Technology To d ay Series
Managing Risks Using Integrated
P roduction Models: A p p l i c a t i o n s
C.V. Chow, SPE, M.C. Arnondin, SPE, K.D. Wolcott, SPE, and N.D. Ballard, SPE, Mobil E&P Technical Center
Summary
This paper presents applications of an asset-management
analysis process that helps quantify and manage uncertainty
to aid strategic decision-making over the life of a field. The
dynamic and iterative nature of the process and tools allows
for rapid, quantitative systems analysis of the impact of a
wide number of options with their associated uncertainty.
The result is a robust method to understand the risks and
potential value of the prospective enterprise on an ongoing
basis through development, operation, and expansion phas-
es. Application of the process over the entire life cycle of an
asset is discussed and illustrated with two case histories.
Introduction
The risk-based integrated-production-model (RIPM) analy-
sis process was developed to help quantify and manage
uncertainty during development, infrastructure implemen-
tation, and operation of a field project. The process quanti-
fies the impact of subsystem (i.e., reservoir, well, or facility)
performance with associated uncertainty on the entire sys-
tem to facilitate strategic planning and decision-making. It is
based on fundamental principles of integration, quantifica-
tion, and validation: integration to evaluate an option’s effect
on the entire system; quantification to compare several
options on a consistent, absolute basis; and validation to
define uncertainty and strategic avenues for improvement.
Ref. 1 introduced the concepts and tools used in the
RIPM process, which uses dynamically linked (i.e., with-
out user interface) models of the subsystems, called an
integrated production model (IPM), to evaluate system
performance quickly. Risk caused by uncertainty in
assumptions, data, (e.g., physical parameters, economic
data), or the model is also quantified when appropriate and
integrated with the IPM to give an RIPM. The result is an
iterative process that quickly evaluates alternative options
for design and reacts to new data during implementation
or operation phases of a project over the life of an asset.
This paper discusses application of the process over an
asset’s life cycle, presents process features required at dif-
ferent stages of the life cycle, and illustrates applications of
the process with two case histories.
Range of Applications
As an asset advances through its life, changes can occur in
the key technical and business drivers, uncertainty magni-
tude, and nature of operations. A flexible analysis process is
needed to provide a common framework to guide decision-
Copyright 2000 Society of Petroleum Engineers
This is paper SPE 57473. Technology Today Series articles provide useful summary
information on both classic and emerging concepts in petroleum engineering. Purpose:
To provide the general reader with a basic understanding of a significant concept, tech-
nique, or development within a specific area of technology.
94
making over the asset life stages without hindering the
asset’s optimization. In development, where analysis focus-
es on design and planning, the process should quantify the
system constraints and the system drivers for a multitude of
options and their associated uncertainties. Otherwise, the
design may be based on limited, previous experience, poten-
tially resulting in many lost opportunities. In infrastructure
implementation, where analysis focuses on validation and
reducing uncertainty, the process should quickly identify
both the local and global (system) impact of data collected
and strategic forward direction if change is required. Other-
wise, the tendency is either not to react or to overreact to
new data, resulting, respectively, in the loss of key opportu-
nities to enact change or inefficiency from waste. In opera-
tion, where analysis focus is on production and optimizing
the value extracted, the process should quantify and validate
performance and identify opportunities and risks. The ten-
dency is to manage field events reactively rather than proac-
tively and to extract value through passive inaction rather
than through active optimization.
The RIPM process has the necessary features to provide
the common framework described.1 It is applicable at dif-
ferent phases of an asset’s life and can affect a wide range of
decisions required during that time (Fig. 1).
• Field Development. Evaluate various development sce-
narios and identify key system drivers.
• Field Evaluation and Expansion. Identify and optimize
opportunities for expansion.
• Field Operation and Maintenance. Identify uplift
opportunities, manage operations, and set depletion strat-
egy with a proactive, fact-based approach.
• Field Acquisition or Exit. Quickly evaluate opportuni-
ties to acquire and dispose of assets.
Ideally, the RIPM process should be used to create a living
model to manage a field during all phases of its life. The
process is applied with an IPM to assess the potential value
of a new or existing field and to examine design options with
associated risk for field development. Local and global
performance predictions, base assumptions, and input data
are validated as subsystem designs are implemented and for-
ward strategy is set. Validated models are then used to devel-
op, monitor, and update depletion plans. The IPM is used
throughout the operations phase to optimize daily produc-
tion through maintenance of base decline and identification
of uplift opportunities. Plans for field redevelopment or
expansion result as opportunities to optimize extracted value
through capital expenditure are identified. Finally, as value
extraction approaches an economic limit, decisions on when
and how to harvest the value can be assessed.
