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SPE 89983

Probabilistic Approach Takes You Back to Reality


S. Macary, SPE, IPR Group of Companies

Copyright 2005, Society of Petroleum Engineers


Introduction
This paper was prepared for presentation at the 2005 SPE Hydrocarbon Economics and
Evaluation Symposium held in Dallas, TX, U.S.A., 3 – 5 April 2005.
After many trials of trade off, both sides: geoscientists and
This paper was selected for presentation by an SPE Program Committee following review of
information contained in a proposal submitted by the author(s). Contents of the paper, as
reservoir engineers could come to a mutual agreement whether
presented, have not been reviewed by the Society of Petroleum Engineers and are subject to to accept the model, i.e., the static one for further use in
correction by the author(s). The material, as presented, does not necessarily reflect any position
of the Society of Petroleum Engineers, its officers, or members. Papers presented at SPE building the dynamic model. However, this does not mean,
meetings are subject to publication review by Editorial Committees of the Society of Petroleum
Engineers. Electronic reproduction, distribution, or storage of any part of this paper for
under any circumstances, that the accepted model is certain. In
commercial purposes without the written consent of the Society of Petroleum Engineers is taking this static model to the dynamics, the domain of
prohibited. Permission to reproduce in print is restricted to a proposal of not more than 300
words; illustrations may not be copied. The proposal must contain conspicuous acknowledgment uncertainties becomes wider. The main parameter that makes
of where and by whom the paper was presented. Write Librarian, SPE, P.O. Box 833836,
Richardson, TX 75083-3836, U.S.A., fax 01-972-952-9435.
the results of the dynamic model to be convergent is the
feasibility, which is, in turn, at high level of uncertainty, e.g.,
Abstract oil prices.

One of the most important outputs of the static model is the In almost all of the reservoir simulation studies you can
volumetrics of the original hydrocarbon in place (OHIP). find deterministic figures counting to the second decimal of
According to the type of reservoir driving mechanism, the MMBO or US$MM (i.e., ten thousand), which is sometimes as
reservoir engineer can assume the recovery factor and hence the small as daily production. The question is: how much
recoverable reserves. Most simulation studies are being accuracy and certainty in our input that allows us to come
conducted on fields considering a period of production up with such deterministic numbers? Murtha (1) said “Much
performance to determine the remaining reserves and the best of risk analysis consists of estimating something with a range
scenario of development to produce these reserves, which is the of values rather than with a single value. We report that the
main function of the dynamic model. wildcat well drilling will require between 56 and 87 days
The volumetrics could be approached using a Monte Carlo instead of saying it will take exactly 65 days. Instead of the
technique, the end product of which is a range of probable single-point estimate of US$ 34 MM, we say the water flood
OHIP and, consequently using the proper recovery factor, NPV is a normal distribution with a mean of US$34 MM and a
getting probability distribution of the recoverable reserves. standard deviation of US$1.7 MM” (equivalent to a range of 29
Therefore, using the probabilistic approach is superior in green to 39 MM US$).
fields rather than brown fields because it captures the full range
of reality and where models are not yet calibrated to dynamic The reliability of reserves estimates is the economic
data. foundation of the petroleum industry. This is the initial point
Sometimes, the dynamic data may take a surprise turn from where $ sign appears. A dependable foundation for reserves
the geological understanding. Different realizations, even the estimates helps to ensure sound choices and avoid errors in the
crazy ones, may help under the probability distribution development of potential oil and gas properties. This, in turn,
functions in defining some certainties that have not yet even positively affects the confidence of shareholders, corporate
been imagined. In addition, each of the dynamic model’s staff, suppliers and contractors, government agencies, and
scenarios yields extra recovery, the certainty of which can be society as a whole (2).
evaluated using the probability distribution curve of the
remaining reserves. This certainty has direct influence on the In the next paragraphs will follow a backward process that
economics approval of one scenario over the others. starts off by dynamic model results and ends with probabilistic
The current work introduces actual case histories reserves. The current work tries to tie the output of the
demonstrating how the probabilistic approach could be of real simulator with the probability distribution of reserves in terms
help in selecting the production enhancement scenario and how of uncertainty or the chance of success.
this tool also could be used to prioritize management interests.
No doubt that it will be a revolutionary approach if we
could use Monte Carlo simulation in dynamic models to
produce directly a distribution of uncertainty per each logic
scenario aiming recovery increase.
2 SPE 89983

