HOUSTON DENVER CALGARY

Reservoir Simulation Models and Their

Use in The Estimation of Reserves
www.ryderscott.com
Ryder Scott Company Reserves Conference
May 6, 2005
Dean C. Rietz, P.E.
HOUSTON DENVER CALGARY
The Adaptation of Reservoir Simulation Models
for Use in Reserves Certification under
Regulatory Guidelines or Reserves Definitions
SPE 71430
(Palke & Rietz)
This Discussion is based on:
HOUSTON DENVER CALGARY
Caveats
Defense of simulation results before
regulatory bodies is somewhat untested
Overlying theme is consistent with SEC
guidelines- Reasonable Certainty Revisions
should be much more likely to be upward
rather than downward
HOUSTON DENVER CALGARY
Introduction
Regardless of the evaluation methods
used, any estimate of future recovery,
does not necessarily qualify as an
estimate of reserves.
Aside from economic viability, specific
criteria must be met to qualify estimated
recoverable volumes as reserves.
These criteria are generally defined in the
form of Reserves Definitions.
HOUSTON DENVER CALGARY
Prevalence of Reservoir Simulation
A numerical model that is expected to behave
like a particular oil or gas reservoir.
After the history match is achieved, the model
can be run to predict future performance.
Simulation continues to become a more widely
used tool.
Simulation has also been increasingly
promoted as a means to estimate reserves.
HOUSTON DENVER CALGARY
Parameters uniform within grid blocks
(possibly very large).
Average block properties not accurately
known.
Undetected structural features may not be
in a model.
Geological Inaccuracies may be present
Generally very data intensive.
Limitations of Simulation
HOUSTON DENVER CALGARY
Where Do Simulation and Reserves
Estimation Overlap?
Mature Reservoirs
Immature Reservoirs
Reservoir Simulation
Proved Reserves Probable Reserves Possible Reserves
SEC - -
SPE/WPC SPE/WPC SPE/WPC
1P
2P
3P
HOUSTON DENVER CALGARY
Reference to Simulation with Reserves
SEC and Reservoir Simulation
SEC and Reservoir Simulation
http://www.sec.gov/divisions/corpfin/guidance/cfactfaq.htm
II. Guidance About Disclosures
F. Issues in the Extractive Industries
3. Definition of Proved Reserves
In a new reservoir with only a few wells, reservoir simulation or application of generalized hydrocarbon
recovery correlations would not be considered a reliable method to show increased proved undeveloped
reserves. With only a few wells as data points from which to build a geologic model and little
performance history to validate the results with an acceptable history match, the results of a
simulation or material balance model would be speculative in nature. The results of such a
simulation or material balance model would not be considered to be reasonably certain to occur in the
field to the extent that additional proved undeveloped reserves could be recognized. The application of
recovery correlations which are not specific to the field under consideration is not reliable enough to be
the sole source for proved reserve calculations.
SPE/WPC and Reservoir Simulation
??
Prepared by Accounting Staff Members
in the Division of Corporation Finance
U.S. Securities and Exchange Commission,
Washington, D.C.
March 31, 2001
HOUSTON DENVER CALGARY
Reference to Simulation with Reserves
SEC and Reservoir Simulation
SEC and Reservoir Simulation
http://www.sec.gov/divisions/corpfin/guidance/cfactfaq.htm
II. Guidance About Disclosures
F. Issues in the Extractive Industries
3. Definition of Proved Reserves
In a new reservoir with only a few wells, reservoir simulation or application of generalized hydrocarbon
recovery correlations would not be considered a reliable method to show increased proved undeveloped
reserves. With only a few wells as data points from which to build a geologic model and little
performance history to validate the results with an acceptable history match, the results of a
simulation or material balance model would be speculative in nature. The results of such a
simulation or material balance model would not be considered to be reasonably certain to occur in the
field to the extent that additional proved undeveloped reserves could be recognized. The application of
recovery correlations which are not specific to the field under consideration is not reliable enough to be
the sole source for proved reserve calculations.
SPE/WPC and Reservoir Simulation
??
Prepared by Accounting Staff Members
in the Division of Corporation Finance
U.S. Securities and Exchange Commission,
Washington, D.C.
March 31, 2001
In a new reservoir with only a few wells, reservoir simulation or application of generalized hydrocarbon
recovery correlations would not be considered a reliable method to show increased proved undeveloped
reserves. With only a few wells as data points from which to build a geologic model and little
performance history to validate the results with an acceptable history match, the results of a
simulation or material balance model would be speculative in nature. The results of such a
simulation or material balance model would not be considered to be reasonably certain to occur in the
field to the extent that additional proved undeveloped reserves could be recognized. The application of
recovery correlations which are not specific to the field under consideration is not reliable enough to be
the sole source for proved reserve calculations.
