Tab3 DeCort Reservesaa

Image: Mari-B - Noble Energy , Inc 2011 Annual Report

Reserves Inventory

Noa

Mari-B

AOT

Map source: Noble Energy, Inc. 2011 Annual Report

Image: Tamar - http://anneinpt.wordpress

Thierry M. De Cort

United States Department of the Interior Bureau of Ocean Energy Management

[email protected]

U.S.A. – Israel Seminar

EIGOA

Environmental Impacts of Offshore

Natural Gas & Oil Exploration & Production Activities in the Mediterranean

Wohl Center, Bar-Ilan, Ramat-Gan, Israel

July 22-25, 2012

U.S.A. – Israel Workshop: Managing Offshore Oil and Gas Resources

Reserves Inventory

Discussion Topics

Authority to Perform Reserves Inventory

Justification for BOEM’s Reserves Inventory Program

Reserves Definitions and Classification System

Reserves Inventory Workflow Process

Uncertainty Associated With Reserves Estimation

Reserves Estimation Methodology – BOEM, U.S. Offshore

Reserves Growth and Appreciation

Reports and Publications


An independent evaluation of both the in-place and technically recoverable oil and natural gas reserves that have been discovered offshore beneath the submerged lands of the U.S. Outer Continental Shelf (OCS)

Reserves Inventory

BOEM’s Reserves Inventory Program

A consistent methodology is used to estimate reserves for every field discovered on the U.S. OCS


OCS Lands Act (Section 8g)

Reserves Inventory

Authority to Perform Reserves Inventory

“The Secretary of the Interior shall conduct a continuing investigation, …, for the purpose of determining the availability of all oil and natural gas produced or located on the Outer Continental Shelf.”



Public Sector

BOEM’s Undiscovered Resource Assessment Program

BOEM’s Lease Tendering Fair Market Value Program

Planning Energy Supply Forecasting

Production Forecasting

Government Revenue Forecasting

Pubic Policy Decisions (Social, Environmental)

Reserves Volume Verification (e.g. EIA)

Assure Fair Value in Public/Private Transactions

Reserves Inventory


Resource Evaluation Program

Basin Analysis / Undiscovered Resources

Geologic Play Level

Fair Market Value Determination

Prospect Level Analogs

Reserve Estimation

Reservoir Level

Reserves Assessment Impact

Reserves Inventory


Private Sector

Reserves Volume Verification (investors, loans)

Corporate Performance Measures (best practices)

Corporate Strategy Planning

Financial Viability Verification (stock value)

Financial Reporting Requirements

Reserves Inventory



Justification for Reserves Classification System

For future planning - governments and industry need to have a clear understanding of the volumes and “type” of oil and gas reserves:

Available for production from commercial discoveries

Anticipated to become available within a certain time frame Additional field development

Technological advances

Exploration.

Reserves Inventory


Justification for Reserves Classification System A common classification framework and / or universal

language for assessing volumes and “types” of petroleum reserves and resources will assist our ability to develop a better and more comprehensive understanding of the status of worldwide petroleum reserves. In the U.S., BOEM’s Reserves Inventory Program is obligated

to develop, for every discovery realized on the OCS, estimates of the oil and gas volumes:

originally in-place,

technically recoverable,

commercially recoverable,

remaining production,

cumulative historical production

Reserves Inventory


Reserves Classification and Definitions

In 1987, The Society of Petroleum Engineers (SPE) published definitions for all reserves categories.

In 1997, SPE and the World Petroleum Council (WPC) jointly developed and published definitions for reserves that could be used worldwide.

In 2000, SPE, the American Association of Petroleum Geologists (AAPG) and WPC jointly developed a classification system for all petroleum reserves and resources.

2001 - SPE / WPC / AAPG Guidelines for the Evaluation of Petroleum Reserves and Resources .

2005 - SPE / WPC / AAPG Glossary of Terms.

Reserves Inventory


Petroleum Resource Management System

Completed in 2007, the PRMS consolidates, builds on, and replaces guidance previously contained in the:

1997 - SPE / WPC Petroleum Reserves Definitions,

2000 - SPE / WPC / AAPG Petroleum Resources Classification and Definitions publications

2001 - SPE / WPC / AAPG Guidelines for the Evaluation of Petroleum Reserves and Resources

2005 - SPE / WPC / AAPG Glossary of Terms.


