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Summary Long-term economic viability of unconventional reservoirs is evaluated from the profit-maximizing perspective of a producing company. The case of the liquids-rich production from the Bakken field is considered as a representative of unconventional resources. A profit-margin optimization model is constructed for a company to meet the demand it faces from a stock of conventional and unconventional resources given different sets of exogenously determined prices. The model is parameterized using the different production-decline rates of the two sources, physical and economic exhaustibility of the resources, and the ever-increasing marginal cost of adding conventional resources into the company portfolio. The optimal extraction path of oil from the conventional and unconventional reservoirs is assessed, and the long-term economic consequence of keeping the unconventional resource in the ground for different oil-price scenarios is predicted. The model reveals the appropriate composition of a portfolio of conventional and unconventional resources. In the case of a high-price scenario, the optimal efficient extraction path is the pursuit of additional conventional resources before using unconventionals to meet the demand. For the reference-price scenario, the decline of the conventional reserves should be substituted with unconventionals from the beginning. The profitability of the enhanced oil recovery (EOR) applications in unconventional reservoirs and when they should be implemented are also determined. Contrary to common expectation, it is shown that the EOR technology is more justifiable in the case of a lower price forecast.
- North America > United States > North Dakota (0.85)
- North America > United States > South Dakota (0.71)
- North America > United States > Montana (0.71)
- Energy > Oil & Gas > Upstream (1.00)
- Government > Regional Government > North America Government > United States Government (0.50)
- North America > United States > South Dakota > Williston Basin > Bakken Shale Formation (0.99)
- North America > United States > North Dakota > Williston Basin > Bakken Shale Formation (0.99)
- North America > United States > Montana > Williston Basin > Bakken Shale Formation (0.99)
Summary While many companies are hunting for elephants, exploration results in deep offshore plays over the past years show the increasing trend away from giant-field discoveries toward smaller fields in the 50-100 million bbl range, which tend to be geographically dispersed. These resources need to accumulate to a critical mass, a global threshold, to justify an economically viable development. This is not only a question of volume but also of geographic location of the discoveries, and the threshold, of course, also depends on economic factors. A methodology is proposed to evaluate the potential of a block to lead to a multiprospect development and to optimize exploration and appraisal. It is illustrated by a real deepwater case study including five discoveries and four prospects, 10-30 km apart. The practical approach taken is to define circles or ellipses on a map representing potential hubs and their catchment areas. For each area, a global resource threshold is defined by analogy with other regional developments or by a detailed economic study of representative cases (not discussed in the paper). A probabilistic model of the resource base is derived from the geological assessments of discoveries and prospects. It is entered into Monte Carlo simulation to generate a large number of scenarios representing exploration outcomes and discovery volumes, which are stored in a scenario database. This allows a probabilistic evaluation of the performance of an exploration and appraisal program, using specially developed indicators such as the cumulative discovered P50. Intelligence is introduced in the process by evaluating after each well the probability of meeting the threshold with the remaining wells. If it is low (10% or less) the program is stopped, which has a great impact on risked economics. The main results of the analysis are the economic decision tree with the probability of a development decision and the P90/ P50/P10 of the developed resources; the number of wells in the dry branch of the tree, which actually is not a fixed number but a probability distribution; the definition of a firm and contingent well program; and an optimum drilling order, which may also reduce the well count.
The latter will normally be executed by private players, for whom decision criteria developed from a commercial perspec - tive are important. But such criteria are also important for the government in calculating the size of subsidies required for vari - ous measures. A ranking of different solutions in a socioeconomic context must rest on calculations made from a commercial perspec - tive. Examples of the subjects covered include the calculation of abatement unit costs and cost estimating for climate projects. The carbon-capture project at the Kårstø gas-fired power station in southwest Norway is used as a case throughout the analysis.
- Europe > Norway (0.67)
- North America > United States > Massachusetts (0.28)
- Government (1.00)
- Energy > Power Industry (1.00)
- Energy > Oil & Gas > Upstream (1.00)
- (2 more...)