE (2007)
Case Study Examples
SPE “The Adaptation of Reservoir Simulation Models for Use in Reserves Certification Under Regulatory Guidelines or Reserves Definitions”
SPE “Reservoir Simulation and Reserves Classifications – Guidelines for Reviewing Model History Matches to Help Bridge the Gap Between Evaluators and Simulation Specialists”
SPE “Case Studies Illustrating the Use of Reservoir Simulation Results in the Reserves Estimation Process”

7. A Look at Reserves
RESERVES ARE
IMPORTANT!
“Estimates of recoverable and marketable quantities can be considered reserves only if commercial or economic.”

8. “Reserves” in the Press

9. Reserves Definitions SPE/WPC/AAPG/SPEE SEC
Petroleum Resources Management System 2007, pp. 20 and 21 (PRMS Document)
Proved, probable, and possible reserves
SEC
17 CFR Part
Recent revisions effective January 1, 2010
References:
“Modernization of the Oil and Gas Reporting Requirements,” Conforming Version No , pp , found at:
Federal Register Final Rule, January 14, 2009, pp , found at: fr.pdf
Two sets of definitions commonly encountered by companies in the United States

10. SPE-PRMS Combines Both Resource Classification and Categorization
“… projects are “classified” based on their chance of commerciality (the vertical axis) and estimates of recoverable and marketable quantities associated with each project are “categorized” to reflect uncertainty (the horizontal axis).”
LIFE CYCLE
Chance of Commerciality
SPE-PRMS Combines Elements of Both Risk (Chance) and Uncertainty
Risk (Chance):
The probability of loss or failure.
As “risk” is generally associated with the negative outcome, the term chance is preferred for general usage to describe the probability of a discrete event occurring.” (i.e., the project will be developed and reach commercial producing status)
Uncertainty:
The range of possible outcomes in a series of estimates.
For recoverable resource assessments, the range of uncertainty reflects a reasonable range of estimated potentially recoverable quantities for an individual accumulation or a project.
SPE-PRMS Page 5

11. Reference to Simulation with Reserves (SPE-PRMS)
SPE-PRMS and Reservoir Simulation
Recovery can be based on analog field or simulation studies.
Reservoir simulation is a “sophisticated form of material balance.”
Most reliable when validated with a history match.
Two sets of definitions commonly encountered by companies in the United States
PRMS Document – SPE/WPC/AAPG/SPEE, pp
(Petroleum Resources Management System 2007)

12. Reference to Simulation with Reserves SEC (2009)
{2008} (25) Reliable technology. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.
consistency
repeatability

13. Combining Reserves & Simulation
Reliable results from models can be used for reserves.
- Verify commerciality
- Comply with guidelines

14. Applying Simulation Results for Estimating Proved Reserves
Usually, the primary objective of a simulation study is to better understand the reservoir to improve recovery (Proved + Probable – 2P or “most likely”).
Development plans should be based on 2P or even 3P (Proved + Probable + Possible).
Models built for proved reserves are typically too limited and unrealistic.
Special circumstances
Contentious reserves situations
Reserves largely proved
__________________________________________________________________________________________________________________________
We do not recommend, that models be constructed to comply with “proved” reserves definitions except under special circumstances
Litigation

15. Applying Simulation Results for Estimating Proved Reserves
It is common that results from a simulation model cannot be directly applied to the proved reserves category, even if they are passed through a cash flow analysis to demonstrate economic viability.

16. Applying Simulation Results for Estimating Proved Reserves
Typical models might not be consistent with “proved” guidelines due to:
Original oil-in-place (OOIP) beyond “proved”
Pressure support or energy
Other parameters
The key is to search for sources of reservoir drive energy that may increase recoveries beyond what would be considered proved.

17. Immature and Mature Reservoirs
Mature reservoirs contain a period of production history that is modeled or “history matched.”
Immature reservoirs contain little or no production history and the simulation models have not yet been verified by actual field performance.
Mature Reservoirs –
The longer the duration of history match, the more confidence in the model’s ability to predict future performance provided the model has attained a reasonable history match to the actual field performance at both field and well level.
Deterministic models should lead to upward revisions.
Immature Reservoirs –
In this situation, sensitivity studies should be performed on uncertain parameters to evaluate the range of results and potential impact to overall model results. This should then be followed by a probabilistic “Monte Carlo” analysis.