Reserves Inventory


PRMS definitions and guidelines provide a common reference for the international petroleum industry.

PRMS is intended to improve clarity in global communications regarding petroleum resources

PRMS definitions and the related classification system are now in common use internationally within the petroleum industry.


Reserves Inventory


http://www.spe.org/industry/docs/Petroleum_Resources_Management_System_2007.pdf


Reserves Inventory

1997 SPE/WPC Petroleum Reserves Definitions

2000 SPE/WPC/AAPG Petroleum Resources

Classification and Definitions

2001 SPE/WPC/AAPG Guidelines for the

Evaluation of Petroleum Reserves and Resources

2005 SPE/WPC/AAPG Glossary of Terms

API/AGA 1961

SPE/API 1964

WPC 1987

SPE 1987

SPEE 1985

API 1936

2007 SPE/WPC/AAPG/SPEE

Petroleum Resources

Management System(SPE-PRMS)

Consolidate, build on, update, and replace prior guidance


PRMS Features PRMS considers both the technical and commercial factors that

impact a project’s economics, productive life, and associated cash flows.

The term “RESOURCES” in PRMS means all naturally occurring petroleum discovered and undiscovered, as well as those quantities already produced.

Classifies resources into three major categories: Prospective Resources (PR)

Contingent Resources (CR)

Reserves

The Project is the primary element of PRMS


Reserves Inventory


Chance of Commerciality reflects the chance that the project will be developed and will reach commercial producing status

Range of Uncertainty reflects the range of estimated quantities potentially recoverable from and accumulation by a project.

PRMS Features

From SPE

Petroleum Resource Management System Reserves Inventory


PRMS Features

Source: SPE



Reserves: discovered, recoverable, commercial, remaining.

Contingent Resources: discovered, potentially recoverable, not yet commercial, remaining.

Prospective Resources: undiscovered, potentially recoverable, potentially commercial, remaining.

Unrecoverable: discovered or undiscovered, not recoverable.

PRMS Definitions Petroleum Resource Management System

Reserves Inventory


Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions

Reserves must meet these criteria:

Discovered

Recoverable

Commercial

Remaining

Based on the development project(s) applied

PRMS Definitions


Reserves Inventory


Project-based Classification System:

Reservoir – types and quantities of PIIP, fluid and rock properties that affect recovery

Property (lease or license area) – contractual rights and obligations including fiscal terms

Project – when applied to a specific reservoir, each project generates a unique production and cash flow schedule

SPE PRMS Features

Source: SPE



Discovery – one or several exploratory wells have established the existence of an accumulation with a significant quantity of potentially moveable hydrocarbons.

Estimated recoverable quantities are initially classified as Contingent Resources pending definition of project(s) with significant chance of commercial development.

Contingent Resources may be considered commercially producible, and thus Reserves, if a firm commitment is demonstrated to proceed with development.

PRMS Features


Reserves Inventory


Determination of Commerciality:

Evidence to support a reasonable timetable for development.

A reasonable assessment of the future economics of such development projects meeting defined investment and operating criteria.

A reasonable expectation that there will be a market for all or at least the expected sales quantities of production required to justify development.

PRMS Features


Reserves Inventory


Determination of Commerciality:

Evidence that production and transportation facilities are available (or can be made available).

Evidence that environmental and social concerns will allow for the implementation of the recovery project’s plan.

Evidence that the necessary legal and contractual instruments are in place that will allow for the implementation of the recovery project’s plan.

PRMS Features


Reserves Inventory


PRMS Project Maturity

Sub-classes

From SPE


Reserves Inventory


Reserves On Production:

Development project currently producing and selling to market.

Approved for Development:

All necessary approvals received, capital funds committed, implementation of development project underway.

Justified for Development:

Reasonable forecast of commercial conditions, reasonable expectations that all necessary approvals can be obtained.

PRMS Maturity Sub-classes



Contingent Resources Development Pending:

Activities ongoing to justify commercial development in the foreseeable future.

Development Unclarified or on Hold:

Project activities are on hold or commercial development may be subject to significant delay.

Development Not Viable:

No current plans to develop or acquire additional data due to limited production potential.

PRMS Maturity Sub-classes



Estimation of recoverable quantities under a defined project can be based on one or a combination of analytical methodologies.

Can use incremental (risk based) or scenario approach.

