Exploration Strategy

1. Global Basin Analysis Complete Basin Studies Acquire New Exploration Licenses

The Prospect Evaluation

2. Develop Play Concepts 3. Define Exploration Play Areas 4. Evaluate Prospects 5. Identify Drillable Prospects Drillable Prospects/ Well proposals Drill Exploration Wells Compile Full Lead & Prospect Inventory

6. Drill Exploration Wells = New Resources

Evaluation
Basin Scale Assessment Estimation of undiscovered potential within each Play 3. Assessment of Prospect-Specific Risk 4. Volumetric Calculations (Reserve estimates) 5. Economic Analysis Š Infrastructure Š Market Š Price Š Taxes and royalties Š Political Risks
1. 2.

To drill or not to drill?
Š
1)

Basin-scale Play assessment:

Identify areas of a basin where there are: source rocks, reservoirs and traps 2) Identify prospects in those areas 3) Rank the prospects by risk 4) Drill the best one, then re-evaluate the others

Probability of Success

Example
100%

US Drilling Success Rates for Oil and Gas Wells 1978-1997

Risk Factor Risk (0-1) Š Probability hydrocarbon charge 0.80 Š Probability of reservoir 0.80 Š Probability of a trap 0.70 Chance of Success 0.44

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996

Exploratory

Development

(EIA, 1997)

No structural traps (20%) C.00 $40.00 $80.00 1983 1988 1993 Hydrocarbon charge • Source Rock Quality (TOC. Long migration required (50%) D.00 $60.00 $20.Number of Wells 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 1978 Number of Wells Inflation-adjusted Price More Detailed Risk Factors Oil Price Š $120. Poor source (50%) Fairway Map Jurassic Gertrude Play Claudius Play HAMLET PLAY ? Polonius Play CI = 300m CI = 500m CI = 500m 50 m . Everything is cool (100%) B.00 $100.00 $0. Long migration and bad reservoir (30%) E. Kerogen type) • Maturity of Source Rock • Migration Pathways Š Reservoir • Porosity • Permeability Š Trap • Closure (Trap volume) • Seal (Trapping efficiency) • Timing Basin-wide Play Map Probability of Success A.

6 . Pressure and gas-oil ratio 1 to 1. Potential Probability Distribution ? Every risk element of a prospect is imperfectly known before drilling.34 RESERVOIR POTENTIAL: Pay Aerial Extent = Pay Thickness = * (Multizone) Porosity = Saturation = 1 1 P10 340km2 1050m 15 % 60 % Min Max .2 Thickness: 48 ft Net/Gross: 0.7 High shrinkage oil Boi= 1.7 411 Billion scm Cumulative Probability Š Volumetric calculation Reserves= Area of trap) x Thickness of reservoir unit x Net to gross ratio of reservoir x Porosity x Hydrocarbon saturation x Recovery factor x Formation volume factor Min Most likely Max Volumetric Example Formation Volume Factor Š Š Š Š Š Change in volume from reservoir to surface conditions Depends on Reservoir Temp. Most Likely P90 200km2 750m 7% 40 % P50 = 138 billion scm (gas) RISK ELEMENTS: Source Presence = Source Maturity = Reservoir Quality* = Trap Quality = Migration/Trap Timing = .8 .Hamlet GEOMETRY: ESTIMATED RESERVES: Risk Elements x Res.4 Low Shrinkage oil Boi = 1.40 .

7 Porosity = .80 billion scm RISK ELEMENTS: Source Presence = Source Maturity = Reservoir Quality = Trap Quality = CI = 50m Migration/Trap Timing = . Potential ? ? ? P50 = 0.8 .GERTRUDE PLAY Gertrude GEOMETRY: ESTIMATED RESERVES: Risk Elements x Res.5 6.12 RESERVOIR POTENTIAL: Pay Aerial Extent = Pay Thickness = .84 Billion scm .6 P90 25km2 140m 9% 70 % P10 27km2 150m 11 % 80 % .7 Saturationc = .

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