i

ACKNOLEDGEMENT

We wish to express special thanks to Dr. Zaw Htet Aung, Professor and Head,
Department of Petroleum Engineering, Yangon Technological University, for his
encouragement and for providing helpful support.
We would like to express a great gratitude and a deep sense of appreciation to
our supervisor, Dr. Naing Lynn, Professor and our mentor, U Thaw Aung, for their
patient guidance and valuable suggestion during the planning and development of this
project. The willingness to give their time so generously has been very much
appreciated.
We also would like to give our special thanks to Dr. Maung Maung Thet
Naing Tun, Deputy Head and Professor, Dr. Aung Ko Oo, Professor, U Aung Zaw
Latt, Associate Professor and U Sein Win Aung, Associate Professor, for their helpful
support and advices.
 ii

ABSTRACT
Field development project introduces the important and fundamental parts related
to the reservoir engineering in both literature and visual view. Starting from
geological subsurface, data analyst’s considerations on geological, geographical and
geophysical properties have been described in this book. Validation with PVT data
and field data can be learned through this.
From PVT data validated, reserve estimation methods have been described.
Volumetric method point of view and Monte Carlo Simulation are included in this
field development project. Linking volumetric estimation and material balance will be
able identify initial reserve and recover factor for the field.
After volumetric and material balance are decided the OOIP and RF, decline
curve is analyze for the reservoir life time. In analyzing the decline curve we need to
have production data. So, by correlating with material balance and economic, we
predict the initial production rate and economic production rate. And then we take the
reservoir as exponential decline instead of hyperbolic and harmonic.
For the development of the field, economic analysis is also important and
mandatory to consider the entire project is profitable or not. If the estimated reserve is
not considerably referred to be economic, the field development is not needed. In such
cases, the main goal of the company is to make decisions and outcomes that drives the
best way of maximizing the present-day profit. The cash flow model is the most
common model used to access appropriateness of a given project, estimate its value
and justify it from an engineering standpoint.
 iii

TABLE OF CONTENTS

ACKNOLEDGEMENT ................................................................................................. I
ABSTRACT .................................................................................................................. II
TABLE OF CONTENTS ............................................................................................. III
LIST OF FIGURES .................................................................................................. VIII
LIST OF TABLE .........................................................................................................XI
.................................................................................................................. 1
INTRODUCTION ......................................................................................................... 1
Geological Structure ....................................................................... 1
Project Workflow............................................................................ 2
Project Schedule ............................................................................. 2
Risk Analysis .................................................................................. 2
.................................................................................................................. 5
THEORY BACKGROUND FOR RESERVE ESTIMATION AND ECONOMIC ..... 5
Data Analysis .................................................................................. 5
2.1.1 Introduction to Data Analysis .............................. 5
2.1.2 Measuring Methods .............................................. 6
2.1.2.1 Core analysis ........................................................ 7
2.1.2.2 Well logging ......................................................... 8
Open hole logging: ................................................................ 9
Cased hole logging ................................................................ 9
2.1.3 Rock and Fluid Properties .................................. 10
2.1.3.1 Review of Rock Properties ................................. 10
2.1.3.2 Review of Gas Properties ................................... 13
2.1.3.3 Review of Crude Oil Properties ......................... 17
2.1.3.4 Review of Reservoir water Properties ................ 19
Volumetric Method ....................................................................... 20
2.2.1 Resources Related Term Definitions .................. 20
2.2.1.1 Total petroleum initially in place ....................... 20
2.2.1.2 Discovered petroleum initially in place.............. 21
2.2.1.3 Production .......................................................... 21
 iv

2.2.1.4 Reserves ............................................................. 21

2.2.1.5 Contingent resources .......................................... 21
2.2.1.6 Undiscovered petroleum initially in place ......... 21
2.2.1.7 Prospective resources ......................................... 21
2.2.1.8 Unrecoverable .................................................... 21
2.2.2 Uncertainty ......................................................... 22
2.2.3 Reserve Estimation Method ............................... 23
2.2.4 Volumetric Method ............................................ 24
2.2.4.1 Deterministic method ......................................... 24
2.2.4.2 Probabilistic method ........................................... 25
Material Balance Method ............................................................. 25
2.3.1 Introduction to MBE .......................................... 26
2.3.2 Material Balance Method ................................... 26
2.3.3 Assumption and Limitation of MBE .................. 28
2.3.4 Significance and Usage of Material Balance
Equation 30
2.3.5 Source of Data to be used in the Material Balance
31
2.3.6 Conclusion .......................................................... 31
Decline Curve Analysis ................................................................ 32
2.4.1 Introduction to Decline Curve ............................ 32
2.4.2 Method of Decline Curve ................................... 33
2.4.3 Basic Plot of Decline Curve ............................... 35
2.4.4 Theory of Arps’ Decline Curve Analysis ........... 37
2.4.4.1 Types of Arps’ decline curve ............................. 37
2.4.4.2 Condition and limitation for Arps method ......... 39
Petroleum Economic ..................................................................... 39
2.5.1 Introduction ........................................................ 39
2.5.2 Role of Petroleum Economists ........................... 40
2.5.3 Type of Contracts ............................................... 40
2.5.3.1 Concession ......................................................... 40
2.5.3.2 Production Sharing Contract (PSC) ................... 41
2.5.3.3 Joint Venture (JV) .............................................. 41
2.5.3.4 Technical Service Agreement (TSA) ................. 41
 v

2.5.4 Investment Analysis ........................................... 42

2.5.4.1 Cash flow............................................................ 42
2.5.4.2 Inflation .............................................................. 43
2.5.4.3 Time value of money.......................................... 44
2.5.4.4 Interest ................................................................ 45
2.5.4.5 Risk and uncertainty ........................................... 45
2.5.4.6 Profitability indicator ......................................... 45
2.5.4.7 Net present value ................................................ 46
2.5.4.8 Internal rate of return (IPR) ................................ 46
2.5.5 Expenditures ....................................................... 46
2.5.5.1 CAPEX ............................................................... 47
2.5.5.2 OPEX ................................................................. 47
2.5.6 Decision tree analysis ......................................... 48
2.5.7 Break even analysis ............................................ 49
2.5.7.1 Components of break-even point ....................... 49
2.5.8 Sensitivity analysis ............................................. 50
2.5.8.1 Tornado chart ..................................................... 50
................................................................................................................ 51
CALCULATION PROCEDURE FOR FIELD DEVELOPMENT PROJECT ........... 51
Data Analysis ................................................................................ 51
3.1.1 Correlated Equations Appropriate with Field
Reservoir 51
3.1.1.1 Correlation of bubble point pressure .................. 51
3.1.1.2 Correlation for isothermal compressibility......... 52
3.1.1.3 Gas formation volume factor.............................. 52
3.1.1.4 Solution gas oil ratio .......................................... 53
3.1.1.5 Oil formation volume factor ............................... 54
3.1.2 Conclusion .......................................................... 54
Volumetric Method ....................................................................... 54
3.2.1 Deterministic Method ......................................... 54
3.2.2 Probabilistic Method .......................................... 55
3.2.3 Data Gathering and Calculating Procedures ...... 57
Material Balance Method ............................................................. 58
 vi

3.3.1 Developing Generalized Material Balance

Equation 58
3.3.2 Generalized Material Balance Equation ............. 63
3.3.3 Solving Material Balance Equation .................... 64
3.3.4 Material Balance Equation for Solution Gas Drive
Reservoir 65
3.3.5 Solution Gas Drive ............................................. 66
3.3.6 Conclusion .......................................................... 67
Decline Curve Analysis ................................................................ 67
3.4.1 Exponential Decline (b=0) ................................. 68
3.4.2 Hyperbolic Decline (0<b<1) .............................. 69
3.4.3 Harmonic Decline (b=1)..................................... 70
3.4.4 Conclusion .......................................................... 70
Petroleum Economics ................................................................... 71
3.5.1 Calculation Procedures ....................................... 71
3.5.1.1 Calculation of P50 Case ..................................... 71
................................................................................................................ 77
RESULT AND DISCUSSION .................................................................................... 77
Data Analysis ................................................................................ 77
4.1.1 Bubble Point Pressure ........................................ 77
4.1.2 Rock Compressibility ......................................... 77
4.1.3 Oil Compressibility ............................................ 78
4.1.4 Gas Deviation Factor .......................................... 78
4.1.5 Gas Formation Volume Factor ........................... 80
4.1.6 Solution Gas-Oil Ratio ....................................... 82
4.1.7 Oil Formation Volume Factor ............................ 83
4.1.8 Checking with Given PVT Data Graph .............. 84
4.1.8.1 Gas Deviation Factor .......................................... 84
4.1.8.2 Gas Formation Volume Factor ........................... 85
4.1.8.3 Solution Gas Oil Ratio ....................................... 85
4.1.8.4 Oil Formation Volume Factor ............................ 86
Volumetric Method ....................................................................... 86
4.2.1 Probabilistic Method .......................................... 87
 vii

4.2.1.1 Probability Density Function and Probability

Curves 87
4.2.2 Monte Carlo Simulation ..................................... 92
4.2.3 Conclusion and Discussion ................................ 94
Material Balance Method ............................................................. 94
4.3.1 Calculation of recovery factor above bubble point
pressure 95
4.3.2 Calculation of recovery factor below bubble point
95
4.3.2.1 Before critical gas saturation .............................. 96
4.3.2.2 After critical gas saturation ................................ 96
4.3.3 Conclusion ........................................................ 103
Decline Curve Analysis .............................................................. 103
Petroleum Economic ................................................................... 105
4.5.1 Sensitivity Analysis .......................................... 105
4.5.1.1 NPV vs. Discount Rate of P50 case ................. 105
4.5.1.2 Tornado Chart .................................................. 106
4.5.2 Decision Tree ................................................... 106
.............................................................................................................. 107
RESERVOIR SIMULATION MODEL .................................................................... 107
Design Thinking ......................................................................... 107
Installation .................................................................................. 109
Difficulties and Problems ........................................................... 114
Conclusion .................................................................................. 114
CONCULSION .......................................................................................................... 115
REFERENCES .......................................................................................................... 117
 viii

LIST OF FIGURES

Figure 1.1. Work Flow chart .......................................................................................... 2

Figure 1.2. Gantt chart ................................................................................................... 2
Figure 2.1. Reservoir rock ........................................................................................... 11
Figure 2.2. Chart of porosity with compressibility on various stone ........................... 12
Figure 2.3. Real gas, Z factor chart .............................................................................. 15
Figure 2.4. Solution gas-oil ratio of the Big Sandy Field reservoir oil, by flash
liberation at reservoir ................................................................................................... 18
Figure 2.5. Formation volume factor of the Big Sandy Field reservoir oil, by flash
liberation at reservoir pressure at 160 F ....................................................................... 19
Figure 2.6. Resources Classification ............................................................................ 22
Figure 2.7. Resources Classification Framework ........................................................ 22
Figure 2.8. Recovery Vs Development Phases ............................................................ 23
Figure 2.9. Tank Model ............................................................................................... 27
Figure 2.10. Chart to show methods and techniques of decline curve ........................ 34
Figure 2.11. Plot of production rate vs. time ............................................................... 36
Figure 2.12. Plot of production rate vs. cumulative production .................................. 36
Figure 2.13. Log of water cut vs. cumulative production ............................................ 36
Figure 2.14. Log of oil cut vs. cumulative production plot ......................................... 36
Figure 2.15 Oil water contact or gas oil contact vs. cumulative production ............... 37
Figure 2.16 Cumulative gas production vs. cumulative oil production ....................... 37
Figure 2.17. Classification of production decline curve. Six typical plot scale to show
the different curvature of Arps decline type. ............................................................... 38
Figure 2.18 International scenario of contract types .................................................... 41
Figure 2.19 A sample of cash flow profile .................................................................. 42
Figure 2.20 Simple Decision Tree (completed) ........................................................... 48
Figure 2.21 Tornado Chart ........................................................................................... 50
Figure 3.1 Compressibility factors for natural gases (after Standing and Katz, trans.
AIME) .......................................................................................................................... 53
Figure 3.2 Triangular Distribution ............................................................................... 55
Figure 3.3 Normal Distribution.................................................................................... 56
Figure 3.4. Lognormal Distribution ............................................................................. 56
Figure 3.5. Monte Carlo Schematic ............................................................................. 57
 ix

Figure 3.6 Rate vs. time decline curve ......................................................................... 68

Figure 4.1. Compressibility factors for natural gases (after Standing and Katz, trans.
AIME) .......................................................................................................................... 79
Figure 4.2. Pressure Vs Gas Deviation Factor ............................................................. 80
Figure 4.3. Pressure Vs Gas Formation Volume Factor .............................................. 81
Figure 4.4. Pressure Vs Solution Gas Oil Ratio........................................................... 82
Figure 4.5. Pressure Vs Oil Formation Volume Factor ............................................... 84
Figure 4.6. Comparison of Observed and Calculated for z.......................................... 84
Figure 4.7. Comparison for Calculated and Observed for Bg ..................................... 85
Figure 4.8. Comparison of Rs for Calculated and Observed ....................................... 85
Figure 4.9. Comparison of Bo for Calculated and Observed ....................................... 86
Figure 4.10. Area Vs PDF............................................................................................ 87
Figure 4.11. Areas Vs Probability................................................................................ 87
Figure 4.12. Net Pay Vs PDF....................................................................................... 88
Figure 4.13. Net Pay Vs Probability ............................................................................ 88
Figure 4.14.Porosity Vs PDF ....................................................................................... 89
Figure 4.15. Porosity Vs Probability............................................................................ 89
Figure 4.16 .Saturation Vs PDF ................................................................................... 90
Figure 4.17. Saturation Vs Probability ........................................................................ 90
Figure 4.18. Volume Factor Vs PDF ........................................................................... 91
Figure 4.19. Volume Factor Vs Probability ................................................................. 91
Figure 4.20. Run time (100)......................................................................................... 92
Figure 4.21. OOIP in 100 run ...................................................................................... 92
Figure 4.22. Reserve in 100 run ................................................................................... 93
Figure 4.23. Run time (1000) ....................................................................................... 93
Figure 4.24. OOIP in 1,000 run ................................................................................... 93
Figure 4.25. Reserve in 1,000 run ................................................................................ 94
Figure 4.26. RF Vs P assuming before critical gas saturation ................................... 100
Figure 4.27. RF Vs P assuming after critical gas saturation ...................................... 101
Figure 4.28. Comparison of RF before and after critical gas saturation .................... 102
Figure 4.29 Result chart. Plot of q vs. t on the cartesian coordinate ......................... 104
Figure 4.30 Result chart. Plot of q vs. t on the semi-log scale................................... 104
Figure 4.31 Result chart. Plot of q vs Np on cartesian coordinate............................. 104
Figure 4.32 Result chart. Plot of q vs. Np on semi-log scale..................................... 105
 x

Figure 4.33 NPV vs. Discount rate of P50................................................................. 105

Figure 4.34 Tornado Chart ......................................................................................... 106
Figure 4.35 Decision Tree of P50 Case ..................................................................... 106
Figure 5.1. Design Thinking for Producing Fluid...................................................... 107
Figure 5.2. Design Thinking for Circulation ............................................................. 108
Figure 5.3. Material Selection .................................................................................... 108
Figure 5.4. Reservoir Layer Preparation .................................................................... 110
Figure 5.5. Sticking Double Tape to Layer................................................................ 110
Figure 5.6. Cutting Extra Parts .................................................................................. 111
Figure 5.7. Putting on the Frame ............................................................................... 111
Figure 5.8. Mixing for Artificial Water ..................................................................... 111
Figure 5.9. Artificial Water Layer ............................................................................. 112
Figure 5.10. Separator Scale Model ........................................................................... 112
Figure 5.11. Christmas Tree scale model with Lego ................................................. 112
Figure 5.12. Rig Scale Model .................................................................................... 113
Figure 5.13. Underground Water Supply ................................................................... 113
Figure 5.14. Surface Scale Model .............................................................................. 113
 xi

