RESERVOIR

ENGINEERING
for Geologists

PRINCIPAL
AUTHORS

Ray Mireault, P. Eng.

Lisa Dean, P. Geol.

CONTRIBUTING
AUTHORS

Nick Esho, P. Geol.

Chris Kupchenko, E.I.T.

Louis Mattar, P. Eng.

Gary Metcalfe, P. Eng.

Kamal Morad, P. Eng.

Mehran Pooladi-Darvish, P. Eng.

cspg.org fekete.com
Reservoir Engineering for Geologists was originally published as a fourteen-part series
in the CSPG Reservoir magazine between October 2007 and December 2008.

TABLE OF CONTENTS

Overview...................................................................................... 03

COGEH Reserve Classifications.................................................. 07

Volumetric Estimation ..................................................................11

Production Decline Analysis.........................................................15

Material Balance Analysis.............................................................19

Material Balance for Oil Reservoirs.............................................. 23

Well Test Interpretation................................................................. 26

Rate Transient Analysis................................................................ 30

Monte Carlo Simulation/Risk Assessment - Part 1...................... 34

Monte Carlo Simulation/Risk Assessment - Part 2...................... 37

Monte Carlo Simulation/Risk Assessment - Part 3 ...................... 41

Coalbed Methane Fundamentals................................................ 46

Geological Storage of CO2........................................................... 50

Reservoir Simulation.................................................................... 54
Res er
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Article I Overview
by Ray Mireault, P. Eng., and Lisa Dean, P. Geol., Fekete Associates Inc..
Welcome to the first article in a series
intended to introduce geologists to
reservoir engineering concepts and their
application in the areas of Corporate Reserve
Evaluation, Production, Development, and
Exploration.

Topics covered in the series are:

Article 1: Overview
Article 2: COGEH Reserve
Classifications
Article 3: Volumetric Estimation
Article 4: Decline Analysis
Article 5: Material Balance Analysis
Article 6: Material Balance for Oil
Reservoirs
Article 7: Well Test Interpretation
Article 8: Rate Transient Analysis
Article 9: Monte Carlo Simulation
Article 10: Monte Carlo Simulation (cont.)
Article 11: Monte Carlo Simulation (cont.)
Article 12: Coalbed Methane
Fundamentals
Article 13: Geological Storage of CO2
Article 14: Reservoir Simulation
Figure 1.1.Traditional decline analysis - Rate vs. Cum. Prod.
The format for each article will generally be to
introduce the concept(s), discuss the theory, and
illustrate its application with an example.

ARTICLE DEFINITIONS AND USES

COGEH, the Canadian Oil and Gas Evaluation
Handbook, Reserve Classifications provide a
Canadian standard reference methodology for
estimating reserve volumes according to
reserve and resource category. There have
been many recent changes in an attempt to
achieve a global standard in order to ensure
the public release of accurate, understandable
reserve and resource estimations and
classifications.

Volumetric Techniques are used to indirectly

estimate Hydrocarbons in Place (OOIP and
OGIP) from estimates of area, thickness,
porosity, water saturation, and hydrocarbon
fluid properties. Analogue or theoretical
estimates for hydrocarbon recovery are then
applied to estimate recoverable hydrocarbons.
These techniques are utilized prior to the
acquisition of sufficient production data to
Figure 1.2.Traditional decline analysis - Rate vs.Time.
allow a more rigorous determination of
reserves and resource estimates. These
methods are therefore primarily used for production limit or cutoff to forecast the In theory it is only applicable to individual
evaluating new, non-producing pools and the expected ultimate recover y (EUR). The wells, but in practice extrapolations of group
evaluation of new petroleum basins. method plots the production rate through production trends often provide acceptable
the production history (time) and records approximations for EUR. Two key
Decline analysis techniques extrapolate the the production rate decline as cumulative assumptions are that past trends represent
historical performance trend to an economic production increases (Figures 1.1 and 1.2). the full capability of the producing entity and


 Figure 1.3. Horizontal well model.

that the trends and operating practices permeability, and wellbore conditions from technique requires that a well be produced
continue into the future. Deviations from mathematical flow equations and dynamic for a period of time and then shut-in for an
theoretical performance can help identify pressure buildup measurements. The appropriate length of time. Analysis inputs
wells and areas that are underperforming.
Well workovers to resolve mechanical
problems or changes in operating practices
can enhance performance and increase
recover y. The presence of pressure
maintenance by an aquifer may make this
method inappropriate to use. This technique
is also more reliable than volumetric
methods when sufficient data is available to
establish a reliable trend line.

Material balance techniques are used to

estimate hydrocarbons in place (OOIP and
OGIP) from measurements of fluid
production and the resultant change in
reservoir pressure caused by that
production. The technique requires accurate
estimates of fluid properties, production
volumes, and reservoir pressure. Estimates
for hydrocarbon recovery, based on fluid
properties and analogue producing pools/
formations, are then applied to estimate
recoverable hydrocarbons. These methods
are more reliable than volumetric methods
as long as there is sufficient data to establish
the relationship.

Well tests and the subsequent pressure

transient analyses are used to determine
fluids present in the reservoir, estimate well
productivity, current reservoir pressure, Figure 1.4. Flowing material balance.


 include fluid viscosity, rock properties, net
pay thickness of the producing interval, and
the mechanical configuration of the wellbore.
An adequate buildup provides information
on the reservoir flow pattern near the
wellbore, identifies restricted reservoirs,
and can sometimes infer the geometric shape
of the wells drainage area (see Figure 1.3).

Rate transient analysis (RTA), also know as

advanced decline analysis is a relatively
recent development that uses well flowing
pressures to characterize well and reservoir
properties and estimate inplace volumes.This
technique has been made available by the
introduction of SC ADA (Super visor y
Control and Data Acquisition) data capture
systems that generally provide the frequency
of flow and pressure information required
for real-life application (flowing material
balance and type curve analysis see Figures
1.4 and 1.5). Since pressure information can
be captured without shutting the well in and
without the loss of cash flow, the frequency
of testing can be significantly increased and
changes in operating performance identified
Figure 1.5. Blasingame typecurve analysis.
more quickly than is practical with
conventional testing.

Monte Carlo simulation is used to deal with

the uncertainty in every input parameter
value in the volumetric equation. Instead of
a single number, it allows the geologist to
provide a value range for areal extent, pay
thickness, porosity, water saturation,
reservoir pressure, temperature, fluid
properties, and recovery factor. Multiple
(typically 10,000) iterations are run to
generate a probable range of values for in-
place and recoverable hydrocarbons (Figure
1.6). The simulation is especially applicable
to play and resource assessments.

Numerical reservoir simulation uses material

balance and fluid flow theory to predict fluid
Figure 1.6.Visualization of results.
movement through three-dimensional space.
The inputs of geometric shape of the
deposit, the rock, and fluid properties must
be determined from other methods to deal
with the nonuniqueness of the forecasts.
However, it has the ability to visually
integrate the geological and geophysical
interpretation with the analytical approach
to reservoir analysis (Figure 1.7).

Although different techniques are used in

different situations, a major purpose of
reservoir engineering is to estimate
recoverable oil or gas volumes and forecast
production rates through time. Forecasts of
production rate and cumulative volumes are
a key input for the following:

Exploration play assessment,

Development drilling locations,
Figure 1.7. Pressure profile from numerical model.


 Accelerated production from a
producing pool,
Rank and budgeting of potential
exploration and development
expenditures,
Corporate reserve evaluations.

The different techniques also have different

applications at different times in the life of a
field or prospect. For example, the initial
stages of exploration may require volumetric
estimates based upon analogue data due to
the lack of existing well information and
estimating volumes with Monte Carlo
simulation. Volumetric estimates based upon
actual well data may be the next step after
exploration drilling and testing has proven
successful. As development and production
commence, SCADA frequency production
and pressure measurements can be obtained
for RTA analysis. Monthly production
volumes provide the data for material balance Figure 1.8. Historical rates vs. time.
and decline analysis techniques.

As production continues, the accuracy and

reliability of the estimates obtained from
RTA, material balance, and decline analysis
increases. Integrating all the techniques
provides more reliable answers than relying
solely on any one method. In addition,
integrating the techniques can lead to
additional hydrocarbon discoveries and/or
increased recovery from known
accumulations.

Articles two through nine address the main

topics of reser voir engineering. The
remaining articles will focus on play types
that are presently of interest to the industry.
Included in this group of plays are coalbed
methane concepts and interpretation
(Figures 1.8 and 1.9), tight gas, shale gas, and
an overview of secondary and tertiary oil
recovery methods.

Figure 1.9. Drainage area and permeability.


Res er
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Article 2 COGEH Reserve Classifications
by Gar y Metcalfe, P. Eng., Vice President Evaluations
In 2004, the Royal Dutch Shell Group on Canadian stock exchanges.The definitions those less certain to be recovered than
reported five separate write-downs of 3,900 and standards for reserve appraisals and probable. The degree of certainty is defined
MSTB, 250 MSTB, 200 MSTB, 100 MSTB, and evaluations are defined in the Canadian Oil as:
one undisclosed volume. In that same year, and Gas Evaluation Handbook (COGEH).
El Paso reported a 41% write-down in Proved: 90% probability of meeting or
reserves from 4,500 BCF to 2,600 BCF. Reserves are the estimated remaining exceeding the estimated proved volume
Where did the reserves go? The answer is quantities of oil and natural gas and related (P90).
nowhere! These write-downs resulted substances anticipated to be recoverable
from misinterpretation of standards and from known accumulations based on analysis Proved plus probable: 50% probability of
guidelines for reserve classification. The of drilling, geological, geophysical, and meeting or exceeding the sum of the
reported oil and gas volumes likely exist; it engineering data; established technology; and estimated proved plus probable volume
was just a matter of premature classification specific economic conditions. (P50).
into the proved reserves category.
Under the COGEH definitions, the reported Proved plus probable plus possible: 10%
The Canadian Securities Administrators proved reserves are those estimated with a probability of meeting or exceeding the sum
(CSA), through National Instrument 51-101 high degree of certainty to be recovered, of the estimated proved plus probable plus
(NI 51-101), sets the standards for disclosure probable reserves are less certain to be possible volume (P10).
of oil and gas activities for companies listed recovered than proved, and possible are

Figure 2.1. COGEH reserves and resources classification.


Each of the reserve classifications can be
divided into Developed and Undeveloped
categories, with the developed category
further subdivided into Producing and Non-
producing.

REQUIREMENTS FOR RESERVE

CL
CLAASSIFIC ATION
SIFICA
Within COGEH, there are requirements and
procedures for classifying reserves. The
conditions that must be met to assign
reserves are:

Drilling accumulation must have a

well;
Testing accumulation must have
evidence of commercial production
from a test;
Economics for producing reserves,
cash flow and NPV must be positive;
for undeveloped reserves, a Figure 2.2. Project status categories / commercial risk (sourced from SPE Oil and Gas Committee Final
reasonable return on investment must Report - December 2005).
be demonstrated; and
Regulatory prohibitive government conversely the arithmetic summation of P10 RECENT DEVELOPMENTS IN RESERVES
restraints must be incorporated when will exaggerate the upside and be optimistic CL
CLA ASSIFIC
SIFICAATIONS
estimating appropriate levels of risk. compared to the P10 from the aggregate International properties
distribution. The scrutiny of oil and gas reserves
ME THOD
METHOD
THODS S OF E
ESSTIMA TING RE
TIMATING SE
RESE
SERRVE S continues to increase, especially as more and
Reserves can be estimated using For reserve reporting to an investment type smaller Canadian issuers are competing in
deterministic or probabilistic methods: audience, probabilistic aggregation poses a the U.S. and international markets. The
problem as a P90 aggregate type corporate financial world is attempting to create a set
Deterministic: A single value assigned for disclosure cannot be allocated back or of global accounting standards through the
each input parameter of the reserves identified in any individual well or property International Accounting Standards Board
calculations is used. The appropriate value or prospect. (IASB). The IASB expects reserve estimates
for each reserve category must be selected. to reflect expected values rather than
The majority of reserves in Canada are RESOURCES conservative (proved) estimates and believes
estimated using this method. The NI 51-101 regulations also allow for the reserve estimates should be presented as a
disclosure of information for properties range reflecting uncertainty.
Probabilistic: A full range of values are used with no attributed reserves. The general
for each input parameter into the reserve reserve / resource classifications as they are Petroleum Resource Management
calculation. Reserve estimates can be defined in COGEH (see Figure 2.1: COGEH System (PRMS)
extracted from a Monte Carlo type of Reserves and Resources Classification, p. 30), Establishing a rigorous, harmonized, and
analysis at the various confidence levels P90, are as follows: universal reserves and resources
P50, P10, etc. This method pertains mainly to classification system for all stakeholders (oil
volumetric evaluations prior to the onset of Resources are limited to discovered industry, accountants, regulators, business /
production. (known) and undiscovered accumulations. financial analysts, investors, and
Contingent resources are discovered but not governments) is an ongoing process. The
Both the deterministic and probabilistic currently economic. Prospective resources recent 2007 SPE / AAPG / WPC / SPEE {etrp;ei,
methods will be presented in subsequent are undiscovered but are technically viable Respirce <amage,emt Suste, (PRMS) has been
articles. and economic to recover. These resources proposed as the new standard for petroleum
are further classified into Low reserve and resource classification,
AG GRE
REGGATION OF RE SE
RESE
SERR VE S (conservative), Best (realistic) and High definition, and guidelines. This system has a
Under COGEH, the P90, P50, and P10 values (optimistic) estimates. commerciality or project
are reported at the corporate level, not at maturitysubclass (see Figure 2.2: Project
the entity (well/proper ty) level. When There are no detailed guidelines in COGEH Status Categories / Commercial Risk).
deterministic methods are used, simple for resource appraisals; however, COGEH
summation of all individual entities within a does recommend probabilistic evaluation. If The United Nations Economic Commission
portfolio provides the aggregate total. resources are subitted in an NI 51-101 for Europe (UNECE) and the United Nations
report, disclosure must include volumes, net Framework Classification for Fossil Energy
With probabilistic methods, reserve pay, areal extent, flow rates, land, seismic, and Minerals Resources (UNFC) both
distributions for the individual entities must wells, exploration / development programs, recognize project maturity (along with
be combined in accordance with the laws of and capital expenditures. The explicit economic viability and geological knowledge)
probability to determine the correct disclosure of risk and / or probability of as the basic criteria for categorization and
distribution for the aggregate. The arithmetic success are also required. This is problematic alignment of energy management and financial
P90 summation will be less than the P90 of in that a single probability estimate is not reporting. To this end, it appears the UNFC
the aggregate (i.e., too conservative) and possible to calculate. and the PRMS definitions are compatible.


 PRMS is an ongoing, long-term process. If
these new standards are developed and
implemented, Canadian and U.S. regulators
must respond positively and provide
regulatory enforcement in order to gain the
trust of investors and have credibility in the
marketplace.

Unconventional Reserves and

Resources
The industry is investing heavily in
technology to improve recovery and
processes for unconventional extra heavy
oil, tight gas sands, CBM, oil shales, and gas
hydrates. The classification and technical
standards for these unconventional reserves
/ resources must conform to the system used
for conventional reservoirs.

The COGEH Volume 3 Detailed Guidelines

for Estimation and Classification of CBM
Reserves and Resources is in draft stage at
the time of writing this article. This huge
undertaking is likely the first publication
dealing specifically with classifying, defining,
and quantifying unconventional reserves and
resources.

Reserves Evaluator Training

The SPEE/WPC/AAPG and SPE have formed
the Joint Committee on Reserves Evaluator
Training (JCORET) to investigate training
courses for reserve evaluators that focus, in
part, on reserves and resources definitions,
classification, and applications. Discussions
on qualifications and standards for
professional reserve evaluators and auditors
are ongoing.

CONCLUSION
The reason for NI 51-101 and COGEH is to
provide the shareholder/investor/
stakeholder with consistent and reliable
reserves information using standardized
reporting guidelines in a format that can be
widely understood. While the COGEH
framework allows for definitions and
Figure 2.3. Multi-well gas pool example reserves classification (sourced from Canadian Oil and Gas classifications for current conventional and
Evaluation Handbook,Volume 2, Secion 6 - Procedures for estimation and calssification of reserves, Figure unconventional reserves and resources, the
6-2B). classification and definition of reserves is an
ever-evolving process. COGEH will continue
to be modified to adapt to new technology
and standardization in a global economy.

REFERENCES
Kemirmen, Ferruh, 2007. Reser ves
Estimation: The Challenge for the Industry,
Society of Petroleum Engineers Paper
#103434, In Journal of Petroleum Technology
May 2007, P80-89.

Canadian Oil and Gas Evaluation Handbook,

First Edition, November 1, 2005, Volume 2,
Detailed Guidelines for Estimation and
Figure 2.4. Aggregation (summation)issues (sourced from Kemirmen, Ferruh, Society of Petroleum Engineers Classification of Oil and Gas Resources and
Paper #103434, Figure 10).


Reserves. Section 6: Procedures for
Estimation and Classification of Reserves,
2005.

Oil and Gas Reserves Committee, Mapping

Subcommittee Final Report December
2005: Comparison of Selected Reserves
and Resource Classifications and
Associated Definitions, 2005. Richardson,
Texas: Society of Petroleum Engineers.
http://www.spe.org/web/ogr/
OGR_mapping_Final_Report_15Dec05.pdf.


Res er
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Article 3 Volumetric Estimation
by Lisa Dean, P. Geol., Fekete Associates Inc..
You have been asked to:

Evaluate the properties that are for

sale in a data room.
Determine whether to participate in a
prospect.
Calculate the potential reserves
encountered by a discovery well.
Identify the upside potential in a
mature field.

In all these situations, the bottom line is

how much oil or gas exists and can be
produced, and what will be the return on
investment? This article addresses this
question.

