Day 1 - Society of Petroleum Engineers

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8/2/12 9:54 AM
22
SPE TODAY
Session Connects Reserves Evaluation With Risk Assessment
Gentry Braswell, JPT Online Technology Editor
The complexities of reserves
evaluation and managing risk will
top the agenda in a technical session
this afternoon. The session “Innovative
Best Practices in Field Management,
Reserves Evaluation, and Application
of Risk and Uncertainty” will take place
at 1400 today in Room 214B, lead by
Marise Mikulis of Baker Hughes and
David Yaw of EnCana Oil and Gas.
“Reserves evaluation is key because,
as we all know, there is a huge problem
with public perception that we are
overstraining reserves,” Yaw said. “And
so using proper uncertainty analysis
techniques and proper risking helps
to mitigate some of those issues. As
things become a range of probabilities
rather than a value, applied risk and
uncertainty quantification is important.”
Most of the technical papers that
will be covered during the session deal
with portfolio optimization, Yaw said.
“The papers are primarily talking about
best practices for uncertainly and risk
management so that proper portfolio
optimization can be applied,” he
added. “Without that, it’s useless.”
John Lee, a reserves evaluation
expert and professor and holder
of the Hugh Roy and Lillie Cranz
Cullen Distinguished University Chair
at the University of Houston, will
discuss “New Guidelines Document
Assists with PRMS Applications.” The
Petroleum Resources Management
System (PRMS) provides definitions
for reserves and resources developed
and endorsed by SPE, the World
Petroleum Council, the American
Association of Petroleum Geologists,
the Society of Petroleum Evaluation
Engineers, and the Society of
Exploration Geophysicists.
Another paper focuses on
quantifying proved undeveloped
reserves in the Woodford shale.
Its lead author, Madhav Kulkarni of
Marathon Oil, said reserve analysis
for unconventional developments
is challenging because of the long
duration of transient flow and limited
long-term production.
Industry estimates are based on
limited performance data and are
complicated by completion differences
and producing strategies employed
by different operators, Kulkarni said.
“However, the resource estimation
for unconventional developments
is very important to the industry
in that it defines the quality of the
potential development with respect
to return on investment,” he said.
“Reliable reserves estimates are
fundamental to providing investor
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confidence and ensuring continued
availability of funding to sustain
development in capital-intensive
unconventional developments.”
Unconventional resource plays
are well suited to the application of
statistical approaches, Kulkarni said.
In turn, statistical representations
of uncertainty can provide a more
consistent understanding of the
uncertainty attached to a specific
reserve volume, and, compared
with conventional developments,
capitalizing on this statistical
repeatability leads to higher initial
reserve bookings for a large program of
development wells, Kulkarni said.
“Clear understanding of the
statistical nature of resource plays is
required for any company involved in
these developments. Furthermore,
the reduction in risk achieved by
participating in many wells, albeit
with potentially lower interests,
further underscores the benefits
of favorable overall results due to
‘statistics at work,’” Kulkarni said.
“Once enough wells have been drilled
in the development to determine
its statistical repeatability, the
development tends to proceed at a
quicker pace.”
Also among the technical papers
being discussed during the session is
Portfolio Optimization in High and Low
Risk Environments. The oil industry is
being forced to develop increasingly
riskier new assets, and long gone
is the era of the big megafield with
shallow wells, primary-only depletion,
and onshore development, said Luis
Rodriguez, the paper’s lead author.
“Reserves evaluation is a key issue
because that is basically what we do as
an industry. We sell reserves. A good
analogy would be to say that reserves
are to the oil industry what inventories
are to the retail sales industry,”
Rodriguez said. “If you don’t know
what you have, you cannot make longterm
commitments and, therefore,
contracts to sell that product. There
are also a number of technical reasons
why you should evaluate reserves, but
anyone in the business will consider
those self-evident.”
Risk quantification allows for
targeting and management of your
assets in a way that can maximize
return while minimizing risk,
Rodriguez said.
“If you don’t do your homework, you
could end up targeting riskier assets
that will yield the same production
than a less-risky reservoir,” Rodriguez
said. “Even worse, you could end up
producing less, when you could have
produced a lot more with a different
combination of rig activity among your
reservoirs, all for the same price. Again,
if you want to succeed in the new
environment, you must understand risk
and uncertainty.”
Much of the reserves that are left
underground are there because of
poor asset management, Rodriguez
said. For example, new oil discoveries
yielding a lower recovery factor
because they were not flooded since
Day 1 and reservoirs that are not
drilled to optimum drainage areas,
he said.