LIST OF TABLE

Table 1.4-1 Level of consequences ................................................................................ 3

Table 1.4-2 Level of probability .................................................................................... 3
Table 3.3-1 Known and unknown parameter for MBE ............................................... 64
Table 3.4-1 Different value of 'b' ................................................................................. 67
Table 3.5-1 Oil Production Profile............................................................................... 72
Table 3.5-2 Expense Profile ......................................................................................... 73
Table 3.5-3 Percentage Sharing between Operator and Contractor ............................. 74
Table 3.5-4 Taxation Profile ........................................................................................ 75
Table 4.1-1. Calculation for z ...................................................................................... 77
Table 4.1-2. Calculation for compressibility ............................................................... 78
Table 4.1-3. Chart for gas deviation factor .................................................................. 80
Table 4.1-4. Chart for gas formation volume factor .................................................... 81
Table 4.1-5. Calculation of solution gas oil ratio......................................................... 82
Table 4.1-6. Calculation for oil formation volume factor below bubble point ............ 83
Table 4.1-7. Calculation of oil formation volume factor above bubble point ............. 83
Table 4.2-1. Original Oil in Place by Deterministic Method ....................................... 86
Table 4.2-2. Parameters Ranges for OOIP................................................................... 87
Table 4.2-3. Percentiles Area ....................................................................................... 88
Table 4.2-4. Percentiles Net Pay .................................................................................. 89
Table 4.2-5. Percentiles Porosity ................................................................................. 90
Table 4.2-6. Percentiles Saturation .............................................................................. 91
Table 4.2-7. Percentiles FVF ....................................................................................... 92
Table 4.3-1. Given PVT data (calculated) ................................................................... 95
Table 4.3-2. Iteration for Recovery Factor at 1000psi ................................................. 99
Table 4.3-3. Iteration for Recovery Factor at 750 psi .................................................. 99
Table 4.3-4. Recovery Factor assuming 1000psi is before critical gas saturation ..... 100
Table 4.3-5RF – Recovery factor assuming 1000psi is after critical gas saturation.. 101
Table 4.3-6Comparison of RF depending on Critical Gas Saturation ....................... 102
Table 4.4-1 Production data from year 1 to 5 (before reaching peak production)..... 103
Table 5.1-1 Risk Analysis for Chemical Hazard ....................................................... 108
Table 5.1-2. Risk Analysis for Physical Hazard ........................................................ 109
 1

INTRODUCTION

The field development plan for the 3800-sand field is assigned to the reservoir
team as design project. The project plan consists of four phases, as will be shown later
in the flow chart. In order to organize and optimize the project plan, a work break
down structure and gnat chart were all generated and later explain in this report.
The main aim for our project is to design step by step plans for an effective
field development project. The key objective is to utilize the integrated asset approach
and to create an integrated asset model for a green field. And during the project, we
have completed the following objectives:
 To know how to correlate the PVT data and G&G data
 To learn about OOIP & reserve estimation by various methods
 To study the declination of a reservoir with time
 To access the profitability of the reserve with economic consideration
So, at the end at the project, we understand how to manage and develop the reservoir
for the production and also for economic.
Geological Structure
For this project, we have assigned 3800-sand from Mann Oil Field.
Geologically, Mann Oil Field lies in the Central Tertiary Basin of Myanmar and is
situated on the Northern Plunging End of the Minbu anticline in Proved Oil Province
of the Central Myanmar Basin. Mann Field is located about 334 miles far from north
of Yangon, (latitude 20 ̊ 7' North and longitude 94 ̊ 50" East) in central Myanmar.
The oil field was produced from several formations and 3800-sand field is
located in Okhmintaung Formation. The 3800-sand field formation have the area of
411 acres and the net pay thickness is about 65 ft. The reservoir has porosity between
12% to 35% (average 24%) and permeability about 113md.
 2

Project Workflow
The project workflow (work breakdown structure and work flow) was
important feature that helped the group plan to work more efficiently. It was
important to visualize what the main deliverables were, and the tasks that were needed
to perform in order to produce them.

Figure 0.1. Work Flow chart

Project Schedule
In scheduling for the project, we use simple and effective Gantt chart to
convey information visually. The schedule is a major feature to first, estimate the
duration of each task and phase, and second, to assign the tasks for the group
members. Gantt chart gives you an instant overview of the project, its associated
tasks, and when these tasks need to be finished. The main aim of making Gantt chart
is to successfully completing the project plan.

GANTT CHART FOR RESERVOIR TEAM

2019
JUNE JULY AUGUST

Jun 9 - Jun 15 Jun 16 - Jun 22 Jun 23 - Jun 29 Jun 30 - July 6 July 7 - July 13 July 14 - July 20 July 21 - July 27 July 28 - Aug 3 Aug 4 - Aug 10 Aug 11 - Aug 17 Aug 18 - Aug 24 Aug 25 - Aug 31
Design Phase
Team Selection and Contact Information 1
Vote on & Acquire Project 2
Organize Given Information 6
Specify Project Phases & Assign to individuals 1
Risk Analysis 6
Phase 1 (Determine Formation Properties)
Analyze well logs 2
Fluid and rock properties 3
Theory Background 2
Phase 2 (Load data on Excel)
Load Data Analysis 5
Load Data for Volumetric 10
Load Data for MBE 10
Load Data for DCA 10
Phase 3 (Develop Reservoir Model)
Volumetric Method 10
Material Balance 10
Decline Curve 10
Economic Analysis 11
Well Spacing 9
Phase 4 (Reservoir Scale Model)
Identification of Scale Model Items 7
Preparation of Reservoir Layer 30
Preparation of Surface Equipments 30

Figure 0.2. Gantt chart

Risk Analysis
To ensure the successful completion of the project, risk analysis was carried
out for each of the phase of the project. Each phase has different risk to take, and in
calculation phase we have to take risk by estimating the data.
 3

Start from the analyzing of the data, we have to face with the uncertainty of
the data. So, in the first step we do data analyzing with various correlation methods
(such as standing method). Then, we take this data to calculate the following methods
(Volumetric, Material balance and Decline analysis) to estimate the following lifetime
of the reservoir.
During the project, we have to manage time and also money for the scale
model. The management skill is important in the life of the project to be successfully
complete within time.
The risk for the health of the people is most concern in the final phase (model
building phase). In building the scale model we can have physical risk, chemical risk
and mental risk that can harmfully affect the human health. So, we should consider
the risks and the control measure before starting the project. In defining the risk, we
have risk level of low, medium and high. The risk level is obtained by multiplying the
probability and consequences.

Table 1.4-1 Level of consequences

CONSEQUENCES
Category Level
5 Catastrophic
4 Major
3 Moderate
2 Minor
1 Insignificant

Table 1.4-2 Level of probability

PROBABILITY
Category Level
5 Almost certain
 4

4 Likely
3 Possible
2 Unlikely
1 Rare

Figure 1. 1. Level of risk

Figure 1. 2. Definition of the level of risk

The risk analysis tables are described in reservoir scale model chapter.
 5

THEORY BACKGROUND FOR RESERVE ESTIMATION AND ECONOMIC

One of the most essential tasks in petroleum industry is reserve estimation.

The total estimated amount of oil in an oil reservoir, including both producible and
non-producible oil, is called “oil in place”. Practically speaking, because of reservoir
characteristics and limitations in petroleum extraction technologies, only fraction of
can be brought to surface, and it is the only this producible fraction that is considered
to be reserve. In the development of the field, the reserve estimation is important to
identify that the reservoir is economic or not. Methods are commonly used to estimate
the reserves of recoverable hydrocarbon are volumetric, material balance, and decline
curve analysis methods. And analyzing the PVT data and calculating the economic
factors is also a part of reserve estimation.

Data Analysis
The oil and gas industry has lot of data from different sources like wells and
seismic surveys. By use of good statistical methods these data can be analyzed in a
manner that can strongly support decisions-making. During planning, exploration and
production of a field, many of the important decisions need to be taken under
uncertainty. This includes positioning of new wells and different developments
scenarios of fields. We incorporate data from large complex stochastic studies, many
scenarios and parameter uncertainty to quantify the total uncertainty and thereby
make it possible to compare different alternatives with respect to expected net present
value or other crucial parameters.

2.1.1 Introduction to Data Analysis

Throughout the life of a reservoir, from exploration to abandonment, an
enormous amount of data is collected. An efficient data management program
consisting of acquisition, analysis, validating, storing and retrieving plays a key role
 6

in reservoir management. It requires planning, justifying, prioritizing, and timing.

Multidisciplinary groups (i.e., geophysics, geologist, petrophysicists, drilling,
reservoir, production and facilities engineers) are involved in collecting various types
of data throughout the life of a reservoir. The types of data collected before and after
production is under the various broad classification including the timing of acquisition
and the professionals responsible for acquisition and analyses. Most of the data,
except for the production and injection data are collected during delineation and
development of the field.
An effective data acquisition and analysis program requires careful planning
and well-coordinated team efforts of interdisciplinary geoscientists and engineers
throughout the life of the reservoir. It will be more effective to justify to management
data collection if the need for the data, the cost, and the benefits are clearly defined.
Certain types of data such as core derived information, initial fluid properties, fluid
contacts, initial reservoir pressures can only be obtained at an early development
stage. Coring, logging, and initial reservoir fluid sampling should be made at
appropriate time using the proper procedure and analysis. Field data are subjected to
many errors (i.e., sampling, systematic, random, etc.). Therefore, the collected data
needed to be carefully reviewed and checked for accuracy as well as for consistency.
In order to assess validity, core and log analyses data should be carefully correlated
and their frequency distributions made to identify different geologic facies. Log data
should be carefully calibrated using core data for porosity and saturation distributions,
net sand determination, and geological zonation of the reservoir. Laboratory rock
properties, such as oil-water and gas-oil relative permeability, and fluid properties,
such as PVT data, are not always available. Empirical correlations can be used to
generate these data. Reservoir type should be known for choosing the most suitable
correlated equations. Moreover, rock and fluid properties should be studied for
effective correlation. Without proper data analysis, the whole project may fail.
Therefore, data analysis is an essential part of the field development project.

2.1.2 Measuring Methods

Over the years, complexity of reservoirs has increased, therefore the necessity
for reduced uncertainty and inefficiency has become crucial in order to ensure that
important information about the reservoir is obtained. This information, which
includes the measurement of fundamental parameters and how these parameters affect
 7

hydrocarbon production, can answer key questions when analyzing a reservoir, such
as:
 The lithology of the reservoir
 Which fluids are contained in the reservoir
 The location and volumes of the fluids
There are two types of measuring methods; Direct and Indirect method. The
only way to directly measure the earth's subsurface is by analyzing samples, or cores,
that engineers extract from the formation using special bits or wireline-conveyed
coring tools. Once the cores are cut, they are captured and retrieved to the surface.
Most data used by exploration and development teams to describe the earth hundreds
or thousands of meters below the surface are from indirect methods such as wireline
or while-drilling logging tools. Although both sophisticated and invaluable to operator
planning, logging measurements are subject to analysis and calibration and are limited
as to how finely they can divide and measure the earth. Core analysis and Well
logging are two essential procedures undertaken as part of the formation evaluation
process which, when used alongside each other can help to determine fundamental
properties of a reservoir and how these properties can affect hydrocarbon production.
By studying core data acquired, tests performed and well logs made available in order
to correlate both sets of data to define the lithology, porosity, permeability and
saturation. Correlation of core and well log data is an essential process as is analyzing
and comparing data for calibration to characterize lithology. This is important in order
to calibrate the data, reduce uncertainty and as a result, gain a more complete
understanding of what to expect within the formation.

2.1.2.1 Core analysis

During the exploration of a field, coring and core analysis is a very important
part of the formation evaluation process, enabling the study of samples of reservoir
rock to determine well conditions and as a result, the ability of the formation to
produce hydrocarbons. There are three types of coring methods; rotary method,
sidewell coring and high-pressure coring. Coring is also a means of obtaining
additional information about the reservoir, unavailable from other sources such as
well logs. On the other hand, as well as being an additional source of information,
coring can also be used to calibrate well log data in order to determine important
reservoir properties. The process involves obtaining cylindrical samples of rock
 8

(whole core and core plug) from a drilled well and analyzing these cores in the
laboratory to determine fundamental rock properties such as lithology, porosity,
permeability and saturation of the various fluids in the formation. Knowledge of these
properties can help to give an idea of whether a formation contains commercial
amounts of recoverable hydrocarbons. In the past, core analysis was predominantly
undertaken at the well site. However, nowadays, as technologies have become more
complex, the process is almost entirely carried out in the laboratory. Core samples
can, however be analyzed in the field, and this method has clear advantages:
 Core samples are analyzed soon after removal from the reservoir, therefore
changes in fluid saturation are minimized
 Data is obtained quickly as core samples are analyzed on site
 Core analysis measurements can be combined with well logs and other
data to enable decisions to be made based on a larger quantity of available
data.
However, field analysis of cores can be highly expensive due to the requirement of
portable equipment and skilled operators at the well site. For this reason, many
companies decide against undertaking analysis at the well site, opting to transport
core samples to the laboratory instead.

2.1.2.2 Well logging

Well logging is the process of creating written record data which are gathered
during the drilling of a borehole. The importance of well logging is that the records
enable information about any characteristics of a reservoir in subsurface layers to be
determined. Therefore, properties of a formation such as porosity, permeability,
thickness and fluid saturation distribution can be evaluated. Additionally, physical
properties including temperature, electrical current, radioactivity and sonic reflection
can be detected by running tools into the wellbore. Although, local information about
properties of a reservoir can be determined by collected cores from the well, electrical
logging is the only source that gives continuous information or data about subsurface
layers. The problem with the analysis data is that although the cores obtained during
drilling can give very important information about the subsurface layers, when they
are exposed to expansion and compression, the physical property of a rock sample can
be changed significantly. Moreover, vibration during drilling can change their
properties too. The saturation of the core can be changed due to contact with mud
 9

resulting in measurements of parameters such as porosity, permeability and saturation

to be unreliable. As a result, well logging plays a significant role in obtaining more
reliable data.
There are 2 main methods of well logging:
(1) Wire line logging
In this type, the tools are lowered into the well by a cable. The obtained data
are transmitted to the surface recording system via the cable. In this method Well
logging is performed after interruption or termination of drilling. Therefore, drilling
must be stopped and therefore the well must be empty. This is a main disadvantage of
this method.
(2) Logging while drilling (LWD)
In this type, the logging device is attached on the drill and collected data are
memorized in the tool. The data are downloaded to the surface record system when
drilling is terminated or interrupted. LWD is efficient in horizontal drilling where
wire line method cannot be applied.
Apart from the two main types, the logging can also be classified according to
the type of the completion. Logging which is classified by the type of well completion
are:
Open hole logging: Electrical, electromagnetic, nuclear or sonic tools can be
introduced into open hole completed well to obtain required data.
Cased hole logging: This type is used after well completion. The main cased hole logs
are Cement bound logging (CBL) and Variable density logs (VDL). Both logs are
used to consider the process of well completion.
In order to determine the different properties of the rock, different well log is
available for acquiring the data. Different types of logs are required to determine
various properties of rocks.
Some of them are defined below.
1. Lithology logs
 Gamma Ray Logs
 Spontaneous Potential Logs
 Sonic logs
These logs determine lithology (sand, shale) of the formation. Porous-permeable beds
and also the volume shale.
 10

2. Porosity logs
 Density logs
 Acoustic logs
 Neutron logs
 Sonic logs
These logs determine Porosity, type of the fluid and also the contact of the fluid
(GSC, GOC, OWC, GWC).
3. Resistivity logs
 Electrode logs
 Induction logs
These logs determine resistivity, saturation, MHI and also indicate the permeability of
the formation.

4. Other logs
 Photoelectric logs
 Dipmeter logs and borehole imaging
 LWD (Logging While Drilling)
Using the core samples, performing the required laboratory tests to obtain key
parameters such as permeability, porosity, saturation, capillary pressure etc., are
essential to better evaluate the formation, but are not always sufficient. Correlation of
core and well log data, analyzing and comparing data for calibration and to define the
lithology, is an essential process to optimize the data, reduce uncertainty and
ultimately gain a better understanding of what to expect within the formation.