Volumetric estimation is the only means

available to assess hydrocarbons in place
prior to acquiring sufficient pressure and
production information to apply material
balance techniques. Recoverable Figure 3.1. Areal estent of rock volume accumulation.
hydrocarbons are estimated from the inplace
estimates and a recovery factor that is
estimated from analogue pool performance
and/or simulation studies.
Sand Grain
Therefore, volumetric methods are primarily
used to evaluate the in-place hydrocarbons
in new, non-producing wells and pools and
Cementing
new petroleum basins. But even after
pressure and production data exists,
Material
volumetric estimates provide a valuable check
on the estimates derived from material
balance and decline analysis methods (to be
discussed in upcoming Reservoir issues).
Interconnected or
VOL UME
OLUME TRIC E
UMETRIC STIMA
ES TION
TIMATION
Volumetric estimation is also known as the Effective Porosity
geologists method as it is based on cores,
analysis of wireline logs, and geological maps. 25%
Knowledge of the depositional
environment, the structural complexities,
the trapping mechanism, and any fluid Isolated or
interaction is required to:
Noneffective
Estimate the volume of subsurface rock
that contains hydrocarbons. The Porosity
volume is calculated from the
thickness of the rock containing oil or
5%
gas and the areal extent of the
accumulation (Figure 3.1).
Determine a weighted average effective
porosity (See Figure 3.2).
Total Porosity
Obtain a reasonable water resistivity 30%
value and calculate water saturation.

With these reservoir rock properties and Figure 3.2.Weighted average effective porosity.
utilizing the hydrocarbon fluid properties,


original oil-in-place or original gas-in-place
volumes can be calculated.

For OIL RESERVOIRS the original oil-

inplace (OOIP) volumetric calculation is:

Metric:
OOIP (m3) =
Rock Volume * * (1 - Sw) * 1/Bo

Where: Rock Volume (m3) = 104 * A * h

A = Drainage area, hectares (1 ha = Trapezoidal Volume V = h * ((A1 + A2) / 2)
10 4m 2)
h = Net pay thickness, metres
= Porosity, fraction of rock
volume available to store fluids
Sw = Volume fraction of porosity
filled with interstitial water
Bo = Formation volume factor (m3/
m3) (dimensionless factor for
the change in oil volume
between reservoir conditions
and standard conditions at
surface)
1/B o = Shrinkage (Stock Tank m3/
reservoir m3) = volume change
that the oil undergoes when
brought to the earths surface
due to solution gas evolving Frustum of a pyramid V = (h/3) * (A1 + A2 + A1 * A2)
out of the oil.

Imperial:
OOIP (STB) =
Rock Volume * 7,758 * * (1 - Sw) * 1/Bo

Where: Rock Volume (acre feet) = A * h

A = Drainage area, acres
h = Net pay thickness, feet
7,758 = API Bbl per acre-feet (converts
acre-feet to stock tank barrels)
= Porosity, fraction of rock
volume available to store fluids
Sw = Volume fraction of porosity
filled with interstitial water Frustum of a cone V = (h/3) * * (r2 + rR + R2)
Bo = Formation volume factor
(Reservoir Bbl/STB)
1/B o = Shrinkage (STB/reservoir Bbl)

To calculate recoverable oil volumes the

OOIP must be multiplied by the Recovery Figure 3.3. Volumetric rules: Trapezoidal, pyramidal, and cone.
Factor (fraction). The recovery factor is one
of the most important, yet the most difficult For GAS RESERVOIRS the original gas- Ts = Base temperature, standard
variable to estimate. Fluid properties such in-place (OGIP) volumetric calculation is: conditions, Kelvin (273 +
as formation volume factor, viscosity, density, 15C)
and solution gas/oil ratio all influence the Metric: Ps = Base pressure, standard conditions,
recovery factor. In addition, it is also a
OGIP (103m3) = (101.35 kPaa)
function of the reservoir drive mechanism
Rock Volume * * (1-Sw) * ((Ts * Pi) / (Ps * Tf * Zi)) Tf = Formation temperature, Kelvin
and the interaction between reservoir rock
(273 + C at formation depth)
and the fluids in the reservoir. Some industry
Where: Rock Volume (m3) = 104 * A * h Pi = Initial Reservoir pressure, kPaa
standard oil recovery factor ranges for
A = Drainage area, hectares (1 ha = Zi = Compressibility at Pi and Tf
various natural drive mechanisms are listed
10 4m 2)
below:
h = Net pay thickness, metres Imperial:
= Porosity, fraction of rock volume OGIP (MMCF) =
Solution gas drive 2 30%
available to store fluids Rock Volume * 43,560 * * (1-Sw) * ((Ts * Pi)
Gas cap drive 30 60%
Sw = Volume fraction of porosity filled / (Ps * Tf * Zi))
Water drive 2 50%
with interstitial water
Gravity Up to 60%

1
Where: Rock Volume (acre feet) = A * h
A = Drainage area, acres (1 acre =
43,560 sq. ft)
h = Net pay thickness, feet
= Porosity, fraction of rock volume
available to store fluids
Sw = Volume fraction of porosity filled
with interstitial water
Ts = Base temperature, standard
conditions, Rankine (460 +
60F)
Ps = Base pressure, standard conditions,
14.65 psia
Tf = Formation temperature, Rankine
(460 + F at formation depth)
Pi = Initial Reservoir pressure, psia
Zi = Compressibility at Pi and Tf

To calculate recoverable gas volumes, the

OGIP is multiplied by a recovery factor.
Volumetric depletion of a gas reservoir with
reasonable permeability at conventional
depths in a conventional area will usually
recover 70 to 90% of the gas-in-place.
However, a reservoirs recovery factor can
be significantly reduced by factors such as:
low permeability, low production rate ,
overpressure, soft sediment compaction,
fines migration, excessive formation depth,
water influx, water coning and/or behind pipe
cross flow, and the position and number of
producing wells. As an example, a 60%
recovery factor might be appropriate for a
gas accumulation overlying a strong aquifer
with near perfect pressure support. Figure 3.4. Gross and net pay distinction (Etris and Stewart, 2003).

Rock Volume Calculations (A * h) comparative log signatures. temperature and consequently of reservoir
Reservoir volumes can be calculated from depth. The Bo and Bg values from analogous
net pay isopach maps by planimetering to Porosity and Water Saturation offset pools are often used as an initial
obtain rock volume (A * h). To calculate Porosity values are assigned as an average estimate for the prospect under
volumes it is necessary to find the areas over a zone (single well pool) or as a consideration.
between isopach contours. Planimetering can weighted average value over the entire pay
be performed by hand or computer interval using all wells in a pool. Similarly, VOL UME
OLUME TRIC UNCE
UMETRIC UNCERRTAIN
AINTTY
generated. Given the areas between the average thickness-weighted water A volumetric estimate provides a static
contours, volumes can be computed using; saturation using all wells in the pool is measure of oil or gas in place. The accuracy
Trapezoidal rule, Pyramidal rule, and/or the commonly assumed as the pool average of the estimate depends on the amount of
Peak rule for calculating volumes (see Figure water saturation. data available, which is very limited in the
3.3). early stages of exploration and increases as
Drainage Area wells are drilled and the pool is developed.
Net pay Drainage area assignments to wells should Article 8, entitled Monte Carlo Analysis, will
Net pay is the part of a reservoir from which be similar to offset analogous pools present a methodology to quantify the
hydrocarbons can be produced at economic depending on the geological similarities and uncertainty in the volumetric estimate based
rates, given a specific production method. productivity of the wells within the analog. on assessing the uncertainty in input
The distinction between gross and net pay is Pressure information is useful in estimating parameters such as:
made by applying cut-off values in the pool boundaries and if any potential barriers
petrophysical analysis (Figure 3.4). Net pay exist between wells. Seismic analysis usually Gross rock volume reservoir
cut-offs are used to identify values below improves the reservoir model and provides geometry and trapping
which the reservoir is effectively non- for more reliability in reserve or resource Pore volume and permeability
productive. estimates. Distribution
Fluid contacts
In general, the cut-off values are determined Formation Volume Factor
based on the relationship between porosity, The volumetric calculation uses the initial The accuracy of the reserve or resource
permeability, and water saturation from core oil or gas formation volume factor at the estimates also increases once production data
data and capillary pressure data. If core is initial reservoir pressure and temperature. is obtained and performance type methods
unavailable, estimation of a cut-off can be Both B o and B g are functions of fluid such as material balance and decline analysis
derived from offset well information and composition, reservoir pressure and can be utilized. Finally, integrating all the

1
techniques provides more reliable answers
than relying solely on any one method.

REFERENCES
Aprilia, A. W., Li, Z., McVay, D. A. and Lee, W.
J., SPE Gas Tech Symposium May 15-17 2006,
Calgary. SPE Paper 100575-MS

Canadian Institute of Mining, Metallurgy and

Petroleum, Determination of Oil and Gas
Reserves, Petroleum Society Monograph
Number 1, 1994.

Etris, Ned and Stewart, Bruce. 2003. Net-to-

gross ratio. CSPG Reservoir, v. 30, issue 4,
p.24-25.

SPEE and CIM, Canadian Oil and Gas

Evaluation Handbook, Vol 2. Detailed
Guidelines for Estimation and Classification
of Oil and Gas Resources and Reserves,
November 2005.


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Article 4 Production Decline Analysis
by Lisa Dean, P. Geol., and Ray Mireault, P. Eng., Fekete Associates Inc..
Production decline analysis is a basic tool The drive mechanism and operating a semi-logarithmic scale. The data will also
for forecasting production from a well or practices continue into the future. present a straight line trend when
well group once there is sufficient production production rate versus cumulative
to establish a decline trend as a function of Production decline curves are a simple visual production is plotted on regular Cartesian
time or cumulative production.The technique representation of a complex production coordinates. The wells ultimate production
is more accurate than volumetric methods process that can be quickly developed, volume can be read directly from the plot by
when sufficient data is available to establish par ticularly with todays software and extrapolating the straight line trend to the
a reliable trend and is applicable to both oil production databases. Curves that can be production rate economic limit.
and gas wells. used for production forecasting include:
The rate versus time plot is commonly used
Accordingly, production decline analysis is production rate versus time, to diagnose well and reservoir performance.
most applicable to producing pools with well production rate versus cumulative Figure 4.1 presents a gas well with an
established trends. It is most often used to production, exponential straight line trend for much
estimate remaining recoverable reserves for water cut percentage versus cumulative of its production life. But in 2004 the actual
corporate evaluations but it is also useful production, performance is considerably below the
for waterflood and enhanced oil recovery water level versus cumulative expected exponential decline rate, indicating
(EOR) performance assessments and in production, a non-reser voir problem. Wellbore
identifying production issues/mechanical cumulative gas versus cumulative oil, modelling suggests that under the current
problems. Deviations from theoretical and operating conditions, the well cannot
performance can help identify pressure versus cumulative produce liquids to surface below a critical
underperforming wells and areas and production. gas rate of about 700 Mscfd, which is about
highlight where well workovers and/or the rate when well performance started
changes in operating practices could enhance Decline curves a) and b) are the most common deviating from the expected exponential
performance and increase recovery. because the trend for wells producing from decline.Water vapour is probably condensing
conventional reservoirs under primary in the wellbore and impeding production
To the geologist, production decline analysis production will be exponential, in from the well. Removing the water would
of an analogous producing pool provides a engineering jargon. In English, it means that restore the wells production rate to the
basis for forecasting production and ultimate the data will present a straight line trend exponential trend.
recovery from an exploration prospect or when production rate vs. time is plotted on
stepout drilling location. A wells production
capability declines as it is produced, mainly
due to some combination of pressure
depletion, displacement of another fluid (i.e.,
gas and/or water) and changes in relative fluid
permeability. Plots of production rate versus Flow rate less than critical
production history (time or cumulative gas rate and well loads up
production) illustrate declining production with liquid
rates as cumulative production increases
(Figures 4.1 - 4.4).
Gas Rate MMscf/d

In theory, production decline analysis is only

applicable to individual wells but in practice
extrapolations of group production trends
often provide acceptable approximations for
group performance. The estimated ultimate
recovery (EUR) for a producing entity is
obtained by extrapolating the trend to an
economic production limit.The extrapolation
is valid provided that::

Past trend(s) were developed with the

well producing at capacity.
Volumetric expansion was the primary
drive mechanism. The technique is not
valid when there is significant Critical gas rate under current line pressure @ ~0.610 MMscf/d
pressure support from an underlying
aquifer.
Figure 4.1. Gas well example showing liquid loading in the wellbore.


Figure 4.2. Pumping oil well where pump capability is decreasing.

Figure 4.2 is an example of a pumping oil While the assumption is not entirely exponential, hyperbolic, and harmonic decline
well that encountered a pump problem. A correct, industry experience has proven that when production rate vs. cumulative
rapid decline in production rate to below decline curves present a practical way to production is plotted on Cartesian scales.
the exponential decline rate cannot be a forecast well production in all but the most The straight orange line extrapolates an
reservoir issue and must therefore be due unusual circumstances. exponential decline from the data. The green
to equipment failure and/or near wellbore and blue lines present hyperbolic
issues such as wax plugging or solids Figure 4.3 illustrates the difference between extrapolations of the data trend with b
deposition in the perforations. In this case,
the pump was replaced and the fluid rate
returned to the value expected for
exponential decline.

Arps (1945, 1956) developed the initial series

of decline curve equations to model well
performance. The equations were initially
considered as empirical and were classified
as exponential, hyperbolic, or harmonic,
depending on the value of the exponent b
that characterizes the change in production
decline rate with the rate of production (see
Figure 4.3 and formulas at the end of the
article). For exponential decline, b = 0; for
hyperbolic b is generally between 0 and 1.
Harmonic decline is a special case of
hyperbolic decline where b = 1.

The decline curve equations assume that

reservoir rock and fluid properties (porosity,
permeability, formation volume factor,
viscosity, and saturation) governing the flow
Figure 4.3. Production history rate versus cumulative production with associated decline formulas.
rate will not change with time or pressure.

1
 important to the industry but they typically
Rate vs. Cumulative Prod. have permeability below 0.1 md and are
generally not productive without some form
of mechanical fracture stimulation. From
Figure 4a, a slightly hyperbolic (approximately
Expotential Decline
exponential) extrapolation of the most
EUR = 1.8 Bcf
Gas Rate MMscf/d

recent production data yields an ultimate

recovery of approximately 1.8 Bcf. But the
hyperbolic decline trend of Figure 4b
provides a good fit for the complete
production history and indicates an ultimate
recovery of 7.6 Bcf.

The typical range of b values is

approximately 0.3 to 0.8. A b value of 2
represents an upper limit to the volume of
gas that will ultimately be produced. The
uncertainty in the trend that should be used
Gas Cumulative Bcf to forecast well performance can be
reflected in the assigned reserves as follows:
Rate vs. Cumulative Prod.
Proven = 1.8 Bcf
Proven + Probable + Possible = 7.6 Bcf

Based on the reserve definitions, the

Hyperbolic Decline (b = 2)
assignment suggests there is a 95% chance
EUR - 7.6 Bcf
Gas Rate MMscf/d

that the actual volume recovered will be

greater than 1.8 Bcf and less than 7.6 Bcf. An
estimate for the proven plus probable
volume can be developed by integrating the
well pressure history and material balance
gas-in-place (OGIP) estimate with the decline
analysis trend.

References
Arps, J. J. 1945. Analysis of Decline Curves.
Trans. AIME, v. 160, p. 228-247.
Gas Cumulative Bcf
Arps, J. J. 1956. Estimation of Primary Oil
Reserves. Trans. AIME, v. 207, p. 182-191.
Figure 4.4. Tight gas well example illustrating minimum and maximum values for EUR depending in
decline methodology. Canadian Institute of Mining, Metallurgy and
Petroleum. 2004. Determination of Oil and
values of 0.3 and 0.6, respectively. Note that and whether declines are exponential, Gas Reserves, Petroleum Society
the curvature of the line increases as the b hyperbolic, or harmonic include rock and Monograph Number 1, Chapter 18.
value increases. fluid properties, reservoir geometry, drive
mechanisms, completion techniques, Canadian Oil and Gas Evaluation Handbook.
Figure 4.3 also illustrates the main challenges operating practices, and wellbore type. These 2005. Volume 2, Detailed Guidelines for
in decline analysis data scatter and the type factors must be understood prior to Estimation and Classification of Oil and Gas
of extrapolation that is appropriate for the analyzing the production decline trends or Resources and Reserves. Section 6:
well under consideration. Data scatter is an serious errors in the ultimate production Procedures for Estimation and Classification
unavoidable consequence of dealing with real estimates can result (see Figure 4.4). of Reserves.
data. In western Canada, the permanent
record of production and injection consists As stated previously, oil and gas wells Stotts, W. J., Anderson, D. M., and Mattar, L.
of monthly totals for gas, oil, and water producing conventional (>10 mD) 2007. Evaluating and Developing Tight Gas
production; operated hours; and wellhead permeability reservoirs under primary Reserves Best Practices. SPE paper #
pressure. For oil wells at least, monthly depletion (or fluid expansion) generally 108183 presented at the 2007 SPE Rocky
production at the battery is routinely pro- exhibit exponential decline trends. But the Mountain Oil and Gas Technolog y
rated back to the individual wells, based on performance of some waterfloods and Symposium, Denver, CO, USA, 16-18 April,
sequential 1-2 days tests of individual well unconventional low permeability gas 2007.
capability. Depending on the number of wells reservoirs are better modeled using
and test capability at each battery, it can take hyperbolic decline trends. Formulas :
up to several months to obtain a test on The Exponential decline equation is: q = qi
each well in the group. Figure 4.4 presents an example of well exp{ -Dt }
production from a tight gas reservoir.These
Factors that determine the rate of decline reservoirs are becoming increasingly where:

1
qi is the initial production rate (stm3/d),
q is the production rate at time t (stm3/d),
t is the elapsed production time (d),
D is an exponent or decline fraction (1/d).