Method of assessing uncertainty in estimates can employ deterministic and/or probabilistic methods.

Three categories of analytical methodologies:

Analogy

Volumetric

Performance Based

PRMS Estimation of Resources



PRMS Estimation of Resources

From Gaffney-Cline


Deterministic Methods Probabilistic Methods

The system accommodates multiple approaches to assessing uncertainty


BOEM’s classification system is based on PRMS

BOEM classifies reserves as commercial based on lease operator actions (project status)

Currently, BOEM’s estimates of reserves volumes represent a mean value.

Reserves Inventory

BOEM Reserves Classification System


BOEM Reserves / Resource Classification Scheme Showing Linkage to BOEM Regulatory Actions

Reserves Inventory


Correlation of BOEM‘s Classification Scheme to PRMS

Reserves Inventory


Reserves Inventory

BOEM‘s Reserves Classification System

(Field and Reservoir)

Resource classes

Maturity classes

Project Status classes


Reserves Inventory


BOEM Classification Flow Chart

Reserves Inventory


Reserves

Unproved – Quantities of petroleum which are estimated with

some certainty to be potentially recoverable from known reservoirs

Proved – Quantities of petroleum which, can be estimated with

reasonable certainty to be commercially recoverable from known reservoirs and under defined economic conditions, operating methods, and government regulations

Proved Undeveloped

Proved Developed

Proved Developed Producing

Proved Developed Nonproducing

Remaining Proved – Proved Reserves minus cumulative production

BOEM Reserves Inventory Definitions

Reserves Inventory


Resources

Undiscovered – Petroleum that exists outside of known accumulations

Contingent – Petroleum estimated to be potentially recoverable from known accumulations

Reservoir

A subsurface rock formation containing one separate natural accumulation of moveable petroleum that is confined by impermeable rock and is characterized by a single-pressure system.


Reserves Inventory


Sand

A sand is a single reservoir or a group of geologically related reservoirs in a field that share a common geologic history of deposition, hydrocarbon generation, accumulation, and entrapment.

Pool

A discrete accumulation (discovered or undiscovered) of hydrocarbon resources that is hydraulically separated from any other hydrocarbon accumulation


Reserves Inventory


Field

An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same general geologic structural feature and/or stratigraphic trapping condition.


Reserves Inventory

Play (or Geologic Play)

A play is a group of geologically related hydrocarbon accumulations that share a common history of hydrocarbon generation, accumulation, and entrapment.


Reserves estimates are calculated at the Reservoir level.

For fields with multiple reservoirs, subsurface data are used to identify common geologic intervals, BOEM defines as a Sand.

Reserves volumes for Reservoirs that cross lease boundaries are allocated to each lease based on bulk volume.

BOEM Reserves Inventory Workflow

Reserves Inventory


Reserves volumes in multiple reservoirs associated with the same Sand are aggregated to develop reserves estimates for each Sand in the Field.

For Fields with multiple Sands, subsurface data are used to identify common Geologic Plays. The Sand or group of Sands in a Field that are correlated to a common geologic Play, BOEM defines as a Pool.


Reserves Inventory



Reserves Inventory

A Pool represents all the reservoirs in a field that exist within a geologic succession that is defined by a unique biostratigraphc interval (ex. Upper Miocene)

(ex. Middle Miocene)


Reserves volumes in multiple Sands associated with the same Pool are aggregated to develop reserves estimates for each Pool in the Field.

For Fields with multiple Pools, subsurface data are used to identify common Geologic Plays. A Pool or group of Pools that are associated with a common geologic structure, BOEM defines as a Field.


Reserves Inventory


Reserves volumes in multiple Pools associated with the same Field are aggregated to develop reserves estimates for each Field.


Reserves Inventory


Relationship between Reservoirs, Sands, Pools, Plays

Reserves Inventory



Reserves Inventory

Every oil and gas reservoir discovered on the OCS is assigned to a Field.