18. Immature Reservoirs
Description relies primarily on geophysical and geological data.
A “history match” of the model to the reservoir is easy to obtain.
Few performance points
Not very reliable

19. Immature Reservoirs Unlikely to be acceptable for proved reserves.
“Most likely” OOIP
Not reliable
Models helpful in estimating hydrocarbon recovery efficiency.
Sensitivity studies
Unless contradicted by analogy data (or experience)
Remember upward revisions should be (much) more likely
____________________________________________________________________________________________________________________
The mere existence of a model of an immature reservoir has no bearing on the determination or confidence of the reservoir size.
Sensitivity studies to uncertain parameters
These aid in the determination of the hydrocarbon recovery efficiency that is reasonably certain to be attained.

20. Mature Reservoirs: Validating with a History Match
Model parameter adjustment
Reasonable
Non-contradictory
Consistent with known geological and engineering evidence
Sensitivity studies can investigate uncertain parameters.
Consistent with traditional techniques, established field and well performance may override volumetric estimates (still need geological explanation).
This may justify upward or downward revisions depending on the actual field performance.

21. Mature Reservoirs & History Matching Drawbacks
Non-unique
Certain parameters may have a limited impact on the history match but may have a dramatic impact on the prediction.
Aquifer dimensions
Original hydrocarbon in-place!
Recommend that any parameters suspected of falling into this category be tested through the use of sensitivity studies.
Generally subjective
Uncertain parameters
Limited impact upon the history match
Possibly dramatic impact upon the predictions
Aquifer dimensions
Original hydrocarbon in-place!
Sensitivity studies

22. Mature Reservoirs & History Matching Additional Considerations
Recognize situations where there may be changes to the depletion process
Assess the Transition to Forecast
Status quo or “do nothing” case is consistent in rate’s decline
Solution gas drive during history but model used to predict waterflood performance.
History match includes only vertical wells but predictions contain horizontal wells.
Observations from analog or nearby fields or laboratory test data could be incorporated into the model to improve the confidence when forecasting under different depletion mechanisms.
An abrupt change at the end of history is indicative of an inappropriate model, even if the history match appears to be reasonable in all other respects.
__________________________________________________________________________________________________________________________________________________________________
Verify that the transition from historical to predicted production is smooth.
An abrupt change is indicative of an inappropriate model or inappropriate constraints.

23. Some Examples

24. Example 1: Apply Reservoir Simulation to Assess Geological or Drive Mechanism Uncertainty
80% RF (Probable)
Case 2
Large Aquifer
Case 1
Small Aquifer
60% RF (Proved)
History Match
Reservoir Pressure
Two models with different assumptions
Both have good history match
Models provide range of expected recovery

25. Example 2: Misuse of Simulation: The “Gasifer”
With “Gasifer”
Without “Gasifer”
Gas Rate
Gas Rate
~30 BCF
Ultimate Recovery
~300 BCF
Ultimate Recovery
Time
Time
Conclusions not supported by model results
Easily disputed

26. Example 3: Reserves Assigned Based on Forecast Uncertainties
Cumulative Oil Recovery
Contract Limit
Sensitivity Cases using various input assumptions (one variable changed at a time)
Most Likely Case 3P
High Case 2P
Beyond Contract
(Not Reserves) 1P
Low Case
Modeling used to assess field recovery under various operating and input parameter assumptions
All of the above projected volumes must be demonstrated to have economic or commercial viability before being called “reserves.”

27. Case Studies Illustrating the Use of Reserves (SPE Paper 110066)
SPE Paper (2007) was written to provide examples of incorporating simulation results in the reserves process.
Case Study 1 - Modify the simulation results (Mature Reservoir).
Case Study 2 - Modify so model complies with reserves definitions (Mature Reservoir).
Case Study 3 – If the field being evaluated is an Immature Reservoir with no sustained production history, then perform a series of sensitivity studies.
Mature
Immature

28. Overall Conclusions
The reliability of the results from a model is strongly dependent on the understanding of the geology and the confidence in all of the parameters used to construct the model.
What is needed?
Reasonable assumptions
Good history match
Good/reasonable forecast
Sensitivity cases
Documentation/Supporting Information

29. Final Remarks Reliable results from models can be used for reserves.
Verify commerciality
Comply with guidelines
Provide significant supporting information.
For proved reserves, detailed analysis and scrutiny should be applied to “typical models.”
SEC: Reasonable Certainty – revisions should be much more likely to be upward rather than downward.
Reliable
Consistent
Repeatable
Reasonably Certain

30. Thank You!

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Society of Petroleum Engineers Distinguished Lecturer Program 31