HOUSTON DENVER CALGARY
The presumed most likely scenario is most
commonly modeled with the reservoir simulator.
Due to the specific regulatory definitions of proved
reserves, most likely is a level of recoverable
volumes that is more consistent with proved +
probable reserves, rather than proved alone.
Therefore, it is very common that results from a
simulation model cannot be directly applied to the
proved reserves category, even if they are passed
through a cashflow analysis to prove economic
viability.
Applying Simulation Results to Estimate
Proved Reserves
HOUSTON DENVER CALGARY
It is not just original hydrocarbon in place that
may not fit the definition of proved reserves.
Models may include pressure support from
aquifers or rock compressibility that are not
proved.
Numerous other parameters would also fall into
this category.
The key is to search for sources of reservoir
drive energy that may increase recoveries
beyond what would be considered proved.
Applying Simulation Results to Estimate
Proved Reserves
HOUSTON DENVER CALGARY
Two approaches.
1 - Modify so model complies with
reserves definitions.
2 - Modify the simulation results.
Applying Simulation Results to Estimate
Proved Reserves
*Assuming the model and the forecasts are valid*
HOUSTON DENVER CALGARY
Consider the case of a reservoir for which the level
of the hydrocarbon-water contact has not been
established from the lowest logged hydrocarbons,
but from seismic flat spot or MDT determined
pressure gradient level. In this situation, the
hydrocarbon-water contact in the model should be
(changed to) set at the lowest observed occurrence
of hydrocarbons (lowest logged hydrocarbon).
As long as the other components of the definition
are also honored, the results generated from this
model could be utilized in the estimation of proved
reserves.
Good history match is implied (will discuss later).
Applying Simulation Results to Estimate
Proved Reserves Method 1 Modify Model
HOUSTON DENVER CALGARY
Potentially difficult.
Modify description / grid.
Modify the planned wells and facilities.
In addition to the question of constraints,
substantial modifications to the original
grid/description could also be required.
Models derived from seismic data often feature
thickening between wells based on reasonable
interpretation of the data. This thickening may or
may not be permitted under the reserves definitions.
Applying Simulation Results to Estimate
Proved Reserves Method 1 - Modify Model
HOUSTON DENVER CALGARY
Appropriate modifications of the
simulator results.
Some of the rigorous nature of the
simulation is lost.
Applying Simulation Results to Estimate
Proved Reserves Method 2 - Modify the Results
HOUSTON DENVER CALGARY
Applying Simulation Results to Estimate
Proved Reserves Method 2 - Modify the Results
proved
proved
probable
probable
1
2
3
4
ROPR ROPR ROPR ROPR
1 2 3 4
DATE STB/D STB/D STB/D STB/D
1-J an-02 1,000 0 1,500 0
1-Feb-02 970 0 1,455 0
1-Mar-02 941 0 1,411 0
1-Apr-02 913 750 1,369 2,000
1-May-02 885 728 1,328 1,940
1-J un-02 859 706 1,288 1,882
1-J ul-02 833 685 1,249 1,825
1-Aug-02 808 664 1,212 1,771
1-Sep-02 784 644 1,176 1,717
1-Oct-02 760 625 1,140 1,666
1-Nov-02 737 606 1,106 1,616
1-Dec-02 715 588 1,073 1,567
1-J an-03 694 570 1,041 1,520
Proved
Stream
Probable Stream
HOUSTON DENVER CALGARY
The solution was to separate the production streams from the
various sands.
Production streams from sands that did not qualify as proved
were eliminated.
While this approach is not terribly rigorous, it at least relies
upon rate forecasts and recovery factors predicted by a well
constructed model.
This approach treats the simulated reservoirs as analogies to
the actual reservoirs in terms of initial rate and recovery
factor.
This approach may meet all of the requirements of proved
reserves estimation.
The original model, although well constructed, did not.
Applying Simulation Results to Estimate
Proved Reserves Method 2
HOUSTON DENVER CALGARY
Description relies primarily on geophysical
and geological data to set reservoir
parameters.
A history match of the model to the
reservoir is easy to obtain since there are
few if any performance points to be
matched.
Because it is so easy to obtain, however,
the match is not very meaningful in terms
of calibrating and improving the reliability
of the model.