2.1.3 Rock and Fluid Properties

Rock and fluid properties should be studied before correlation for effective
data analysis. As fluid from a reservoir is produced and brought back to the surface,
the fluid remaining in the reservoir experiences changes in the reservoir conditions.
The produced fluid also experiences changes as it is brought to the surface.

2.1.3.1 Review of Rock Properties

Properties discussed in this section include porosity, isothermal
compressibility, and fluid saturation.
(i) Porosity
 11

The porosity of a porous medium is given the symbol of Ø and is defined as

the ratio of void spaces, or pore volume, to the total bulk volume of the rock. This
ratio is expressed as either a fraction or a percentage. The term ‘hydrocarbon porosity’
refers to that part of porosity that contains hydrocarbon. It is the total porosity
multiplied by the fraction of pore volume that contains hydrocarbon. Porosity values
ranges from 10% to 40% for sandstone type reservoir and 5% to 15% for limestone
type reservoir. The value of porosity is usually reported as either a total or an effective
porosity, depending on the type of measurement used. The total porosity represents
the total void space of the medium. The effective porosity is the amount of the void
space that contributes to the flow of fluids.

Figure 0.1. Reservoir rock

(ii) Isothermal Compressibility
The isothermal compressibility for a substance is given by the following
equation:
1 𝑑𝑉
𝑐𝑓 = − 𝑉 × (2.1)
𝑑𝑃

Where,
c = isothermal compressibility
V = volume
P = pressure
The equation describes the change in volume that a substance undergoes during a
change in pressure while the temperature is held constant. The units are in reciprocal
pressure units. When the internal fluid pressure within the pore spaces of a rock,
which is subjected to a constant external (rock or overburden) pressure, is reduced,
the bulk volume of the rock decreases while the volume of the solid rock material
(e.g., the sand grains of a sandstone) increases. Both volume changes act to reduce the
porosity of the rock slightly, of the order of 0.5% for a 1000-psi change in the internal
fluid pressure (e.g., at 20% porosity to 19.9%).
 12

Figure 0.2. Chart of porosity with compressibility on various stone

(iii) Fluid Saturation
The ratio of the volume that a fluid occupies to the pore volume is called the
saturation of that fluid. Saturation is expressed as either a fraction or a percentage, but
it is used as a fraction in equations.
There are, in general, two ways of measuring original fluid saturations: the
direct approach and the indirect approach. The direct approach involves either the
extraction of the reservoir fluids or the leaching of the fluids from a sample of the
reservoir rock. The indirect approach relies on a measurement of some other property,
such as capillary pressure, and the derivation of a mathematical relationship between
the measured property and saturation.
Direct methods include retorting the fluids from the rock, distilling the fluids
with a modified American Society for Testing and Materials (ASTM) procedure, and
centrifuging the fluids. Each method relies on some procedure to remove the rock
sample from the reservoir. Experience has found that it is difficult to remove the
sample without altering the state of the fluids and/or rock.
The indirect methods use logging or capillary pressure measurements. With
either method, errors are built into the measurement of saturation. However, under
favorable circumstances and with careful attention to detail, saturation values can be
obtained within useful limits of accuracy. Ezekwe presents models and equations used
in the calculation of saturation values for both direct and methods.
 13

2.1.3.2 Review of Gas Properties

Properties discussed in the section include about ideal gas, real gas, gas
formation volume factor and other factor correspond with gas.
(i) Ideal Gas Law
The laws relating to gases are straightforward in that the relationships of
pressure, temperature and pressure are covered by one equation. First consider an
ideal gas. An ideal gas is one where the following assumptions hold:
 Volume of the molecules i.e. insignificant with respect to the total volume
of the gas.
 There are no attractive or repulsive forces between molecules or between
molecules and container walls.
 There is no internal energy loss when molecules collide.
The Equation of State for an Ideal Gas
By combining the above laws an equation of state relating pressure,
temperature and volume of a gas is obtained.
𝑃𝑉
= constant = R (2.2)
𝑇

R is the constant when the quantity of gas is equal to one mole. It is termed the
Universal Gas Constant and has different values depending on the unit system used,
so that;
R in oilfield units = 10.732 cu ft psia lb mole R
For n moles the equation becomes:
PV = nRT (2.3)
T= absolute temperature ̊ K or ̊ R where
ºK=273 + ̊ C and ̊ R=460 + ̊ F (2.4)
To find the volume occupied by a quantity of gas when the conditions of temperature
and pressure are changed from state 1 to state 2, we note that:
𝑃𝑉
n= is a constant so that
𝑅𝑇
𝑃1 𝑉1 𝑃2 𝑉2
𝑇1
= 𝑇2
(2.5)
(ii) Specific Gravity
The specific gravity of a gas is the ratio of the density of the gas relative to that
of dry air at the same conditions.
𝑑𝑒𝑛𝑠𝑖𝑡𝑦 𝑜𝑓 𝑔𝑎𝑠
Sp.gr = (2.6)
𝑑𝑒𝑛𝑠𝑖𝑡𝑦 𝑜𝑓 𝑎𝑖𝑟
 14

Assuming that the gases and air are ideal.

(2.7)
(iii) Real Gas Law
The equations so far listed apply basically to ideal systems. In reality,
however, particularly at high pressures and low temperatures the volume of the
molecules are no longer negligible and attractive forces on the molecules are
significant.
The ideal gas law, therefore, is not too applicable to light hydrocarbons and
their associated fluids and it is necessary to use a more refined equation. There are
two general methods of correcting the ideal gas law equation:
1. By using a correction factor in the equation PV = nRT
2. By using another equation-of-state
(iv) Compressibility Factor for Natural Gases
The correction factor ‘z’ which is a function of the gas composition, pressure
and temperature is used to modify the ideal gas law to:
PV = znRT (2.8)
Where the factor ‘z’ is known as the compressibility factor and the equation is known
as the compressibility equation-of-state or the compressibility equation.
The compressibility factor is not a constant but varies with changes in gas
composition, temperature and pressure and must be determined experimentally as in
Error! Reference source not found..
To compare two states the law now takes the form:
𝑃1 𝑉1 𝑃2 𝑉2
= (2.9)
𝑧1 𝑇1 𝑧2 𝑇2

z is an expression of the actual volume to what the ideal volume would be. Therefore,
𝑉𝑎𝑐𝑡𝑢𝑎𝑙
𝑧= 𝑉𝑖𝑑𝑒𝑎𝑙
(2.10)
Although all gases have similar shapes with respect to z the actual values are
component specific. However, through the law of corresponding states all pure gases
are shown to have common values.
 15

Figure 0.3. Real gas, Z factor chart

Law of Corresponding State

The law of corresponding states shows that the properties of many pure liquids
and gases have the same value at the same reduced temperature (Tr) and pressure (Pr)
Where:
 16

Tr = T/ Tc (2.11)
𝑃𝑟 = P/𝑃𝑐 (2.12)
Where, Tc and Pc are the pure component critical temperature and pressure.
The compressibility factor ‘z’ follows this law. It is usually presented vs. Tr
and Pr. Although in many cases pure gases follow the Law of Corresponding States,
the gases associated with hydrocarbon reservoirs do not. The Law has however been
used to apply to mixtures by defining parameters called pseudo critical temperature
and pseudo critical pressure.
For mixtures a pseudo critical temperature and pressure, Tpc and Ppc is used such
that:
Tpc = ΣyjTcj and Ppc = ΣyjPcj (2.13)
Where y is the mole fraction of component j and Tcj and Pcj are the critical
temperature and pressure of component j.
It should be emphasized that these pseudo critical temperature and pseudo
critical pressures are not the same as the real critical temperature and pressure. By
definition the pseudo values must lie between the extreme critical values of the pure
components whereas the actual critical values for mixtures can be outside these limits.
(v) Gas Formation Volume Factor
It is the volume in barrels that one standard cubic foot of gas will occupy as
free gas in the reservoir at the prevailing reservoir pressure and temperature. The
petroleum industry expresses its reservoir quantities at a common basis of surface
conditions which for gases is standard cubic volumes. To convert reservoir volumes
to surface volumes the industry uses formation volume factors. For gases we have Bg,
the gas formation volume factor, which is the ratio of the volume occupied at
reservoir temperature and pressure by a certain weight of gas to the volume occupied
by the same weight of gas at standard conditions.
volume occupied at reservoir temperature and pressure
𝐵𝑔 = (2.14)
volume occupied at STP

The gas formation volume factor can be obtained from PVT measurements on a gas
sample or it may be calculated from the equations-of-state.
The reciprocal of 𝐵𝑔 is often used to calculate volumes at surface so as to reduce the
possibility of misplacing the decimal point associated with the values of 𝐵𝑔 being less
than 0.01, ie:
 17

𝑣𝑜𝑙𝑢𝑚𝑒 𝑎𝑡 𝑠𝑢𝑟𝑓𝑎𝑐𝑒
= 1/𝐵𝑔 = E (2.15)
𝑣𝑜𝑙𝑢𝑚𝑒 𝑖𝑛 𝑓𝑜𝑟𝑚𝑎𝑡𝑖𝑜𝑛

E is sometimes referred to as the expansion factor.

Usually the units of Bg are barrels of gas at reservoir conditions per standard cubic
foot of gas, i.e. bbl/SCF or cubic meters per standard cubic meter.

2.1.3.3 Review of Crude Oil Properties

The next few sections contain information on crude oil properties, including
several correlations that can be used to estimate values for the properties. Correlations
should only be used in the early stages of production from a reservoir when laboratory
data may not be available.
(i) Solution Gas Oil Ratio
Although the gas associated with oil and the oil itself are multicomponent
mixtures it is convenient to refer to the solubility of gas in crude oil as if we were
dealing with a two-component system. The amount of gas forming molecules in the
liquid phase is limited only by the reservoir conditions of temperature and pressure
and the quantity of light components present.
The gas solubility Rs is defined as the number of cubic feet (cubic meter) of
gas measured at standard conditions, which will dissolve in one barrel (cubic meter)
of stock tank oil when subjected to reservoir pressure and temperature.
Crude oil is said to be saturated with gas at any pressure and temperature if, on
a slight reduction in pressure, some gas is released from the solution. Conversely, if
no gas is released from the solution, the crude oil is said to be undersaturated at that
pressure. The undersaturated state implies that there is a deficiency of gas present and
that, had there been an abundance of gas present, the oil would be saturated at that
pressure. The undersaturated state further implies that there is no free gas in contact
with the crude oil (i.e., there is no gas cap).
It gives a typical shape of gas solubility as a function of pressure for a
reservoir fluid at reservoir temperature. When the reservoir pressure is above the
bubble point pressure then the oil is undersaturated, i.e. capable of containing more
gas. As the reservoir pressure drops gas does not come out of solution until the bubble
point is reached, over this pressure range therefore the gas in solution is constant. At
the bubble point pressure, corresponding to the reservoir temperature, two phases are
produced, gas and oil. The gas remaining in solution therefore decreases.
 18

The nature of the liberation of the gas is not straight forward. Within the
reservoir when gas is released then its transport and that of the liquid is influenced by
the relative permeability of the rock. The gas does not remain with its associated oil
i.e. the system changes. In the production tubing and in the separator, it is considered
that the gas and associated liquid remain together i.e. the system is constant. The
amount of gas liberated from a sample of reservoir oil depends on the conditions of
the liberation. There are two basic liberation mechanisms:
Flash liberation - the gas is evolved during a definite reduction in pressure and
the gas is kept in contact with the liquid until equilibrium has been established.
Differential liberation - the gas being evolved is being continuously removed
from contact with the liquid and the liquid is in equilibrium with the gas being
evolved over a finite pressure range.

Figure 0.4. Solution gas-oil ratio of the Big Sandy Field reservoir oil, by flash
liberation at reservoir

(ii) Oil Formation Volume Factor

The oil formation volume factor, is the volume in barrels (cubic meters)
occupied in the reservoir, at the prevailing pressure and temperature, by one stock
tank barrel (one stock tank cubic meter) of oil plus its dissolved gas.
 19

The volume occupied by the oil between surface conditions and reservoir or
other operating changes is that of the total system; the ‘stock tank oil’ plus its
associated or dissolved ‘solution gas’. The effect of pressure on the complex stock
tank liquid and the solution gas is to induce solution of the gas in the liquid until
equilibrium is reached. A unit volume of stock tank oil brought to equilibrium with its
associated gas at reservoir pressure and temperature will occupy a volume greater
than unity (unless the oil has very little dissolved gas at very high pressure).
Above the bubble point pressure, the reduction in pressure from the initial
pressure causes the fluid to expand as a result of its compressibility. Below the bubble
point pressure this expansion due to compressibility of the liquid is small compared to
the ‘shrinkage’ of the oil as gas is released from solution.
The reciprocal of the oil formation volume factor is called the ‘shrinkage factor bo
1
𝑏𝑜 = (2.16)
𝐵𝑜

The formation factor Bo may be multiplied by the volume of stock tank oil to find the
volume of reservoir required to produce that volume of stock tank oil. The shrinkage
factor can be multiplied by the volume of reservoir oil to find the stock tank volume.

Figure 0.5. Formation volume factor of the Big Sandy Field reservoir oil, by flash
liberation at reservoir pressure at 160 F

2.1.3.4 Review of Reservoir water Properties

The properties of formation waters are affected by temperature, pressure, and
the quantity of solution gas and dissolved solids, but to a much smaller degree than
 20

crude oils. The compressibility of the formation, or connate, water contributes

materially in some cases to the production of volumetric reservoirs above the bubble
point and accounts for much of the water influx in water-drive reservoirs. When the
accuracy of other data warrants it, the properties of the connate water should be
entered into the material-balance calculations on reservoirs.
Similar to oil, PVT properties such as water formation volume factor, solution
gas oil ratio and water compressibility are also important. The viscosity is also one of
the factors that should be considered. The viscosity of water increases with decreasing
temperature and in general with increasing pressure and salinity.

Volumetric Method
Reserve estimation is one of the fundamental parts in field development
project that continues throughout the life of field. If originally hydrocarbon in place is
estimated exactly, further development, production and abandonment phases can be
defined accurately with the economic limitations. So, reserve estimation and
prediction are done in every development project for the following reasons.
 To estimate the amount of hydrocarbon in the reservoir
 To acquire the quantity of hydrocarbon during the life of field
 To decide the consequences of the project
 To evaluate economic profits from results
It is much of an important one to understand the resources and reserve definitions
to calculate original hydrocarbon in place.

2.2.1 Resources Related Term Definitions

Resources are all quantities of petroleum naturally occurring on or within
Earth’s crust, discovered and undiscovered (recoverable and unrecoverable), plus
those quantities already produced. Besides, it includes all types of petroleum whether
currently considered “conventional” or “unconventional”.

2.2.1.1 Total petroleum initially in place

It is the quantity of petroleum that is expected to exist initially in naturally
occurring accumulations. It includes that quantity of petroleum that is estimated, as of
a given date, to be in place of known accumulations before production, additionally
with those estimated quantities in accumulations yet to be discovered.
 21

2.2.1.2 Discovered petroleum initially in place

It is the quantity of petroleum that is estimated, as of a given date, to be
enclosed in known accumulations prior to production.

2.2.1.3 Production
Production is the cumulative quantity of petroleum that has been recovered at
a given date. The projects are subdivided into commercial and sub commercial, with
the estimated recoverable quantities being categorized as reserves and contingent
resources, individually, which are well-defined as follows.

2.2.1.4 Reserves
Reserves are those quantities of petroleum anticipated to be commercially
recoverable by application of development projects to known accumulations from a
given date forward under defined conditions. Reserves must further fulfill four
criteria: they must be discovered, recoverable, commercial, and remaining (as of the
evaluation date), based on the development project applied.

2.2.1.5 Contingent resources

Contingent resources are those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from known accumulations, but the applied
project(s) are not yet considered mature enough for commercial development due to
one or more contingencies.