Uncertain Reservoir Description Data less volatile than the percentage error in remaining reserves.
Additional data (in the form of production data, if nothing else)
Bradley (3) and Sverdrup (4) stated that errors in reservoir helps narrow the range of uncertainty until late in the life of the
description data clearly contribute to errors in simulation model property. However, there is a point of irreducible uncertainty
results. Since the description data are never exactly known, one regardless of the amount of money and effort expended.
might infer that model results are necessarily erroneous and
unreliable. A number of considerations contribute, in Data Surveillance
contradiction of this inference, to model results being widely
used to select and to design oil-recovery processes and to A multireservoir field in the Western Desert-Egypt was the
forecast oil recovery. subject of an integrated engineering study in 2000; the point
forward date of the prediction runs was January 2001, while the
In any event, the pertinent question regarding reservoir- forecast termination is June 2006. The simulation study
description data is not related to correctness or uniqueness in an included 55 modules (scenarios) out of which only 37 were
absolute sense but it concerns the engineering significance of reported. Among these scenarios one can find well optimization
variations in parameter values within ranges of uncertainty. The (different workover jobs: add perforation, new completion,
simulation model itself might be useful in estimating this cleaning, etc), infill drilling (vertical or horizontal) and
significance. secondary projects (water injection).

Our case histories have a wide range of variations within Table 1 introduces a comparison of descriptive statistics of
lithology, driving mechanism, volume, rock and fluid Monte Carlo probabilistic simulation (Mean, Min, Max, P10,
properties. Regardless of the number of scenarios (modules) P50 and P90) versus the simulation study output (both OOIP
considered per each case, this study concerns only one and reserves) as calculated either volumetrically or by material
scenario/each reservoir that gave through simulation runs the balance (MBC) for all reservoirs, in addition to the total field
maximum incremental recovery above the base case, which is (aggregated probabilistically). The simulation study did not
“Do nothing”. It’s worth to mention that values used to provide complete picture of reserves through MBC due to the
calculate reserves probabilistically (volumetrics) were taken absence of pressure data. Anyhow, this is not the concern of the
from the averages considered in the simulation study. Monte current work.
Carlo simulation then was used to create probability
distributions using logic and industry experience assumptions Table 2 illustrates the production history of our concerned
for each variable of the volumetrics. case; December 2000 stands for the end of production history
match period used in the simulation study; December 2004 is
Probabilistic Reserves versus Deterministic Ones the last oil cumulative used in the analysis (current work). This
table also shows the incremental production for the last four
Many believe that for the first time, the official reserves years and the certainty of the cumulative production with
definitions allow for the use of probabilistic reserves though respect to the entire range of ultimate reserves. Table 3 shows
they do not require this methodology. Not true-reserves the incremental recovery from the best development scenarios,
estimates have always been probabilistic, whether or not the both individually and as a combined total field development
definition recognized that fact. Words such as “reasonably scenario.
certain”, “with high confidence”, “more likely than not” and
“possible” all lay tribute to the concept of probability. Discussion

For probable reserves, Capen (5) asked “What opportunities At that stage of the field age regarding the best scenarios
do I see in this field that I can move into the proved category concerned, the author believes as SPE (8) does that the
over the next 2 to 3 years?” For possible reserves, consider incremental recovery gained through simulation study scenarios
looking at a 4 to 6-year time horizon. How many new barrels belongs to the category of proved reserves (developed). In our
will begin their journey to the well bore during that time? These case (i.e., the best scenarios not all examined modules) there is
possible reserves define the optimistic end of the distribution. no step drilling, infill seismic,
Treating reserves probabilistically can provide useful
information for decision makers as they plan for future or pressure maintenance projects; the best scenarios are either
development and extension exploration. recompletion or ESP installation.

