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The economics of exhaustible resources was employed in this paper to isolate the relationships between reserves estimates, time, and optimal pricing. A multilinear regressive technique was utilized to evaluate the statistical significance of the relationship of the independent variables of uncertainty in reserves estimates and time to the dependent variable of price. An idealized model of the international petroleum market was used as the basis of analysis and to develop theoretical statements regarding the affect of uncertainty in reserves estimates on petroleum pricing.
It was found that for reserves estimates made with uncertainty there was a statistical significance in its effect on pricing through time while reserves estimates made with certainty only time had a significant effect on pricing. Therefore, static commodity-based equilibrium methods of economic analysis are not adequate for the forecasting of future petroleum prices. Instead, price forecasting models must be dynamic and must incorporate reserves estimates that have been calculated with the most precise reservoir engineering and geological methodologies.
Hotelling (1931) published what was to become the foundation of a subfield of economics, the economics of exhaustible resources. His theoretical work was based on the underlying assumption that natural resources such as oil, natural gas, minerals, and even forests are exhaustible and nonrenewable or renewable only with difficulty and great delays. Thus, the usual static-equilibrium methods of economic analysis applied to production and pricing as in manufacturing or commodities are inappropriate.
Hotelling assumed that the owner of an exhaustible resource wishes to maximize the present value of all future profits and that the present value of all future profits and that the present value of a unit of profit to be obtained present value of a unit of profit to be obtained after time t is equal to e-rt, with r being the interest rate. He used this concept to devise what has become known as "Hotelling's Rule."
p = poert,................................. (1)
p = net price per unit of the resource after p = net price per unit of the resource after production and marketing, including transportation, costs are paid
Po = initial price per unit. Po = initial price per unit. Additionally, Hotelling proposed the following relationship between production, pricing, and reserves; pricing, and reserves; T T T qdt = f(p,t)dt = f(poert,t) dt = R,....(2) o o o
where q = production at time t T = time of final economic exhaustion
R = total supply of the resource = ultimately economically recoverable reserves.
Twelve practicing petroleum engineers participated in a study comparingdeterministic with probabilistic reserve estimates. Production data for fivewells were provided sequentially in four phases covering the first 5 years ofproduction history. A deterministic and probabilistic reserve estimate was madeby each evaluator for each phase.
The deterministic reserve estimates were based on Securities & ExchangeCommission (SEC) definitions. For the probabilistic reserve estimates, theevaluators were asked to supply three values: P90, P50, and P10. P90 is thevalue where there is a 90% probability that the actual reserves are greaterthan this value; P50 is the value where there is a 50% probability that theactual reserves are greater than this value; and P10 is the value where thereis a 10% probability that the actual reserves are greater than this value. Mostevaluators used their deterministic estimate as the basis for the probabilisticestimates. In these cases, subjective estimates were made rather than using astatistical approach.
The evaluators have more difficulty in estimating the P90 value when thedecline exponent b is low. The evaluators have the same difficulty inestimating the P10 value when the decline exponent b is high. In comparing theindividual evaluators, there is considerable variability in deterministic, P90,P50, and P10 values. The most variability is in the P10 values. Also, it wasobserved that over time, as more production history is recorded, P90 values donot approach truth from the low side.
This study was designed to compare the currently used deterministicdefinition of proved reserves (where the estimator is "reasonablycertain") with a probabilistic definition with three levels of certainty.The first level is defined as "proved" or P90. This is the amount ofreserves where there is a 90% probability that the actual reserves will begreater. The second level is "proved plus probable" or P50. This isdefined as the amount of reserves where there is a 50% probability that theactual reserves will be greater. The third level is "proved plus probableplus possible" or P10. This is defined as the amount of reserves wherethere is a 10% probability that the actual reserves will be greater.