2.2.1.6 Undiscovered petroleum initially in place

It is the quantity of petroleum estimated, as of given date, to be contained
within accumulations yet to be discovered.

2.2.1.7 Prospective resources

Prospective resources are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from undiscovered accumulations by
application of future development projects.

2.2.1.8 Unrecoverable
It means the part of discovered or undiscovered petroleum initially-in-place
quantities that is expected, as of a given date, not to be recoverable by future
development projects.
 22

According to the above definitions, it can be related all the terms and
conditions as shown in Error! Reference source not found..

Total Petroluem
Initially in Place

Discovered Undiscovered Unrecoverable

Production Prosperctive
Resources

Reserves

Contingent
Resources

Figure 0.6. Resources Classification

Figure 0.7. Resources Classification Framework

2.2.2 Uncertainty
The word ‘estimate’ is critical in reserve estimation. Thus, there are
uncertainties that may encounter in the estimation. It may be involving some level of
 23

uncertainty. Since the project is field development, abandonment phase is just

predicted and so ultimate recovery is uncertain. The ultimate recovery becomes most
accurate when the reservoir reaches to permanent abandonment. In fact, uncertainty
level will be lower as soon as the cumulative production increase and more
information are available. This concept can be more understandable together with the
Error! Reference source not found..
As mentioned, uncertainty is undeniably risky and therefore the following
predominant facts should be taken care of.
 Reservoir type
 Sources of reservoir energy
 Quality and quantity of G&G data (geological & geophysical)
 Assumptions
 Available technology and programs
 Experience and knowledge of evaluators
Understanding the above factors can help to reduce the uncertainty in reserve
estimation.

Figure 0.8. Recovery Vs Development Phases

2.2.3 Reserve Estimation Method

There are varieties of methods to evaluate the reserve. In this field
development project, the following methods are applied to guesstimate and predict the
reserve.
 Volumetric Method
 24

 Material Balance Method

 Decline Curve Method

2.2.4 Volumetric Method

Volumetric method is used to estimate how much hydrocarbon in place in the
reservoir. In the early phase of field development, only seismic and G&G data are
available. Even though there is a limited amount of data are available for estimation,
volumetric method can still be applied to estimate the original hydrocarbon in place.
Therefore, it can be said that volumetric method is the easiest and earliest method to
estimate the reserve.
Material Balance method was also used to enhance the confidence level in
volumetric as volumetric method was based on static reservoir data which were more
uncertain than dynamic data that were used in Material Balance.
The volumetric method is a straightforward approach that needs determination
of the areal extent of the reservoir bulk volume (calculated as area times net pay
thickness), the rock pore volume, and the fluid content within the pore volume to
estimate the original hydrocarbon in place. The ultimate recovery can be obtained
with an appropriate recovery factor depending on the drive mechanism of the
reservoir. Reserves estimation is usually elevated with this method. Since, it does not
think about the heterogeneity of the reservoir and it includes the un-drained
compartments that do not flow. Those un-drained are included in summing up the
bulk rock volume of the reservoir or accumulation. At this stage, the level of inherent
error can be reduced if the reservoir is precisely characterized. In volumetric method,
there are two types of estimation. They are
 Deterministic Method
 Probabilistic Method

2.2.4.1 Deterministic method

Deterministic Method is the single value estimate of reserve. It is based on the
single value. The input parameters for this method are exactly known and the
variability is usually ignored. Therefore, it is no doubt that this method can post a
certain amount of error in the estimation. Since deterministic method may encounter
uncertainty, it came to use probabilistic method to compare and assure the quality of
the OOIP and reserve outcome.
 25

2.2.4.2 Probabilistic method

Probabilistic method is the one that generate randomly G&G data parameters with
certain standard deviation and related probabilities. It applies a distribution curve for
each input parameter and all the way through the use of Monte Carlo Simulation. In
this method, all input parameters are not exactly known and variability cannot be
neglected. Many methods such as Plackett Burman and Monte Carlo Simulation can
be used to calculate probabilistic method. Since Monte Carlo Simulation is most
widely used in oil and gas industry and so it is been applied in this field development
project.
Monte Carlo stimulation
Monte Carlo technique is mostly applied to estimate hydrocarbon in place
where each input parameter required for the reserve estimation is represented by
statistical distributions. It has been used in risk and efficiency evaluation of
exploration and production project. Monte Carlo simulation has been used in oil and
gas industry to test the relationship and dependency between parameters.
Using Monte Carlo simulation method, random variations of input parameters,
insufficient data on the sensitivity and performance or reliability of the output have
been studied. The input data has been randomly generated from the probability
distribution. Error analysis is a key factor and needs to be well studied during the
interpretation of the results.
Monte Carlo simulation is able to run by using software, spreadsheets and
MATLAB and so on. In this field development, excel function and simulation
spreadsheets are used to simulate Monte Carlo to estimate OOIP and reserves.

Material Balance Method

Material balance method has been recognized as one of the basic tools of
reservoir engineering for interpreting and prediction of reservoir performance. The
petroleum engineer must be able to make dependable estimates of the initial
hydrocarbons in place in a reservoir and predict the future reservoir performance and
the ultimate hydrocarbon recovery from the reservoir. In this section, the material
balance equation is presented, especially for solution gas drive reservoir.
 26

2.3.1 Introduction to MBE

Material balance is based on the law of conservation of mass; the mass in is
always equal to the mass out. According to reservoir terms, the initial volume of oil
and gas in the reservoir at initial pressure before any start of production is equal to the
summation of hydrocarbon volume that still remains in the reservoir and the volume
that removed to the surface after some production.
Material balance can be applied using simply the production and pressure
histories together with the fluid PVT properties. No geometrical considerations
(geological model) are involved, hence the material balance can be to calculate the
hydrocarbon in place and define the drive mechanism. In this respect, it is the safest
technique in the business since it is the minimum assumption route through the
subject of reservoir engineering.
There are no "sufficient" conditions for the meaningful application of material
balance to a reservoir, a statement that applies across the broad spectrum of reservoir
engineering activity, but there are two "necessary7' conditions that must be satisfied.
In the first place, there should be adequate data collection (production/ pressure/PVT),
both in quantity and quality, otherwise the attempted application of the technique can
become quite meaningless. The second condition is that it must be possible to define
an average pressure decline trend for the system under study.

2.3.2 Material Balance Method

The material balance equation mainly depends on the law of conservation of
mass. However, the material balance can be written on a volumetric basis because oil
field measurements are volumetric and significant factors can only be expressed
volumetrically.
The MBE is designed to treat the reservoir as a single tank or region that is
characterized by homogeneous rock properties and described by an average pressure,
i.e., no pressure variation throughout the reservoir, at any particular time or stage of
production. Based on this tank model (as in Error! Reference source not found.),
we can generate the basic material balance equation that can be applied for all types
of reservoir. This equation is as follows:
PV occupied by the oil initially in place at Pi
=PV occupied by remaining oil at P
+ PV occupied by gas in gas cap at P
+ PV occupied by evolved solution gas at P
 27

+PV occupied by net water influx at P

+ Change in PV due to connate water expansion and pore volume reduction due to
rock expansion at P
+ PV occupied by the injected gas at P
+ PV occupied by the injected water at P
+PV occupied by the gas in the gas cap at Pi

Figure 0.9. Tank Model

There are three main types of material balance methods. They are
1. Schilthuis (Generalized MBE)
2. Havlena and Odeh (Straight Line MBE)
3. Tracy’ s form
The general form of the material balance equation was first presented by
Schilthuis1 in 1941. For this equation, the reservoir is derived as a volume balance
which equates the cumulative observed production, expressed as an underground
withdrawal, to the expansion of the fluids in the reservoir resulting from a finite
pressure drop.
 28

In late 1963, Halvana and Odeh presented the straight-line material balance
method in which the initial oil in place can be determined from the slope of the best
straight line.
Tracy’s form of material balance equation is the rearranging of the generalized
material balance equation. In this equation, the initial reserve is expressed in terms of
PVT properties of reservoir, (phi g, phi o and phi w.)
All these forms of material balance equations are used for the following reasons.
1. Estimates initial hydrocarbon volumes in place
2. Predict future reservoir performance
3. Predict ultimate hydrocarbon recovery under various types of primary
driving mechanisms

2.3.3 Assumption and Limitation of MBE

MBE is widely used in reservoir engineering and it can give the estimation of
reservoir performance with high accuracy. The MBE keeps an inventory on all
material entering, leaving, or accumulating within a region over discrete periods of
time during the production history. However, there may be some vulnerable
calculation because of some underlying assumption. Basic assumptions in the material
balance equation are
1. Constant temperature
2. Reservoir characteristics
3. Fluid recovery
4. Pressure equilibrium
5. Constant reservoir volume
6. Reliable production data
7. Representative PVT data

(1) Constant temperature

Changes in a reservoir generally take place at isothermal, constant
temperature, conditions, unless major external temperatures are imposed thorough for
example thermal recovery processes and in some cases large cold-water injection
schemes.
 29

(2) Reservoir characteristics

The reservoir has uniform porosity, permeability, and thickness
characteristics. In addition, the shifting in the gas–oil contact or oil–water contact is
uniform throughout the reservoir.
(3) Fluid recovery
The fluid recovery is considered independent of the rate, number of wells, or
location of the wells. The time element is not explicitly expressed in the material
balance when applied to predict future reservoir performance.
(4) Pressure equilibrium
The MB equation is a tank model treating the reservoir as a large tank at
which the pressure is constant throughout the reservoir at a particular time. It clearly
ignores pressure changes which may arise across the reservoir. In the radial flow
section it was clear that there are large pressure variations around the producing and
injection wells. In order to apply the equation at a particular time an average pressure
has to be selected being representative of the reservoir pressure at the particular time.
All fluid properties are evaluated at this pressure.
(5) Constant reservoir volume
Reservoir volume is assumed to be constant except for those conditions of
rock and water expansion or water influx that are specifically considered in the
equation. The formation is considered to be sufficiently competent that no significant
volume change will occur through movement or reworking of the formation due to
overburden pressure as the internal reservoir pressure is reduced. The constant-
volume assumption also relates to an area of interest to which the equation is applied.
(6) Reliable production data
All production data should be recorded with respect to the same time period. If
possible, gas cap and solution gas production records should be maintained
separately. Gas and oil gravity measurements should be recorded in conjunction with
the fluid volume data. Some reservoirs require a more detailed analysis and the
material balance to be solved for volumetric segments. The produced fluid gravities
will aid in the selection of the volumetric segments and also in the averaging of fluid
properties. There are essentially three types of production data that must be recorded
in order to use the MBE in performing reliable reservoir calculations. These are oil
production data, gas production data and water production data.
(7) Representative PVT Data
 30

The PVT measurements should be made in an attempt to reflect the behavior

in the reservoir. Although this may not be totally possible conditions as near to the
real situation are used, for example in the differential test to reflect below bubble
point conditions.
Limitation of Material Balance
1. Inadequate handling with variation in initial fluid properties
2. Only average saturation distribution is available.
3. Lack of time parameter

2.3.4 Significance and Usage of Material Balance Equation

The material balance is roughly a relation between four quantities:
• oil and gas in place (N, m or G)
• production (Np, Rp, Wp)
• water influx (We)
• average reservoir pressure (pressure dependent PVT parameters and: p in
pore/water compressibility term).
This means that if three of these quantities are known, the fourth can be calculated.
Some examples illustrate this:
 If production and pressure date are known as a function of time, and oil
and gas in place is available from a volumetric estimate, the water influx
We can be determined as function of time. Its magnitude has a direct
bearing on secondary recovery plans.
 If there is no evidence of a natural water drive (We=0) the oil in place can
be calculated from production and pressure data. This may have an
influence on the geological interpretation (volumetric estimate) and thus
on the further development of the reservoir.
 For a known oil in place, the pressure at future dates can be calculated for
a postulated production plan (making some assumptions regarding the
future water influx). The result of this calculation may help in:
(a) deciding whether or when artificial lift facilities will be needed.
(b) estimating the reserve of the reservoir down to a certain abandonment
pressure, also as function of the cumulative gas oil ratio Rp.
 31

2.3.5 Source of Data to be used in the Material Balance

A range of sources provide the key data for the application of the MB
equation. These sources are also the source for other simulation tools.
PVT Data – From PVT reports of individual wells. Averaging and correcting PVT
data prior to use in and M.B. may also be required
Production Data – From well and reservoir records (data banks) or the subject of
calculation.
Oil and Gas in Place – From volumetric estimates or subject of the calculation.
Connate Water Saturation – Sw: from petrophysics
Water Compressibility – cw: at oilfield temperatures and pressures: Should be
determined. 4 to 5 x 10-5 atm-1 = about 3 x 10-6 psi-1
Pore Compressibility – In the past has often been assumed from texts. Should be
measured.
Reservoir Pressures – From pressure surveys in the field, or subject of the calculation.
In the next chapter we will see how an average pressure can be obtained from a
reservoir where there are different drainage zones.
Water Influx – The subject of water influx, We is covered in a subsequent chapter.

2.3.6 Conclusion
The material balance is an important and indispensable reservoir engineering
tool. As with other reservoir engineering tools it has its limitations of which the user
should be aware.
In spite of the availability of fast, powerful digital computers with large
storage capacity for reservoir modeling, material balance methods are still important
for reservoir engineering. The material balance methods were mostly developed
before the advent of modern computers. Furthermore, all the analyses that can be
performed with material balance methods can be replicated in many cases more
rigorously with reservoir modeling. However, material balance methods are still very
useful and are incredibly simple tools for gaining an understanding of the reservoir
processes before undertaking the more elaborate and time-consuming task of reservoir
modeling. In practical terms, material balance methods and reservoir modeling should
be viewed as complementary tools in the toolkit of the engineer for reservoir analyses.
 32

In practice, material balance methods can be of assistance in determining the

type of reservoir model to construct, and assessing the quality of reservoir
performance data to use in conducting reservoir modeling.

Decline Curve Analysis

In earlier days, smart producers realized that they were dealing with depleting
petroleum reservoirs, and well rates were bound to decline with production. When
sufficient production data is available and production is declining, the past production
curves of individual wells by lease or of the field as a whole can be extended to an
economic rate.
Decline curve analysis is a reservoir engineering empirical technique that
extrapolates trends in the production data from oil and gas. The objectives are the
prediction of future performance and estimation of reserves. Since the graphical
presentations of oil and gas production rates over time show that the rate would
eventually decline with time, the curves are known as “decline curves.” Unlike other
developments, graphical techniques in predicting the production decline preceded
mathematical analysis techniques, which were developed later. And the most
commonly used trending equations are those first documented by J.J.Arps (1945).

2.4.1 Introduction to Decline Curve

The decline curve is a basic tool for estimating remaining proved reserves, and
can be applied once there is sufficient history to show a trend in a performance
variable that is a continuous function of either time or cumulative production.
Forecasts are made by extrapolating trends to an endpoint where production is
expected to cease (i.e., an economic limit or a related parameter such as water-oil
ratio). Such forecasts are particularly useful in the latter stages of depletion when
trends are clearly evident and there is insufficient revenue to justify a more
comprehensive analysis. The accuracy of the analysis improves when sufficient
production data is available.
Decline curve methods have a universal appeal because they provide a simple
visual representation of a complex production process. In some cases, a visual
interpretation is too simplistic, and some background knowledge is needed in order to
draw reliable conclusions.
 33

The method of extrapolating a “trend” for the purpose of estimating future

performance must satisfy the condition that the factors that caused changes in past
performance, for example, decline in the flow rate, will operate in the same way in the
future.