First of all, engineers have to understand that any value within


Idrobo (6) agreed that the correct use of the combination of the range of probabilistic reserves frequency distribution is
deterministic and stochastic methods along with consistent probably correct as any other one; the matter is how to narrow
reservoir engineering criteria guarantees healthy reservoir the range. Again, the older the reservoir is (more data) the more
management decisions. realistic are the ranges of properties used in the volumetrics
(porosity, Bo, RF and gross volumes, Sw). One interesting
approach to narrow reserves range was introduced by
Wright (7) concluded that uncertainty is a fact of life in Verbruggen (9) in which the ultimate recovery (UR) range is
reserve estimates, in which the percentage error is smaller and
SPE 89983 3

narrowed by setting the current cumulative production value at reservoir, the incremental production for 80% prediction period
the P100 value, i.e. 100% confidence level of achieving this is almost two folds the predicted recoverable reserves by
recovery. simulation. In addition, even December 2004 cumulative value
covers less than 1.5% from the probabilistic range. Hence, there
Analyzing the tabulated data we can make the following is up to 98% certainty to get bigger values of recoverable
comments: reserves, i.e., there is an extremely high chance of success to
feasibly develop this reservoir.
a) OOIP values from the simulation study do match with
both the Mean and P50 output of Monte Carlo (Table 1). This is Very interesting point is to compare between the
expected, as the avareges (most likely values of volumetrics uncertainties of remaining recoverable reserves in AD and RS.
parameters) are the same in both studies. However; It’s clear that the chance of success for RS reservoir to produce
reserves up to P50 (about 5.4 MMBO incremental) is much
b) Simulation study reserves show the following higher than the chance of AD to go to P90 reserves value (4
inequalities with respect to the Monte Carlo ones: AD >P50, MMBO incremental). The other reservoir AR/G has the same
DS > P30 and others are even less the P10 (Table 1). This property, very high chance of success to go to P50 with
complete dismatch could be a result of incorrectness of either incremental recovery of about 1.8 MMBO. Then, both
way: Monte Carlo overestimated recovery factor or simulation reservoirs can produce with high certainty two folds of what
study pessimism! Anyhow, this should be interpreted in the AD may produce with higher uncertainty.
light of OOIP match;
The purpose of the current work was just to compare
c) All reservoirs to date cumulative is higher than the numbers gained from both simulation study and probabilistic
simulation study UR (Table 2); however, this cumulative still Monte Carlo simulation using probability distribution functions
far less than P10 with the exception of AD; (PDF), we did not want to go into details like reservoir driving
mechanism, reservoir characterization, stratigraphy or any other
d) Almost all reservoirs for the last four years have parameters either favorable or not. However, the simple
produced more than two folds the predicted values through the example given above about certainty of producing some
best scenario calculated to June 2006 (Table 3). One may incremental oil lets us to have a look at the economics of the
attribute this positive situation to good reservoir management development by each scenario. It was found that the sum of
but it is better to evaluate what was the uncertainty in achieving investments to implement best scenario for both RS and AR/G
incremental production by applying one or another scenario. is just one sixth of the needed investment to develop AD. This
is another justification to highly prioitize developing these
Now, let us go to definite situations to judge the added reservoirs.
value driven from certainly levels. Both reservoirs AS because
of its small size and DS because of being shut in are not This combination of oil volumes, uncertainty analysis and
included in the next analysis. By any means, approaching economics could be effectively used in prioritizing
higher production with respect to predicted certain one by development schedule and making successful decisions.
Monte Carlo could be a result of better reservoir understanding Decision makers should take into account that the simulation
and management study is an ongoing process
that needs to be updated on regular basis as long as there is a
We start off by AD reservoir. Cumulative production to volume of data added. This will produce dynamic behavior of
December 2000 was 62.93 MMBO covering 72% from the reserves, which regardless of being a growth or a decline means
reserves range produced by Monte Carlo. Other words, this better understanding of the reservoirs attidude and capabilities.
means having just 28%
chance of success of getting more (see Fig. 1). In subtracting There’re another two points we need to highlight. First, any
the cumulative oil produced from the total range of new evaluation should start from two positions: certainty of
probabilistic reserves we got what we can call “Remaining produced volumes with respect to the total ultimate recovery
Reserves”. Figure 2 shows the frequency distribution of these and probability distribution of the remaining reserves. Figure 5
remaining reserves. The best scenario gave an incremental is the “Overlay Plot” illustrating the share of the three reservoir
recovery of 0.446 MMBO, which has just 24% certainty in the total remaining reserves, while Fig. 6 is a trend plot
(chance of success). In real life, the incremental recovery from showing a comparison between the remaining reserves in the
this reservoir (Jan. 2001-Dec. 2004) was only 0.15 MMBO-just three reservoirs expressed in terms of P10, P50 and P90. Both
one third of the predicted incremental and produced within plots confirm the above mentioned analysis about the
about 80% of the prediction interval (Jan. 2001-June 2006). superiority of some reservoirs above the others. The second
point is to use this trade off between the two concepts to tune
The other two reservoirs: AR/G and RS have a our decisions.
completely contradictory status in comparison with AD
reservoir. RS may have more superiority, as it’s three times Conclusions
bigger by volume as AR/G as illustrated in Figures 3 and 4.
Regardless this fact, they’re twins with respect to the analysis 1. Simulation engineer should use a pragmatic approach
tying simulation results with the probabilistic approach. For RS to quantify the uncertainty ranges around the base case.
4 SPE 89983