Solving for D and t gives:

D = - ln { q/qi } / t and t = - ln { q/qi } / D

The cumulative production to time t (Np) is

given by:

Np = Iq dt = Iqi exp{ -Dt } dt = (qi - q) / D

The Hyperbolic decline equation is:

q = qi { 1 + bDit }-1/b

where:

qi is the initial production rate (stm3/d),

q is the production rate at time t (stm3/d),
t is the elapsed production time (d),
Di is an initial decline fraction (1/d),
b is the hyperbolic exponent (from 0 to 1).

Solving for Di and t gives:

Di = [ (qi /q)b - 1 ] / bt and t = [ (qi /q)b - 1 ] /Di b

The cumulative production to time t (Np) is

given by:

Np = Iq dt = Iqi { 1 + bDit }-1/b dt

= { qib / [ (1 - b)Di ] }[ qi1-b - q1-b ]

The Harmonic decline equation is:

q = q i / { 1 + D it }

where:

qi is the initial production rate (stm3/d),

q is the production rate at time t (stm3/d),
t is the elapsed production time (d),
Di is an initial decline fraction (1/d).

Solving for Di and t gives:

Di = [ (qi/q) - 1 ] / t and t = [ (qi /q)-1 ] / Di

The cumulative production to time t (Np) is

given by:

Np = Iq dt = Iqi { 1 + Dit }-1 dt

= { qi / Di } ln { qi /q }

1
Res er
ervvoir Eng in
Engin
inee ering for G
Gee olo
ologgists
Article 5 Material Balance Analysis
by Ray Mireault, P. Eng., and Lisa Dean, P. Geol., Fekete Associates Inc..
With sufficient production, material balance
techniques offer an alternative, largely
independent, method of estimating the
original hydrocarbons in-place (OOIP and
OGIP) to supplement the direct volumetric
calculation. A material balance of a pools
history can also help to identify the drive
mechanism and the expected recovery factor
range, since different drive mechanisms
display different pressure behaviours for the
same cumulative production. Figure 5.1
presents the different P/Z curve trends that
result from different drive mechanisms.

Material balance calculations are commonly

used to answer reservoir development
questions but the technique can also help
with the interpretation of reservoir
geometr y. Geological and geophysical
mapping will give an indication of a pools
shape and orientation but typically the
confidence in the in-place volume is not high
unless the well and/ or seismic control is
abundant. Conversely, material balance can
reveal a great deal about the volume of a
reservoir but nothing about its shape or
orientation. The combination of the two
Figure 5.1. Gas reservoir P/Z material balance diagnostics.
often greatly improves the understanding and
interpretation of the pool parameters.
entering, exiting, and accumulating in the in pressure create only small
Material balance uses actual reservoir reservoir. For the sake of convenience, this variations in reservoir temperature
performance data and therefore is generally mass balance is usually expressed in terms over the reservoir area.
accepted as the most accurate procedure for of reservoir voidage (see CIM Monograph 1,
estimating original gas in place. In general, a page 143 for the general material balance A constant reservoir volume assumes
minimum of 10 to 20% of the in-place volume equation). In theory, the original in-place that changes in the pore space of the
must be produced before there is sufficient volume can be determined knowing only: rock with pressure depletion are so
data to identify a trend and reliably small that they can be ignored. The
extrapolate to the original in-place volume Oil, gas, water, and rock assumption is valid only when there is
through material balance. Thus material compressibility. a very large contrast between
balance is of direct use to the development Oil formation volume factor (Bo) and reservoir rock compressibility and
geologist who is attempting to identify infill solution gas ratio (Rs) at the the compressibility of the contained
and step-out drilling locations to optimize pressures considered. fluids.
the depletion of a pool. To the explorationist, The amount of free gas in the reservoir
material balance is probably most often used at initial reservoir pressure. Typical compressibility ranges are:
to describe the production behaviour of Connate water saturation.
analogous producing pools. Production/injection volumes and the Rock: 0.2 to 1.5x10-6 kPa-1
associated reservoir pressures. Gas: 10-3 to 10-5 kPa-1 (Varies
The material balance procedure describes significantly with reservoir
the expansion of oil, gas, water, and rock In practice, the material balance calculation pressure.)
over time as a pool is produced. When fluid is quite complex and its application requires Water: 0.2 to 0.6x10-6 kPa-1
is removed from a reser voir, reser voir several simplifying assumptions, including: Oil: 0.4 to 3x10-6 kPa-1
pressure tends to decrease and the remaining
fluids expand to fill the original space. A constant reservoir temperature is Thus rock compressibility can be ignored in
Injection situations, such as waterflooding assumed despite changes in reservoir normally pressured or volumetric gas
or gas storage, are handled by treating the pressure and volume. For most cases reservoirs (see Figure 5.1) and oil reservoirs
injection volumes as negative production. the approximation is acceptable, as with free gas saturation. Ignoring rock
the relatively large mass and heat compressibility in over-pressured reservoirs
The material balance equation is simply an conduction capability of reservoir and in fluid systems that do not have a gas
inventory of the mass of all materials rock plus the relatively slow changes phase will overestimate the original in-place

1
 pressures at discrete points in time are
estimated from analyses of well
pressure build-up tests (well talk about
well tests in another article). Although
local pressure variations near wellbores
can be ignored, pressure trends across
a pool must be accounted for. The
additional uncertainty in the pressure
estimate introduces another challenge
to the hydrocarbon in-place calculations
but is generally tolerable.

A material balance can be performed for a

single well reservoir (or flux unit) or a group
of wells that are all producing from a
common reservoir / flux unit. However, well
production and pressure information is
commonly organized into pools or
subsurface accumulations of oil or gas by
regulatory agencies, on the basis of the
initially available geological information. The
pool classification does not account for
internal compartmentalization so a single
pool can contain multiple compartments/
reservoirs/flux units that are not in pressure
communication with each other. To further
confuse the issue, the word reservoir
is often used interchangeably with the
word pool and is also used to refer to
the reservoir rock regardless of fluid
content. For clarification, in this series of
Figure 5.2. Multi-well gas reservoir P/Z plot. articles reservoir means an individual,
hydraulically isolated compartment within
hydrocarbons (see Figure 5.2). provided the prorationing is performed a pool.
in accordance with industry standards.
Representative pressure / volume / Thus the first real world challenge to a
temperature (PVT) data for the oil, gas A uniform pressure across the pool is reliable material balance is identifying which
and water in the reservoir. Usually, the assumed because the properties of the portions of the off-trend data scatter are
challenge is to obtain a representative reservoir fluids are all related to due to measurement uncertainty, pressure
oil sample for laboratory analysis. pressure. In practice, average reservoir gradients across the reservoir, and different
Bottomhole sampling can inadvertently
lower the sampling pressure and cause
gas to come out of solution. Surface
sampling requires accurate
measurements of oil and gas production
during the test to correctly recombine
the produced streams. Gas reservoir
sampling requires accurate
measurement of the gas and condensate
production and compositional analysis
to determine the composition and
properties of the reservoir effluent.

Accurate and reliable production data

directly impacts the accuracy of the in-
place estimate. Produced volumes of oil
(and gas if its being sold) are generally
accurate because product sales meters
at the oil battery and gas plant are kept
in good repair. Prorationing of the
monthly sales volumes back through the
gathering system(s) to the individual
wells is standard industry practice. It
introduces a level of uncertainty in the
reported production values for the
wells that can generally be tolerated, Figure 5.3. Multi-well gas reservoir pressure vs. time plot.


 flow, and buildup), the length of the test
(shut-in time for buildups), the temperature
gradient in the reservoir, and the accuracy of
the fluid composition all contribute to the
accuracy of the reservoir pressure
interpretation.

The classical P/Z plot for normally pressured

gas reservoirs is perhaps the simplest form
of the material balance equation and so it is
introduced first. Rock and water expansion
can be ignored because of the high gas
compressibility. Assuming an isothermal or
constant temperature reservoir and
rearranging terms yields the equation in the
form of a straight line y = b - mx as follows:

P / Z = (Pi / Zi ) Q * ( Pi / (Gi * Zi))

Where:

P = the current reservoir pressure

Z = the gas deviation from an ideal gas at
current reservoir pressure
Pi = the initial reservoir pressure
Zi = the gas deviation from an ideal gas at
initial reservoir pressure
Q = cumulative production from the
reservoir
Gi= the original gas-in-place

Figure 5.4. Single well gas reservoir P/Z plot. As the equation and Figures 5.1 and 5.2
indicate, when there is no production,
pressure trends over time due to reservoir within a common pool will each have current reservoir pressure is the initial
compartmentalization. For gas reservoirs their own pressure/time trend that can reservoir pressure. When all the gas has
(oil reservoirs will be discussed in next be identified with adequate production been produced, reservoir pressure is zero
months Reservoir), a pressure vs. time plot history and used to properly group the and cumulative production equals the initial
(see Figure 5.3) greatly assists in the wells. gas-in-place volume.
diagnosis as follows:
For confidence in the original-gas-in-place A straight line on the P/Z plot is common in
The accuracy of electronic pressure estimate of Figure 5.2, Figure 5.3 compares medium and high (10 to 1,000 mD)
gauges has dramatically reduced the a computer-predicted average reservoir permeability reservoirs. A strong upward
uncertainty in the interpreted reservoir pressure, based on the combined production curvature that develops into a horizontal
pressure due to gauge error. It can cause history of the grouped wells and the line, as presented in Figure 5.1, demonstrates
small random variations in the interpreted gas-in-place volume of Figure 5.2, pressure support in the reservoir and is
interpreted pressures but the with the interpreted reservoir pressures usually associated with a strong water drive.
magnitude is so small that it is seldom a from well pressure build-up tests. All Formation compaction can cause a non-linear,
factor when a pressure deviates from pressure measurements follow the downward trend, as in the example of Figure
the trend line on a P/Z plot. predicted trend, which indicates that the 5.2. However, a downward trend may also
wells have been correctly grouped into a be caused by unaccounted-for well
Inadequate build-up times during common reservoir. production from the reservoir.
pressure tests lead to interpreted
reservoir pressures at the well that are Well pressures that fall below the trend line A slight upward curvature in the P/Z plot
always less than true reservoir of Figure 5.3 are consistent with a indicates some gas influx into the main
pressure. productioninduced pressure gradient across reservoir from adjacent tight rock as
the reservoir (well G and I) and/or an illustrated by Figure 5.1 and the single well
Pressure gradients across a reservoir inadequate build-up time during pressure reservoir of Figure 5.4.The upward curvature
are always oriented from the wells with testing (wells D and G). For the occasional illustrates that there is a significant
the greatest production to wells with anomalous reservoir pressure in a series permeability difference between the main
little or no production. that otherwise follows the trend, other reservoir and the adjacent rock. A limited
circumstances may justify a detailed review upward curvature on P/Z plots is being
The failure to separate and correctly of selected well build-up tests and their observed with increasing frequency in Alberta
group wells into common reservoirs is interpretation. The horizon(s) tested, the as medium and high permeability reservoirs
the most common reason for excessive reservoir geometry, formation permeability are produced to depletion and the industry
data scatter. Wells producing from and depth variations across the reservoir, develops lower and lower permeability plays.
different reservoir compartments the type of test (static gradient, wellhead,


References

Canadian Institute of Mining, Metallurgy and

Petroleum, 2004. Determination of Oil and
Gas Reserves. Petroleum Society
Monograph Number 1, Chapter 7.

Canadian Institute of Mining, Metallurgy and

Petroleum, 2005. Canadian Oil and Gas
Evaluation Handbook, Volume 2, Detailed
Guidelines for Estimation and Classification
of Oil and Gas Resources and Reserves.
Section 6: Procedures for Estimation and
Classification of Reserves.

Cosentino, Luca, 2001. Integrated Reservoir

Studies. Gulf Publishing Company. Chapters
5-6.

Mattar, L. and Anderson, D, 2005. Dynamic

Material Balance (Oil or Gas-in-place without
Shut-ins). SPE paper # 2005-113, presented
at the 2005 Canadian International Petroleum
Conference, Calgary, AB, Canada, 7-9 June
2005.

Mattar, L. and McNeil, R, 1998. The Flowing

Gas Material Balance. Journal of Canadian
Petroleum Technology, Volume 37, No. 2,
Pages 52-55.

Rahman, Anisur N.M., Anderson, D., and

Matter, L., 2006. New, Rigorous Material
Balance Equation for Gas Flow in a
Compressible Formation with Residual Fluid
Saturation. SPE Paper #100563, presented at
the 2006 SPE Gas Technology Symposium,
Calgary, AB., 15-17 May 2006.


Res er
ervvoir Eng in
Engin
inee ering for G
Gee olo
ologgists
Article 6 Material Balance for Oil Reservoirs
by Ray Mireault, P. Eng.; Chris Kupchenko, E.I.T.; and Lisa Dean, P. Geol., Fekete Associates Inc.
Material balance calculations for oil
reservoirs are more complex than for gas
reser voirs. They must account for the
reservoir volumes of the produced fluids and
the effect of pressure depletion on the oil
volume remaining in the reservoir. They must
account for the formation, expansion, and
production of solution gas. The calculations
must also account for the expansion of the
reservoir rock and formation water, since
they have similar compressibility as oil. As
noted in last months ar ticle , typical
compressibility ranges are:

Rock: 0.2 to 1.5x10-6 kPa-1

Gas: 10-3 to 10-5 kPa-1 (Varies
significantly with reservoir
pressure.)
Water: 0.2 to 0.6x10-6 kPa-1
Oil: 0.4 to 3x10-6 kPa-1

Nonetheless, in theory, material balance

calculations can provide an independent
estimate for the original oil-in-place for a
solution gas drive reservoir with sufficient
production history.
Figure 6.1. Gas reservoir P/Z material balance diagnostics.
Havlena and Odeh (1963) developed a useful
graphical procedure for estimating the oil-
in-place volume for a solution gas drive
reservoir (see Figure 6.1). By rearranging
the material balance equation so that the
total withdrawals from the reservoir are
grouped onto the y axis while all the
expansion terms are grouped on the x axis,
the correct oil-in-place value will generate a
straight line trend on the graph. Thus the oil
volume for a solution gas drive reservoir
can be determined by successively iterating
until a straight line is achieved. Upward
curvature indicates that the value selected
as the OOIP is too small. Downward
curvature indicates that the selected value is
larger than the true size of the oil deposit.
Various formulations of the material balance
equation can be sourced in any of the
references cited.

Figure 6.2 presents a Havlena-Odeh plot for

a solution gas drive reservoir with an OOIP
of 49 MMSTB.The four points calculated from Figure 6.2. Multi-well gas reservoir P/Z plot.
reservoir pressure measurements are in
good agreement with the predicted trend material balance calculations must also of the gas cap.Then the size of the oil deposit
based on the OOIP value. Inadequate account for gas cap expansion and can be estimated via material balance
pressure buildup time may be the reason production. However, there are now too calculations.
that the third pressure measurement comes many unknowns to develop a unique solution
in slightly below the predicted trend line. by material balance alone. Estimating the oil- Though it cannot independently determine
in-place in the presence of a gas cap first the oil-in-place volume when a gas cap is
When an oil deposit has a gas cap, the requires a volumetric estimate for the size present, the Havlena-Odeh plot can assist in


 A downward curvature when there is a
pressure deficit.

The Havlena-Odeh plot cannot however,

identify the reason for pressure support or
the pressure deficit. Potential reasons for
pressure support include:

An unaccounted-for water injection/

disposal scheme.

Flow from a deeper interval via a fault or

across a fault from an adjacent reservoir
compartment. Note that the fluid can
be any combination of oil, gas, and water.

U tube displacement of the producing

reservoirs water leg by a connected
reservoir. The connected reservoir is
usually gas-bearing and may be
undiscovered.

Expansion of water. Due to the limited

compressibility of water (0.2 to 0.6x10-6
kPa-1) the water volume must be at least
10 times the reservoir oil volume for
Figure 6.3. Multi-well gas reservoir pressure vs. time plot.
water expansion to provide pressure
support. Thus the Cooking Lake aquifer
confirming the consistency of the proposed geological knowledge to identify the material underlying Alberta D-3 oil pools has the
solution. For every gas cap volume, there balance solution(s) consistent with the potential but water legs in clastic
will be a corresponding oilin- place volume reser voirs physical geometr y. This reservoirs are too small.
that together result in a straight line consistency check provides the best chance
pressure trend on the Havlena- Odeh plot. of determining the correct magnitude of Potential reasons for a pressure deficit or
As before, upward curvature on the plot OOIP and OGIP. downward curvature include:
indicates that the OOIP value is too small;
downward curvature that it is too large Geologic knowledge of the reservoir Later time interference from
(Figure 6.3). geometry is also essential when attempting unaccounted-for producing wells.
to assess fluid influx into a reservoir. For
In practice, a table of values for OOIP is often example, water influx into a D-3 reef with Rock compressibility in an
set up and iteration performed on the ratio an underlying aquifer could be assessed by overpressured reservoir.
of the reservoir volume of the gas cap periodically logging selected wellbores to
relative to the oil-inplace (referred to as determine and relate a rising oil-water An inflow that gradually decreases over
m). Now upward curvature on the interface to a water influx volume. Once the time, perhaps because of depletion or
Havelena-Odeh plot indicates that the m influx volume is estimated, in theory a because flow across the fault decreases/
value (size of the gas cap) is too small relative material balance estimate for the original oil- ceases below a certain pressure
to the selected oil volume. Downward in-place volume can be calculated. However, threshold.
curvature indicates that m (size of the gas internal compartmentalization of the reef
cap) is too large (Figure 6.3). into multiple reservoirs may make the task In cases where fluid inflow is suspected,
significantly more challenging than might be knowledge of the reservoir geometry is an
Due to the fact the solution is non-unique concluded from this article. absolute requirement to limit the possible
many combinations of OOIP and m can be reasons for either an upward or downward
found that will mathematically match the The Havlena-Odeh plot is also useful when curving trend.
reservoir production and pressure history. fluid influx is suspected, as in possible inflow
Mathematically successful solutions can range across a fault. In theory, measured reservoir Thus far, the discussion has been on the
from: pressures on a Havlena-Odeh plot will theoretical challenges to material balance
exhibit (Figure 6.4): analysis. In addition, a real world challenge
A large oil volume with a relatively is the scatter that is present in the pressure
small gas cap. A straight line for a volumetric (solution data. As with gas systems, oil well pressure
A small oil volume with a relatively gas or gas cap) expansion reservoir data must first be correctly grouped into
large gas cap. provided the OOIP and OGIP values are common reservoirs to generate reliable
Multiple intermediate oil and gas cap correct. trends. But oil pressure data generally
volume combinations. exhibits greater scatter because:
An upward curvature when there is
The dilemma can usually be resolved by using pressure support due to fluid influx. Longer build-up times are required to

2
 extrapolate the pressure data to a
reliable estimate of reservoir pressure,
due to the increased viscosity of oil

Pressure gradients across the reservoir

are more pronounced, due to the oil
viscosity.