Field Development. The RIPM process can significantly
impact the total value extracted from a field when applied
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Fig. 1—RIPM applications.
in the field-development stage. This is the stage where the
greatest uncertainty exists concerning many of the param-
eters but often also is where key strategies and subsystem
constraints (e.g., production capacity) are set. The risk-
based and iterative features of the process provide the
means to quantify and evaluate quickly several develop-
ment options and their associated uncertainty on a consis-
tent basis and thereby set development strategy on the
basis of a quantitative risk/benefit analysis.
The process and tools can be used to help design the
overall reservoir-exploitation strategy. Reservoir size,
geometry, quality, drive mechanisms, and fluid types and
associated uncertainty affect design strategies for well and
facility subsystems. For wells, this involves such decisions
as number, type, and associated completion methods. For
surface facilities, options considered involve type of facili-
ties [e.g., fixed platforms; subsea templates; or floating
production, storage, and offloading (FPSO) units] and
required capacities based on the expected reservoir and
well performances.
Field Evaluation and Expansion. This type of application is
characterized by decisions regarding modification or expan-
sion of a field that has been in operation for some time. As
with development-planning studies, the quantitative nature
of the process can help determine whether field expansion is
worthwhile and the strategic means to accomplish it. For
these applications, a significant amount of data generally is
available to develop, match, and validate the subsystem mod-
els and to determine key parameters and associated proba-
bility distribution functions.
Examples of issues that can be addressed include the
need for reservoir pressure maintenance, the impact of
infill drilling to increase the number of wells, and the
impact and prioritization of workover programs for exist-
ing wells. Analysis of existing wells also identifies optimal
techniques for improving well-completion reliability and
performance. For surface facilities, typical issues addressed
include bottleneck source(s) and the impact of potential
upgrades to these facilities.
Field Operation and Maintenance. This is the most
detailed type of application for the RIPM process. It
involves use of data gathered from field surveillance activi-
ties to quantify system performance and to identify oppor-
tunities for production optimization and forward depletion
96
plans, thereby providing a bridge between production opti-
mization and reservoir-management planning activities. As
such, the process must be flexible to tap into field-manage-
ment systems and existing infrastructure for data acquisi-
tion, management, and surveillance. Typical issues involve
gas allocation for lifted wells, selection of wells to shut in,
compression requirements, and such operational decisions
as choke settings for individual wells to optimize overall
field production. These are decisions that typically must be
carried out in a fairly short time. Detailed well-performance
analyses also can be conducted to identify effective com-
pletion practices and stimulation candidates. The extensive
field data that normally are available are used to quantify
uncertainty in input data, to validate models, and to set
bounds on model predictions. Using an IPM without the
risk component may be sufficient to make the necessary
decisions in those systems with little uncertainty.
Field Acquisition or Exit. This type of application is char-
acterized by decisions regarding buying or selling of a field.
An essential component of decision-making is accurate
assessment of actual value and potential value with change
(e.g., new technology). Key technical and business drivers
should be identified and used to define negotiating strategy
and contract terms.
Case Studies
The RIPM process has been applied in different assets in
development, operations, and expansion phases. It has not
been used yet to evaluate an asset for acquisition or exit or
as a living model over the entire life cycle. We believe and
our experience shows that application of the process has
consistently achieved the overall goal of conducting sound,
fundamental analyses to facilitate timely, strategic decision-
making. However, value added by the process itself cannot
always be established quantitatively because end results are
sometimes achieved in spite of the process used.
The selected case histories demonstrate the process
without revealing proprietary details of the project or out-
come. The discussion focuses on the impact of the process,
not on the uniqueness of the technical results. Case 1 is
application of the process in the design of a development
plan. This case shows how the process was used to estab-
lish a strategic framework to manage uncertainty quanti-
tatively and to alter the development plan as new data
indicated that a change was required. Case 2 is application
of the process in a mature asset for facilities-expansion and
depletion-planning studies. This case shows how the
process was used to integrate a large amount of historical
data and identify key parameters in designing a platform
upgrade and to help optimize production.
Case 1: Development. An RIPM was used in the prepara-
tion of a development plan for a South American oil field.