2.4.2 Method of Decline Curve

Decline curve methods may be classified many ways; however, any
classification should recognize the difference between analyses for a single well and
analyses for aggregated production from a group of wells.
The least complex production facility is a single well served by a single-well
battery. In such a facility, there is no doubt about the source of the production. The
measurement accuracy will also be reliable if the facility is properly sized.
Among the most complex facilities are central treating facilities that serve
several multiwall satellite batteries equipped with three-phase test separators and
operating at high pressure. In this case, the total (group) production of oil, gas, and
water is allocated to individual wells on the basis of their operated hours and test
rates. The accuracy of this allocation depends upon the frequency of well testing and
the variation of oil, gas, and water rates among wells. A good indication of the
allocation accuracy is given by the quotient of theoretical production and measured
production for each fluid (e.g., oil, gas, and water). Theoretical production is the
piece-wise sum of the product of test rate and time interval. These quotients (called
proration or allocation factors) are usually considered to be acceptable if they are in
the range of 0.95 to 1.05.
Single-well Vs. Aggregated (multi) well
Decline curve analyses for single wells are widely used and readily interpreted
because they have the following advantages:
 All the raw data can be displayed.
 Decline trends are easy to recognize and often correlate with the total fluid
production rate.
 The economic limit can be directly applied to estimate reserve.
 The conventional decline equation has been shown to have strong
foundation based on reservoir engineering principles.
 34

On the other hand, decline curve analyses and forecasts for aggregated
production from a group of wells are also widely used, but may be misinterpreted for
the following reasons:
 Only part of the raw data can be displayed.
 Decline trend may be masked by the number and variability of the wells
contributing to the aggregated production.
 The economic limit cannot be directly applied to estimate reserves.
 The analysis is largely empirical.

Figure 0.10. Chart to show methods and techniques of decline curve

As it shown in Error! Reference source not found., both the single well and multi-
wells used the same technique (method) to interpolate the curve.
The most common techniques are:
 The classical curve fit of historical production data by Arps (1945)
 The type curve matching technique by Fetkovish (1980).
Since the method for the group of wells is not as reliable as single well
method, the evaluator needs some assumptions to draw the reliable solutions. When
the production from a group of wells is aggregated (summed), only the total is
available for plotting, and much of the raw data is omitted from the analysis.
Sometimes the average-well rate is plotted to make the analysis appear more like that
for a single well. Another major difficulty is that the economic limit is not clearly
defined for aggregated production. This difficulty also makes forecasts hazardous
because some of the wells will be abandoned during the forecast and will no longer be
contributing to the aggregate. Clearly, the theoretical base for aggregated production
is not as solid as that for single wells.
 35

Despite the foregoing problems, decline curve analysis can be successfully

applied to aggregated production. For example, if there is a wide variation in rates, the
analysis can be improved by splitting the wells into a few groups having similar
characteristics (e.g., rates, water cuts, remaining life, well spacing, gas-oil ratios). By
making sub-groups of wells with similar remaining lives, an economic limit can be
applied with more confidence. In general, aggregate rate vs. cumulative curves exhibit
decline trends which are easier to interpret (i.e., better defined) than those for
aggregate rate vs. time curves.
Apart from that, when using with Arps traditional method, the accuracy of
entire reservoir is easier. The reason is that when plotting for the entire reservoir, the
plotted rate data is smooth and easy to evacuate.

2.4.3 Basic Plot of Decline Curve

In the analysis of decline curve, there are five common different plotting, they
are,
1. Plot of production rate vs. time,
2. Plot of cumulative production with flow rate
3. Log of water cut or oil cut vs. cumulative production
4. Oil/water or gas/oil contact vs. cumulative production
5. Cumulative gas production vs. cumulative oil production
The first and second type plot is the common use plot for the prediction of
future production performance. This project is based on the first two type of plot and
will be discussed in the following chapters.
The third type of plot is used when the economic is strongly based on the cost
of disposal of water or even a change in oil price. A straight extrapolation of this type
of curve is not applicable in low water cut because it may yield a conservative
estimate of reserve. On the other hand, if oil cut data is used instead of water cut in
the same levels, straight-line extrapolation of the log of oil-cut versus cumulative oil
production may deteriorate. This could lead to overly optimistic reserve estimates.
There may be special use of the type 4 curve. The fourth type of plot is used in
natural water or gas drive reservoir. It can be used to track the movement of the
contacts with production. The number 5 type of curve is used to estimate gas reserve
from oil reserve or vice versa.
 36

Figure 0.11. Plot of production rate vs. time

Figure 0.12. Plot of production rate vs. cumulative production

Figure 0.13. Log of water cut vs. cumulative production

Figure 0.14. Log of oil cut vs. cumulative production plot

 37

Figure 0.15 Oil water contact or gas oil contact vs. cumulative production

Figure 0.16 Cumulative gas production vs. cumulative oil production

2.4.4 Theory of Arps’ Decline Curve Analysis

The Arps decline curve analysis is the traditional method introduced by
J.J.Arps at 1945. Nowadays many methods are developed for the analysis of decline
curve. Some of advanced methods are;
 Type curve matching method by Fetkovish (1980)
 Doublet and Blasingame 1995 developed theoretical basis for combining
transient and boundary dominated flow for the pressure transient solution
to the diffusivity equation.
 Ershaghi and Omoregie method using modified water-cut factor
 Aganval and Gardner type curve method
 Agarwal–Gardner Decline Curves Analysis
And in this project, I will calculate with the Arps’s traditional method. The following
theory and calculation are based on Arps method only.

2.4.4.1 Types of Arps’ decline curve

For the analysis of future production trend, the Arps’s method used the plot of
production rate vs. time and/or cumulative production vs. production rate with three
decline trends (exponential, hyperbolic and harmonic). Each trend has their own
 38

particular shape (different curvature) when plotting on various scale (Cartesian, semi-
log and log-log plot). So, we can easily define the type of decline by analyzing the
shape of the curvature.
Exponential decline: Result in straight line when plotting the flow rate vs. time on
the semi log scale. And also result in straight in straight line in the Cartesian plot of
cumulative production vs. production rate.
Hyperbolic decline: None of the plot will result straight line in this type of decline.
Harmonic decline: Result in straight line when plotting the flow rate vs. cumulative
production on the semi log scale. Except that all other scale will result some
curvature.

Figure 0.17. Classification of production decline curve. Six typical plot scale to show
the different curvature of Arps decline type.
Among the three types of decline, hyperbolic decline is most common in the
field and the harmonic is most rarely. But when the interpreters predict the future
performance, they usually do interpret as exponential. Some facts of the Arps decline
trend are
 Because of the assumption involved in the analysis, the reserve prediction
can be overestimated or underestimated.
 Unrestricted early production from a well shows a hyperbolic decline rate
but in later stage the well show the exponential trend
 Well production drops rather slowly with time under harmonic. So, this
type of decline indicates relatively large reserve
 Among three types, the exponential trend has better prediction reserve and
the reservoir life time is short rather than hyperbolic and harmonic.
 39

The reason and the result will be discussed in the following chapters with the example
calculation and with my calculation project.

2.4.4.2 Condition and limitation for Arps method

This decline analysis can only be used when the reservoir reached pseudo-
steady stage. Also mean that when the reservoir is in boundary-dominated flow
condition. In the early life of the flow, the production is not steady to be used for the
decline curve analysis. In that stage, the curve may exhibit value that result in quiet
incorrect reserve estimate. Some of the basic assumptions for analyzing the decline
curves are discussed in the following.
 The well is draining a constant drainage area, that is, the well is in a
boundary-dominated flow condition
 The well must be in constant operation condition (for example; the
analysis is assumed to continue to flow without restriction in the future)
 The well is produced at a constant bottom-hole pressure
 Sufficient production is needed to draw the trend for the future
performance
In this analysis the most important condition is to consider the second fact
from the above. Because when we predicting for the reserve, we predict that the flow
is in constant with the trend of the decline. We don’t consider the flow restriction (due
to choke, mechanical damage, etc.) or the shutdown of the well or also the
implementation of the alternative production techniques.

Petroleum Economic
Economic is essential when doing the development of the oil and gas field.
After estimating the most possible reserve, we have to conclude with economic to
consider the reserve is profitable or not.

2.5.1 Introduction
Petroleum economics involves the application of the techniques of economic
analysis at every stage in the development of oil and gas exploration and production
projects. It is the heart of the oil and gas field dealing with reservoir engineering,
exploration and geology, production engineering, process engineering, environmental
 40

and well engineering. The primary objective of the oil and gas industry is not merely
to produce oil and gas but rather to make a profit – the maximum profit.
The economics of oil and gas projects are affected by a range of factors such
as:
1. Level of knowledge about oil and gas field,
2. Location, type and number of wells,
3. Market conditions, and
4. Effect of tax/royalty systems.

2.5.2 Role of Petroleum Economists

Petroleum economists have to assist in making investment decisions, such as
deciding whether or not to drill an exploration well or whether or not to develop an
entire gas production project. They are crucial in the negotiations around Production
Sharing Contracts (PSC) and purchasing oil and gas properties. They involve in the
assessment and management of the technical, economic and other risks associated
with the different phases of an oil or gas projects.

2.5.3 Type of Contracts

The types of contracts within oil and gas project are classified into four
categories:
1. Concession
2. Production Sharing Contract (PSC)
3. Joint Venture (JV)
4. Technical Service Contract/Agreement (TSA)

2.5.3.1 Concession
A government can give a concession to a prospector. In the concession
agreement, a number of things (e.g. the conditions for exploration & the rules
governing the production agreement in the case of success) are stipulated. Oil
companies own the production & contractors pay royalty and tax to the government.
This type of contract is no more prevalent.
 41

2.5.3.2 Production Sharing Contract (PSC)

PSA is an agreement between the parties to a well and a host country
regarding the percentage of production each party will receive after the participating
parties have recovered a specified amount of costs & expenses. It is particularly
common in the Middle East & Asia. PSC is either negotiated between a multinational
and the host country, or by bidding. The host country remains the owner of the
resource. Part of the oil produced is termed “cost oil” and can be sold by the oil
company to recover its costs. The rest is “profit oil” the proceeds of which are shared
by Government and Company (could well be in a ratio of 80-20%).

2.5.3.3 Joint Venture (JV)

A joint venture between a foreign oil company and a national oil company of
the host country. For the government, JV is an opportunity for technology transfer
that may eventually lead to independence for the national oil company. There is a
wide variety of such JV’s.

2.5.3.4 Technical Service Agreement (TSA)

In TSA, a company can do a well-defined job for the national oil company of
the host country. The duration is often fixed, and the company does not receive any of
the produced oil, but gets a fixed fee per barrel, above reimbursement of the costs it
incurs. At a few dollars per barrel, such a contract is much less attractive than most of
the concession agreements or PSA’s. TSA agreements were operation in Venezuela,
Iraq, Kuwait, etc.

Figure 0.18 International scenario of contract types

 42

2.5.4 Investment Analysis

A successful petroleum project passes through six phases: licensing,
exploration, appraisal, development, production and abandonment. Investment
analysis is used as a managerial tool to take such decisions throughout the project. In
all these phases, the decisions have to be taken.
Investment analysis can be divided into two categories:
1. Cash flow analysis
2. Economic decision criteria

Cash flow analysis consists of inflation, time value of money, and risk and
uncertainty. Economic decision criteria are Net Present Value (NPV), Internal Rate of
Return (IRR), and payback time.

2.5.4.1 Cash flow

The sum of cash revenues and expenditures over a period of time is termed as
“cash flow”. Cash inflow only come in production period while cash outflow come in
all stages, even during production period. It is important to consider the timing of cash
flow or value of cash relative to time. The total of all of the inflow and outflow of
related funds each year, over the life of an investment, is referred to as the cash flow
stream produced by the capitalized investment.

2.5.4.1.1 Cash flow model

Project economics is done as cash flow analysis. It works with cash flow
which are payments.

Figure 0.19 A sample of cash flow profile

 43

Cash flow is generally calculated as

Cash Flow = Revenues – Expenditures (2.17)
This equation is used before tax condition. When taxes are considered, cash flow
model is known as after tax or net cash flow model. This is computed as
Net Cash Flow (NCF) = R -I -E -FIT (2.18)
where,
Revenues = (+) R, Investment = (-) I, Expenses = (-) E, Federal Income Tax = (-) FIT.

2.5.4.1.2 Net cash flow (NCF)

The cash remaining after covering all the expenses during one year or one
period is defined as net cash flow. The annual NCF is the subtraction of the cash
disbursements from the cash receipts for the given period.
NCF = cash inflows (revenue) – cash outflows (cost) (2.19)

2.5.4.1.3 Discount cash flow

Discounted cash flow is a technique that translates the time value of money by
discounting the future cash flow to a present value reference (Kruschwitz & Leoffler,
2005). The discounted cash flow (DCFa) at the end of the year “a” is given as:
NCFa
DCFa = (1+i)a (2.20)

Where, DCFa = Discounted cash flow at the end of year “a”, NCFa = Net cash flow at
the end of the year “a”, i = Discount rate, a = Number of year (a = 0,1, 2..., A). This
equation is assumed that the cash flow has occurred at the end of the year.

2.5.4.2 Inflation
An increase in the quantity of money, leading to a devaluation of existing
money. Very serious matter in economic analysis and indexing of the net cash flow
projections is the best approach to reduce the inflation.
pt = pi (1 + II )t (2.21)
Where,
pi = average price, or annual cost, for initial year
pt = average price, or average cost, for year “t”
II = effective annual inflation rate, fraction per year [(p2 / p1 )-1]
 44

2.5.4.2.1 Causes of inflation

Rising prices are the root of inflation, though it can be attributed to different
factors
1) Demand pull inflation - it is used to describe what happens when O & G
price levels rise cause of imbalance in aggregate supply and demand.
When aggregate demand outweighs aggregate supply, prices goes up.
Many economics describe this inflation as too many dollars chasing few
barrels of oil and gas.

2) Cost push inflation - occurs overall prices increases in the cost of wages
and raw materials. High cost of productions can decrease the aggregate
supply. Unexpected cause are often natural disasters, e.g., floods, fires
explosions. A company have no choice but to increase prices to help
recoupling some of the losses from disaster.

3) Built in inflation – it depends on adaptive expectations. As the price of O

& G rises, labor expects and demands more wages to maintain their cost of
living.
Cost Push is driven by supply costs while Demand Pull is driven by costumer
demand, both lead to higher prices.

2.5.4.2.2 Advantages of inflation

(1) Inflation growth tends to be unsustainable
(2) Inflation tends to discourage investments and long-term economic growth
(3) Inflation can make economy uncompetitive and it reduces value of savings

2.5.4.2.3 Disadvantages of inflation

(1) Moderate inflation enables adjustment of wages
(2) Inflation enables adjustment of relative prices
(3) Inflation can boost growth

2.5.4.3 Time value of money

Money has a time value. A sum of money now is normally worth more than an
equal sum of money at some future date. The amount of money that must be added to
the current sum to make an equivalent future sum is defined as “interest”. The amount
of interest necessary to create equivalence depends upon the period under
consideration. Most economic problems in Petroleum Industry involve determining
what is economic in long run, that is over a period of time. A dollar is now worth
 45

more than the prospect of a dollar next year or at some later date. The process of
converting future income into present value is called “discounting”.
F = P (1 + i)n (2.22)
Where,
i = Interest rate in percentage per year
n = No. of periods

2.5.4.4 Interest
Interest is the cost of borrowing money or the benefit of loaning it.it is used to
calculate time value of money, and is crucial in the practice of engineering. Interest is
the return on capital, which in turn is invested money and resources. There are mainly
two types of interest rates -
Simple interest – it is not complicated, requires compensation payment at a
constant interest rate based only on the original principal.
Compound interest- interest on the capital due at the end of each period is
added to the principal, interest is charged on this converted principal for the next time
period.

2.5.4.5 Risk and uncertainty

Risk refers to a situation where one can specify a probability distribution over
possible outcome. Uncertainty refers to the condition when one cannot specify the
relative likelihood of the outcomes. Where uncertainties are great, and where there is
no recognized way of taking them into account, decision making becomes difficult.
Uncertainty can be reduced by analyzing the risk associated with it. Risk analysis
does not remove the ambiguity, it simply describes it in a way that provides decision
maker with useful insight into their nature. Risk can impact the overall cost of the
project, the schedule of the project, and the scope of the project.

