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Author

Crystal Ball

Summary

Oil companies need to assess new fields or prospects where very little hard data exists. Based on seismic data, analysts can estimate the probability distribution of the reserve size. With little actual data available, your discovery team wants to quantify and optimize the Net Present Value (NPV) of this asset. In the process, you will optimize the number of wells to drill, the size of the processing facility, and the plateau rate of the field. Keywords: oil field, development, optimization, NPV, reserves, production profile

Discussion

You can simplify this analysis by representing the production profile by three phases: (1) Build up: The period when you drill wells to gain enough production to fill the facilities. (2) Plateau: After reaching the desired production rate (plateau), the period when you continue production at that rate as long as the reservoir pressure is constant and until you produce a certain fraction of the reserves. In the early stages of development, you can only estimate this fraction, and production above a certain rate influences plateau duration. (3) Decline: The period when production rates, P, decline by the same proportion in each time step, leading to an exponential function: P(t) = P(0) exp(-c*t), where t is the time since the plateau phase began and c is some constant. With only estimates for the total Stock Tank Oil Initially In Place (STOIIP = reserve size) and percent recovery amounts, the objective is to select a production rate, a facility size, and well numbers to maximize some financial measure. In this example, the measure used is the P10 of the NPV distribution. In other words, the oil company wants to optimize an NPV value which they are 90% confident of achieving or exceeding. As described, the problem is neither trivial nor overly complex. A high plateau rate doesn’t lose any reserves, but it does increase costs with extra wells and larger facilities. However, facility costs per unit decrease with a larger throughput, so choosing the largest allowed rate and selecting a facility and number of wells to match might be appropriate.

**Using Crystal Ball
**

Crystal Ball enhances your Excel model by allowing you to create probability distributions that describe the uncertainty surrounding specific input variables. This model includes five probability distributions, referred to in Crystal Ball as "assumptions." These five assumptions describe the uncertainty around the STOIIP, Recovery, Well rate, Discount factor, and Well cost input variables. Each assumption cell is colored green and is marked by an Excel note (mouse over the cell to view the note). To view the details of an assumption, highlight the cell and either select Define Assumption from the Define menu or click on the Define Assumption button on the Crystal Ball toolbar.

Using Crystal Ball, cont.

89 million? What about your certainty of breaking even? To view which of the assumptions had the greatest impact on the forecast. For each optimization. you will see the NPV forecast chart. The problem has no constraints and one objective: to maximize Gross Profit around the P10. even with the inherent uncertainty around the five input variables (the assumptions).g. Which variables most affect the NPV result? Would more research help to reduce the uncertainty around one or more assumptions? Using OptQuest Now that you have run at least one simulation. cont. can lead you to a higher NPV. Forecasts are equations. What is the best combination of the three decisions that results in the highest P10 for NPV? Once OptQuest is finished. cont. and Plateau rate. Using OptQuest. When you run a simulation. shown in light blue. What is the mean NPV? What is your certainty of achieving or exceeding the original NPV estimate of $258. you want to analyze the Net Present value (NPV). which is a histogram of the simulated values. and Crystal Ball displays the forecast chart for the simulation from the best . drill 28 wells) and runs a Crystal Ball simulation (e. The three decision variables defined in this model are Well to drill. OptQuest then saves the NPV P10 value. while maximizing your NPV forecast around the 10th percentile (P10) value. Your spreadsheet now displays the optimal solution. you want to optimize the number of wells to drill. OptQuest then runs another simulation on a new decision variable value. Start OptQuest from the Run menu and use the OptQuest Wizard to view the settings for the optimization. highlight the cell and either select Define Forecast from the Define menu or click on the Define Forecast button on the toolbar. You can watch OptQuest's progress through the performance graph.. it uses multiple metaheuristic methods and techniques to analyze past results and improve the quality and speed of its process. This model also includes a Crystal Ball forecast. Each decision variable is colored yellow and is marked by an Excel note (mouse over the cell to view the note). use a sensitivity chart. During a simulation.Using Crystal Ball. In this example. you can begin to address optimization using OptQuest. that you want to analyze after a simulation. As OptQuest runs. Excel then recalculates the model. and the plateau rate of the field. You can test this by selecting Single Step from the Run menu or clicking on the Single Step button on the toolbar. when made properly. Your previous simulation used static values for each of these variables. these are decisions that. In this model. which shows a flattened line as it converges to an optimal result. highlight the cell and either select Define Decision from the Define menu or click on the Define Decision button on the Crystal Ball toolbar. OptQuest selects a new value within the defined range of each decision variable (e. which are model variables over which you have control. To view a forecast with Crystal Ball. Run the optimization. constantly searching for the best Gross Profit that also agrees with your requirement. To view the details of a decision variable. or outputs. but in reality. you can copy the optimal results back to your spreadsheet through the Copy Best Solution to Spreadsheet command in the Edit menu. Facility size. the size of the processing facility. Crystal Ball saves the values in the forecast cells and displays them in a forecast chart. 2000 trials). OptQuest requires decision variables. Crystal Ball generates a random number for each assumption (based on how the assumption has been defined) and places that new value in the cell. After you run a simulation.g. OptQuest repeats this process..