Lease Operator Qualifies Lease as Capable

of Production

• Well Production Test • 15 Vertical feet of log pay in a single sand

• Makes Request to MMS

Lease Automatically Qualifies Through

Continuous Production

Petrophysical Analysis Unit in Resource Studies

Section Handles Request To Qualify Lease

• Log Analysts Determine

Amount of Pay • Weekly Query to Identify

Production

Reserves Section Field Determination Geoscientist

Receives Notification of Existence of New

Producible Lease from PAU Unit Supervisor

• New Producible Lease

Report (TIMS)

Field Determination Committee Reviews

In-House and Operator Supplied Geologic

Information and Makes Field Determination

• Creates a New Field with

New Producible Lease • Places New Producible

Lease in an Existing Field

Field Determination Committee Generates:

• Operator Notification

Letter • OCS Operations Field

Directory Monthly and Quarterly Reports

Reserves Section Field Determination Geoscientist

Uses Gulf of Mexico OCS Region Field Naming

Handbook as a Guideline for Field Determinations

• Geologic Features on an

Existing Field or as a New Field

BOEM Field Determination Process

Reserves Inventory

Reservoir discoveries not associated with an existing Field are assigned a new Field name.


Reservoir level reserves estimates are aggregated to establish volume estimates at the Sand level.

Sand level estimates are aggregated to establish volume estimates at the Pool level.

Pool level estimates are aggregated to establish volume estimates at the Field level.


Reserves Inventory


Reserves Oil & Gas Data

Reserve Reservoirs

Reserves Leases

Leases

Field Leases

Fields

- Field

- Reservoir Type

- Reservoir Class

- Original Proved BOE

- Cumulative Production

- Remaining Proved BOE

- Annual Production

-Pressure/Volume/Temperature Data

- Geologic

- Seismic

- Petrophysical

- Recoverable Oil & Gas

- Lease Number

- Lease Percent

- Lease Number

- Block Area & Number

- Lease Block Nickname

- Planning Area

- NPL Determination Date

- Lease Portion in Field

- Lease Description

- Lease Project Nickname

- Field Name

- Production Type

- Water Depth

- Reserves Unit Assignment

- Field Classification

- Field Priority Code

- Discovery Lease

- First Production Date

- Original Proved BOE

- Cumulative Production

- Remaining Proved BOE

- Annual Production

- Unproved Reserves

- Resources

- Ultimate Recovery

- Lease Number

- Mineral Type

- Sale Number

- Tract Number

- Effective Date

- Lease Status

- Acreage

- Planning Area

- Area/Block

- Water Depth Range

Formation Sands

- Sand Name

- Paleo Codes

- Play Information

- Pressure Gradient

- Temperature Gradient

Formations

- Formation Name

- Reservoir Name

- Well Depths

- Departure

BOEM Reserves Inventory Database

Reserves Inventory


Gulf of Mexico Reserves (January 2008)

1,251 Proved Fields – 953 Proved Active Fields

36,540 Reservoirs – 5,021 Active Producing

15,254 Active Completions

BOEM

Reserves Inventory


Gulf of Mexico Oil Production

70% of the oil produced in the Gulf comes from deep water leases. This

represents ~19% of total U.S. oil production.

Total OCS oil production accounts for ~ 25% of domestic oil production

Reserves Inventory


36% of the gas produced in the Gulf comes from deep water leases. This represents approximately 6% of the total US production.

Total OCS gas production accounts for ~ 11% of the gas produced domestically.

Gulf of Mexico Gas Production

Reserves Inventory


Discovery Sequence, Deep Water Gulf of Mexico

Reserves Inventory


Proved Reserves – Deep Water Gulf of Mexico

Reserves Inventory


Oil and Gas Production Infrastructure Deep Water Gulf of Mexico

Reserves Inventory


Development Milestones Deep Water Gulf of Mexico

Reserves Inventory


Deep Water Gulf of Mexico Projects

Reserves Inventory


Reserves Inventory

Perhaps the most critical word in any reserves definition is “estimate”

All reserve calculation methods involve some degree of uncertainty

Until a reservoir has produced to permanent abandonment, its ultimate recovery volume is uncertain



Reserves Inventory

Uncertainty is primarily related to the amount of -and reliability of geological, geophysical and engineering data available at the time of the estimate and the interpretation of these data

PRMS/BOEM definitions attempt to qualitatively convey these uncertainties.



Reserves Inventory



Reserves Inventory Methodology

Initial reserves estimates of discoveries are initiated after some development wells have been drilled but prior to significant production

Recoverable volumes are reported in bbls of oil and Mcf of gas

Data sources include seismic data, well logs, core analysis, completion reports, production accounting data, bottom hole sample information (i.e. - pressures, temperatures, fluid samples)

Reserves Inventory


Volumetric Method currently used by BOEM

Estimation of reserves based on geological and geophysical data analysis. (structure maps, isopach maps, well

log analysis, core analysis, oil/gas in place, recovery efficiency).