Pressure differences in an oil column,

due to the density of the oil, are
sufficient to require careful correction
to a common datum.

Multiple perforation intervals and

inadvertent commingling of intervals
that were isolated by nature creates the
potential for crossflow and further
confuses the pressure data
interpretation.

Other potential sources of error include:

Thermodynamic equilibrium is not

attained.

PVT data that does not represent

reservoir conditions.
Figure 6.4. Single well gas reservoir P/Z plot.
U ncertainty in the m ratio.
Canadian Institute of Mining, Metallurgy and Reserves, Petroleum Society Monograph
Inaccurate production allocation. Petroleum, 2005. Canadian Oil and Gas Number 1, 1994.
Evaluation Handbook, Volume 2, Detailed
Yet despite the foregoing theoretical and Guidelines for Estimation and Classification SPEE and CIM, Canadian Oil and Gas
practical challenges, material balance analysis of Oil and Gas Resources and Reserves. Evaluation Handbook, Vol 2. Detailed
has proven its worth, with the accuracy of Section 6: Procedures for Estimation and Guidelines for Estimation and Classification
the analysis generally increasing as the Classification of Reserves. of Oil and Gas Resources and Reserves,
reser voir is produced. In Feketes November 2005.
experience, the most reliable analyses are Cosentino, Luca, 2001. Integrated Reservoir
obtained by integrating the reservoir Studies. Gulf Publishing Company. Chapters
geology; fluid properties; and the well 5-6. Mattar, L. and Anderson, D, 2005. Dynamic
production, pressure, and completion Material Balance (Oil or Gas-in-place without
histories into a consistent explanation. Shut-ins). SPE paper # 2005-113, presented
at the 2005 Canadian International Petroleum
References Conference, Calgary, AB, Canada, 7-9 June
Canadian Institute of Mining, Metallurgy and 2005.
Petroleum, 2004. Determination of Oil and
Gas Reserves. Petroleum Society Mattar, L. and McNeil, R, 1998. The Flowing
Monograph Number 1, Chapter 7. Gas Material Balance. Journal of Canadian
Petroleum Technology, Volume 37, No. 2,
Havlenah, D., and Odeh, A.S. 1963. The Pages 52-55.
Material Balance as an Equation of a Straight
Line. Trans., AIME, Vol. 228, p. 896. Rahman, Anisur N.M., Anderson, D., and
Matter, L., 2006. New, Rigorous Material
Canadian Oil and Gas Evaluation Handbook, Balance Equation for Gas Flow in a
2005. Procedures for Estimation and Compressible Formation with Residual Fluid
Classification of Reserves, Vol 2, Section 6. Saturation. SPE Paper #100563, presented at
the 2006 SPE Gas Technology Symposium,
Craft, B.C., and Hawkins, M.F., 1964. Applied Calgary, AB., 15-17 May 2006.
Petroleum Reservoir Engineering. Prentice
Hall Inc., Englewood Cliffs, NJ. Aprilia, A.W., Li, Z., McVay, D.A. & Lee, W.J.,
SPE Gas Tech Symposium May 15-17 2006,
Canadian Institute of Mining, Metallurgy and Calgary. SPE Paper 100575-MS
Petroleum, 2004. Determination of Oil and
Gas Reserves. Petroleum Society Canadian Institute of Mining, Metallurgy and
Monograph Number 1, Chapter 7. Petroleum, Determination of Oil and Gas

2
Res er
ervvoir Eng in
Engin
inee ering F or G
For Gee olo
ologgists
Article 7 Well Test Interpretation
by Louis Mattar, P. Eng. and Lisa Dean, P. Geol., Fekete Associates Inc.
Lets start off with a simple situation:

Well A produces at 100 bopd from a

reservoir that contains 1 millions
barrels of oil.
Well B also produces at 100 bopd from
a reservoir that also contains 1
millions barrels of oil.

Are these two wells worth the same?

The answer is NO. This is because Well A is

in a high permeability reservoir, but has a
zone of reduced permeability around the
wellbore (damage caused by drilling mud
filtrate invasion or clay swelling). If this well
were to be stimulated its rate would increase
significantly. On the other hand, Well B is in
a low permeability reservoir, which is the
factor that limits its production rate. Figure 7.1. Drawdown and build-up test.

How can we identify the differences between

these two wells? The answer is well testing.

Well testing, often called pressure transient

analysis (PTA), is a powerful tool for
reservoir characterization. The following
information can be extracted from well tests:

Permeability The value obtained from a

well test is much more useful than that
from core analysis, because it
represents the in-situ, effective
permeability averaged over a large
distance (tens or hundreds of metres).

Skin (damage or stimulation) Most wells

are either damaged or stimulated, and Figure 7.2. Semi-log (Horner) plot of build-up data.
this has a direct effect on the
deliverability of the well. The skin is a Reservoir description Reservoir shape, is flowing, the quality of the data is often
measure of the completion effectiveness continuity, and heterogeneity can be poor, thus the data during a shut-in is
of a well. A positive skin (typically +1 to determined from pressure transient usually analyzed.
+20) represents damage, while a tests
negative skin (typically -1 to -6) Opening or closing a well creates a
represents improvement. Fluid samples The reservoir fluid pressure pulse. This transient expands
composition and its PVT (pressure- with time, and the radius investigated
Average reser voir pressure This volume-temperature) properties can during a test increases as the
parameter, which is either measured have a significant effect on the squareroot of time. The longer the flow
directly or extrapolated from well test economics and production operations. test, the further into the reservoir we
data, is used in material balance investigate.
calculations for determining Well testing is also an integral part of good
hydrocarbons-inplace. reservoir management and fulfills Because of the diffusive nature of
government regulations. pressure transients, any values
Deliverability potential The IPR (inflow determined from a well test represent
performance relationship) or the AOF FUNDAMENTALS:: area averages and not localized point
(absolute open flow) is used in A well test is a measurement of flow values.
forecasting a wells production. rate, pressure, and time, under
controlled conditions. While the well The analysis of oil well tests is similar

26
 to that of gas well tests. The theory is
derived in terms of liquid flow, and is
adapted for use with gas by converting
pressure to pseudo-pressure ( R) and
time to pseudo-time(ta).

The practice of testing a flowing oil well

and a gas well is similar measure the
bottom-hole pressure. However, for a
pumping oil well, it is often not easy to
measure the bottom-hole pressure
directly, so it is usually calculated from
surface data and Acoustic Well Sounders,
thereby having a greater potential for
error. This article will concentrate on
the analysis of the two most common
well test types in Alberta, namely build-
up and deliverability tests.
Figure 7.3. Derivative plot of build-up data.
Build-up test*:
To conduct a build-up test, simply shut
the well in. It is obvious that a build-up
test must be preceded by one or more
flow periods. Figure 1 shows the
simplest possible build-up, a shut-in that
follows a single constant rate. In
practice, the period preceding the
buildup will often consist of variable
rates, and even multiple flows and shut-
ins. These non-constant flow periods
cannot be ignored, but must be
accounted for during the analysis. This
is done through a mathematical process
called superposition, which converts
these variable flow periods into an
equivalent constant rate.

Deliverability tests: Figure 7.4. Modeling comparison of synthetic and measured pressures.
The purpose of these tests is to
determine the long term deliverability
of a well, rather than defining the useful transformation is the derivative plot, 5. On the same log-log graph as the
permeability and skin (as in build-up obtained as follows: derivative, plot ) p (for gas, )R)
tests). There is one overriding factor in versus _)t (Figure 7.3).
these tests; it is that at least one of the 1. Plot the shut-in pressure, p (for gas*,
flow durations must be long enough to _R ) versus log {(t+ )t)/ ) t}, where t is DIA
DIAG GNO
NOSSTIC AN AL
ANAL
ALYYSIS:
investigate the whole reservoir. This the duration of the flow period (or The buildup is divided into three time
condition is known as stabilized flow. the corresponding superposition time, regions early, middle, and late time. The
Sometimes it is impractical to flow a when the flow period has not been middle time represents radial flow, and it is
well for that long. In that case, the constant) and ) t is the shut-in time. A not until middle time is reached that the
stabilized condition is calculated from semi-log plot of this is called a permeability can be determined. In Figure
the reservoir characteristics obtained Horner plot and is shown in Figure 7.2, the permeability is calculated from the
in a build-up test. 7.2. slope of the semi-log straight line, and in
Figure 7.3, from the vertical location of the
INTERPRETATION:: 2. Determine the slope of the Horner flat portion of the derivative. These two
Interpretation of well test data is often plot at each ) t. This slope is called the answers should be the same.
conducted in two stages. The first is a derivative.
diagnostic analysis of the data to reveal the The skin is calculated from the ) p curve. In
reservoir model and the second is modeling 3. Plot the derivative versus )t on log- Figure 7.3, the larger the separation between
of the test. log graph paper (Figure 7.3). the curves in the middle time region, the
more positive is the skin.
DATA PRE
PREPPARA TION:
ARATION: 4. Calculate )p (for gas*, )R ), the
To analyze the build-up data, it is transformed difference between the build-up and Early time represents the wellbore and the
into various coordinate systems in order to the last flowing pressure. nearwellbore properties (effects of damage,
accentuate different characteristics.The most acidizing, or hydraulic fracture). It is often
associated with a (log-log) straight line of
*Injection and fall-off tests are analyzed the same way as a build-up
simply replace the production rate by the injection rate, and the *In well testing the corrections caused by pseudo-time are usually fixed slope. A slope equal to one means
pressure rise by the pressure fall. negligible. For simplicity this article will use t rather than ta.

27
 the test (Figure 7.4). The values of the
parameters in the model (permeability, skin,
distances to boundaries, etc.) are varied until
an acceptable match is obtained between the
synthetic and measured pressures.

This process, called modeling or history

matching, is a powerful mathematical tool,
but must be used with caution, as it can result
in mathematically correct, but physically
meaningless answers. Some very complex
reservoirs (multi-layers, heterogeneous,
etc.) can be modeled using sophisticated
mathematical models, but for these
interpretations to be meaningful, they must
be consistent with known geological
descriptions and realistic physical well
Figure 7.5. Modified isochronal test. completions.

TYPES OF WELL TESTS:

RFT*, WFT*, MDT*, RCI*, FRT* These
are tests of very short duration
(minutes) conducted on a wireline,
usually while the well is drilling. The
popular use is for determining the
reservoir pressure at various depths.

DST (drill stem test) conducted during

drilling of exploratory wells, to
determine reservoir fluids, reservoir
pressure and permeability. Onshore
DSTs are usually open hole, whereas
offshore DSTs are cased hole. An open-
hole DST typically consists of a 5-minute
pre-flow and a 30-minute build-up. It is
analyzed exactly like the build-up test
described above. Because of the short
flow durations, p* does equal p R. It
should be noted that on most scout
tickets what is reported is not p* or
Figure 7.6. AOF plot. pR, but the ISI (initial shut-in pressure)
and the FSI (final shut-in pressure). In
low permeability reservoirs, the FSI is
wellbore storage, and during that period, severe, it might be indicative of a depleting usually less than the ISI, and sometimes
nothing can be learned about the reservoir reservoir. this difference is misconstrued as being
because the wellbore is still filling up. A caused by depletion occurring during
slope of half typically means linear flow as The average reservoir pressure (p R ) is the test (which implies a small reservoir
a result of a hydraulic fracture. From this obtained by extrapolating the semi-log and could lead to abandonment of that
straight line, the fracture length or fracture straight line to infinite shut-in time (=1 on zone).
effectiveness can be calculated if the the Horner plot). This extrapolation is called
permeability is known. p* and it is used, along with an assumed Build-up The well is shut-in, following
reservoir shape and size, to calculate the one or more flow periods. The
The period after middle time is known as average reservoir pressure. For short flow pressure is measured and analyzed to
late time, and it reflects the effect of the durations, for example in a DST or in the give permeability, skin, average reservoir
reservoir boundaries and heterogeneities. initial test of a well, the correction from p* pressure, and reservoir description.
It is from this region that the reservoir shape to pR is negligible, and p* does equal pR. This is the most commonly analyzed test
can be determined. A straight line of slope because it is often quite long (several
approximately half would indicate a long, MODELING:: days of flow and several days of shut-in)
narrow reser voir. A straight line slope Once the analysis has been completed and and the data quality is usually good.
approximately one could imply a low an approximate reservoir description
permeability reservoir surrounding the deduced, a mathematical model of the Interference or pulse These tests
region investigated during middle time. If the reservoir is constructed. This model utilizes involve flowing one well (active) but
derivative trends downward during the late the production history of the test (all the measuring the pressure at another well
time period, it could indicate an improvement flow and shut-in data) to generate synthetic
in permeability (actually mobility) away from pressures which are then compared with the *Trade Marks: RFT=Repeat Formation Tester, WFT=Wireline
the well. If this downward curvature is pressures that were actually measured during Formation Tester, MDT=Modular Dynamic Tester, RCI= Reservoir
Characterization Instrument, FRT=Flow Rate Tester

28
 (observation), and are used to back-pressure is zero, ) p 2 = p R 2 ). This
determine interwell connectivity. maximum is called the AOF (absolute open
flow) and is one of the most commonly used
IPR These tests are designed to yield indicators of the wells deliverability
the long-term deliverability of the well, potential.
and are not concerned with determining
the reser voir characteristics The PITA (perforation inflow test analysis)
deliverability test for an oil well is called In these tests, sometimes referred to
IPR (inflow performance relationship). as PID (perforation inflow diagnostic),
It describes the inflow into the the well is perforated and the pressure
wellbore at various bottom-hole rise in the closed wellbore is recorded,
pressures. The test consists of a single and interpreted to yield an estimate of
flw until stabilization is reached, at permeability and reservoir pressure.
which time the oil and water flow rates These tests are useful for tight gas
and the flowing pressure are measured. where most other tests would take too
An IPR is plotted according to known long because of the very low
relationships such as the Vogel IPR permeability.
equation.
REFERENCES
AOF (absolute open flow) An AOF test Energy Resources Conservation Board.
is the gas well equivalent to a liquid IPR 1979. Gas Well Testing Theory and Practice.
test. It too must have at least one flow ERCB, Guide G3 (Directive 034), 547 p.
rate to stabilization. It differs from a
liquid IPR in several ways: Lee, J., Rollins, J.B., and Spivey, J.P. 2003.
Pressure Transient Testing. Society of
Often more than one flow rate is Petroleum Engineers, v. 9, 376 p.
required. This is because gas flow in the
reservoir can be turbulent (liquid flow
is laminar) and the degree of turbulence
can be assessed only by utilizing
multiple flow rates.

The governing equation is not Vogels but

a Back-Pressure Equation of the form
q = C () p2)n, where q is the flow rate, C a
constant that depends on the wells
charactereistics (permeability, skin, etc.) and
n is a measure of turbulence. Values of n
range from 1 to 0.5, where n = 1 means
laminar flow and n = 0.5 means fully turbulent
flow.

P2 is used instead of pseudo-pressure as

a simplification.

Typically four different flow rates are

selected (e.g., four hours each) with a
4-hour intervening shut-in. These are
called the isochronal points. If the time
to stabilization is too long, then the
stabilized rte is replaced by an
extended flow (3 to 5 days). The
results of the build-up analysis are used
to calculate what the stabilized flow rate
and pressure would have been.

A best-fit straight line is drawn through the

isochronal data on a log-log plot of )p 2
versus q. A line parallel to that is drawn
through the stabilized point (NOT the
extended point) (Figure 7.6). This is the
stabilized deliverability line and is used for
determining the flow rate that corresponds
to any specified back-pressure. Extrapolating
this line to p R 2 gives the maximum
deliverability potential of the well (when the

29
Res er
ervvoir Eng in
Engin
inee ering for G
Gee olo
ologgists
Article 8 Rate Transient Analysis
by Louis Mattar, P. Eng., Ray Mireault, P. Eng., and Lisa Dean, P. Geol., Fekete Associates Inc..
While a well is producing, a lot of (Rate Transient Analysis) can give the pessimistic), as will be illustrated by the
information can be deduced about the well Original- Oil-In-Place (OOIP) or following examples.
or the reservoir without having to shut it in Original-Gas-In- Place (OGIP), if the
for a well test. Analysis of production data flowing pressure is known in addition Example 1, shown in Figure 8.1, clearly
can give us significant information in several to the flow rate. exhibits an exponential decline. It is obvious
areas: from this Figure that the recoverable
The principles and methods discussed in this reserves are 2.9 Bcf. Typically this type of gas
1. Reserves This is an estimate of the article are equally applicable to oil and gas well has a recovery factor of 80% (0.8), and
recoverable hydrocarbons, and is reservoirs, but for brevity will only be one can thereby conclude that the
usually determined by traditional presented in terms of gas. originalgas- in-place (OGIP) = 2.9/0.8 = 3.6
production decline analysis methods, as Bcf. By using the modern rate transient
described in Article #4 in this series TRADITIONAL METHODS : RESERVES analysis described later in this article, it will
(Dean, L. and Mireault, R., 2008). From an economic perspective, it is not what be shown that this value of OGIP is grossly
is in the reservoir that is important, but pessimistic.
2.Reservoir Characteristics rather what is recoverable.The industry term
Permeability, well completion efficiency for this recoverable gas is Reserves. There Example 2, (Figure 8.2, page 30), also exhibits
(skin), and some reservoir are several ways of predicting reserves. One an exponential decline. It can be seen from
characteristics can be obtained from of these methods, traditional decline analysis this Figure that the recoverable reserves are
production data by methods of analysis (exponential, hyperbolic, harmonic) has 10 Bcf. Assuming a recovery factor of 80%
that are extensions of well testing already been discussed in Article #4. The (0.8), the OGIP = 10/0.8 = 12.5 Bcf. By using
(Mattar, L. and Dean, L., 2008) method is used daily for forecasting the modern rate transient analysis described
production and for economic evaluations. later in this article, it will be shown that this
3. Oil- or Gas-In-Place The modern Generally, the results are meaningful, but they value of OGIP is optimistic.
methods of production data analysis can sometimes be unrealistic (optimistic or
Example 3, (Figure 8.3, page 30) is a tight gas

Figure 8.1.Traditional decline - example 1.