The asset was acquired with data from one exploration
well. Data were limited to maps, volumetric estimates,
three drillstem production tests, a few logs from one well,
and two pressure/volume/temperature studies. Informa-
tion from offset operators also was limited. Preliminary
asset-evaluation plans called for significant investment for
an aggressive seismic-acquisition program; possibly six to
eight additional exploration wells; open- and cased-hole
logs; drillstem tests; production tests with artificial lift; and
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 Fig. 2—Incremental NPV vs. artificial-lift method.
geological, core, and fluid studies. The limited information
that existed was used to guide discussions on the scope of
the analysis. The RIPM process was proposed as a practi-
cal way to explore alternative development options, prob-
able outcomes, and associated risks in the planning stages
to provide a strategic framework that could be modified as
additional data were obtained.
An IPM was constructed. As data were acquired and inte-
grated, it became clear that well productivity, completion
design, and artificial-lift method were key drivers of project
economics through obtainable initial rates and the corre-
sponding facility design. At the same time, fiscal models
suggested that initial production at half of peak production
with a 2- to 3-year rampup to peak production yielded
favorable financial results and reduced the affiliate’s expo-
sure during the mixed exploration and appraisal phases.
Plans were proposed to scale the development in two stages.
An IPM was used to quantify the effect of reservoir qual-
ity, well productivity, and artificial-lift alternatives to dic-
tate the range of wells required for the development. The
need for stimulation and its impact on well productivity
was also analyzed and integrated. The dynamic and itera-
tive nature of the process allowed quick, quantitative com-
parison of several options, some of which were conceived
through understanding developed during iteration. Uncer-
tainty in reservoir quality yielded a range of well produc-
tivity-index (PI) values bracketing that observed in the
exploration-well test. Risk analysis linked the production
profiles for different completion designs and potential well
interventions, uncertainty of reservoir quality, operating
and capital expenditures of the different options, and
anticipated fiscal regime to quantify the different options
on a net-present-value (NPV) basis. The framework was
created to process new data (collected to define uncertain-
ty further) and to determine its impact on key system
design decisions.
The study provided an estimate of the number of wells
needed to meet the initial target rate as a function of for-
mation quality. It was found that a 10% incremental invest-
ment doubled the system’s capacity, with substantial poten-
tial impact on the incremental NPV. Strategic direction was
also formulated quantitatively for artificial-lift and stimula-
tion needs on the basis of reservoir quality and expected
NPV. Minimum, maximum, and mean values of the incre-
mental NPV distribution showed the superiority of the
reverse-gas-lift option even though electric submersible
pumps (ESP’s) gave the highest initial rates (Fig. 2). The
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Fig. 3—Incremental NPV vs. PI.
analysis quantified the PI threshold required to justify the
cost of a massive stimulation treatment (Fig. 3).
Two more wells subsequently were drilled, and the addi-
tional geologic and reservoir data and analyses were fed to
the RIPM process. Analysis of the lower measured gas/oil
ratio (GOR) indicated that insufficient gas was available to
execute the reverse-gas-lift technique economically. There-
fore, the decision was made to shift to ESP’s, which result-
ed in a dramatic topsides design change that required a
power-distribution network (i.e., instead of gas) and dif-
ferent equipment. More detailed studies were carried out
to improve well design by quantifying well performance
for vertical, slant, high-angle and horizontal well configu-
rations together with the new artificial-lift method.
Case 2: Expansion, Optimization, and Maintenance. A
quantitative analysis with an RIPM offshore west Africa
was conducted to help optimize the upgrade design of a
production platform, the completion strategy for new
wells, and ongoing depletion plans for a large field com-
plex. The flexibility and robustness of the analysis process
and the created model were extensively tested by the size
of the fields, the data quality and quantity, the need to link
with results from detailed technical tools, and the number
of decisions impacted.
The model encompassed three fields, more than 30 dif-
ferent reservoir zones, 110 completions, two production
platforms, and the corresponding surface pipeline network
and represented the largest multiplatform, multifield
model in Mobil. Data from more than 25 years of produc-
tion were used to build and validate reservoir and well
models for the IPM. A fairly intensive data-quality process
was established to quantify model accuracy and to attain
consistency in model quality. Results from detailed techni-
cal tools for reservoir, well, and surface subsystems (e.g.,
model predictions from reservoir simulation, well comple-
tion efficiency and failure, and a surface pipeline network
of 20 fields) were linked with the IPM.