2.5.4.6 Profitability indicator

Profitability indicator is an index to measure the value of a project. It is used
to rank the project attractiveness if several investment opportunities existed. There are
three common indicators:
(1) Net Present value (NPV)
(2) Internal Rate of Return (IRR)
(3) Profit to Investment Ratio (PIR)
 46

2.5.4.7 Net present value

The net present value (NPV) or net present worth profit is the algebraic sum of
all net cash flows when discounted to time zero using a single discounting rate. It is
the difference between the present value of the cash inflows and the cash out flows
generated by the investment and discounted at the assumed hurdle rate.
NPV value is selected for the following strategies:
 Accept projects that maximize NPV profit and reject all project having
negative NPV profit (except to meet certain objectives- pollution control)
to meet standards.
 The greater amount or the positive value of NPV available for a project,
the more economically attractive it becomes.
NPV= PV of future benefits – PV of the Cost
 Logically, If NPV > 0, benefits exceed costs and the project should be
accepted.
 If NPV < 0, the project must be rejected.
 In comparing projects, the best way is to choose the one that results in
highest NPV.

2.5.4.8 Internal rate of return (IPR)

The internal rate of return (IRR) is a metric used in capital budgeting to
estimate the profitability of potential investments. The internal rate of return is
a discount rate that makes the net present value (NPV) of all cash flows from a
particular project equal to zero.
 If IRR > weighted average cost of the capital (WACC), the project’s rate
of return will exceed its costs and as a result, it should be accepted
 If IRR < WACC, the project’s rate of return will not exceed its costs and
the project must be abandoned.
 IRR does not indicate an increase in the company’s wealth.

2.5.5 Expenditures
Expenditures are payment made, and government royalties and taxes. The total
expenditures incurred in producing oil and gas wells may be divided into two groups:
1. Capital Expenditure (CAPEX)
2. Operating Expenditure (OPEX)
 47

2.5.5.1 CAPEX
The total cost of installed facilities which cannot be deducted for tax purposes,
but for which depreciation is allowed by the tax authorities is defined as CAPEX. It
includes all expenditures required to drill and complete the well, and to provide the
well with production facilities required to lift the oil and gas from the bottom of the
well to the surface, and to transport it from the well head to the terminal. It also
included are all future expenditures required to keep the well on production (other
than operating costs). The main characteristic of CAPEX is that it is one-off cost,
usually incurred at the beginning of the project (also referred to as front-end cost). It
must be incurred several years before any revenue is obtained.
CAPEX typically includes:
 Drilling of production and injection wells
 Construction of production facilities
 Dismantling of facilities at the end of production life
CAPEX is classified as:
1. Tangible Expenses: cost of physical equipment and are tax deductible only
by depreciation
2. Intangible Expenses: expenditures not represented by physical equipment.
These items are not capitalized for tax purposes (e.g. land survey, site
development, access roads, well logging/testing, etc.)

2.5.5.2 OPEX
The expenditure incurred by producing an oil or gas well after it has been
drilled and completed is called OPEX. It is also referred to as lease operating
expenditure (LOE). It occurs periodically and is necessary for the day-to-day
operations of the field. It is usually expressed in terms of expenditure per year, per
barrel, or per MScf in cash flow analysis.
OPEX typically consists of five elements:
1. Fixed cost
2. Variable cost per unit of production (determined as a function of
production rate)
3. Maintenance of facilities
4. Maintenance of wells (workover activities)
5. Overheads
 48

2.5.6 Decision tree analysis

Decision tree analysis is one way to frame and solve complex situations that
require a decision. They are a way to graphically represent the principles discussed in
the section about expected monetary value. There is no scale to decision trees.
Decision trees are constructed with “time” flowing from left to right and are made up
of “nodes” connected by “branches.”
There are three types of nodes (forks):
1. Decision nodes (or activity node): represented by a square. The decision
maker dictates which branch is taken.
2. Chance nodes (or event node): represented by a circle. Chance determines
which outcome will occur.
3. Terminal nodes: represented by triangles. The end of a decision tree.
To complete the decision tree analysis, associate probabilities to all chance nodes at
first and then place the outcome value to all branch ends. There are three important
rules:
1. Normalization requirement: Sum of all probabilities around a chance node
must be 1.0.
2. There are no probabilities around decision nodes.
3. The end nodes are mutually exclusive.

Figure 0.20 Simple Decision Tree (completed)

Advantages of Decision Tree Analysis

1. The complexity of a decision is reduced.
2. It provides a consistent action plan.
3. Decision problems of any size can be analyzed.
4. Forces us to think ahead.
5. If conditions change, the situation can be re-analyzed.
6. Logical, straight-forward an easy to use.
 49

2.5.7 Break even analysis

At the point where revenues equal costs, the firm will just break even on the
product or service. At volumes beyond the break-even points, the firm will realize a
profit. This area of decision making is often referred to as cost-volume-profit analysis
or break-even analysis. The break-even point gives the decision maker a point of
reference in determining how many units will be needed to ensure a profit.
Break even analysis is concerned with answering three important and basic
economic questions:
(1) What is the minimum level of activity that can be operated at?
(2) What is the level of activity that will cover the cost?
(3) At what level of activity will maximum profit be achieved?

2.5.7.1 Components of break-even point

There are three main components of break-even analysis: volume, cost, and
profit. Each of components is a function of several other components. These
components are analyzed as:
1. Volume
Volume is the level of production and can be expressed as the number of units
produced and sold. It can also be expressed in monetary terms or as a percentage of
total capacity available.
2. Costs
Costs are usually divided into two components: fixed and variable. Fixed costs
are generally independent of the volume of units produced. Some individual costs that
might be incorporated into the fixed cost include rent on plant and equipment,
insurance, advertising, staff salaries, depreciation, heat and light, and janitorial
services.
Variable costs are the expenses that can be attributed directly to the production
of an individual unit of product or service. Examples of this type of cost are raw
materials, direct labor expenses, packaging and shipping, sales commissions, and
maintenance costs. Total variable costs are a function of the volume and the variable
cost per unit. The total cost is the sum of fixed costs and total variable costs.
3. Profit
Profit is the difference between total revenue and total costs. Total revenue is
the volume multiplied by the price per unit.
 50

2.5.8 Sensitivity analysis

Sensitivity analysis is a method to measure the project robustness as a result of
changes in project input/variables. Key variables normally are production profile,
oil/gas price, and CAPEX. The result will be plotted on “tornado chart” or “spider
plot”. Project is called robust if any change in key variables still result project
economic (NPV, PIR) which meet criteria.

2.5.8.1 Tornado chart

Tornado chart is the modified version of bar charts and one of the classic tools
of sensitivity analysis used by decision makers to have a quick overview of the risks
involved. In other words, it shows a financial analysis for a project.
In tornado chart, x-axis shows NPV value. Longer bar indicates more sensitive
variable.

Figure 0.21 Tornado Chart

 51

CALCULATION PROCEDURE FOR FIELD DEVELOPMENT PROJECT

In designing for the development of the field, we need to made many decision
and consideration on the calculation steps. For the calculation of reserve, methods
such as material balance and decline curve need production data. Then we estimated
the production data and consider the following development phase techniques.
Data Analysis
The PVT properties are so important to be used in material balance equation.
These data can be obtained from PVT lab. However, correlation of these data is
essential to make sure they are valid to be used.

3.1.1 Correlated Equations Appropriate with Field Reservoir

While there are many equations for PVT correlation, only equations that can
give close value with data from PVT lab will be described. Although the following
equations can be applied to that reservoir that we sort out for project, they cannot be
applied to other fields.

3.1.1.1 Correlation of bubble point pressure

For correlation of bubble point pressure, the Grace Method will be applied.
This method greatly effects on solution gas oil ratio. It uses data available in field
such as Tres, (𝐴𝑃𝐼), g, and Rsb.
z1 = 1.2206 − 1.8029 × 10−2 (𝐴𝑃𝐼) − 3.8682 × 10−4 (𝐴𝑃𝐼)2 (3.1)
z1 = 1.2206 − 1.8029 × 10−2 (𝐴𝑃𝐼) − 3.8682 × 10−4 (𝐴𝑃𝐼)2 (3.2)
𝑧3 = −7.7161 + 2.3604[ln(𝑇𝑟𝑒𝑠)] − 1.6678 × 10−1 [ln(𝑇𝑟𝑒𝑠)]2 (3.3)
𝑧4 = −1.0056 × 101 × 1.6664[ln(𝑅𝑠𝑏)] − 1.7682 × 10−2 [ln(𝑅𝑠𝑏)]2 (3.4)
𝑧𝑜 = 𝑧1 + 𝑧2 + 𝑧3 + 𝑧4 (3.5)
ln(𝑃𝑏) = 7.8421 + 4.9506 × 10−1 [ln(𝑧𝑜)] − 2.5726 × 10−3 [𝑙𝑛(𝑧𝑜)]2 (3.6)
 52

3.1.1.2 Correlation for isothermal compressibility

Compressibility factor is very significant below bubble point and therefore, it
is one of the main factors that has to be considered. For formation compressibility,
Newman equation is the best appropriate for our project reservoir. It can be applied
for
 For Sandstone reservoir
 Fit the Data to Hyperbolic Equation
 Porosity ranges from 0.02 < Ø <0.23
For oil compressibility, Mc Cain and Co-authors equation can be applied. It improves
the correlating parameter A by including the Bubble Point Pressure.
𝑐𝑜 = exp(𝐴) (3.7)
Where,

𝐴 = −7.573 − 1.45 ln(𝑃) − 0.383 ln(𝑃𝑏) + 1.402𝑙𝑛(𝑇) + 0.256 ln(𝐴𝑃𝐼) +

0.449ln(𝑅𝑠𝑏) (3.8)
Gas deviation factor
The compressibility factor also known as gas deviation factor is a correction
factor which describes the deviation of a real gas from ideal gas behavior. The gas
deviation factor can be found with the help of pseudo reduced pressure (𝑃𝑝𝑟 ) and
reduced pseudo reduced temperature (𝑇𝑝𝑟 ).

3.1.1.3 Gas formation volume factor

The gas formation volume factor can be expressed in either ft3 or barrels of
reservoir volume per standard cubic foot of gas.

𝑧𝑇
𝐵𝑔 = 0.02829 (ft3/scf) (3.9)
𝑃
𝑧𝑇
𝐵𝑔 = 0.00504 (bbl/scf) (3.10)
𝑃
 53

Figure 0.1 Compressibility factors for natural gases (after Standing and Katz, trans.
AIME)

3.1.1.4 Solution gas oil ratio

The solution gas oil ratio at and above bubble point was known to be 436
scf/stb. The solution gas oil ratio below bubble point is needed to obtain and it is
found using Casey-Cronquist equation.
Where, 𝑅𝑠 = (1 − 𝑟)𝑅𝑠𝑏 (3.11)
 54

𝑟 = 0.99632 − 1.3078𝑃𝐷 + 1.7964𝑃𝐷2 − 4.1124𝑃𝐷3 + 4.3031𝑃𝐷4 −

1.6743𝑃𝐷5 (3.12)
𝑃 −14.7
𝑃𝐷 = 𝑃𝑏 −14.7 (3.13)

3.1.1.5 Oil formation volume factor

There are many methods in correlating the oil formation volume factor but this
book explains about only two methods.
(1) Standing’s Correlation (Below Bubble Point)
The Standing’s correlation was originated from examining a total of 105
experimental data points on 22 different California hydrocarbon systems and it has an
average error of 1.2%
0.5 1.2
𝛾
𝐵𝑜 = 0.9759 + 0.000120 [𝑅𝑠(𝛾𝑔 ) + 1.25(𝑇 − 460)] (3.14)
𝑜
(2) McCain and coauthors (Above Bubble Point)
𝐵𝑜 = 𝐵𝑜𝑏 exp[−𝑐𝑜(𝑃 − 𝑃𝑏)] (3.15)
Where,
𝑐𝑜 = exp(𝐴) (3.16)
𝐴 = −7.573 − 1.45 ln(𝑃) − 0.383 ln(𝑃𝑏) + 1.402𝑙𝑛(𝑇) + 0.256 ln(𝐴𝑃𝐼) +
0.449 ln(𝑅𝑠𝑏) (3.17)

3.1.2 Conclusion
In the next chapter, calculation for correlation of PVT data based on these
methods will be discussed.
Volumetric Method
Volumetric method requires limited amount of data to calculate. Therefore,
some of the data are taken from the field development data analyst. Others are taken
and investigated.

3.2.1 Deterministic Method

As it is mentioned, mean values of each parameter are required to estimate
original oil in place (OOIP). For the estimation with deterministic method, the
following equation is utilized to calculate OOIP.
7758 × A × h × Φ(1−Sw )
OOIP = (3.18)
Bo

Where,
 55

A = Reservoir area (acres)

h = Net Pay thickness (ft)
Φ = Porosity (Percent or Fraction)
Sw = Water Saturation (Percent or Fraction)

3.2.2 Probabilistic Method

For the probabilistic method, the input parameters are ranged with the ± 10 %
of original values gathered. Each parameter is distributed and the mean value of each
of them is determined.
In this field development project, we applied Simon Monte Carlo Simulation
and Excel to distribute the parameters and calculate the Original oil in place and
recoverable reserve with the appropriate recovery factor for reservoir drive
mechanisms.
Firstly, Parameter distributions can be done with various distributions such as
 Triangular Distribution
 Normal Distribution
 Lognormal Distribution
It can be observed distribution and probability curve of different types in the
following figures.
In this field development project, triangular distribution is applied. The
primary advantage of the triangular distribution is that the cumulative distribution can
be easily expressed algebraically with a bit of geometry.

Figure 0.2 Triangular Distribution

 56

Figure 0.3 Normal Distribution

Figure 0.4. Lognormal Distribution

Equations for triangular distribution are as follows.
2(b−x)
F(x) =
(b−a)(b−c)
,a≤x≤c (3.19)

2(x−a)
F(x) =
(b−a)(c−a)
, c<x ≤b (3.20)

Where,
F(x) = probability density function
a = maximum value of parameter
b = minimum value of parameter
c = most likely value of parameter
x = required value of parameter
For Monte Carlo simulation, the schematic works as in following figure.
 57

Figure 0.5. Monte Carlo Schematic

3.2.3 Data Gathering and Calculating Procedures

Area has been determined from seismic data and isopach map.Net pay
thickness can be investigated from logging. Porosity and saturation are obtained from
logging and core sample. For the formation volume factor, it is available from PVT
data and also DST (Drill Stem Test) data.
Calculation procedures for volumetric method are as follows.

 Collect Data
 Find Area from isopach map
 Investigate Net Pay Thickness from logging
 Collect saturation, porosity and formation volume factor from PVT lab and
correlations
 Calculate OOIP by Deterministic Method
 Distribute Each parameter with triangular distribution
 Generate PDF and probability curves for each parameter
 Range Parameter from probability 0 to 100%
 Run Simon Monte Carlo Simulation in 100, 1000, and 10000 times
 58

Material Balance Method

The generalized material balance equation is discovered by Schilthus in 1941
and based on the volumetric analysis of the reservoir. This equation is structure to
keep the inventory of all materials entering, leaving and accumulating in the reservoir.
The material balance equation which is based on the law of conservation of mass
expresses that the initial volume of oil and gas in the reservoir before any production
is equal to the summation of volume of hydrocarbon removed to the surface and that
remained in the reservoir after a particular production.
Initial volume = volume remaining + volume removed
In this section, the calculation procedure of recovery factor by using material
balance equation is emphasized. As a result of new field, the production data are not
available and only recovery factor can be determined instead of initial reserve
estimation.