Figure 8.2.Traditional decline - example 2.

Figure 8.3.Traditional decline - example 3.

3
 well and has been analyzed using hyperbolic
decline.The reserves are 5.0 Bcf which (using
a recovery factor of 50% for tight gas)
translates to an OGIP equal to 10 Bcf. By
using the modern rate transient analysis
described later in this article, it will be
shown that this value of OGIP is overly
optimistic.

Typically, the traditional methods of

determining reserves do not work well
when the operating conditions are variable,
or in the case of tight gas. The above three
examples fall into these categories, and while
the results appear to be reasonable, it will
be shown using the modern methods
described below, that they are in error;
sometimes by a significant amount.

MODERN METHODS :
Figure 8.4. Rate transient analysis - type curve match - example 1. HYDROCARBONS-IN-PLACE AND
RESERVOIR CHARACTERISTICS
There are two significant differences
between the traditional methods and the
modern methods:

a. The traditional methods are empirical,

whereas the modern methods are
mechanistic, in that they are derived
from reservoir engineering
fundamentals.

b. The traditional methods only analyze

the flow rate, whereas the modern
methods utilize both the flow rates
and the flowing pressures.

The modern methods are known as rate

transient analysis. They are an extension of
well testing (Mattar, L. and Dean, L., 2008).
They combine Darcys law with the equation
of state and material balance to obtain a
Figure 8.5. Rate transient analysis - type curve match - example 2. differential equation, which is then solved
analytically (Anderson, D. 2004; Mattar, L.
2004). The solution is usually presented as a
dimensionless type curve, one curve for
each of the different boundary conditions,
such as: vertical well, horizontal well,
hydraulically fractured well, stimulated or
damaged well, bounded reservoir, etc.

To analyze production data using rate

transient analysis, the instantaneous flow
rate (q) and the corresponding flowing
pressure (p wf) are combined into a single
variable called the normalized rate (= q/() p))
and this is graphed against a time function
called material-balance time. As in well
testing (Mattar, L. and Dean, L., 2008), a
derivative is also calculated.The resulting data
set is plotted on a log-log plot of the same
scale as the type curve, and the data moved
vertically and horizontally until a match is
obtained with one set of curves. Figure 8.4
shows the type curve match for the data of
Figure 8.6. Rate transient analysis - type curve match - example 3. Example 1. This procedure is known as type

3
 REFERENCES :
Anderson, D. 2004. Modern Production
Decline Analysis, Getting the Most Out of
Your Production Data.Technical Video 2. http:/
/www. fekete.com/aboutus/techlibrary.asp.

Dean, L. and Mireault, R. 2008. Reservoir

Engineering For Geologists, Part 4:
Production Decline Analysis. Canadian
Society of Petroleum Geologists Reservoir,
Vol. 35, Issue 1. p. 20-22.

Mattar, L. 2004. Evaluating Gas-In-Place, Case

Studies Using Flowing and Shut-In Data.
Technical Video 4. http://www.fekete.com/
aboutus/techlibrary.asp.

Mattar, L. and Anderson, D. M. 2005. Dynamic

Material Balance (Oil or Gas-In-Place
Without Shut-Ins). CIPC.

Mattar, L. and Dean, L. 2008. Reservoir

Figure 8.7. Flowing material balance - example 1. Engineering For Geologists, Part 6: Well Test
Interpretation. Canadian Society of
Example#: OGI P (Traditional) OGI P (Modern) Petroleum Geologists Reservoir, Vol. 35,
curve matching, and the match point is used #1 3.6 Bcf 24 Bcf Issue 3. p. 22-26.
to calculate reservoir characteristics such #2 12.5 Bcf 6.9 Bcf
as permeability, completion (fracture) #3 10.0 Bcf 1.3 Bcf Mireault, R. and Dean, L. 2008. Reservoir
effectiveness, and original-gas-in-place. Engineering For Geologists, Part 5: Material
The reasons for the discrepancies are Balance. Canadian Society of Petroleum
The data sets of Examples 2 and 3 have been different in each case. In Example 1, the Geologists Reservoir, Vol. 35, Issue 2. p. 24-
analyzed in the same way, and the type curve flowing pressure was continuously 26.
matches are shown in Figures 8.5 and 8.6. increasing due to infill wells being added into
Note that the type curves for each of these the gathering systems, which caused an
examples have different shapes because they excessive production rate decline. In
represent different well/reservoir Example 2, the flow rate and flowing pressure
configurations. Figures 8.4 and 8.5 represent were declining simultaneously. The decline
a damaged or acidized well in radial flow, in flow rate would have been more severe
whereas Figure 8.6 represents a hydraulically with a constant flowing pressure. In Example
fractured well in linear flow. 3, the permeability is so small that the data
is dominated by linear flow into the fracture
In addition to the type curve matching (traditional methods are NOT valid in this
procedure described above, another useful flow regime).
method of analysis is known as the flowing
material balance (Mattar, L. and Anderson, D. In rate transient analysis, once the reservoir
M., 2005). The flow rates and the flowing characteristics have been determined, a
pressures are manipulated in such a way that reservoir model is constructed to
the flowing pressure at any time (while the historymatch the measured data. The model
well is producing) is converted is then used to forecast future production
mathematically into the average reservoir scenarios, such as different operating
pressure that exists at that time . This pressures, different completions, or well
calculated reservoir pressure is then drilling density.
analyzed by material balance methods
(Mireault, R. and Dean, L., 2008), and the A word of caution is warranted. Data quality
original-gas-in-place determined. The flowing can range from good to bad. Multiphase flow,
material balance plot for the data set of liquid loading in the wellbore, wellhead to
Example 1 is shown in Figure 8.6, and the bottomhole pressure conversions,
results are consistent with those of the type interference from infill wells, multiwell
curve matching of Figure 8.4. pools, rate allocations, re-completions, and
multilayer effects can all compromise data
SUMMAR
UMMARY Y OF RE
RESSUL
ULTTS : quality and complicate the analysis.
When Examples 1, 2, and 3 are analyzed using Notwithstanding these potential
modern Rate Transient Analysis, and the complications, it has been our experience
results compared to those from the that significant knowledge has been gained
traditional methods, the following volumes by analyzing production data using the
are obtained: modern methods of rate transient analysis.

3
RE SE
RESE
SERRVOIR E NG
ENG INE
NGINE
INEEERING F OR G
FOR EOLO
GE OLOG GIS
ISTTS
Article 9 Monte Carlo Simulation/Risk Assessment
by: Ray Mireault P. Eng. and Lisa Dean P. Geol., Fekete Associates Inc.
Geologist A is presenting a development
prospect. Geologist B is presenting an
exploration play. Which should you invest
in?

This is a daily question in oil companies. A

development prospect is generally
considered a safer investment but the
volume of hydrocarbons and its economic
value is limited (Figure 9.1). The exploration
prospect may carry more dry hole risk but
a company has to make some exploration
discoveries or it eventually runs out of
development opportunities (Figure 9.2).

However, simply estimating the size of the

deposit is not sufficient. Although Geologist
As development prospect has a P10 to P90
recoverable gas range of between 258 and
1,219 106 m3 (10 to 43 BCF), it may or may
not be a good investment. For example:

Low permeability reservoir rock may

restrict production rates so that each
well recovers very little gas over time.
The low rate/long life profile may
actually have very little economic value.

The combination of royalty rates,

operating costs, processing fees, and
transportation tariffs may mean that
very little of the sales revenue is retained
by the company, despite an apparently
attractive commodity sale price outlook.

Capital costs may simply be too great. If

the prospect is located offshore (or at
a remote onshore) location, the Figure 9.1. Probability chart, gas development prospect.
prospect may contain insufficient gas to
offset the required investment capital. Answering the financial questions would be approach also enables comparison and
(relatively) easy if we knew exactly how ranking of development and exploration
Management needs to know the following much oil/gas is in place, the fraction that will opportunities, so a company can identify and
about any exploration or development be recovered, its sale price when produced, pursue its better prospects.
opportunity: and the associated capital and operating
costs. But prior to producing a deposit, we In Feketes experience , the following
What are the chances that at least the dont know any of the foregoing with any assessment procedure provides a consistent
value of the capital investment will be degree of precision. We need to assess and approach to prospect evaluation:
recovered if we proceed? balance the uncertainty in our technical
knowledge against the impact that the 1. Estimate the probable range in OOIP/
How much capital could be lost if events uncertainty has on the expected financial OGIP from 3-point estimates for the
do not turn out as expected? performance (and capital exposure) of the input parameters in the volumetric
investment. equation.
What is the potential gain in economic
value if events do unfold as expected? When consistently applied, Monte Carlo 2. Estimate the probable range in recovery
simulation provides a tool to systematically factor from reservoir engineering
What is the total capital commitment assess the impact of technical uncertainty principles, analogue performance, and/
required to realize production? on financial performance . A consistent or reservoir simulation.


 3. Estimate the total field/pool daily
production rate range from the
recoverable hydrocarbon range based
on a seven year rate-of-take (deplete
the field in about 15 years).

4. Estimate the number of wells required

to achieve the projected daily
production rate from reservoir rock
characteristics and test well
performance.

5. Estimate the type and size of pipelines,

wellsite, and plant facilities required to
produce at the forecasted production
rates.

6. Estimate operating costs and assess the

present day value of production from
economic runs. This is the discounted
present day value of the sales price less
royalties, operating costs, processing
fees, and transportation tariffs.

7. Estimate well and facility capital costs.

8. Compare the probable range in

economic value to the required capital
investment range. Quantify the chances
of recovering the capital investment, the
expected return on investment, the
capital exposure, and the total capital
commitment.

The job of the earth sciences (geology,

geophysics, reservoir engineering) in a Monte
Carlo evaluation is to develop input
parameter ranges that reflect the current Figure 9.2 Probability chart, oil exploration prospect.
state of knowledge for the prospect. The
recommended approach is an integrated
approach that first develops minimum and expected to be limited and so not all sands for fine-grained sand).
maximum values that are consistent with the are expected to be gas charged. Accordingly,
known facts. The end point values must the average net pay is estimated to be Well test data indicates that the deposit
encompass the true value with a high (90 to between 12 and 46 m but will most likely be contains a sweet, 0.7 gravity gas.Two pressure
95%) degree of certainty. The most likely about 21 m. buildup tests indicate a reservoir pressure
value is estimated only after establishing the of 3,448 and 4,138 kPa(abs) for an arithmetic
possible range in the parameter values. The geological model and limited cuttings average of 3,793 kPa(abs). Reservoir
analysis suggest that sand porosity also temperature is estimated at 38C. The gas
Geologist As development prospect is a varies. If the deposit is dominated by deviation factor (Z) at initial reservoir
structural trap with 4-way closure that argillaceous, highly cemented sands, then conditions is estimated to be about 0.9.
contains a series of stacked fluvial sands at a average porosity could be as low as 8%.
depth of about 400 m.The sands were initially However, porosity will be either better Sand permeability is expected to vary
deposited in a broad valley and are capped developed or better preserved when fluvial considerably between individual sands with
with a thick shale sequence. Subsequent rock is saturated with hydrocarbons, so a a range of 3 to 30 mD. Based on experience
basement uplift created the present drape large percentage of ultra-clean sands could and reservoir engineering principles, gas
structure. Drilling results to date set the push the average porosity value to as much recovery from volumetric expansion of a
minimum area of the deposit at 600 ha. Based as 18%. Assuming average quality sands, reservoir at shallow depth is generally in
on the seismic interpretation, the areal porosity will most likely be about 12%. the order of 70 to 85%. Due to the limited
extent is most likely about 1000 ha but it areal extent of the sands, the most likely
could be as large as 1,600 ha (the maximum Currently, there is no good basis from which value is estimated at 75%
closure area with the existing data). to estimate the residual water saturation in
the gas-bearing sands. The best value for The following table summarizes the input
The structure is estimated to contain about good-quality sands would be 15% Sw. An parameters that were used to develop the
46 m of gross sand thickness within a 60 m average water saturation value for the dirty volumetric estimates of gas-in-place and
gross interval. Due to fluvial deposition, the fine-grained sands might be about 40% but recoverable gas for the development
areal extent of an individual sand body is could be as high as 60% (the maximum value prospect:


OGIP=A*h* N *(1-Sw)* ((Ts* Pi) / ( Ps*T f*Z)) The reason for the large discrepancies is
because the error in the product of
multiplication successively increases with
each multiplication, unlike addition. To
illustrate, if the estimated value for each
input parameter is out by 17%, the sum of
addition will also be out by 17%. Not so with
multiplication:

Once 3-point estimates have been developed,

Monte Carlo simulation can be used to
calculate the gas-in-place and recoverable gas
volumes. Monte Carlo simulation consists
of randomly selecting values for each input
parameter and calculating a gas-in-place and
recoverable gas volume. Many iterations (in
this case 10,000) creates gas-in-place and Even alternating from a conservative to an
recoverable gas distributions. optimistic estimate doesnt completely cancel
out the errors when multiplying.
From the simulation, Geologist As gas
development prospect has an 80% probability
of containing between 380 and 1,624 106m3
of gas-in-place. Based on the technical input,
there is an 80% chance that the recoverable
gas volume is between 285 and 1,219 106m3
of gas. The mathematical significance of the
P50 value is that it is the number that splits
the distribution into 2 equal halves.

An obvious question is why cant we simply

multiply all the minimum input parameter
values to determine the minimum gas volume
and all the maximum values for the maximum
volume? Doing so yields the following values:

As can be seen, the minimum values are much

less than the P90 values calculated previously
and the maximum values are much greater.
Even a calculation using the most likely values
doesnt match the P50 values very well. From
inspection of the probability graph (Figure
9.1) the chances of recovering more than
120 106m3 of gas are greater than 98% (100-
2%). At the other end of the scale, there is
less than a 2% chance of producing 3,880
10 6m 3 from the prospect (the probability
value corresponding to 3,880 106m3 is well
off the scale).


Res er
ervvoir Eng in
Engin
inee ering for G
Gee olo
ologgists
Article 10 Monte Carlo Simulation/Risk Assessment (cont.)
by: Ray Mireault, P. Eng. and Lisa Dean, P. Geol., Fekete Associates Inc.

In the introductory article (Article 9),

recoverable gas from Geologist As
development prospect was estimated to be
between 285 and 1,219 106m3 of gas.

What is this gas worth? The first factor to

consider is the time value of production. The
following chart presents the present day
value of $100 of future years production at
a 12% discount rate.

While $100 received today is worth $100,

next years production is only worth 88% of
todays value. In year five it is only worth
52.77%; in year ten, 27.85% and in year 20,
7.76%. Clearly, we would like to produce
the gas as quickly as possible to maximize its
value but there is a limit. Each incremental
increase in production rate requires more
wells and larger, more costly facilities so that
eventually the incremental value of further
acceleration cannot offset the increased Figure 10.1. Probability chart, gas development prospect.
capital requirement.

What should we assume for a depletion rate? between 118 and 502 103m3/day (also Figure By inspection of Figure 1, 118 103m3/day
In Feketes experience, a seven-year rate- 10.1) was obtained by dividing the annual corresponds to the 10th percentile of the
of-take provides a starting point for a volume range by 350 producing days per year. daily production rate curve and 236 103m3/
production profile with good economic value. day is about the 47th percentile. The plant is
Note that the calculation provides an With an estimated daily rate and the correct size for the lower 37% of the
estimate of the annual produced volume knowledge of the gas composition, the range and thus capital and operating costs
during the initial one-to-three years of type and size of the central facilities can for the central facilities can be estimated. If
production. Since well productivity declines be determined. Since the gas contains development drilling ultimately proves that
over time, it will take between 10 and 15 mostly methane and ethane with no H 2S larger facilities are required, increased gas
years to produce the prospect to depletion and a low concentration of other revenues will more than offset the
but about half the gas will be recovered nonhydrocarbon gases, only dehydration incremental cost of larger facilities.
during the initial five years. and compression will be required to treat
the raw gas to sales gas specifications. If Geologist As prospect also requires a 70
Dividing Geologist As recoverable gas range the design capacity of the facilities is set km sales gas pipeline to connect to the
by seven yields an initial annual production at 236 10 3m 3/day of raw gas, a plant with a nearest sales point. The central facility design
volume of between 41 and 176 10 6m 3/yr (typical) 2:1 turndown ratio will be able rate can similarly be used to estimate the
(Figure 10.1). A daily production rate of to operate down to about 118 10 3m 3/day. size and associated capital and operating

37
 developed for all the inputs necessary to
evaluate the economics of the prospect. The
general calculation sequence is:

Calculate the net cash flow for each

years production, NCF = (Sales
Volume*Sales Price) - Royalties -
Operating Costs - Taxes - Capital
Discount each years net cash flow to
its present day value
Sum each years discounted value to
arrive at the prospect net present
value NPV = E {Yearly NCF*Yearly
Discount Factor} (See table 10.1.)