Number of values to test for Facility Size is 7. Your spreadsheet now displays the optimal solution. Other names may be trademarks of their respective owners. select Run > Tools > Decision Table and follow the three-step process. Number of trials per simulation is 500. You can use OptQuest's Solution Analysis tool to review the other combinations of decision variables that resulted in high NPV forecasts. Oracle is a registered trademark of Oracle Corporation and/or its affiliates.Best Solution to Spreadsheet command in the Edit menu. which you can analyze using the chart buttons on the upper left of the table. Oracle and/or its affiliates. Show only target forecast After Step 3. Copyright Information Copyright © 2004. 2008. the tool will create a new workbook with the Decision Table results (42 simulations in this case). To run the tool. Using the Decision Table Tool The Crystal Ball User Manual uses this example to describe the operation of the Decision Table tool. . All rights reserved. Suggested settings for testing NPV: Step 1 = Select NPV as the forecast Step 2 = Move Wells to drill and Facility size to the Chosen Decision Variables list Step 3 = Number of values to test for Wells To Drill is 6. and Crystal Ball displays the forecast chart for the simulation from the best optimization.

00 Cumulative Cumulative Oil Discounted Oil (mmb) (mmb) 21.60 63.0 mmbbls % years mbd mbd % $mm mbd $/bbl % of reserves % of reserves annually Oil Production Profile Abbreviations Used mmbbls: million barrels mbd: thousand barrels per day $mm: million dollars $/bbl: dollars per barrel 630.18 Note: production decline rate is exponential with the exponent calculated to produce remaining reserves.0 10.50 7.00 258.2692 18.00 2 115.00 63.50 0.00 10.00 42.00 10.00 250.00 59.00 2. .08 379.00 346.00 172.00 250.07 42.53 21.00 65.0 2.00 10.60 172.89 mmbbls mbd mbd mmbbls mmbbls years years mmbbls $mm $mm $mm Facilities Costs Output (mbd) Cost ($mm) 50 70 100 130 150 180 200 220 250 250 300 270 350 280 Objective: maximize 10th percentile Calculated Production Profile Annualized Annual Year Rate Production (mbd) (mmb) 1 57.00 21.45 250.Oil Field Development Input Variables STOIIP Recovery Time to plateau Well rate Wells to drill Minimum rate Discount factor Well cost Facility size Oil margin Plateau ends at Plateau rate is Calculated values Reserves Max plateau rate Plateau rate Build up production Plateau production Plateau ends at Decline factor Production life Discounted Reserves Well Costs Facilities Costs NPV 1500.00 25 10.

00 0.00 0.41 629.00 630.45 .00 0.16 369.73 0.60 167.00 630.60 172.60 172.00 0.00 252.3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 172.00 0.00 63.29 307.81 625.00 0.00 0.00 0.00 630.25 524.45 379.00 0.87 612.45 379.00 630.00 630.00 0.00 0.00 630.45 379.04 375.45 379.00 0.05 132.99 45.00 0.00 630.00 0.00 630.47 619.45 379.00 126.00 0.00 630.21 58.28 0.00 0.00 0.32 573.00 111.85 590.45 379.00 0.00 0.45 379.60 172.06 77.00 0.00 0.45 379.00 0.10 15.00 378.45 379.30 0.00 189.45 379.00 630.00 0.53 16.10 345.45 379.40 373.14 552.00 63.00 630.00 0.32 378.45 379.00 630.00 630.61 4.45 379.31 20.36 11.00 0.00 0.30 602.00 630.00 0.61 364.73 276.00 63.00 0.83 0.00 630.97 487.60 7.00 0.58 330.61 240.00 0.07 34.00 630.00 0.89 28.00 438.00 315.00 630.00 0.60 172.25 158.18 21.45 379.00 0.45 12.00 0.45 379.00 0.54 379.00 630.70 630.43 26.00 0.00 0.45 379.00 60.00 63.00 0.00 630.45 379.00 0.58 201.00 63.57 9.00 0.00 0.27 101.34 5.00 0.97 48.45 379.45 379.39 379.00 630.74 356.57 377.28 36.45 379.00 630.45 379.45 379.00 630.

45 379.00 0.00 630.00 630.00 379.45 .45 379.00 0.45 379.00 0.45 379.45 379.00 630.00 0.45 379.42 43 44 45 46 47 48 49 50 0.45 379.00 0.00 0.00 0.00 630.00 0.00 630.00 0.00 0.00 0.00 0.00 630.00 630.00 630.00 0.00 0.45 379.00 0.00 0.00 0.00 630.

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