3.3.1 Developing Generalized Material Balance Equation

Before driving the material balance, the symbols used in equation are denoted
for brevity. The following terms are the standard nomenclature adopted by the Society
of Petroleum Engineering.
Pi Initial reservoir pressure, psi
P Volumetric average reservoir pressure
△P Change in reservoir pressure = (Pi – P) psi
Pb Bubble point pressure, psi
N Initial (original) oil-in-place, STB
Np Cumulative oil produced, STB
Gp Cumulative gas produced, scf
Wp Cumulative water produced
Rp Cumulative gas–oil ratio, scf/STB
GOR Instantaneous gas–oil ratio, scf/STB
Rsi Initial gas solubility, scf/STB
Rs Gas solubility, scf/STB
Boi Initial oil formation volume factor, bbl/STB
Bo Oil formation volume factor, bbl/STB
Bgi Initial gas formation volume factor, bbl/scf
Bg Gas formation volume factor, bbl/scf
 59

WingCumulative water injected, STB

Ging Cumulative gas injected, scf
We Cumulative water influx, bbl
m Ratio of initial gas cap gas reservoir volume to initial reservoir oil volume,
bbl/bbl
G Initial gas cap gas, scf
PV Pore volume, bbl
cw Water compressibility, psi−1
cf Formation (rock) compressibility, psi−1
Several of the material balance calculations require the total pore volume (PV)
as expressed in terms of the initial oil volume N and the volume of the gas cap. The
expression for total PV can be derived by introducing the parameter m into the
relationship as follows.
initial volume of gas cap (GBgi )
m= (3.21)
initial volume of oil(NBoi )

Firstly, let’s examine about the initial hydrocarbon in place in the reservoir at initial
pressure.
Initial volume of oil = N𝐵𝑜𝑖
Initial volume of gas = mN𝐵𝑜𝑖
These initial volume of oil and gas has to be stored in the pore volume of reservoir
with some degree of saturation, the equation for pore volume can be written as
PV (1- 𝑆𝑤𝑖 ) = (N𝐵𝑜𝑖 + mN𝐵𝑜𝑖 ) (3.22)
(N𝐵𝑜𝑖 + mN𝐵𝑜𝑖 )
PV = (3.23)
(1− 𝑆𝑤𝑖 )
N𝐵𝑜𝑖 (1+ m)
PV = (3.24)
(1− 𝑆𝑤𝑖 )

PV = total pore volume (bbl)

N = initial oil in place (STB)
𝐵𝑜𝑖 = initial oil formation volume factor (bbl/STB)
𝑆𝑤𝑖 = initial water saturation
m = ratio of initial gas cap reservoir volume to initial oil reservoir volume (bbl/bbl)
For the derivation of MBE, the condition of reservoir before and after production is
needed to be known. According to the tank model, the volume of reservoir always
remains as constant. The generalized MBE can be written in words as
PV occupied by the oil initially in place at Pi
 60

=PV occupied by remaining oil at P

+ PV occupied by gas in gas cap at P
+ PV occupied by evolved solution gas at P
+PV occupied by net water influx at P
+ Change in PV due to connate water expansion and pore volume reduction due to
rock expansion at P
+ PV occupied by the injected gas at P
+ PV occupied by the injected water at P
+PV occupied by the gas in the gas cap at Pi

Each term in above expression will be derived step by step as follows.

(i) Hydrocarbon PV occupied by the oil and gas cap initially in place
PV occupied by the oil initially in place at Pi
+ = N𝐵𝑜𝑖 + mN𝐵𝑜𝑖 (3.25)
PV occupied by the gas in the gas cap at Pi
N = initial oil in place (STB)
Boi = initial oil formation volume factor (bbl/STB)
m = ratio of initial gas cap reservoir volume to initial oil reservoir volume (bbl/bbl)
(ii) PV occupied by the remaining oil at P
Volume of the remaining oil (bbl) = (N-Np )Bo (3.26)
N = initial oil in place (STB)
𝑁𝑝 = cumulative oil production (STB)
Bo = oil formation volume factor at reservoir pressure (bbl/STB)
(iii) PV occupied by the gas cap at P
The originally gas cap volume is mNBoi . This volume can be
mNBoi
expressed as surface volume in terms of .
Bgi

If initial pressurePi, the initial gas formation volume factor Bgi occupies mN𝐵𝑜𝑖 ,
At pressure P, the gas formation volume factor Bg occupies ?
Bg
= mNBoi ⨯B
gi

Therefore,
Bg
Volume of gas cap at P = mNBoi ⨯B
gi

(3.27)
𝐵𝑔𝑖 = Initial gas formation volume factor, bbl/scf
𝐵𝑔 = Gas formation volume factor at P, bbl/scf
 61

(iv) PV occupied by evolved solution gas at P

The total volume of gas initially dissolved in solution at Pi is equal
to the addition of volume of gas produced to the surface, volume of evolved gas
occupied in the pore space of the reservoir and the volume still remaining in solution.
Volume of gas initially in solution = volume of gas produced + volume of evolved gas
+ volume of gas remaining in solution
Volume occupied by evolved solution gas = Volume of gas initially in solution -
volume of gas produced + volume of gas remaining in solution
For the gas dissolved in oil, the oil volume is multiplied with gas-oil ratio (R) when
gas volume is required, and then multiply with Bgi to convert reservoir volume.
Volume of gas initially in solution = NR si Bg
Volume of gas produced = Np R p Bg
Volume of gas remaining in solution = (N -Np ) R s Bg
Volume occupied by evolved solution gas = (NR si Bg )– (Np R p Bg ) – [(N -Np ) R s Bg ]
= [(NR si ) – (Np R p ) – (N -Np ) R s ] Bg
(3.28)
(v) PV occupied by the net water influx at P
There may be also some water production while water influx into reservoir may
occur depending on the reservoir drive mechanism. Therefore, the net water influx in
the reservoir is
Volume of net water influx = We - Wp Bw (3.29)
We = cumulative water influx, bbl
Wp = cumulative water produced, STB
Bw = water formation volume factor, bbl/STB

(vi) Change in PV due to connate water and rock expansion at P

Compressibility Effects
Although the reduction in hydrocarbon pore volume due to connate water and
rock expansion is very small, these terms cannot be neglected for undersaturated oil
reservoir since it is the main drive mechanism for producing hydrocarbon.
The compressibility of water is about 10-6 psia-1 compared to oil at around 10-5
psia-1 and although it is a low value it can contribute significantly to the hydrocarbon
pore volume change when pressure declines. Another contributing effect to reduction
 62

of pore volume available to hydrocarbons is the compressibility of the pore volume

itself.
The reduction in pore volume with decline in pressure is due to two factors.
• reduction in the bulk volume of reservoir
• increase in volume of the reservoir grains
Overburden Pressure

A reservoir is subjected to an overburden pressure caused by the weight of the

formation above the reservoir. It is equivalent to about 1 psi/ft of depth. These
pressures simply apply a compressive force to the reservoir rock. The pressure in the
pore space, the pore pressure, does not normally approach that of the overburden
pressure and is normally about 0.5 psi/ft. If the reservoir sands are highly
unconsolidated then this pressure could be higher as the overburden pressure is
transmitted to the fluids in the pore space.
When the pore pressure is reduced then the effective opposing pressure is
increased and the bulk volume is slightly reduced. At the same time since the rock
grains are compressible albeit only slightly the effect of a reduction in reservoir
pressure will be to expand the rock grains. hence reduce Vb)) - decrease in porosity ø
and increase Vs )
The compressibility coefficient c which describes the changes in the volume
(expansion) of the fluid or material with changing pressure is given by:
1 ∂V
c = - V ∂P (3.30)

△V = Vc△P (3.31)
In which, V = pore volume
c = compressibility
△P = pressure difference

The pore volume V has been already expressed in equation (3.32) as

N𝐵𝑜𝑖 (1+ m)
PV = (3.32)
(1− 𝑆𝑤𝑖 )

Expansion of connate water △Vw = [PV Swi]cw △P

NBoi (1+ m)
= (1− Swi )
Swi cw △P (3.33)

Expansion of reservoir rock △Vw = [PV]cf △P

 63

NBoi (1+ m)
= cf △P (3.34)
(1− Swi )
NBoi (1+ m) NBoi (1+ m)
Total changes in PV = Swi cw △P + cf △P
(1− Swi ) (1− Swi )

swi cw +cf
= NBoi (1 + m) ( ) △P (3.35)
1−swi

cw = water compressibility (psi−1)

cf = formation compressibility (psi−1 )
𝑆𝑤𝑖 = initial water saturation

(vii) PV occupied by the injection of gas and water

For increasing recovery, gas and water injection have to be carried out and so,
these injection volumes should include in material balance equation.
Total injection volume of water and gas = Ginj Bginj + Winj Bw (3.36)

3.3.2 Generalized Material Balance Equation

Combining all the effects of gas cap expansion, water encroachment, pore
volume changes and equating these to the volume changes associated with the oil
gives the general material balance equation below.
Bg
N𝐵𝑜𝑖 + mN𝐵𝑜𝑖 = mNBoi ⨯B +[(NR si ) – (Np R p ) – (N -Np ) R s ] Bg + We - Wp Bw
gi

swi cw +cf
+NBoi (1 + m) ( ) △P + Ginj Bginj + Winj Bw (3.37)
1−swi

After rearranging to get the value of N, the equation becomes

Np [Bo + (Rp − Rs )Bg ] – (We − Wp Bw ) − Ginj Bginj − Winj Bw

N= Bg s cw +cf
(3.38)
(Bo − Boi )+(Rsi − Rs )Bg +mBoi [( )−1]+ Boi (1+m) ( wi ) △P
Bgi 1−swi

This relationship is referred to as the generalized MBE. A more convenient form of

MBE can be arrived at, by introducing the concept of the total (two-phase) formation
volume factor Bt into the equation.

Bt = Bo + (R si - R s ) Bg (3.39)

Introducing Bt into equation (3.38) and

 64

𝑁𝑝 [𝐵𝑡 + ( 𝑅𝑝 − 𝑅𝑠𝑜𝑖 )𝐵𝑔 ]−(We − Wp Bw ) − Ginj Bginj − Winj Bw

N= 𝑐𝑤 𝑠𝑤𝑖 + 𝑐
(3.40)
𝐵𝑔 𝑓
(𝐵𝑡 − 𝐵𝑡𝑖 )+𝑚𝐵𝑡𝑖 [ −1]+ 𝐵𝑡𝑖 [ ]△𝑃
𝐵𝑔𝑖 1−𝑠𝑤𝑖

If we assume that there is no water production or water encroachment and no water or

Np
gas injection into the reservoir, then, the recovery factor and be written as
N

𝐵𝑔 𝑐𝑤 𝑠𝑤𝑖 + 𝑐
𝑓
(𝐵𝑡 − 𝐵𝑡𝑖 )+𝑚𝐵𝑡𝑖 [ −1]+ 𝐵𝑡𝑖 [ ]△𝑃
Np 𝐵𝑔𝑖 1−𝑠𝑤𝑖
= [𝐵𝑡 + ( 𝑅𝑝 − 𝑅𝑠𝑜𝑖 )𝐵𝑔 ]
(3.41)
N

3.3.3 Solving Material Balance Equation

Considering the fully material balance equation, the parameters can be divided
into the following categories.
Table 3.3-1 Known and unknown parameter for MBE
Known Potential
unknown
Np N
Rp We
Wp P
Cw Bo
Sw Rs
Bw Bg
M
cf

For strictly commercial reasons, Np (cumulative oil production) is the best

"known" of all but, frustratingly, in many older fields or fields that are in remote
locations where produced gas cannot be utilized, R p (cumulative or average GOR) and
Wp , (cumulative water production) are not necessarily measured. This moves them
into the unknown category and exacerbates the difficulty in making sense of the
material balance, if not making it an impossibility.
For the unknowns, the value of Bo ,R s , Bg and cf can be obtained from PVT
lab.
 65

The main reason for the use of MBE is to find the initial reserve in place.
However, for the development of a new field with the lack of production data, we can
only estimate the recovery factor (Np /N) instead of initial oil in place(N).

3.3.4 Material Balance Equation for Solution Gas Drive Reservoir

We will now examine the application of the material balance to oil reservoirs. As
the main drive mechanism of the reservoir is solution gas drive, the MBE used for this
kind of drive reservoir will be cited. A depletion drive reservoir has two phases of
depletion. The first stage above the saturation pressure the undersaturated state, and
that below the saturation pressure from where the drive mechanism gains its name,
solution gas drive.
Above the Bubble Point
Above the bubble point, in the undersaturated state, the system is all liquid and
without any other drive mechanism therefore the fluid production is purely a result of
the total compressibility of the system. In this state, the gas dissolved in oil still
dissolves and so the initial solution gas-oil ratio, instantaneous gas-oil ratio and
produced gas-oil ratio are the same for undersaturated state.
If the generalized MBE is
𝑁𝑝 [𝐵𝑡 + ( 𝑅𝑝 − 𝑅𝑠𝑜𝑖 )𝐵𝑔 ]−(We − Wp Bw ) − Ginj Bginj − Winj Bw
N= 𝑐𝑤 𝑠𝑤𝑖 + 𝑐
(3.42)
𝐵𝑔 𝑓
(𝐵𝑡 − 𝐵𝑡𝑖 )+𝑚𝐵𝑡𝑖 [ −1]+ 𝐵𝑡𝑖 [ ]△𝑃
𝐵𝑔𝑖 1−𝑠𝑤𝑖

And for above bubble point,

 There is no gas cap (m=0)
 Aquifer small in volume (We , Wp = 0)
 R s = R si = R p
Therefore, the MBE for depletion drive above bubble point is
𝑁𝑝 𝐵𝑡
N= 𝑐𝑤 𝑠𝑤𝑖 + 𝑐
(3.43)
𝑓
(𝐵𝑡 − 𝐵𝑡𝑖 )+ 𝐵𝑡𝑖 [ ]△𝑃
1−𝑠𝑤𝑖

𝑐𝑤 𝑠𝑤𝑖 + 𝑐
𝑓
Np (𝐵𝑡 − 𝐵𝑡𝑖 )+ 𝐵𝑡𝑖 [ ]△𝑃
1−𝑠𝑤𝑖
= (3.44)
N 𝐵𝑡
 66

3.3.5 Solution Gas Drive

When the reservoir pressure drops below the bubble point, then solution gas drive is
effective, then the analysis is more complex as gas comes out of solution. Solution gas
drive is the most common drive mechanism in oil reservoirs but unfortunately it is
also very inefficient. It is often associated with other drive mechanisms for example
water drive and gas cap drive. In this next section however we will ignore
supplementary drive from these two sources.
When the pressure reaches below bubble point, the gas needs to attain its critical
gas saturation to be able to mobile. Before the critical gas saturation, although the
pressure is below bubble point, the gas will not move and so the solution gas-oil
ration will be equal to the instantaneous gas-oil ratio. After the critical gas saturation
is reached, the instantaneous gas-oil ratio will not be the same as solution gas-oil
ratio. So, we need to develop other independent equations, the instantaneous
producing gas-oil ratio equation and the saturation equation.
The compressibility factor can be neglected below bubble point because the
compressibility of water and formation rock is so small compared to the gas. So, we
can generate MBE for solution gas drive reservoir below bubble point as follow.
Np Bt − Bti
=B (3.45)
N t ( Rp − Rsoi )Bg

Before critical gas saturation, the instantaneous GOR is the same as solution GOR and
therefore, no other additional equations are required to find instantaneous GOR.
But after critical as saturation, the instantaneous GOR is needed to find by the
equation
Bo keg μo
R=B + Rs (3.46)
g keo μg

In the equation(3.46) , 𝐵𝑜 , 𝐵𝑔 , 𝜇𝑜 and 𝜇𝑔 can be obtained from PVT lab. The

permeability ratio 𝑘𝑟𝑔 /𝑘𝑟𝑜 is
krg (1−S∗o )2 (1−S∗2
o )
= (3.47)
kro (S∗o )4

In which
Np B
So = (1- N ) (B o ) (1- Swi ) (3.48)
ob

S
So∗ = 1−So (3.49)
w
 67

After substituting all the required data in equation (3.47) , the recovery factor below
bubble point can be calculated.

3.3.6 Conclusion
In this section, MBE was mainly used to find the recovery factor above and
below bubble point. Not only calculation steps but also formula derivation of material
balance equation is expressed and so, it will greatly help in generating the results.