The calculations are amenable to

spreadsheet analysis (Table 10.1) and Monte
Carlo simulation. Since no two prospects
are exactly alike, the calculations and their
presentation can and should be modified to
fit the details of each particular situation.

Although the final goal of Monte Carlo is to

generate the expected NPV range for
Geologist As prospect, Fekete has found it
useful to calculate some intermediate values
as follows:

Calculate the cash flow for each years

production before capital investment,
CF = (Sales Volume*Sales Price) -
Royalties - Operating Costs - Taxes
Discount each years cash flow to its
present day value (PV)
Sum each years discounted value to
arrive at the prospect present day
value PVCF = E {Yearly CF*Yearly
Figure 10.2. Probability chart, gas development prospect number of wells required. Discount Factor}
Categorize each years capital
costs of the sales gas pipeline. Accounting surface access, the required wellsite facilities, investment and discount it to its
for processing shrinkage and fuel gas and wellsite layouts. The level of effort present day value
consumption, the 236 10 3m 3/day raw gas expended is just sufficient to develop three- PVcapital = Sales line*DF + Plant*DF +
production rate equates to 217 103m3/day of point estimates for the capital and operating Gathering System*DF + Dev. Wells*DF
sales gas. costs of system components. PVcapital = E {PVsales lines + PVplant
+ PVgathering system + PVdev. wells}
The next issue is the number of wells Contractual terms are obtained from the Calculate the net present value NPV =
required to produce at the desired rate. licence/lease agreement while a price PVCF-PVcapital
From the available test information, a wells forecast(s) for the production period may
1st year average production rate, based on be obtained from a variety of sources. At The mathematical manipulation generates
the years production volume, could range this point, estimate ranges have been the same NPV range for a prospect. But
from 3 to 21 103m3/day but most likely will
be about 8.5 103m3/day. Multiplying the range
for an individual well by the number of wells
yields deliverability curves for the selected
numbers of wells. From inspection of Figure
2, about 22 wells will most likely be required
to provide the required deliverability for the
prospect but as few as 15 or as many as 30
wells may be needed.

Knowing the number of wells, a scoping level

layout of the well locations and the
production gathering system can be
undertaken. The scoping plan addresses Table 10.1. Example input spreadsheet, in any given year. Net present value @ 12% = annual net cash
issues such as the timing and sequencing of flow * 12% discount factor. Net present value @ 12% = PV before investment @ 12% - PV of capital
well drilling, drilling and completion design, investment.

38
additionally, the present day value of a unit that Geologist As prospect has a present category and estimate the total capital cost
of production can be estimated by dividing day value before capital of between $12 and range for the project. Cost estimates for
the prospects present day value before $66 Million. well costs and wellsite facilities that were
capital (highlighted in blue) by the projected provided on a per well basis were added
total gas sales volume (in pink). While the PV before investment range looks together and then multiplied by the
promising, it must be compared with the distribution for the expected number of
In Feketes experience, the uncertainty range required capital investment to know if the development wells to determine the total
on the present day value of a unit of prospect has economic potential. The cost range for the development well category.
production is relatively small compared to present value capital costs for the prospect
the uncertainty range of the input were estimated for each category as follows: The development well category should also
parameters. The reason is because increased include the cost of the dry holes that will be
sales revenue, due to higher production encountered. The number of dry holes can
volumes and/or gas prices tends to be offset be estimated by dividing the number of wells
by increased royalties, operating costs, and required by the drilling success rate to yield
taxes. Conversely, lower revenue scenarios the total number of drilling attempts that
have reduced royalties, operating costs, and must be undertaken. Multiplying by the chance
taxes. of a dry hole (between 15 and 30%) yields
the number of dry holes that are likely to be
At the time that Geologist As prospect was encountered. Multiplying by the cost per dry
evaluated, its unit of production PV was hole yields an estimated range of values for
estimated to be between $35.50 and $71 total dry hole cost. The updated capital cost
per 103m3 ($1 to $2/Mcf). Using Monte Carlo table follows:
simulation to multiply the unit PV by the
recoverable gas estimate yields the present
day value of the prospect before capital
investment. As shown in Figure 10.3, there Monte Carlo simulation can be used to
is an 80% probability (P10 to P90 values) successively add the cost range for each

As can be observed, the sales pipeline and

the wells are the two largest capital cost
categories. Monte Carlo simulation is once
more used to add the separate cost
distributions and estimate the range of total
costs for the project. In Feketes experience
it is useful to track the effect of each
successive cost category on the total cost
profile as follows:

From Figure 10.4 (p. 40), the P10 (blue line)

and P90 (upper red line) values of the capital
cost range intersect the PV before capital
investment curve at about the 43rd and 63rd
percentiles. Thus the prospect has between
a 37 and 57% chance of achieving a positive
NPV. The graph also illustrates that even at
Figure 10.3. Probability chart, gas development prospect present value (PV). the upper end of the reserve range we

39
 cannot do any better than double the value
of the capital invested and that the sales
pipeline and well costs have the greatest
impact on financial performance.

Should a prospect with these financial

characteristics be developed? One company
may choose to develop the prospect because
this is the best investment opportunity
available at the time. Another may determine
that its time has not yet come and choose to
wait until the price of gas rises sufficiently
and/or other developments in the area
reduce the distance and cost of the sales
pipeline. Either way, a consistent Monte
Carlo evaluation methodology helps
management make informed decisions.

Can Monte Carlo simulation also evaluate

Geologist Bs exploration prospect? Well
show you how in the next issue of the
Reservoir.

REFERENCES
Mackay, Virginia (ed.). 1994. Determination
of Oil and Gas Reserves. Petroleum Society
Monograph No. 1, p. 106-119.

Otis, Robert M. and Schneidermann, Nahum

1997. A Process for Evaluating Exploration
Prospects, AAPG Bulletin, v. 81 p. 1087- 1109.

Pallisade @ Risk Guide . Version 4.5

November, 2005

Figure 10.4. Probability chart, gas development prospect PV vs. Capital.

40
RE SE
RESE
SER RVOIR E NG
ENG INE
NGINE
INEE ERING F OR G
FOR GEEOLO
OLOG GIS
ISTTS
Article 11 Monte Carlo Simulation/Risk Assessment (cont.)
by Ray Mireault, P. Eng. and Lisa Dean, P. Geol., Fekete Associates Inc.
The second article (Mireault and Dean, 2008)
in the series on Monte Carlo simulation
presented an evaluation methodology for
Geologist As development prospect. This
last article extends the methodology to
address Geologist Bs exploration prospect.

Geologist B interprets a hydrocarbonbearing

reef at approximately 1,500 m depth from
the available seismic data. Wrench tectonics
and strike-slip faults influence the structural
aspects of the play. Underlying shale
represents a potential local hydrocarbon
source while overlying lime mudstones and
calcareous shales form the prospective cap
rock.

Core samples and outcrops show up to 30%

porosity and are considered to reflect an in
situ combination of intra-crystalline and vuggy
(moldic) porosity. In situ primary porosity
may / may not have been altered over time.

Organic geochemistry suggests a Type II

marine algal source charged the reservoir
target with light (35-40 API) sweet oil.
Reservoir reef and trap geometry are
interpreted to have been in place at the time
of oil generation.

Carbonate reef deposits tend to be oilwet

systems and this particular prospect is
interpreted to sit on basinal material that
precludes the existence of a mobile aquifer
underlying the reef. Accordingly, water
saturation should approach residual values.
Solution gas drive is anticipated with primary
recovery in the range of 10 to 20%. Figure 11.1. Oil exploration prospect.

From the viewpoint of a Monte Carlo bearing deposit (i.e., how many
simulation, after an exploration prospect has exploratory wells need to be drilled)?
been discovered it will require development
capital to achieve production, just like any Are the prospect economics
other development prospect. Thus an sufficiently attractive to accommodate
exploration prospect is no more than a both the development and exploration
development prospect with an additional costs?
step. Accordingly, the financial questions to
be answered become: DEV
DEVE ELOPME
LOPMEN NT EV AL
EVAL
ALUUATION
COMPONENT
Does the prospect present sufficient As with Geologist As development prospect, Table 11.1. Geologist Bs input parameter ranges.
economic potential to proceed with Monte Carlo simulation was used to
development (assuming it contains the volumetrically estimate the potential oil-in- OOIP = A * h * N * (1 - Sw) * 1/Bo
postulated volume of hydrocarbons)? place and recoverable oil volumes. Geologist
If so, Bs input parameter ranges are in Table 1. Recoverable Oil = OOIP * Recovery Factor

How much additional (risk) capital is As presented in the Volumetric Estimation Figure 11.1 graphically presents the prospect
required to create a high (70%) article (Dean, 2008), the equations for oil potential based on the foregoing input
probability of locating a hydrocarbon- are: parameters. Dividing the recoverable oil

41
range by a seven-year rate-of-take provides
the initial annual production volume. The
initial daily production rate assumes 350
producing days per year.

Theoretical estimates of well production

capability range between 80 and 320 m3/day.
From the graphical comparison of Figure
11.2, between 6 and 20 wells will probably
be required to achieve the initial target
production rate, with 12 wells as a most likely
value.

Table 11.2. Estimated volumes.

At the time Geologist Bs prospect was

evaluated, the present-day (PV) value of a
cubic metre of production was estimated to
be between $25 and $38/m3. Based on the
estimate, the expected PV before capital for
the prospect is between $62 MM and $798
MM (Figure 11.3).

The development capital items and their

associated capital costs at the time of the
evaluation are summarized in Table 11.3.

Figure 11.2. Oil exploration prospect number of wells required.

prospect from the individual capital cost E XPLORA TION RISK C

PLORATION APIT
CAPIT AL
APITAL
ranges (Table 11.5). ESTIMA TE
TIMATE
TESS
Unlike development capital, which always
generates some cash flow from subsequent
Table 11.3. Capital Cost Estimates (all values in
production, exploration risk capital is
millions of dollars).
spent without any potential for immediate
revenue generation. The majority of an
Based on the estimate of between 6 and 20 exploration prospects risk capital consists
development wells and the cost estimates of:
for an individual well (and dry hole) Monte
Carlo simulation was used to generate the The up-front (land) cost for the right to
required range of development drilling explore for hydrocarbons on specified
capital (Table 11.4). acreage.
Table 11.5. Cumulative Development Costs (all
Data acquisition (largely seismic) costs
values in millions of dollars).
to infer the presence of prospect(s).

By inspection of Figure 11.3, the P90 limit of Exploration drilling to locate a

total development costs ($44.9 MM) hydrocarbonbearing deposit.
intersects the PV before Capital Curve at
about the 6th percentile. Thus, there is in For offshore exploration, follow-up
Table 11.4. Development Drilling Costs (all values excess of a 94% chance that the prospect, as delineation drilling to confirm the
in millions of dollars). postulated to exist, would achieve a positive minimum size of deposit needed for
NPV on the development capital. With this development.
Simulation was also used to generate the chance of success, most companies would
cumulative development cost profile for the give the prospect further consideration. Estimating land and seismic acquisition

42
 probability of geologic success as follows:

Pg = Psource * Preservoir * Pstructure * Pseal * Pmigration

Note that the individual subscripts can be

customized to suit each evaluation. A neutral
(50%) assignment for all 5 factors yields an
overall chance of geologic success of 3.125%.

In Feketes experience, either a four- or five

parameter system can be used to evaluate a
prospect. Which to use often comes down
to which the earth science team that is doing
the evaluation is most comfortable with.
Fekete has also evaluated prospects with a
seven-parameter system (CCOP, July 2000)
but when all seven parameters have a neutral
(0.5) rating, the chance of geologic success
is 0.8%. This does not mean that a seven-
parameter system should not be used, but
when it is, the evaluators must be aware of
the consequence of additional multiplication
and adjust the input values relative to the
values that would have been used in a four-
or five-factor evaluation.

A five-factor system was used for Geologist

Bs prospect and values estimated as shown
in Table 11.6.

Figure 11.3. Oil exploration prospect present value (PV) potential.

Table 11.6. Five-factor system parameters.

costs is generally straight forward. However, Pg = Psource * Preservoir * Ptrap * Pdynamics
the exploration drilling cost estimate is
essentially the number of consecutive dry where: A 12% chance of success means there is an
holes that will be drilled prior to making a P source is the probability of mature 88% chance of a dry hole on the first drilling
discovery times the cost per dry hole. source rock attempt. If the drilling sequence is a random
Exploration drilling is evaluated as a Preservoir is the probability that reservoir series of events, as the number of
component of the total risk capital because quality rock exists consecutive drilling attempts increases, the
80 to 97% of the time, the outcome of an P trap is the probability that a trap chance that they will all be dry holes
individual drilling attempt is a dry hole. exists decreases. Table 11.7 shows the profile,
Fur ther, offshore exploration (and P dynamics is the probability of appropriate assuming random events.
delineation) wells are abandoned after timing for migration and
testing, irrespective of what they encounter. trapping
For onshore evaluations, the successful
discovery well can be treated as the first A neutral assessment is assigned a value of
development well, as was done for Geologist 0.5. Indirect supportive data increases the
Bs prospect, or as a salvaged exploration assigned probability of occurrence while
attempt. non-supportive data reduces the estimated
value. The approach has the advantage that a
Otis and Schneidermann (1997) present the neutral (50% probability) assignment for all
concept of geological success for an 4 factors yields a 6.25% probability of
exploration well as having a sustained geologic success. The value compares with
stabilized flow of hydrocarbons on test. They the industry perception of about a 5% chance
estimate the probability of geologic success of success on an exploration well.
(P g ) as the product of the individual
probabilities of occurrence for four factors Fekete has also successfully used a
as follows: fiveparameter system to estimate the Table 11.7. Chance of Failure / Success.

43
In reality, we should learn something about
the prospect and play with each drilling
attempt, so we may consider that less than
10 wells are required for a 70% chance of
making at least one discovery. Or we may
decide that the drilling locations currently
available to the company are not related and
the above table reasonably presents the
chance with each successive attempt.

The consensus for Geologist B was that even

with luck, a minimum of three dry holes
would be incurred before making a discovery.
The more likely value was six (53% chance
of a discovery) but up to ten attempts could
be required to tip the odds in the companys
favour. An additional $10 MM was also
recommended for additional seismic
acquisition (Table 11.8).

Table 11.8. Exploration Costs (all values in millions

of dollars).

From Monte Carlo simulation, total dry hole

costs, total exploration costs, and cumulative

Figure 11.4. Gas development prospect NPV.

The chance of realizing a positive NPV on The potential gain in economic value if
Table 11.9. Cumulative Prospect Capital Cost the capital investment can be read from the events do unfold as expected.
Ranges. graph. From Figure 11.4, upper and lower
prospect capital cost ranges were estimated limits of the NPV curve have a value of zero total capital commitment required to
as shown in Table 11.9: at about the 43rd and 63rd percentiles. The realize production.
chance of achieving a positive NPV on the
With a total exploration and development capital investment with Geologist As Which prospect would you invest in?
cost of $60.7 MM and a PV before investment development prospect is between 37 and
value of $62 MM at the 90th percentile 57%.
(Figure 11.3), the prospect has better than a REFERENCES
90% chance of achieving a positive NPV (if In Figure 11.5, the NPV = 0 axis is intersected Canadian Institute of Mining, Metallurgy and
the deposit really exists). When presented at about the 6th and 9th percentiles. If Petroleum. 1994. Determination of Oil and
with this level of economic attractiveness, Geologist Bs exploration interpretation is Gas Reserves, Petroleum Society
most companies would seriously consider correct, there is between a 91 and 94% chance Monograph Number 1, Chapter 6.
pursuing Geologist Bs prospect. of achieving a positive NPV on the capital
investment. Canadian Institute of Mining, Metallurgy and
PROSPECT FINANCIAL COMPARISONS Petroleum. 2004. Determination of Oil and
Figure 4 summarizes the financial picture For any prospect, management needs to Gas Reserves, Petroleum Society
for Geologist As development prospect. know: Monograph Number 1, Chapter 6.
Figure 5 presents Geologist Bs exploration
prospect. The Max NPV curve is generated The chances that at least the value of Coordinating Committee for Coastal and
by subtracting the P10 total cost value from the capital investment will be Offshore Geoscience Programmes in East
the NPV before capital curve. The Min NPV recovered if the project proceeds. and Southeast Asia (CCOP). 2000.The CCOP
curve is similarly created from the NPV Guidelines for Risk Assessment of Petroleum
before capital curve less the P90 value for How much capital could be lost if Prospects. July, 2000. 35 p.
events do not turn out as expected.
total capital costs.

44
Figure 11.5. Oil exploration prospect NPV potential.

Dean, L. 2008. Reservoir Engineering For

Geologists, Part 3: Volumetric Estimation.
Canadian Society of Petroleum Geologists
Reservoir, v. 34, no. 11, p. 20-23.

Mireault, R. and Dean, L. 2008. Reservoir

Engineering For Geologists, Part 8b: Monte
Carlo Simulation / Risk Assessment. Canadian
Society of Petroleum Geologists Reservoir,
v. 35, no. 7, p. 14-19.

Otis, Robert M. and Schneidermann, Nahum.