Includes associated paper 36358, "Discussion of a Comparison ofProbabilistic and Deterministic Reserve Estimates: A Case Study," byChapman Cronquist
PANEL DISCUSSION WORLD RESERVES OF OIL AND GAS Chairman: N. A. EREMENKO (USSR) Vice-chairmen: J. MASSERON (France), D. C. ION (UK) Scientific Secretary: S. T. MOCUTA (Romania) Part I Panel Discussion 12 consisted of two parts. In the first part 3 papers concerned with methods of reserves estimation have been presented: 1. A. M. KHALIMOV and M. V. FEIGIN, `The Principles of Classification and Oil Resources Esti- mation'; 2. G. J. DeSORCY, `Estimation Methods for Crude Recoverable Reserves of Oil and Gas'; 3. C. BOIS, H. COUSTEAU, A. PERRODON and G. POMMIER, `Méthodes d'Estimation des Réserves Ultimes'. Paper 1. The lack of common criteria for oil resources classification together with the existing differences in terminology and definitions lead to uncorrelated results of oil resources evaluation in individual regions. Oil resources classifications developed in the USSR and in the USA are most widely adopted. Both are based on the same prin- ciples: the degree of geological assurance and economic expediency of production. The new classification of oil resources proposed is based on the following principles: (1) the degree of geological assurance of resources evaluation; (2) economic significance of resources; (3) the maximum percen- tage of field reserves produced and the highest degree of bowels exploitation; (4) economic expediency of current production of reserves (profitability). `Dis- covered resources' include the following three groups: (1) `recovered reserves' (cumulative produc- tion); (2) `explored reserves'; (3) `reserves in unexplored area within discovered pools'. `Explored reserves' are those explored to the extent sufficient for their production to commence. Depending on the stage of industrial utilization, this subgroup is sub- divided into `developed' and `undeveloped' reserves. Appraisal of `undiscovered oil resources' results from numerical evaluation of petroleum potential of different geological units. The report also deals with the basic terms and definitions applied to classify and evaluate oil resources. Paper 2. Volumetric methods for estimating in- place reserves are useful during early life or for small reservoirs but the expected accuracy cannot be better than *lo% and frequently ranges to greater than *20%. Properly applied material balance cal- culations, particularly if incorporated into reservoir models, are a better estimation method, but, again, individual reserve estimates cannot be expected to be more accurate than *lo%. Reserve estimates based on production history are typically less accurate than the previously mentioned methods. Recoverable reserve estimates approximately as accurate as in-place estimates can be obtained from detailed reservoir depletion projections and economic forecasts. However, when recovery esti- mates are based on qualitative assessments such as correlations, they may add 120% to the range of uncertainty.
Abstract This paper presents a comparison of stochastic and deterministic reserves estimation methods as related to the various stages of development of an oil or gas field, with emphasis on offshore environment. The current debate concerning stochastic and deterministic reserve estimates and definitions is framed with respect to the various stages of field development. Advances in technology in terms of three-dimensional seismic data and reservoir simulation appear to narrow the range of reserves estimates. Field examples are presented to compare stochastic and deterministic reserves estimates. Stochastic methods are preferable during exploration and pre-development, while both methods can be used in practice to support the decision to proceed with development. In the later stages of development, deterministic methods become more practical as other data become available. Advances in technology are leading to better deterministic estimates as well as stochastic estimates with narrower ranges. Practices in the industry vary from complete dedication to deterministic or stochastic to a choice of the method depending on the stage of development. This paper offers recommendations as to which reserves estimation technique is more suitable at specific stages of field development based on data scope and availability. Introduction The comparison and assessment of stochastic and deterministic reserves estimation methods presented in this paper originated through a standardisation program at Petroliam nasional Berhad (Petronas), the national oil company of Malaysia. The Petronas Geosciences Committee was subsequently assigned the responsibility for developing appropriate guidelines for the estimation of hydrocarbon reserves. This Committee's scope of work included reserves estimation in both exploration and development projects, which necessitated comparison of stochastic and deterministic methods. Petronas reviews reserves estimates submitted by several oil companies, each with a preference for one method or the other. A simple method for translating from deterministic to stochastic and vice versa became necessary. The elimination of ambiguity, the adoption of an appropriate and clearly-defined system, and comparison with existing worldwide definitions were other objectives. P. 309
Aleshina, A. V. (VNIIneft JSC, RF, Moscow) | Kozhemyakin, A. A. (Zarubezhneft JSC, RF, Moscow) | Trakhacheva, E. A. (Zarubezhneft JSC, RF, Moscow) | Yakupova, N. R. (Zarubezhneft JSC, RF, Moscow) | Vyborov, A. A. (RUSVIETPETRO JV LLC, RF, Moscow) | Yanakayev, R. R. (Ufa SciTechCenter LLC, RF, Ufa)
The PDF file of this paper is in Russian.
