Three Statements his company s best guess is that the Mukluk structure contains 3 billion barrels of recoverable oil beneath a moderate-sized cap of natural gas -Anchorage Daily News 23 Oct 1983 In 1998, a USGS assessment of petroleum resources of the 1002 Area estimated the expected volume of technically recoverable oil beneath the 1002 area to be 7.7 billion barrels, with a 95 percent chance of 4.2 billion barrels and a 5 percent chance of 11.8 billion barrels. - -Interior Secretary Gale Norton, 6 June 2001 (Congressman) Hastings (R-WA), whose committee has jurisdiction over federal lands, said producing oil from ANWR could net the government between $150 billion and $300 billion through leasing and royalties. -Marketwatch, 7 Sept 11
Resource Assessment How large is an oil & gas field? How large is an ore deposit? How much oil & gas remains to be found? How much gold, lead... remains to be found?
Will the well find oil or gas? What is the chance factor? How much might it find? What is the reserve estimate? Near Carlsbad, NM Permian Basin
First: some context from known fields Note the scale bars on these graphs Baker et al 1984
First: some context from known fields Note the scale bars on these graphs and shapes of curves.
First: some context from known fields Note the scale bars on these graphs Baker et al 1984
Baker et al 1984 These are Log-Normal Distributions
Baker et al 1984 These are Log-Normal Distributions
Kesler 1994
Kesler 1994
How large is an oil & gas field? Area Net pay Porosity HC Saturation expressed as (1-S water ) Depth expressed as Bo or Bg Recovery Factor
Porosity
Area Depth Net Pay
Res Seal Source Prospect Assessment Seismic Line Jurassic 6507/10-1 TWT 0 5
Heidrun Field Pre-Drill Assessment Commercial Minimum (190 MMBO) Mean 625 MM BO Proven Reserves 1.063 B BO But what was it worth? Prospect Assessment
Annual Average Brent Spot Price 1984-2011 120 100 Nominal Price 80 1983 Price Scenario $ / Barrel 60 40 20 1983 CPI Price 0 Prospect Assessment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1984-2011
At $35 per barrel, then $37.275 billion, less expenses At $20 per barrel, the $20.300 billion, less expenses Expenses thru end 2014 are 60,428 billion kroner Assume 7NoK per $U S = $8.6 billion expenses (To do the calculation correctly, we need annual expenses, annual average oil price, and annual average exchange rate.)
How do we choose which prospect to drill? Calculate Mean Risked Estimated Reserves: Mean Estimated Reserves X Chance Factor Viking Oil Field Prospect 1 Prospect 2
Mean Expected Reserves = Chance Factor * Mean Estimated Reserves
How do we choose which prospect to drill? Prospect 1: 10 MMBBL Mean Estimated Reserves 25 % Chance Factor Prospect 2: 10 MMBBL Mean Estimated Reserves 10% Chance Factor Viking Oil Field Prospect 1 Prospect 2
How do we choose which prospect to drill? Prospect 1: 10 MMBBL Mean Estimated Reserves 25 % Chance Factor 2.5 MMBL Mean Risked Estimated Reserves Prospect 2: 10 MMBBL Mean Estimated Reserves 10% Chance Factor 1.0 MMBL Mean Risked Estimate Reserves Viking Oil Field Prospect 1 Prospect 2
How do we judge these estimates? Average Chance Factor = Success Ratio Sum of Mean Expected Reserves = Discovered Oil and Gas
Now for some vocabulary: Undrilled Prospect: reserves are estimated, not proven
Successful Exploration Well Adds Proven Reserves 1 Possible Reserves Probable Reserves
Successful Delineation Well Also Adds Proven Reserves 2 1 Possible Reserves Probable Reserves
Later Successful Delineation Well Also Adds Proven Reserves 2 3 1 Possible Reserves Probable Reserves
Reserve Categories Proven: discovered hydrocarbons with a 90% to 100% chance of production Probable: undiscovered hydrocarbons with a 50% to 90% chance of production Possible: undiscovered hydrocarbons with a 10% to 50% chance of production See Rose (2007) for a detailed discussion.
Mining Ore Reserves Reserves: can be produced under current economic & other conditions at a profit. Reserve Base: includes Reserves and lower grade ore that may be mined at a later time. Resources: includes Reserves, Reserve Base, and undiscovered ore.