1997. A Process for Evaluating Exploration
Prospects. AAPG Bulletin, vol. 81 no. 7. p.
1087-1109

45
Res er
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Engin
inee ering for G
Gee olo
ologgists
Article 12 - Coalbed Methane Fundamentals
by Kamal Morad, P. Eng., Ray Mireault, P. Eng., and Lisa Dean, P. Geol., Fekete Associates Inc.
Historically, gas emissions from coal have relative to matrix permeability, but very
been a nuisance and a safety hazard during Matrix limited storage capacity.
coal mining operations, causing numerous Fracture
explosions and deaths. But today, coalbed In coal terminology, natural fractures are
methane (CBM) is an increasingly important called cleats. The cleat structure consists
source of the worlds natural gas production of two parts: face cleats and butt cleats
with many countries, including Canada, Butt Cleats (Figure 12.2). Face cleats are typically
actively developing this unconventional Matrix continuous fractures that go across the
energy source. reservoir. They are considered the main
pathway for gas production.
Currently, CBM accounts for 10% of U.S.
natural gas production with the size of the Butt cleats are discontinuous, perpendicular
Face Cleats to the face cleats and generally act as a feeder
resource (OGIP) estimated at 700 TCF. The
most active areas of production are the San network of gas into the face cleats.
Juan Basin in New Mexico, the Powder River
Figure 12.1. Coal is a dual-porosity system.
Basin in northeast Wyoming / southeast The effective porosity, permeability, and
Montana, and the Black Warrior Basin in water saturation are all properties of the
Alabama. because of several unique physical coal cleat system. Since coal permeability
properties. The coals typically have very low is a property of the cleat space, it is affected
In Canada, CBM is still in the early stages of gamma, low density, and high resistivity by the structure and characteristics of the
development, yet it already accounts for values. cleat network, e.g., the dominant fracture
about 1% of total gas production.The Western orientation, fracture continuity, frequency,
Canada Sedimentary Basin contains the Similar to conventional naturally fractured and width.
majority of Canadas estimated 600 TCF of reservoirs, coal is generally characterized
CBM resource potential. Formations of as a dual-porosity system because it consists The effective permeability of the cleat system
greatest interest are the Mannville, which of a matrix and a network of fractures (Figure is also influenced by the contrast between
tends to produce water as well as gas (a 12.1). For both groups, the bulk of the in- face and butt cleat permeability. CBM
wet coal) and the Horseshoe Canyon, place gas is contained in the matrix. However, reservoirs are generally considered to be
which usually produces gas with virtually no matrix permeability is generally too low to anisotropic systems, where the effective
water (a dry coal). permit the gas to produce directly through permeability is the geometric average of face
the matrix to the wellbore at significant and butt cleat permeability. Permeability
In general, coal is classified into four main rates. anisotropy creates elliptical drainage areas
types depending on the quantity and types of and should be taken into account when
carbon it contains as well as the amount of In a naturally fractured system, most of the placing wells in CBM development projects.
heat energy it can produce. These are: produced gas makes its way from the matrix
to the fracture system to the wellbore. If DIFFERENCES WITH CONVENTIONAL
1. Lignite (brown coal) the lowest rank the well has been hydraulically fracd, gas may RESERVOIRS
of coal; used as fuel for electric power also travel from the natural fracture system A good starting point to understanding the
generation. to the man-made fracture system to the production characteristics of coalbed
2. Sub-bituminous coal properties range wellbore. With both conventional naturally methane reservoirs is by considering the
between lignite and bituminous coal. fractured reservoirs and CBM reservoirs, the differences to conventional gas production.
3. Bituminous coal a dark brown to black, natural fracture system has high permeability, The most significant differences are:
dense mineral; used primarily as fuel in
steam-electric power generation. In a conventional reservoir, the majority
4. Anthracite the highest rank; a harder, of the gas is contained in the pore space
glossy, black coal used primarily for but in a CBM reservoir, the majority of
residential and commercial space the gas is adsorbed (bonded to the coal
heating; it may be divided further into molecules) in the matrix.
petrified oil, as from the deposits in In a conventional reservoir, reservoir
Pennsylvania. gas expands to the producing wells in
direct response to any production-
Note that graphite, which is metamorphically induced ressure gradient. But CBM
altered bituminous coal, is technically the reservoirs generally require that
highest rank of coal. However, it is not reservoir pressure be below some
commonly used as fuel because it is difficult threshold value to initiate gas
to ignite. desorption.
In a CBM reservoir, a gas molecule must
COAL CHARACTERISTICS first desorb and diffuse through the coal
Coals are recognized on geophysical logs Figure 12.2. Example of coal cleat structure. matrix to a cleat. It can then move

46
 The gas content of the coal,
The degree of heterogeneity and
complexity contained in CBM
reservoirs,
The impact of modelling complex
multilayer coal/non-coal geometries
with simple one- or two-sequence
models.

CBM GAS DESORPTION

While the relationship between pressure
decline and gas production is essentially a
straight line in a conventional reservoir
(Figure 12.3), the depletion profile in a CBM
reservoir is distinctly non-linear. For a given
pressure drop, a CBM reservoir will desorb
significantly more gas when the starting
reservoir pressure is low compared to when
reservoir pressure is high (Figure 12.4).

If the initial reservoir pressure is significantly

greater than the pressure required to initiate
desorption (the coal is under-saturated), and
water is initially present in the cleat system,
then the initial production period may
produce only water without any gas (Figure
Figure 12.3. Conventional gas P/Z plot. 12.5). Depending on the degree of under-
saturation, dewatering can last from a few
through the cleated fracture system and A is drainage area, months to two or three years and can
the hydraulic frac-stimulation to the h is net pay, significantly affect the economics of the
wellbore via conventional Darcy flow. D b is bulk density, prospect.
GCi is initial Gas Content,
CB
CBM MG GAAS S
STTORA
ORAG GE CCAPAPAB
APAB
ABILIL IT Y
ILIT N i is porosity, If initial reservoir pressure is equal to the
The primary storage mechanism in CBM Swi is initial water saturation critical desorption pressure (the coal is gas-
reservoirs is adsorption of gas by the coal Bgi is initial formation volume factor. saturated), then gas production will start as
matrix. Matrix surface area, reservoir soon as reservoir pressure begins to
pressure, and the degree to which the coal The first term represents the adsorbed gas decrease. This situation most often applies
is gas saturated are the factors that determine in the matrix while the second term is the to dry coals but can also apply to saturated
the in-place gas volume of a coal. Note that free gas in the cleats. Since the pore volume wet coals.
the smaller the coal particle size, the larger in CBM reservoirs is in the order of 1% of
the surface area. the total volume, the free gas contribution The equation that is commonly used to
to the total in-place gas volume is negligible. describe the relationship between adsorbed
The complete gas-in-place volumetric gas and free gas as a function of pressure is
equation for a CBM reservoir is: As with all volumetric estimates, uncertainty known as the Langmuir isotherm. The
in the input data creates a range of possible isotherm is determined experimentally and
OGIP = A * h * Db* GCi + (Ah Ni(1-Swi) / Bgi) outcomes for OGIP. Some common areas of measures the amount of gas that can be
uncertainty for CBM projects include: adsorbed by a coal at various pressures. The
Where: Langmuir isotherm is stated as:

V = VL * (P / PL + P)

Where:
V L , the Langmuir Volume, is the gas
content of the coal when reservoir
pressure approaches infinity.

PL, the Langmuir Pressure, is the pressure

corresponding to a gas content that is
half () of the Langmuir volume. The
steepness of the isotherm curve at
lower pressures is determined by the
value of PL.

CBM gas consists primarily of methane (CH4)

but may also contain lesser percentages of
carbon dioxide (CO2) and nitrogen (N2). As
coal has the strongest affinity for nitrogen
Figure 12.4. Comparison of desorption volumes with changes in reservoir pressure.

47
 that affect the absolute permeability of the
cleat system:

1. As reservoir pressure decreases, it

reduces the pressure in the cleats. Cleat
effective stress (which is the difference
between overburden stress and pore
pressure) increases and compresses
the cleats, causing cleat permeability to
decrease.
2. As gas desorbs from the coal matrix,
the matrix shrinks. Shrinkage causes the
space within the cleats to widen and
the permeability of the cleats increases.
From the Langmuir isotherm (Figure
12.4), the amount of gas desorbed for a
given pressure drop is relatively small
at high pressures. Thus in the early
stages of production, the compaction
effect is the dominant factor and cleat
permeability will tend to decrease
slightly. As production continues and gas
recovery becomes significant, matrix
shrinkage will dominate and increase
Figure 12.5. Desorption behaviour of under-saturated CBM reservoirs. cleat permeability.

and the weakest affinity for carbon dioxide, cleat spacing. In general, greater In wet coals, changes in the relative
the three gases adsorb/ desorb at different concentration gradients, larger diffusion permeability of the cleat system with changes
rates from coal (Figure 12.6). Thus, it is not coefficients, and tighter cleat spacing all act in water and gas saturation must be
uncommon for the CO 2 content of the to reduce the required travel time. On considered in the Darcy flow equation to
produced gas to decrease as gas is produced reaching a cleat, gas then travels the remaining correctly predict well performance. As
and reservoir pressure depletes. distance to the wellbore by conventional illustrated by a typical set of relative
Darcy flow. Since flow in a CBM reservoir is permeability curves (Figure 12.7), the relative
CBM GAS TRANSPORT MECHANISMS generally two-phase flow, fluid saturation permeability to gas increases with decreasing
After desorbing from the coal, gas in a CBM changes in the cleat system and consequent water saturation and vice versa.
reservoir uses diffusion to travel through changes in relative permeabilities become
the coal matrix to the cleat system. The time important. CBM WELL PERFORMANCE
required to diffuse through the matrix to a The production of CBM wells can be
cleat is controlled by the gas concentration As the gas is produced from a CBM reservoir, generally divided into three separate phases
gradient, the gas diffusion coefficient, and the two distinct and opposing phenomena occur (Figure 12.8):

Dewatering phase (for under-saturated

reservoirs): In this phase, no gas is
produced (excepting in the transient
near wellbore region or in complex
reservoirs).
Negative decline: Water production
continues to decline while gas
production increases.
Production in this phase is generally
dominated by the relative permeability
of gas and water.
Decline phase: Declining reservoir
pressure is now the dominating factor
although its impact is mitigated to some
extent by a shrinking matrix and
increasing cleat permeability.
Nonetheless, the gas production rate
declines as in conventional gas
reservoirs, albeit at a slower rate of
decline.

The water production forecast looks similar

to a production forecast for a conventional
water producing reservoir. Maximum water
production rates are achieved initially but
decline thereafter through a combination of
Figure 12.6. CBM gas storage capacities for N2, CH4, and CO2.

48
 cumulative production of CBM wells. As
improvements in drilling, completion and
production techniques advance, CBM will
continue to be an increasingly important
source of natural gas.

REFERENCES
Gas Research Institute. 1993. GRI Reference
No. GRI-94/0397, A Guide to Coalbed
Methane Reservoir Engineering, Chicago,
Illinois.

Jensen, D. and Smith, L.K. 1997. A Practical

Approach to Coalbed Methane Reserve
Prediction Using a Modified Material Balance
Technique. International Coalbed Methane
Symposium, The University of Alabama,
Tuscaloosa, Alabama, paper 9765, p. 105-113.

Lamarre, Robert A. 2005. Coalbed Methane

A Non-Conventional Energy Source What
Is It And Why Is It Important, 25th Annual
North American Conference of the USAEE/
IAEE, Fueling the Future.

Mavor, M.J. 1996. A Guide to Coalbed

Methane: Coalbed Methane Reservoir
Figure 12.7. Relative permeability to gas and water. Properties. Gas Research Institute Chicago,
Illinois, GRI Reference No. GRI-94/0397,
reservoir pressure depletion and decreasing As the water saturation approaches its Chapter 4.
relative permeability to water. minimum value, declining reservoir pressure
dominates and the well goes into the decline Schafer, P.S. and Schraufnagel, R.A. 1996. A
The gas production profile displays both the phase of its producing life. During this time Guide to Coalbed Methane: The Success of
initial, dormant period followed by an period, the declining production trend Coalbed Methane. Gas Research Institute
increasing production rate till it reaches a resembles conventional gas production. Chicago, Illinois, GRI Reference No. GRI- 94/
peak and then declines. Although reservoir Note that a dry CBM reservoir exhibits 0397, Chapter 1.
pressure is monotonically declining through only the declining portion of the production
the life of the simulation well, it is pattern. Steidl, P.F. 1996. A Guide to Coalbed Methane
counteracted during the inclining production Reservoir Engineering: Coal as a Reservoir.
period by increases in the relative Given the scope and complexity of the inputs Gas Research Institute Chicago, Illinois, GRI
permeability to gas and in the absolute for CBM reservoirs, simulation is generally Reference No. GRI-94/0397, Chapter 2.
permeability of the cleats. required to predict the deliverability and
Zuber, M.D. 1996. A Guide to Coalbed
Methane: Basic Reservoir Engineering for
Coal. Gas Research Institute Chicago, Illinois,
GRI Reference No. GRI-94/0397, Chapter 3.

Figure 12.8. CBM well production profile.

49
Res er
ervvoir Eng in
Engin
inee ering for G
Gee olo
ologgists
Article 13 - Geological Storage of C02
by Mehran Pooladi-Darvish, Ph.D., P. Eng. and R. Mireault, P. Eng., Fekete Associates Inc.
Over the past few years, the production and terms, 230 Mt/yr (Albertas annual emissions) of CO2.
usage of fossil fuels has increased despite translates to approximately 12 bcf/d; roughly
rising concern over the atmospheric equal to Albertas daily natural gas production The sheer magnitude of a 6 bcf/d injection
emission of greenhouse gases (e.g., CO2). It rate. Conversely, injecting 12 bcf/d of CO2 rate raises additional considerations. Further,
appears that fossil fuels will remain the would require 400 wells, each operating at a multi-century time-scale for the geological
energy of choice for at least a few more 30 mmcf/d. storage of CO2 is a fundamental departure
decades. Despite conservation, alternate with the decade(s)-long operating horizon
fuels, constrained supply, and higher prices, While all generated CO 2 presents equal for hydrocarbon development (Bachu,
the National Energy Board predicts that the potential in terms of the greenhouse gas 2008a). To address these differences, the
demand for fossil fuels in Canada will effect, the level of effort needed to collect, models and workflows used for hydrocarbon
continue to increase . The International purify, and inject CO2 varies with the source development are being reconsidered and
Energy Agency forecasts similar trends for of the emission. For example, CO2 from large revised.
worldwide demand at least until 2050. stationary point sources, such as coal-fired
power plants and hydrocarbon processing Desired Storage Site Characteristics
This article does not debate either the plants, is more easily captured and stored A desired CO2 storage site should have at
occurrence of global warming or the role compared to CO2 from small, moving sources least the following characteristics:
played by man-made CO 2 emissions. It such as automobiles.
instead considers the similarities and Ensure containment over long periods
differences between hydrocarbon Note that fossil fuels contribute to CO 2 of time (centuries).
production and the geological storage of emissions both when they are produced (e.g., Enough injectivity to receive the CO2
CO 2. Assuming the public is interested in oil sand production, bitumen upgrades, and at the desired rates.
capturing the CO2 waste created by burning gas-sweetening plants) and when they are Sufficient storage capacity.
fossil fuels, Alberta is a suitable place for its burned. Capture refers to the process of
geological storage and the petroleum selectively treating or purifying the waste Containment
industry has the necessary abilities to gas stream to capture just the CO 2 The density of CO2 increases with increasing
significantly reduce net CO2 emissions. component for injection (e.g., flue gas depth / pressure, to approximately 700 kg/
contains less than 15% CO2). m3 at 2,000 to 3,000 m. But the density of
CO
CO22 Emissions in Canada and Alberta formation brines is above 1,000 kg/m 3. As
In 2000, Canadas CO 2 emissions were While the majority of CO 2 emissions in with petroleum reservoirs, competent cap
approximately 725 megatonnes (Mt) (Figure Ontario are from small emitters, about half rock is required to ensure containment. Even
13.1). Alber ta and Ontario together of the total emissions in Alberta are from with competent cap rock, creating large,
accounted for 430 Mt or slightly less than large, point-source stationary plants. Given buoyant accumulations of concentrated CO2
60% of total emissions. Quebec, British the abundance of depleting petroleum that are in storage for centuries raises
Columbia, and Saskatchewan together reser voirs in the Western Canada complex questions. Therefore, natural and
accounted for 220 Mt or about 30%. Sedimentary Basin, capture and geological man-made processes are being studied that
storage would appear to be the preferred could lead to permanent trapping of the
How much gas is this? In petroleum industry solution, at least for Albertas point sources injected CO2. For example:

Figure 13.2. Large-scale CO2 storage in the Redwater Reef (Gunter and
Figure 13.1. CO2 emissions (Mt / year) in Canada in 2000 (Bachu, 2008b). Bachu, 2007).

50
 Designs are being considered to enhance pore space by capillary forces residual leakage as a result of enhanced solubility
the contact between CO 2 and the trapping. trapping will need to be balanced against
formation brine, to facilitate what is the increased risk of leakage with
called solubility trapping. Once CO 2 While many of these trapping processes distance from the injection site, since
is dissolved in the brine, the mixture is occur naturally, they occur slowly over our knowledge of the integrity and areal
denser than the in-situ brine and tends centuries. To accelerate these trapping extent of the cap rock generally
to settle. mechanisms, engineering solutions are being decreases with distance from the well.
proposed. For example:
Reacting CO2 with formation minerals Studies conducted by Hassanzadeh et al.
could create new stable minerals In a dipping aquifer, down-dip injection (2008) suggest that production of the
mineral trapping. of CO 2 could lead to CO 2 flow formation brine farther away from the
underneath the cap rock and along the CO2 injection site and its injection on
After flowing through porous rock, small length of the aquifer, enhancing top of the CO2 plume at some distance
CO2 bubbles can remain trapped in the solubility trapping. The reduced risk of from the CO 2 injector, could lead to
solubility trapping of a significant amount
of CO2 at a small energy cost.

Injectivity
Although total injection rates can always be
increased by drilling more injection wells,
the number of wells that will ultimately be
required to inject 6 bcf/day can significantly
affect the economics of geological storage.
High permeability reservoirs and formations
are obviously preferred.

Feketes studies have shown that the CO 2

injection rate is not only controlled by
permeability in the vicinity of the wellbore
but also by the permeability distribution
throughout the reser voir. The kv/kh
relationship is equally important with
respect to overall storage capacity of the
formation. For example, in simulation studies
of the Redwater reef, the allowable injection
rate is strongly affected by the degree of
communication / permeability between the
margins of the reef, the interior of the reef,
and the underlying Cooking Lake aquifer.