Immature Reservoirs
HOUSTON DENVER CALGARY
Most likely hydrocarbons in-place
generally not proved.
Unlikely to be acceptable for proved
reserves estimation.
Models helpful in estimating hydrocarbon
recovery efficiency ranges (with compliant
proved recovery on the low end of the
range)
Immature Reservoirs
HOUSTON DENVER CALGARY
History match is usually
difficult to obtain.
Is more meaningful in terms of
enhancing model reliability.
Mature Reservoirs & History Matching
HOUSTON DENVER CALGARY
History match is important.
Should result from logical
adjustments.
Consistent with geological and
engineering evidence.
Uncertain parameters / Sensitivity
studies
Mature Reservoirs & History Matching
HOUSTON DENVER CALGARY
History matching is generally a somewhat subjective
process.
It is unlikely that any two engineers would arrive at
the exact same solution.
It is normal that certain parameters that may have
a limited impact upon the history match would have
a dramatic impact upon the predictions from the
same model.
Aquifer dimensions
Original hydrocarbon in-place!
Recommend that any parameters suspected of
falling into this category be tested through the use
of sensitivity studies.
Mature Reservoirs & History Matching
HOUSTON DENVER CALGARY
Consistent with traditional techniques, well
established performance may override
volumetric guidelines.
Imperative that reasonable assumptions be
made.
Mature Reservoirs & History Matching
HOUSTON DENVER CALGARY
It is also important to recognize situations where the
physical processes governing reservoir behavior are
expected to be different in the future than they have
been in the past, and to adjust expectations for the
model accordingly.
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.
Mature Reservoirs & History Matching
(Appropriateness)
HOUSTON DENVER CALGARY
As a final check, the evaluator should
verify that the transition from historical to
predicted production is smooth if the
model is run as a status quo, or do
nothing case.
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.
Mature Reservoirs & History Matching
(Appropriateness)
HOUSTON DENVER CALGARY
How much data is enough for a good
history match or what defines maturity?
Here is an example of a good History
Match but there still exists geological
uncertainty
Mature Reservoirs & History Matching
(Appropriateness)
HOUSTON DENVER CALGARY
HOUSTON DENVER CALGARY
HOUSTON DENVER CALGARY
HOUSTON DENVER CALGARY
Mature Reservoirs & History Matching
(Appropriateness)
How much confidence should be placed in
this Model?
HOUSTON DENVER CALGARY
Mature Reservoirs & History Matching
(Appropriateness)
Hint: How well do we know the geology?
HOUSTON DENVER CALGARY
R.F.
60%
R.F.
89%
HOUSTON DENVER CALGARY
Conclusions
Analogy
Must follow Reserves
Definitions
Models typically
capture most likely
description
Models can be
modified to comply
with the definitions
May alter the simulation
output
Immature reservoirs -
hydrocarbon recovery
efficiency
Sensitivity Studies for
Uncertain Parameters
Reasonable history
matches
Status Quo Cases
HOUSTON DENVER CALGARY
Conclusions
Analogy
In general, simulation results should be treated as
if they are actual results from an analog field.
If the simulation model is very detailed, properly
constructed, and well history matched, then the
model can be treated as a nearly perfect analog.
It is our conclusion that when incorporating
simulation modeling results into reserves
estimation, the model should be treated as
additional data, rather than the sole source of data.
HOUSTON DENVER CALGARY
Conclusions
Sensitivity Studies
Some parameters will be uncertain, even in
a history matched model. These parameters
may strongly influence the prediction mode
results. The impact of uncertain parameter
should be studied through the use of
sensitivity runs.
How would you incorporate this in reserves?
Use lower end of the range, much like a probabilistic
program
HOUSTON DENVER CALGARY
Conclusions
Reasonable History Matches
Models of mature reservoirs should feature
reasonable history matches before they are
accepted for reserves purposes. The
uniqueness and the quality of the history
match affect the confidence to be placed in a
models ability to predict future
performance, and thus dictate the models
appropriate usage in the process of
estimating reserves.
HOUSTON DENVER CALGARY
Closing Thoughts
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
HOUSTON DENVER CALGARY
Final Remarks
Defense of simulation results before
regulatory bodies is somewhat
untested
Dont expect to use models directly for
proved reserves
If you want to use models, provide
significant supporting information
Think of model as an analogy
Reasonable Certainty Revisions should
be much more likely to be upward
rather than downward
HOUSTON DENVER CALGARY
Questions & Comments?
dean_rietz@ryderscott.com