Mining Ore Reserves: Australasian Terms Mineral Resource: ore with a reasonable chance of extraction Measured Mineral Resource: estimate of ore body size base on data that confirms both geological and grade continuity Indicated Mineral Resource: estimate of ore body size is reasonably assumed but not verified Inferred Mineral Resource: estimate of ore body size based on limited geologic data
How Do We Estimate Ore Reserves? Estimate = volume x density x ore grade But this is too simple... the Earth is heterogeneous
How Do We Estimate Ore Reserves? Estimate = B 1 + B 2 +B 3 +B 4 +B 5 +B 6 + B 7 4 1 2 5 7 6 3 7 For each block of the ore body, estimate B i =Volume i x density i x ore grade i
El Aouj Iron Discovery, Mauritania
Mining & Petroleum Terms Reserves = Proven Hydrocarbons Reserve Base = Proven + Probable HC s Resources = Proven + Probable + Possible HC s
Mineral Resource Estimation Resource-driven models: based on understanding of geology of the resource. Limited allowance for changing economy Limited allowance for changing technology Commonly assume growth rates projected from existing patterns
Arabian Peninsula and Gulf Regional Assessments
Regional Hydrocarbon Assessments Delphi: average of expert Opinions Area Yield: barrels/acre Volumetric Yield: barrels/acre-foot Geologic Analogy: This looks just like GOM Extrapolation of Discovery Rate Geochemical Mass Balance Field Density Summation of Assessments: prospects, plays, AU s
White and Gehman 1979 Delphi
White and Gehman 1979 Volumetric Yield
Geologic Analogy Does this basin resemble the North Sea s Viking Graben?
Extrapolation of Discovery Rate White and Gehman 1979
North Sea Discovery History: How Much Remains to be Found?
60 Oil Discoveries 1930 to 2010 50 40 30 20 10 0 1930 1950 1970 1990 2010
Geochemical Mass Balance
Mass Balance: CBM in Chahilis Basin, SW Washington Regional Assessment
Centralia Coal Mine (closed) Transalta Big Hanaford Power Plant Chehalis Basin, WA Mt Rainier Regional Assessment
Mass Balance Coal Bed Methane Monte Carlo Simulation Chehalis Basin, Washington Cell F6.029 Forecast: Chehalis CBM Gas in Place Frequency Chart 4,932 Trials 142 Recovery Factor.02 106.01.00.00 In Place 0.00 200.00 400.00 600.00 800.00 BCF 71 35.5 0 Rec Factor 0.72 0.75 0.79 0.82 0.85 Recoverable Gas = Gas-in-Place * Recovery Factor Cell H6.027 Forecast: Chahilis CBM Basin Recoverable Gas Frequency Chart 4,901 Trials 133.02 99.7.01 66.5.00 33.2.00 0 50.00 187.50 325.00 462.50 600.00 BCF Regional Assessment
Summation of Prospects or Plays
USGS Estimates 2000
USGS
UK Lower Permian Rotliegendes Play Area Regional Assessment
1988 Estimated Undiscovered Gas Rotliegendes Formation UK Southern Gas Basin Mean = 487 BCF Discoveries 1988-2009
Who actually uses these techniques? Danish Parliament Building, Copenhagen
Industry To enter new ventures: prospects, plays, basins, countries To exit old ventures: prospects, plays, basins, countries Government To choose among basins/blocks for licensing To forecast future oil and gas revenues To adjust license and revenue policies Application
Danish Oil and Gas Concessions Norway Sweden North Sea Denmark Application
Danish Oil Production
Danish Oil and Gas Recovery
Danish Oil Production Scenario
Danish Oil and Gas Revenue Forecasts
Danish Oil and Gas Revenues 1972-2010 2003 $28/Barrel Forecast Application
Conclusions: Dealing with Uncertainty Chance of discovery: we do not know if hydrocarbons before drilling Size of discovery: we do not know the size of a field before drilling Value of discovery: we do not know oil or gas prices before production To address these uncertainties, we need probability distributions and multiple scenarios.
Three Statements his company s best guess is that the Mukluk structure contains 3 billion barrels of recoverable oil beneath a moderate-sized cap of natural gas -Anchorage Daily News 23 Oct 1983 In 1998, a USGS assessment of petroleum resources of the 1002 Area estimated the expected volume of technically recoverable oil beneath the 1002 area to be 7.7 billion barrels, with a 95 percent chance of 4.2 billion barrels and a 5 percent chance of 11.8 billion barrels. - -Interior Secretary Gale Norton, 6 June 2001 (Congressman) Hastings (R-WA), whose committee has jurisdiction over federal lands, said producing oil from ANWR could net the government between $150 billion and $300 billion through leasing and royalties. -Marketwatch, 7 Sept 11
Three incomplete Statements his company s best guess is that the Mukluk structure contains 3 billion barrels of recoverable oil beneath a moderate-sized cap of natural gas -Anchorage Daily News 23 Oct 1983 In 1998, a USGS assessment of petroleum resources of the 1002 Area estimated the expected volume of technically recoverable oil beneath the 1002 area to be 7.7 billion barrels, with a 95 percent chance of 4.2 billion barrels and a 5 percent chance of 11.8 billion barrels. - -Interior Secretary Gale Norton, 6 June 2001 (Congressman) Hastings (R-WA), whose committee has jurisdiction over federal lands, said producing oil from ANWR could net the government between $150 billion and $300 billion through leasing and royalties. -Marketwatch, 7 Sept 11 What is the chance of making a commercial discovery? What is the range of commercially recoverable field sizes? What is the assumed future oil or gas price? What is the minimum commercial field size?