8. www.spe.org “ Petroleum Reserves and Resources


2. It’s an open invitation to simulator designers to build
Definitions” .
in some uncertainty analysis for further improvement of
probabilistic reserve estimates.
9. Rini Verbruggen et al: “Understanding Reserves Uncertainties
in a Mature Field by Reservoir Modeling”, SPE 77896 presented
3. Bigger reservoirs give better reasonable results in at the SPE Asia Pacific Oil & Gas Conference and Exhibition
comparison as they’re subjected to higher level of exploitation (APOGCE) held in Melbourne, Australia, Oct. 8-10, 2002.
activities.

4. Probability distribution functions could be used as a


quality check tool to evaluate the level of reservoir
management.

5. Such approach in evaluating reserves reveals the


priorities in developing multiple choices.

6. combination of oil volumes, uncertainty analysis and


economics could be effectively used in prioritizing
development schedule and making successful decisions.

Acknowledgments

The author extends his thanks to IPR Group of Companies for


permission upon using the data of the simulation study in
addition to the access to the current production performance.
He also does thank IPR Group of Company for supporting the
publication of this paper. Many other thanks are to be addressed
to Dr. Jim Pollin upon his valuable comments and Mr. Dale
Hinshaw upon his instructive directions.

References

1. James A. Murtha: “Monte Carlo Simulation: Its Status and


Future”, SPE 37932 presented at the SPE ATCE, San Antonio,
TX, Oct. 5-8, 1997.
2. W. Gary McGilvray: “Independent Evaluation for Reliable
Reserves Estimates”, JPT, Dec. 2004.
3. Howard Bradley: “Petroleum Engineering Handbook”, Third
Edition, Richardson, TX, USA, 1992.

4. Einar Sverdrup: “Modeling Streamlines Workflows,” E&P,


Aug. 2004, pp. 69-72.

5. E.C Capen: “Probabilistic Reserves! Here at Last?”


SPE Reservoir Evaluation & Engineering, Oct. 2001, pp. 387-94.

6. E. A. Idrobo et al: “A New Tool to Make Quick Estimates of


Probabilistic Reserves from Production Trends”, SPE 68597
presented at SPE Hydrocarbon Economics and Evaluation
Symposium, Dallas, TX, Apr. 2001.

7. John Wright: “Irreducible Uncertainty: A Fact of Life in


Reserve Estimates”, SPE 84146 presented at SPE ATCE, Denver,
CO, Oct. 5-8, 2003.
SPE 89983 5