Performance Estimation of reserves based on projections of declining

production rates or reservoir pressures.

Analog Estimation of reserves based on analogy to similar

fields, reservoirs or wells. (prior to drill)

Methods Used For Estimating Reserves

Reserves Inventory


Advantages Well log and seismic data combined - allow for

geologic interpretation of the discovery based on hydrocarbon (oil and gas) pore-volume.

Disadvantages Range of estimates usually narrows, but may still be

large due to lack of fluid data and understanding of the reservoir producing drive mechanism.

Methods Used For Estimating Reserves Volumetric

Reserves Inventory


The volumetric method can be used to estimate the amount of oil and gas in-place and the recoverable reserves by calculating a volume from the physical properties of the reservoir.

The volumetric method requires knowledge of the size of the reservoir, and the physical properties of the reservoir rocks and fluids. Some of these properties are area, net pay, porosity, water

saturation, pressure, temperature, formation volume factor and recovery factor.

Methods Used For Estimating Reserves Volumetric

Reserves Inventory


Deterministic Reserves Estimation Method currently used by BOEM

This method of estimation uses a single value for all parameters used in the calculation. The result is a single best estimate of reserves volumes in the reservoir. The parameter values are determined from known geophysical, geological, engineering, and economic data and information.

Probabilistic Reserves Estimation This method of estimation uses a range of values for

parameters used in the calculation. The result is a continuous range of values estimate of reserves volumes in the reservoir and their associated probability.


Reserves Inventory


Deterministic Method Category Descriptive Term

Proved (P1) Reasonable certainty

Probable (P2) More likely than not

Possible (P3) Less likely than probable


Reserves Inventory

Probabilistic Method Category Descriptive Term Proved (P1) At least 90% probability

Probable (P1+P2) At least 50% probability

Possible (P1+P2+P3) At least 10% probability


Probabilistic techniques address the uncertainties associated with the parameters used to develop the estimate

Repeated random sampling techniques are most commonly used to compute results

Values for all variables impacting the reserves estimate are described with ranges of possible values and are associated with probability density functions

Reserves Inventory

Methods Used For Estimating Reserves Probabilistic Method


Computer selects a single value from each variable density distribution

Selected values are used to calculate a single reserves value

Process is repeated hundreds or thousands of times

Reserve estimates from each trial are then sorted and ranked

The result is a range of possible reserve estimates, typically reported as a cumulative frequency distribution

Reserves Inventory



Reserves Inventory



Reserves Inventory


Cumulative Frequency Distribution


Reserves Growth Due to significant uncertainties, estimates of proved reserves

and ultimate recoveries during the early years of a field’s or a reservoir’s productive life span are generally conservative.

Estimates of the volumes that will ultimately be produced from reservoirs and fields tend on average to increase substantially over time.

Without doubt, the most important word in the proved reserves definition is “estimate.” Until such time as a reservoir is produced to permanent abandonment, its ultimate recovery volume will be uncertain no matter how much data have been amassed or how well they have been interpreted. Proved reserves estimated, never measured.

Reserves Inventory


Reserves Growth Reserves Growth is principally the result of

several factors:

The lack of adequate geotechnical information at the time of field discovery.

Delineation of additional reservoir volumes.

Technical Advancements such as use of new recovery techniques increasing efficiency.

Changes in conditions such as economic, operating, or political/regulatory.

Reserves Inventory


Reserves Growth

From USGS

Reserves Inventory


Reserves Growth

From USGS

Reserves Inventory D

epth


Reserves Growth

From USGS

Reserves Inventory


BOEM Reserves Reports

Reserves Inventory

Thierry M. De Cort

United States Department of the Interior

Bureau of Ocean Energy Management

[email protected]

Reserves Inventory

Image: Tamar - http://anneinpt.wordpress

Thank You For The Opportunity To Speak With You

U.S.A. - Israel Seminar

EIGOA

Environmental Impacts of Offshore

Natural Gas & Oil Exploration & Production Activities in the Mediterranean

Wohl Center, Bar-Ilan, Ramat-Gan, Israel

July 22-25, 2012

Tab3 DeCort Reservesaa

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