Evaluating the permeability distribution

throughout a reservoir is not normal
practice when injecting petroleum wastes at
modest rates. Nonetheless, it is required to
assess the dissipation of the resulting
pressure build-ups (below fracture gradient)
at the rates required for large scale CO 2
injection. Thus, additional geolog y /
geophysics / drilling / testing may be required
to develop the degree of characterization
necessary for detailed planning of CO 2
projects.

Capacity
Depleted oil and gas pools are attractive as
storage sites, because of the availability of
information and the knowledge that the cap
rock is a competent seal. But large scale CO2
injection, (6 bcf/d is 2.2 tcf/year) requires
formations that can store 10s of tcf or 1,000+
megatonnes of CO 2 . While depleted
petroleum pools may play a part in localized
injection of CO2, two projects that are being
considered for Alber ta, illustrate the
differences between conventional

Figure 13.3. Readwaters proximity to large CO2 emitters (Gunter and Bachu, 2007).

51
 From where we are to where
we need to be
Making a significant impact on the net volume
of CO2 emissions, even from Albertas 2002
rate of 12 bcf/d, requires a large industry.
The petroleum industry, with its earth-
science and engineering knowledge, its
operating expertise, managerial ability, and
financial resources, is well suited to the task
of CO2 capture and geological storage. We
already know much about the issues by virtue
of our hydrocarbon production experience:

The same formations and knowledge that

have produced hydrocarbons from the
Western Canada Sedimentary Basin are
required for CO2 injection and storage.
Further, working in concert provides
the potential for co-optimization of
hydrocarbon production and CO 2
injection.

The industry is familiar with the challenges

posed by surface transport of large fluid
volumes and their underground
injection and monitoring.

For more than two decades, dozens of

acid gas disposal projects, many having
Figure 13.4. Redwater well locations (Gunter and Bachu, 2007).
CO2 as the main constituent of the gas,
have been underway in Alberta. These
hydrocarbon production and large-scale projects have much that is of direct
geological CO 2 storage operations. application to the geological storage of
The reef and its overlying and underlying CO2 (Pooladi-Darvish et al., 2008).
HARP strata are being characterized, using available
The Hear tland Area Redwater Project geological, petrophysical, geophysical, There are differences and significant
(HARP), run by Alberta Research Council and hydrogeological, and engineering challenges ahead:
industrial partner ARC Resources, envisions information. Initial studies have been
using the entire Redwater reef as a CO 2 conducted to estimate storage capacity, The injection rate and volumes for the
storage site. The Redwater oil reservoir was number, and location of injection wells, and acid gas disposal projects have been
the third-largest oil field in Alberta but it fate of the injected CO 2 in the reservoir. much smaller than the scale of CO 2
occupied only a small fraction of the total These will be refined as exploratory well(s) storage projects that will significantly
reef volume (Figure 13.2). The factors that are drilled and a pilot project is conducted, affect the net volume of CO2 emissions.
led to the selection of Redwater for large monitored, and evaluated.
scale CO2 storage are: Hydrocarbon sweetening operations
WASP have been the CO2 source for acid gas
Its proximity to several large CO 2 The Wabamun area CO 2 Sequestration
emitters: the Heartland industrial area Project (WASP), run by the University of
(northeast of Edmonton) and the CO2 Calgary and Industrial Partners, is
that may be pipelined from oil sands investigating aquifer disposal for four coal-
production facilities in the Fort fired power plants west of Edmonton that
McMurray area (Figure 13.3). contribute significantly to Albertas CO 2
emissions (Figure 13.5).
Established knowledge of the reef s
containment geometry, capacity, and Michael et al. (2008) have reviewed the CO2
injectivity albeit over a small portion storage potential of different formations that
of the reef. are in close proximity to the power plants,
mapping at least three sequences of aquifers
One of the challenges to the project is the (Figures 13.6). The dolomitized Nisku aquifer
lack of geoscience knowledge over large is separated from the surface by at least two
portions of the reef, which nevertheless is sequences of seals (shales) and appears to
required for storage. While hundreds of potentially meet the three requirements of
wells have been drilled in the northeastern containment, capacity, and injectivity. Studies
portion of the reef (most to shallow depths) similar to those planned for HARP are
the rest of the reef has been penetrated by underway.
only a couple of dozen wells (Figure 13.4). Figure 13.5. Large coal-fired CO2 emitters near
Edmonton (Mitcheal et al., 2008).

52
 Pooladi-Darvish, M., Hong, H., Theys, S.,
Stocker, R., Bachu, S., and Dashtgard S. 2008.
CO 2 injection for Enhanced Gas Recovery
and Geological Storage of CO2 in the Long
Coulee Glauconite F Pool, Alberta. SPE
115789 presented at the SPE annual Technical
Conference and Exhibition, Denver,
September 21-24, 2008.

Figure 13.6. Wabamun area stratigraphic chart (Mitcheael et at., 2008).

disposal projects. But large-scale Hassanzadeh, H., Pooladi-Darvish, M., and

geological storage projects will mostly Keith, D.W. 2008. Accelerating CO 2
capture CO2 from the burning of fossil Dissolution in Saline Aquifers for Geological
fuels, such as from coalfired power Storage Mechanistic and Sensitivity Studies.
plants. The different effluent gas Paper submitted (June 2008) to Journal of
composition from power plants may Petroleum Science and Engineering.
require different technologies to
capture and purify the CO2 component Michael, K, Bachu, S, Buschkuehle, B.E., Haug,
in the emissions. K., and Talman, S. 2008. Comprehensive
Characterization of a Potential Site for CO2
While smaller CO 2 projects could Geological Storage in Central Alber ta,
potentially make use of depleted oil and Canada. In: Carbon Dioxide Sequestration in
gas pools, there is a point where only Geological Media State of the Art. M. Grobe,
aquifers can provide sufficient storage J. Pashin, and R. Dodge, (eds.). AAPG Special
capacity. But our present knowledge of Publication, In press.
aquifer extent, quality, and distribution
even those associated with
hydrocarbon production is likely
insufficient for large scale CO2 storage.

Capture and geological storage of CO 2

presents both challenges and opportunities.
As Figure 13.7 illustrates, the industry is on
a steep learning curve.

References :
Bachu, S. 2008a. CO2, Storage and Geological
Media: Role, means, status, and barriers to
deployment. Progress in Energy and
Combustion Science An International
Review Journal, v. 34, p. 254-273.

Bachu, S. 2008b. personal communications.

Gunter, W. and Bachu, S. 2007. The Redwater

Reef in the Hear tland Area: A Unique
Opportunity for Understanding and
Demonstrating Safe Geological Storage of
CO2. http://www.nrcan. gc.ca/es /etb/cetc/
combustion/co2network/ htmldocs/
publications_e.html. 16 p. Figure 13.7. Current and projected CO2 injection rates.

53
Res er
ervvoir Eng in
Engin
inee ering for G
Gee olo
ologgists
Article 14 - Reservoir Simulation
by: Ray Mireault, P. Eng.; Nick Esho; and Lisa Dean, P. Geol.; Fekete Associates Inc.
In Feketes experience, a well performed permeability versus well-test permeability, of development to ensure consistency in the
reservoir simulation represents the ultimate core porosity versus log-derived values) until interpretation and reaffirm that the
integration of geolog y, geophysics, the team has a consistent explanation of the developing model is fit-for-purpose. A very
petrophysics, production data, and reservoir reservoirs pre- through post-depositional detailed geological model may be unable to
engineering. Through simulation, the flow of history. Hydrocarbon reservoirs are too address the question(s) that the simulation
multiple fluids in heterogeneous rock over complex to develop a complete team is attempting to answer.
time can be quantitatively estimated to gain understanding in one afternoon so the
insights into reservoir performance not process should be viewed as a series of The engineers role in the process is to
available by any other means. ongoing discussions. reliably simulate the performance of the
geological model for the production
Initially, reservoir simulation was reserved The next step is to define, test, and prioritize scenario(s) under consideration by history
for large reservoirs requiring large capital the uncertainties to be modeled and their matching a producing field and / or forecasting
investments that justified costly, intensive impact on the overall dimensions of the future performance. While it may seem that
studies such as offshore developments. model. For example, a gridblock height that reservoir simulation would be
However, simulation of more modest-sized is too large to reflect the layering in thin straightforward if we only knew all the
reservoirs has increased as simulation beds will introduce significant errors in the inputs, that perception is incorrect. Limited
software and computer capability have flow net-to-gross pay estimates as well as information unquestionably complicates the
become more readily available. Oilfields flow pathways. It is essential to agree upfront task but the most fundamental (and
under primary production, waterflood, and on the level of resolution and details to be unavoidable) issue is the error introduced
EOR typically qualify for reservoir simulation captured in the model. The appropriate level by approximating overwhelmingly complex
but its usage is not uncommon for gas fields, of detail can be different for each reservoir physical geometries / interactions with
unconventional reservoirs, or pools and is also dependent on the purpose of the simpler but manageable mathematical
undergoing CO 2 injection. simulation, sometimes testing and iterations relationships.
maybe necessary.
In broad terms, the geologist / geophysicist / Of necessity, simulation uses a sequence of
petrophysicists role in reservoir simulation Next comes selecting the appropriate grid three-dimensional gridblocks as a proxy for
is to reliably approximate the (a) stratigraphy, type (regular or faulted) to model the reservoir rock volume (see Figure 1). In
(b) structure, and (c) geometry of the present day structure of the reservoir. order to keep the time, cost, and computing
reservoir flow unit(s) and the initial fluid Components to be modeled include the top requirements of a simulation manageable, the
distributions throughout. The aim of the of structure, faults, internal baffles to flow, total number of gridblocks is generally
exercise is to quantify and manage the and any areal variation in thickness and rock limited to less than 500,000, with a small
subsurface knowledge and uncertainties. In properties. The objective is to replicate the simulation requiring less than 100,000
the practical sense, a good model is the one orientation, geometry, and effect of the gridblocks. For either large or small projects,
that is fit-for-purpose utilizing sound structural imprint as it affects flow within
geological reasoning and at the same time the model. It is imperative to validate the
supports reservoir dynamics (e.g., fluid flow, fault-horizon network to ensure it is
history matching). geologically feasible and to ascertain the
absence of structural distortion and other
Geological data is often characterized by problems.
sparseness, high uncertainty, and uneven
distribution, thus various methods of Facies modeling is the next step in
stochastic simulation of discrete and construction. Where available, the best
continuous variables are usually employed. practice is to integrate core data and outcrop
The final product will be a combination of: analogues to constrain and refine logderived
observation of real data (deterministic facies type and property estimates.
component), Understanding the facies distribution
education, training, and experience provides a tool for predicting reservoir
(geology, geophysics, and quality away from the known datapoints. The
petrophysics), and geometry (length, width, thickness, and
formalized guessing (geostatistics). direction) of each facies body will affect the
way heterogeneities in porosity and
The first step is the geologists conceptual permeability are modeled. Attribute analysis
depositional model which (s)he must be able (inversion/QI) and geobodies extracted from
to sketch and explain to the other members seismic data are also useful to further refine Figure 14.1.Typical reservoir simulation models (a)
of the team. The conceptual model should be the geological model. tank, (b) ID, (c) ID radial, (d) cross-sectional, (e)
broadly compared and tested with each areal, (f) radial cross-sectional, and (g) 3D;
disciplines observations and data (e.g., core It is important to quality check at each step Mattax and Dalton, 1990.

54
 a gridblock may represent a unit rock
volume of one or more acres in areal extent
and several feet thick (Figure 14.2).

While fluid saturations and / or other

properties can vary significantly over an acre
and / or several feet of reservoir (e.g., an
oil-water transition zone), each gridblock
has only a single value for each property (e.g.,
porosity, saturation of water, oil and gas,
permeability, capillar y pressure) of the
gridblock. When the true variation in the
reservoir is too great to be comfortably
represented by a single average value, the
solution may be to (iteratively) increase the
density of the gridblocks (fine grid) in a
specific area of the reservoir. Alternatively,
a separate, smaller simulation may be run
and the results provided as input to the
larger study, as when modeling fluid and
pressure behaviour at the wellbore sandface.

Similarly, simulation must approximate the

continuous movement of fluids and the
resulting changes in fluid saturations with
calculations performed at discrete timesteps.
Though it does not occur in the real world,
there can be abrupt changes in a gridblocks
fluid saturation(s) as fluids move into or out
of the gridblock. The usual solution is to limit
the magnitude of the change to tolerable
levels through (iterative) selection of smaller
timesteps.

The use of discrete timesteps and discrete

gridblocks with a single value for each
property also leads to the dilemma of what
values to use in modeling the fluid
properties for flow between adjacent
gridblocks and adjacent timesteps. This
artifact of numerical simulation also has
consequences on calculated performance
that do not exist in reality. For further
discussion, see Chapter 2 of the SPE
Monograph Volume 13. Though there is no
completely satisfactory answer to the
problem, workable approximations for flow
across gridblock boundaries and between
subsequent timesteps exist. The choice of
which to use in a particular situation often
comes down to experience and iteration.

Figure 14.3. Rock and fluid properties (Mattax

and Dalton, 1990).

Figure 14.2. Example of 3D gridblocks.

55
 volume of a gridblock and rate of fluid flow
(production) both influence the rate of
change in a gridblocks fluid saturations over
time. Limits on the rate of saturation change
that are developed from experience, are
generally used to determine the largest
timestep size that will present apparently
smooth results when mapped or graphed.
This process is done internally by the
simulator to ensure smoothness of results.

SIMUL
SIMULA ATION OU TP
OUTP
TPU UT
Since it is not possible to individually inspect
the millions of calculations that are
performed in a simulation, editing and
graphical presentation of the output is
crucial to assessing the consistency and
reliability of the results. As a minimum, the
output graphs should include:

oil, water and gas production rates,

producing gas-oil ratio;
producing water cut or water oil ratio,
and
bottomhole flowing pressures.

Maps / movies of fluid saturation and

Figure 14.4.Visualization of 3D model. reservoir pressure trends are also
invaluable to assessing the quality and
DATA RE QUIRE
REQUIRE
QUIREMEME
MEN NTS and internal no-flow boundaries such as consistency of the output. For example,
The rock and fluid properties required for shale deposits or non-conducting faults are inconsistent pressure behaviour related
reservoir simulation are summarized in other features that can be the determining to negative cell volumes may indicate that
Figure 14.3. Collecting the data and putting factor in selecting gridblock size. there is an issue with the gridding and / or
it into a form that can be imported in a assigned transmissibility of gridblocks along
reservoir simulator can be a major effort in Porosity and permeability distribution are a fault zone.
itself. nearly always important and are often the
keys to reservoir performance. Sensitivity USE
SESS AND L IMIT
LIMIT
IMITAATIONS OF
ASSIGNMENT OF GRIDBLOCK studies generally indicate that if the facies SIMUL
SIMULA ATION
PROPERTIES distributions through the reservoir are As computing power and software capability
Chapter 4 and 5 of SPE Monograph 13 correctly modeled and each facies is assigned have developed, the ar t of reser voir
provide further discussion on the challenges the correct order of magnitude for simulation has proven to be a valuable
of assigning representative average values permeability, the relatively small errors in complement to other methods of reservoir
for rock and fluid properties to each the absolute value of permeability assigned analysis. To the geologist, a threedimensional
gridblock in a simulation model and the size to each gridblock are insignificant, since they model is the ultimate tool for visualizing and
of gridblocks and timesteps to use. The are compensated for by the large area of then communicating the reservoir
choices are interrelated and influenced by: flow that is available for fluid movement. interpretation to others (Figure 14.4). As a
working tool, it integrates the partial
the areal and vertical variation in the Constructing the entire reservoir model interpretations provided by each discipline
observed rock and fluid properties, with a minimum size of gridblock captures and allows for an unsurpassed level of
the type of physical processes being the level of detail needed for critical consistency checks.
modeled, and aspect(s) of the reservoir simulation but
the solution techniques being used. over-compensates in non-critical areas. To the reser voir engineer, modern-day
Subsequent inspection of the model, keeping reservoir simulation software provides the
Often, the best approach is to select the in mind the physical processes (i.e., thermal capability to visualize and present the
smallest gridblock size and number of layers processes) and solution techniques that will movement of fluids through rock in
needed to accurately describe the changes be used to model fluid flow, will identify areas accordance with physical principals. With it
in reservoir facies, reservoir geometry, and of the reservoir that do not require the level we can:
fluid distribution. For example, fluid of detail that was built into the original
saturation changes in an oil-water transition model. The process of subsequently selecting comparatively assess the hydrocarbon
zone might require gridblocks with an and reducing the number of gridblocks used recovery efficiency of various
unusually small height of one foot or less to to model the non-critical areas is referred production systems that could be
adequately represent the change in saturation to as upscaling. considered for a given reservoir prior
through the transition zone with the series to their implementation and
of single values available to stacked Selection of the appropriate timestep is more closely monitor producing
gridblocks. Production and injection wells generally left to last, because the pore reservoir trends and more quickly

56
 identify the probable causes of
deviations from forecasted
performance, particularly during the
early life of a reservoir.

Prior to production, Monte Carlo volumetric

estimates are still the best tool to quantify
the uncertainty in the gas or oil-in-place
within a deposit. But reservoir simulation
allows comparison of production
performance over the probable volumetric
range at a level not previously available.
Simulation sensitivity studies are invaluable
in identifying the uncertainties that can have
a significant impact on production / financial
performance and in focusing efforts to
acquire additional information and / or
modify development plans to mitigate
potential impacts.

For a producing reservoir, material balance

still provides the most accurate estimates
of oil- and / or gas-in-place. Accordingly,
tuning the in-place volumes in the simulator
to the material balance results improves the
diagnoses of well performance and allows
for better reservoir management.

REFERENCES
Mattax, C.C. and Dalton R.L. 1990. Reservoir
Simulation. Society of Petroleum Engineers, Henry
L. Doherty Series, Monograph Vol. 13.

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