The IPM and linked models were used to quantify the
impact of several platform-upgrade design parameters,
such as separator-liquids-handling capacity, gas injection,
compressor installation, and completion efficiency of pro-
posed new wells. Uncertainties in reservoir quality and
completion efficiency of new wells were quantified, and
risk analysis was used to link resulting production profiles
97

Fig. 4—Tornado graph of uncertainty and impact on NPV.
and associated capital expenditures with the operating fis-
cal regime in an economic model to evaluate different
options on an incremental-NPV basis. Subsequent analysis
allowed strategic prioritization of the options on the basis
of value impact and uncertainty. In particular, completion
efficiency of new wells was determined to have the greatest
impact on and the most uncertainty for incremental NPV
(Fig. 4). Novel completion techniques were subsequently
undertaken to improve efficiency even though they
increased initial cost. The analysis helped quantify the tim-
ing and value of acquiring data to narrow bands of uncer-
tainty and impact decisions on large capital expenditures.
The models also were used in production-optimization
and depletion-planning studies. Sand-control completion
efficiencies were quantified and production-uplift oppor-
tunities from damage removal were identified. Production-
uplift opportunities were identified through single-well
and system optimization/debottlenecking studies. The
linked models were used to quantify well and system
deliverability, facility restrictions from line sizing, and pro-
duction-platform capacities and to provide options for
improved efficiency. In one example, an opportunity was
identified to increase field production more than 20,000
BOPD by accelerating installation of a gas-injection line
and using it to capture excess well deliverability. Produc-
tion increases were also captured through shutting in high-
rate, high-GOR wells. As total gas decreased, the system
manifold pressure decreased and production from wells
with excess deliverability increased, which more than
compensated for the lost oil. The linked models also pro-
vided guidance for planning and forecasting activities by
use of predictions of facility capacity and timing of avail-
ability to influence drilling recommendations.
The RIPM process also significantly affected the affiliate’s
existing reservoir-management process. Integration fea-
tures of the process helped define and clarify the frame-
work for reservoir surveillance and field optimization:
requirements for data and data types, analysis type and fre-
quency, implementation of optimization recommenda-
tions, and validation follow-up. The system for collecting
and processing field data was redesigned to integrate more
efficiently with the IPM tools. The efficiency, quality, and
output of well-review and asset-management meetings
98
were also enhanced. Results from the IPM and linked
models were used with reservoir-characterization input
from geoscience to set strategies for well utilization and
system optimization. The exchange provided further
quantification of model accuracy and also facilitated rapid
visualization and understanding of a tremendous amount
of information that the asset-management team had not
included in past decision-making processes. Not only did
the number of recommendations increase, but the quanti-
tative basis of the recommendations and the understand-
ing derived were deemed to be of higher quality as well.
Conclusions
The RIPM adds value to the decision-making process over
the asset life cycle through integration of subsystem mod-
els and quantification of the impact of uncertainty. The
process is dynamic, iterative, and well-suited to impacting
the different decisions required in development, expansion,
and operation stages of an asset. It provides a framework
for setting strategic direction and responding strategically
to new or unexpected data as they are collected. JPT
Acknowledgment
We thank Mobil management for permission to publish
this paper.
Reference
1 .C h o w, C.V. and Arnondin, M.C., “Managing Risks Using Inte-
grated Production Models: Process Description,” JPT (March
2000) 54.
SI Metric Conversion Factors
bbl ×1.589 873 E−01= m3
psi ×6.894 757 E−03= MPa
Chris V. Chow is an engineering adviser at Mobil E&P Tech-
nical Center in Dallas, conducting research and worldwide
technical service support. His technical interests include inte-
grated production models, sand management, perforating,
completion efficiency, and risk and decision analysis. Chow
holds a PhD degree in chemical engineering from the Cali-
fornia Inst. of Technology. Michael C. Arnondin is an
engineering adviser at Mobil E&P Technical Center in Dallas,
providing worldwide technical support to Mobil affiliates. He
held positions in operations, production, and reservoir engi-
neering in U.S. and U.K. North Sea affiliates for 19 years
and has spent the last 7 years using IPM’s to establish devel-
opment plans, evaluate field-expansion opportunities, and
optimize field production. Arnondin holds a BS degree in
petroleum engineering from the U. of Southwestern
Louisiana. Kenneth D. Wolcott, a senior staff engineer at
Mobil E&P Technical Center in Dallas, currently is working on
gasflood optimization for Mobil Producing in Nigeria. With
Mobil since 1991, he previously worked as a reservoir engi-
neer on the South Midway Heavy Oil and South Belridge
Diatomite teams. Wolcott holds an MS degree in petroleum
engineering from the Colorado School of Mines. N. David
Ballard is a senior operations engineering adviser at Mobil
E&P Technical Center in Dallas, working worldwide on IPM
efforts. He previously was with Mobil in Bakersfield, Califor-
nia, consulting on artificial lift and heavy- and light-oil oper-
ations. Ballard holds a BS degree in mechanical engineering
from California State U., Long Beach.
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