The audit of hydrocarbon reserves estimate based on international classification is an established process in a majority of international and Russian companies. The main purpose of the audit is to determine the capitalization of a company, its market value, as well as its collateral value in case of external borrowings and securities offering in stock markets. Zarubezhneft pays special attention to the process of auditing its Russian and international assets, especially with respect to the technical part of the assessment (determination of geological and technical recoverable volumes). Along with the assessment performed by an affiliated international auditor, the Company carries out an internal evaluation to estimate possible results of an independent audit and to form an optimal strategy of asset development. The process of internal reserves estimate is carried out in accordance with the Procedure adopted by the Company. It consists of three stages: appraisal of geological reserves as of the established date, estimation of technical recoverable volumes and economic assessment. The first stage involves systematization of geological, geophysical, production and design data followed by information analysis to get a comprehensive idea of a reservoir structure and to identify uncertainty (WOC position, petrophysical models, uncertainty in structural plan, etc.). The result of the work at this stage includes geological volumes, calculated according to SEC and SPE/PRMS categories, and graphic maps with selected categories. At the second stage, recoverable reserves by each of the categories are estimated on a well after well basis. The evaluation is based on the actual production dynamics and analogues data. The results of the stage are technical recoverable amounts, final oil recovery factor and anticipated production levels by categories TP, 2P and 3P. Upon obtaining anticipated production profiles, economic appraisal is carried out for each asset based on individual characteristics of the assets (production sharing, inter-Government agreement, etc.) and exploitation targets (very heavy oil, level of reserve depletion, availability of benefits, etc.). The internal evaluation is based on the use of international standards along with own tools for performance of engineering design. A large amount and variety of input data, as well as specific characteristics of the Group of Companies` assets have caused a necessity to optimize the existing process. The transition to the use of databases, as well as automation of some operations through application of software (tools) has significantly improved the process.
Аудит запасов углеводородов по международной классификации является устоявшимся процессом в большинстве международных и российских компаний. Основная цель аудита – определение капитализации компании, ее рыночной стоимости, а также залоговой стоимости в случае сторонних заимствований и размещения ценных бумаг на фондовых рынках. Компания «Зарубежнефть» уделяет особое внимание процессу аудита своих активов, особенно технической части оценки (определению геологических и извлекаемых запасов). Наряду с оценкой, выполняемой аффилированными международными аудиторами, компания проводит внутреннюю оценку с целью формирования оптимальной стратегии развития активов. Внутренняя оценка запасов осуществляется в соответствии с регламентом, принятым в компании, и включает три этапа: оценка геологических запасов на фиксируемую дату, оценка технически извлекаемых запасов и экономическая оценка. На первом этапе выполняется систематизация геолого-геофизических, промысловых и проектных данных и проводится анализ информации с целью получения актуального представления о строении залежи и выявления факторов неопределенности (положение водонефтяного контакта, петрофизические модели, неопределенность структурных характеристик и др.). Результатом работ на данном этапе являются величины геологических запасов и ресурсов, подсчитанные по категориям SEC и SPE/PRMS, и картографический материал с выделенными категориями. На втором этапе проводится поскважинная оценка извлекаемых запасов по каждой из категорий. Оценка основывается на фактической динамике добычи и данных об объектах-аналогах. Результатами второго этапа являются величины технически извлекаемых запасов, конечные коэффициенты извлечения нефти и прогнозные уровни добычи по категориям. После получения прогнозных профилей добычи по каждому активу выполняется экономическая оценка. Внутренняя оценка проводится с использованием международных стандартов и собственного инструментария для выполнения технических расчетов. Большой объем исходных данных и их многообразие, а также специфика активов компании обусловили необходимость оптимизации сложившегося процесса. Переход к использованию баз данных, а также автоматизация части операций путем применения программного обеспечения (инструментария) позволили значительно улучшить процесс оценки.