Table 1 - Comparison: Probabilistic versus Study Deterministic Output

Monte Carlo Results Simulation Study


NAME MEAN MIN MAX P10 P50 P90 Determ. MBC
MMSTB
OOIP 17.13 5.00 27.50 12.86 16.90 21.79 17.48 N.A.
1 AR/G
Reserves 4.27 1.20 7.20 2.93 4.21 5.68 1.788
OOIP 39.89 15.00 65.00 28.85 39.61 51.39 45.071 N.A.
2 RS
Reserves 12.95 5.90 22.50 9.17 11.99 17.15 5.83
OOIP 11.83 2.50 20.00 8.17 11.65 15.82 12.737 12.51
3 DS
Reserves 4.16 1.00 8.00 2.72 4.17 5.64 3.501
OOIP 189.55 125.00 250.00 164.48 189.16 214.72 192.966 209.84
4 AD
Reserves 59.58 40.00 80.00 50.98 59.53 67.16 62.881
OOIP 6.99 3.00 12.00 4.98 6.86 9.28 7.193 N.A.
5 AS
Reserves 1.06 0.38 2.50 0.73 1.06 1.42 0.09
OOIP 265.80 200.00 350.00 238.62 271.17 292.55 270.11
Total Field
Reserves 82.35 60.00 105.00 72.64 81.98 92.38 74.09

Table2 - Production History of the Concerned Case


Cum Des. 2000 Cum Dec. 2004 Incremental
Reservoirs Date of Qi Certainty
MSTB MSTB MSTB
AR/G 1988 1,788 2,440 < P10 652
RS 1981 5,829 6,610 < P10 781
DS 1974 3,501 3,501 P30 < 3.5 < P50 0
AD 1968 62,930 63,079 P70 < 63.1 < P80 149
AS 1996 94 134 < P10 40
Total Field 74,142 75,764 P20 < 76.3 < P30 1,622

Table 3 - Simulation Study Results


Reservoir Incremental Recovery, 01.2001-06.2006, MSTB

Name Do Nothing Best Scenario

AR/G 238 446

RS 264 404

DS 0 50

AD 76 446

AS 87 161

TOTAL FIELD * 665 1459

* Not a sum of the above (separate combined scenario)


6 SPE 89983

Forecast: Reserves, Dolomite

996 Trials Frequency Chart


.036 36

.027 27

.018 18

.009 9

Mean = 59.27
.000 0

40.00 50.00 60.00 70.00 80.00


Certainty is 28.31% from 62.93 to 80.00 MMSTB

Fig. 1 – Reservoir AD Probabilistic Reserves and Certainty of Cumulative Oil Produced

Forecast: REmaining Reserves

962 Trials Frequency Chart


.746 718

.560 538.5

.373 359

.187 179.5

.000 0

0.00 2.25 4.50 6.75 9.00


Certainty is 24.22% from 0.42 to 9.00 MMBO

Fig. 2– Reservoir AD Probabilistic Remaining Reserves

Forecast: Reserves, AR/G

995 Trials Frequency Chart


.029 29

.022 21.75

.015 14.5

.007 7.25

Mean = 4.25
.000 0

1.50 3.00 4.50 6.00 7.50


Certainty is 97.99% from 2.40 to 7.20 MMSTB

Fig. 3– Reservoir AR/G Probabilistic Reserves and Certainty of Cumulative Oil Produced
SPE 89983 7

Forecast: Reserves, Razzak Sand

996 Trials Frequency Chart


.032 32

.024 24

.016 16

.008 8

Mean = 12.94
.000 0

5.00 9.38 13.75 18.13 22.50


Certainty is 98.69% from 6.93 to 22.50 MMSTB

Fig. 4– Reservoir RS probabilistic Reserves and Certainty of Cumulative Oil Produced

Overlay Chart

Frequency Comparison
.212
3-Reservoirs Remaining Reserves

.159

AR/G Remaining Reserves


.106

RS Remaining Reserves
.053

Dolomite Remaining Reserves


.000

0.00 6.88 13.75 20.63 27.50

Fig. 5 – Overlay Plot Showing the Share of each Reservoir in the Remaining Reserves

Trend Chart

Trend Chart: P10, P50 and P90 for the Three Reservoirs
15.00

90%

10.00

50%

5.00

10%

0.00
Dolomite Remaining Reserves

RS Remaining Reserves

AR/G Remaining Reserves

Certainties Centered on Means

Fig. 6 – Trend Chart Showing How Much Certainty of Remaining Reserves within Each Reservoir
8 SPE 89983