As with any business, the better you get at predicting the future, the greater the opportunity for success. While no one, not even the top financial institutions or oil majors, can predict the commodity price of oil a year or two down the road (or next week for that matter), by conducting a reservoir performance analysis, oil and gas operators can predict reservoir performance with some degree of certainty.
Now, when we talk about predicting reservoir performance, what we’re really talking about is predicting the production of the well(s) over the life of the field.
And if we back that up even further the propose of predicting the production over the life of the field, is to assess the economic viability of the project.
Economic Viability Based on Reservoir Performance
The economic viability of an oil and gas project is based on three primary factors related to the performance of a reservoir.
- Initial production rate of the reservoir
- Production rate decline over time: Decline Curve
- Percentage of hydrocarbons recoverable from those existing in the subsurface
Initial Production Rate
The initial production rate of an oil or gas well is quite simply the initial rate of oil or gas flowing freely from the well.
While often portrayed in movies and TV as the typical oil “gusher,” the production of an oil or gas well typically follows a bell curve with the initial flow rate of the well being below that of peak production for any given reservoir.
The real life occurrence of a gusher or blowout of an oil and gas well is something to be avoided at all costs due to the highly combustible nature of the hydrocarbons and other materials being produced by the uncontrolled well.
The stack or blow out preventer (BOP) is a critical piece of equipment designed to help the drill crew prevent those types of events from occurring. When oil or gas is brought to surface, it is done in a safe and controlled manner.
Production Rate Decline
The production rate decline or decline curve of an oil or gas well is the decrease in production that can be expected over time, as the reservoir is depleted.
By conducting a performance analysis of a reservoir, scientists can understand the decline curves of the fields in which you operate is key to predicting reservoir performance. But while there is no unified theory related to production rate decline, there are general rules and principles taken from historical observations, which have been combined with modern sophisticated computer modeling that can be used to make fairly accurate production rate predictions.
Recoverable Hydrocarbons: Proved Reserves
Unfortunately, the vast majority of the hydrocarbons contained under the Earth’s surface are unrecoverable. As new technology is developed in the oil and gas industry the volume of oil and gas that we can recover increases, but we are a long way from 100%.
The proved reserves of a hydrocarbon rich reservoir is the amount that the operator can reasonably expect to extract from the play.
The SEC defines proved reserves using its “Final Rule” as such:
“Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.” – sec.gov
Eating the Elephant: Flow Units
Predicting the performance of a reservoir is best done by doing a performance analysis of a reservoir and breaking the data down into bite-sized chunks: How do you eat an elephant? One bite at a time.
A flow unit is one piece of the overall puzzle: It is a mappable portion of the total reservoir.
Each flow unit is comprised of similar geological features which allow the hydrocarbons to behave, of flow in a similar manner to each other. The characteristics that make up the pieces of a flow unit do not have to be homogeneous.
A geologists ability to build a reservoir model will depend greatly on his or her ability to define and analyze the flow units that make of a greater reservoir. The model developed from this will give an overall picture of the reservoir characteristics.
Incorporating Production Systems
The performance of any oil and gas reservoir is not solely dependent on the geology of the reservoir itself. The actual production of an oil or gas well is also greatly influenced by the operators chosen production system.
Production systems analysis or Nodal Analysis is the process of optimizing either a producing well or a theoretical model to get the most production out of a reservoir in the most economical manner.
It is key for the petroleum engineer or geologist designing the model to ensure that the well’s production is optimized while understanding what flow rates will load of kill a well.
While these reservoir models are vital to an operator, it should be noted that not all theoretical production can be achieved in practice. It is essential that the economic drivers around an oil and gas project have an accurate and realistic margin of error built into the model.
It has been said before here that geological modeling and reservoir performance predictions are as much an art as it is a science. A skilled geologist builds his or her models not only with the information of the existing well in the field and the seismic data available but with years of experience determining what to expect from specific geological formations and how well stimulation or artificial lift techniques will affect the existing geology.
Sierra Pine Resources International has decades of experience in all types of upstream oil and gas consulting. We have several case studies with varying types of geology available for free download on our Case Studies page. Or you can contact one of our consultants directly.