Decline Curve Analysis

The calculation step for the decline curve analysis is simple and
straightforward. The equations are derived from the empirical main equation and vary
by the type of the decline.
𝑑 (𝑙𝑛𝑞) 1 𝑑𝑞
𝐷= − 𝑑𝑡
= − 𝑞 𝑑𝑡 = 𝐾𝑞 𝑏 (3.50)

Where:
D = decline rate (yr-1, month-1 or day-1)
q = production rate (bopd, bbl/month or bbl/year)
t = time (year, month or day)
K = constant
b = Arps’ decline curve exponent

This equation is the main form of Arps’ decline curve analysis. Since different in the
value of decline exponent, b, for different curve the total of twelve equations are
formed.
Table 3.4-1 Different value of 'b'
Type of decline curve Decline exponent, b
Exponential =0
Hyperbolic 0<b<1
Harmonic =1
 68

Figure 0.6 Rate vs. time decline curve

The area under the decline curve of q versus time between the times t1 and t2 is a
measure of the cumulative oil or gas production during this period. Dealing with oil
reservoirs, the cumulative oil production, Np, can be expressed mathematically:
𝑡
𝑁𝑝 = ∫𝑡 2 𝑞𝑡 𝑑𝑡 (3.51)
1

3.4.1 Exponential Decline (b=0)

The decline exponent, b, is zero in exponential decline. Hence, the decline
rate, D, is calculated by:
𝑞
ln( 𝑖 )
𝑞𝑡
𝐷= (3.52)
𝑡

And also;
𝑞𝑖 −𝑞𝑡
𝑁𝑝 = (3.53)
𝐷

And when we consider the economic level for the field, we can calculate the
economic life time of the reservoir by the following equation:
𝑞
ln( 𝑖 )
𝑞𝑎
t= (3.54)
𝐷

Where:
qi = initial production rate/decline zero rate (bopd, bbl/month or bbl/year)
qt = production rate with time (bopd, bbl/month or bbl/year)
qa = abandon production rate/economic limit (bopd, bbl/month or bbl/year)
Np = cumulative production (bbl or MMbbl)
 69

Calculation Procedures
The graphical presentation of this type of decline curve indicates that a plot of
flow rate versus time on a semi-log scale or a plot of qt versus Np on a Cartesian scale
will produce linear relationships. So, before the start of any calculation, we need to
have enough production data.
Step 1 – Plot the data. After plotting the data on the graphic, we can simply decide the
decline trend. If not, take two production rates as qi and qt. Use equation (3.50) to
determine the decline rate at time, t. Check the cumulative production with eq (3.51)
and decide this data is matched with exponential or not.
Step 2 – The production is declining as exponential. Use eq (3.51) as 𝑞𝑡 = 𝑞𝑖 𝑒 (−𝐷𝑡) to
predict the future production rate with time. Also use eq (3.51) for the prediction of
cumulative production.
Step 3 – Determine the economic production rate. By knowing this we can use eq
(3.54) to determine life time of the reservoir.
Step 4 – Draw the predicted future production trend with the past data.

3.4.2 Hyperbolic Decline (0<b<1)

The decline exponent, b, is between zero and one in hyperbolic decline.
Hence, the decline rate, D, is calculated by:
𝑞
( 𝑖 )𝑏 −1
𝑞𝑡
𝐷= (3.55)
𝑏𝑡

And also;
𝑞𝑖 𝑏 (𝑞𝑖 1−𝑏 − 𝑞𝑡 1−𝑏 )
Np = (1−𝑏)𝐷
(3.56)

And when we consider the economic level for the field, we can calculate the
economic life time of the reservoir by the following equation:
𝑞
( 𝑖 )𝑏 −1
𝑞𝑎
t= (3.57)
𝐷𝑏

In hyperbolic, the value of b is considered by iteration or simply putting the values

from 0.1 to 0.9.
 70

Calculation Procedure
This type of decline trend doesn’t show straight line any type of the plot-scale.
The calculation procedures are same as exponential except the choice in the value of
“b”.
Step 1 – Plot the data. After plotting the data on the graphic, we can simply decide the
decline trend. If not, take two production rates as qi and qt. Use equation (3.52) to
determine the decline rate at time, t, by substituting the value of “b” from 0.1 to 0.9.
The typical/theoretical value of “b” is 0.5. Check the cumulative production with eq
(3.48) and decide this data is matched with exponential or not.
The following step 2 from step 4 is same as exponential.

3.4.3 Harmonic Decline (b=1)

The decline exponent, b, is one in harmonic decline. Hence, the decline rate,
D, is calculated by:
(𝑞𝑖 −𝑞𝑡 )
𝐷= (3.58)
𝑞𝑡 𝑡

And also;
𝑞𝑖 𝑞
𝑁𝑝 = ln(𝑞𝑖 ) (3.59)
𝐷 𝑡

And when we consider the economic level for the field, we can calculate the
economic life time of the reservoir by the following equation:
𝑞𝑖 −𝑞𝑎
𝑡= (3.60)
𝑞𝑎 𝐷

Calculation Procedures
The graphical presentation of this type of decline curve indicates that a plot of
flow rate versus cumulative production on a semi-log scale will produce linear
relationships. And all the calculation steps are same as I mention in the exponential.

3.4.4 Conclusion
This section is present about how decline curve are generated from the
production data. And simply illustrated the procedure to calculate decline for the field.
So, this section will have you to understand how we decide and calculate decline from
step to step.
 71

Petroleum Economics

3.5.1 Calculation Procedures

For the cash flow analysis, there are 9 steps as follows:
Step1: In order to recover more profit, how many numbers of wells should be drilled
is considered. After numbers of wells are decided, oil production profile is calculated.
Revenue ($) = Cumulative Oil Production (bbls) * Oil Price ($/bbl) (3.61)
Step2: Expense profile is calculated.
Annual Expense ($) = CAPEX + OPEX (3.62)
Step3: Revenue profile is calculated according to PCC contract. If revenue<expense,
contractor will get 60% of revenue and if revenue>expense, contractor will get 35%
of revenue.
Step4: Taxation profile is computed.
Taxable Revenue ($) = [60% of Revenue from Cost Recovery ($) + 35% of Revenue
from Share Split ($)] (3.63)
Revenue after tax ($) = Taxable Revenue – (Taxable Revenue * 25%) (3.64)
Step5: In this step, Net Cash Flow (NCF) is calculated by
NCF = Gross Revenue – Annual Expense (3.65)
Step6: Net Cash Flow is discounted with 10% discount rate by
Net Cash Flow (NCF)
Discounted Cash Flow = (1+Discount Rate)No.of wells (3.66)

Step7: Cumulative NPV is calculated by summing up the annual discounted cash

flow.
Step8: Internal Rate of Return (IRR) is computed in excel IRR (Cell A: Cell T)
Step9: Discounted Profitability to Investment Ratio (DPI) is calculated by
Cumulative NPV
DPI = (3.67)
CAPEX

3.5.1.1 Calculation of P50 Case

Step1: Revenue is calculated by using equation (3.61) and oil production profile is
computed as shown in Table 3.5-1.
Step2: Annual Expense is calculated by using equation (3.62) as shown in Table
3.5-2. In this case, artificial lift process occurs in 2022 after 4 years. Thus, completion
cost of pumping unit and assembly is added in CAPEX and OPEX.
Step3: Revenue profile is calculated according to respective percentage sharing
between contractor and operator.
 72

Step4: Taxable revenue and Revenue after tax are calculated by using equation (3.63)
and (3.64) .
Table 3.5-1 Oil Production Profile
Oil Production Profile
Oil Cumm. Oil
Sr. Year No. of Oil Price,
Production, Production, Revenue, $
No End wells $/bbl
bopd bbls

0 1
1 2019 1 286 104,390 58.53 6,109,947
2 2020 1 572 208,780 58.7594 12,267,795
3 2021 1 858 313,170 58.9898 18,473,828
4 2022 2 1430 521,950 59.221 30,910,409
5 2023 2 2000 730,000 59.4532 43,400,807
6 2024 1837.0246 670,514 59.6862 40,020,442
7 2025 1687.3296 615,875 59.9202 36,903,364
8 2026 1549.833 565,689 60.1551 34,029,066
9 2027 1423.5406 519,592 60.3909 31,378,640
10 2028 1307.5396 477,252 60.6276 28,934,647
11 2029 1200.9912 438,362 60.8653 26,681,010
12 2030 1103.1251 402,641 61.1039 24,602,902
13 2031 1013.234 369,830 61.3434 22,686,652
14 2032 930.66786 339,694 61.5839 20,919,654
15 2033 854.82986 312,013 61.8253 19,290,281
16 2034 785.17173 286,588 62.0676 17,787,816
17 2035 721.18988 263,234 62.3109 16,402,374
18 2036 662.42176 241,784 62.5552 15,124,840
19 2037 608.44253 222,082 62.8004 13,946,809
20 2038 558.86194 203,985 63.0466 12,860,532
21 2039 513.32155 187,362 63.2937 11,858,862
22 2040 471.49215 172,095 63.5418 10,935,209
23 2041 433.07133 158,071 63.7909 10,083,497
24 2042 397.78134 145,190 64.041 9,298,122
25 2043 365.36705 133,359 64.292 8,573,918
26 2044 335.59412 122,492 64.544 7,906,120
27 2045 308.24732 112,510 64.7971 7,290,335
28 2046 283.12895 103,342 65.0511 6,722,511
29 2047 260.05742 94,921 65.3061 6,198,914
30 2048 238.86594 87,186 65.5621 5,716,098
31 2049 219.4013 80,081 65.8191 5,270,888
32 2050 201.52279 73,556 66.0771 4,860,353
33 2051 185.10116 67,562 66.3361 4,481,794
34 2052 170.01768 62,056 66.5961 4,132,720
35 2053 156.16333 57,000 66.8572 3,810,834
36 2054 143.43794 52,355 67.1193 3,514,019
37 2055 131.74951 48,089 67.3824 3,240,322
38 2056 121.01354 44,170 67.6465 2,987,943
 73

39 2057 111.15243 40,571 67.9117 2,755,221

40 2058 102.09487 37,265 68.1779 2,540,624

Table 3.5-2 Expense Profile

Expense Profile
CAPEX, $ OPEX, $ Annual Expense, $

6,204,691 6,204,690.98
6,204,691 132,947.74
6,337,639
6,204,691 132,947.74
6,337,639
6,204,691 132,947.74
6,337,639
12,371,127 730,759 13,101,886
12,371,127 1,023,062 13,394,189
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
 74

1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062
1,023,062

Table 3.5-3 Percentage Sharing between Operator and Contractor

Revenue Profile
Revenue from Cost Recovery ($) Revenue from Cost Share Split ($)
Contractor (60%) Operator (40%) Contractor (35%) Operator (65%)

3,665,968 2,443,979 - -
6,337,639 4,225,092 596,772 1,108,292
6,337,639 4,225,092 2,768,884 5,142,213
13,101,886 8,734,590 3,175,876 5,898,056
13,394,189 8,929,459 7,377,006 13,700,153
1,023,062 682,041 13,410,369 24,904,970
1,023,062 682,041 12,319,391 22,878,869
1,023,062 682,041 11,313,387 21,010,576
1,023,062 682,041 10,385,738 19,287,798
1,023,062 682,041 9,530,340 17,699,203
 75

1,023,062 682,041 8,741,567 16,234,339

1,023,062 682,041 8,014,229 14,883,569
1,023,062 682,041 7,343,542 13,638,007
1,023,062 682,041 6,725,092 12,489,457
1,023,062 682,041 6,154,812 11,430,366
1,023,062 682,041 5,628,949 10,453,763
1,023,062 682,041 5,144,045 9,553,226
1,023,062 682,041 4,696,908 8,722,829
1,023,062 682,041 4,284,597 7,957,109
1,023,062 682,041 3,904,400 7,251,029
1,023,062 682,041 3,553,815 6,599,943
1,023,062 682,041 3,230,537 5,999,569
1,023,062 682,041 2,932,438 5,445,956
1,023,062 682,041 2,657,556 4,935,462
1,023,062 682,041 2,404,085 4,464,729
1,023,062 682,041 2,170,356 4,030,661
1,023,062 682,041 1,954,831 3,630,400
1,023,062 682,041 1,756,093 3,261,315
1,023,062 682,041 1,572,834 2,920,977
1,023,062 682,041 1,403,848 2,607,147
1,023,062 682,041 1,248,024 2,317,760
1,023,062 682,041 1,104,337 2,050,912
1,023,062 682,041 971,842 1,804,849
1,023,062 682,041 849,666 1,577,951
1,023,062 682,041 737,006 1,368,725
1,023,062 682,041 633,120 1,175,795
1,023,062 682,041 537,327 997,892
1,023,062 682,041 448,994 833,846
1,023,062 682,041 367,541 682,576
1,023,062 682,041 292,432 543,088

Table 3.5-4 Taxation Profile

Taxation Profile
Taxable Revenue, $ Revenue after Taxation, $

3,665,968 2,749,476
6,934,411 5,200,808
9,106,522 6,829,892
16,277,762 12,208,322
20,771,195 15,578,396
14,433,431 10,825,073
13,342,453 10,006,840
12,336,449 9,252,337
11,408,800 8,556,600
10,553,402 7,915,052
 76

9,764,629 7,323,472
9,037,292 6,777,969
8,366,604 6,274,953
7,748,155 5,811,116
7,177,874 5,383,406
6,652,012 4,989,009
6,167,107 4,625,330
5,719,970 4,289,977
5,307,659 3,980,744
4,927,462 3,695,597
4,576,878 3,432,658
4,253,599 3,190,199
3,955,500 2,966,625
3,680,619 2,760,464
3,427,147 2,570,360
3,193,418 2,395,063
2,977,893 2,233,420
2,779,155 2,084,366
2,595,896 1,946,922
2,426,910 1,820,183
2,271,087 1,703,315
2,127,400 1,595,550
1,994,904 1,496,178
1,872,728 1,404,546
1,760,068 1,320,051
1,656,183 1,242,137
1,560,389 1,170,292
1,472,056 1,104,042
1,390,603 1,042,952
1,315,494 986,621
 77

RESULT AND DISCUSSION

After step by step calculation from data analyzing to economic, the following
result are obtained. The result for each method is estimated and calculated for our
field development project. Some result such as well spacing and well production rate
are estimated only for this project.
Data Analysis
The data analysis for Ohmintaung sand layer are described as follows. The
correlation of field data and PVT data are taken in step by step procedures.

4.1.1 Bubble Point Pressure

By Grace Correlation
z1 = 1.2206 − 1.8029 × 10−2 (𝐴𝑃𝐼) − 3.8682 × 10−4 (𝐴𝑃𝐼)2
z2 = 3.8649 − 6.5080(𝛾𝑔) + 1.9670(𝛾𝑔)2
𝑧3 = −7.7161 + 2.3604[ln(𝑇𝑟𝑒𝑠)] − 1.6678 × 10−1 [ln(𝑇𝑟𝑒𝑠)]2
𝑧4 = −1.0056 × 101 × 1.6664[ln(𝑅𝑠𝑏)] − 1.7682 × 10−2 [ln(𝑅𝑠𝑏)]2
𝑧𝑜 = 𝑧1 + 𝑧2 + 𝑧3 + 𝑧4
ln(𝑃𝑏) = 7.8421 + 4.9506 × 10−1 [ln(𝑧𝑜)] − 2.5726 × 10−3 [𝑙𝑛(𝑧𝑜)]2
Table 4.1-1. Calculation for z
𝐳𝟏 𝐳𝟐 𝒛𝟑 𝒛𝟒 𝒛𝒐
0.1737 0.2434 - 0.1783 - 0.5814 - 0.3427
𝑃𝑏 = 1493.6346(with error 11.8%)
𝑃𝑏 = 1317.3857 psi

4.1.2 Rock Compressibility

By Newman
97.3200(10)−6
𝑐𝑓 =
(1 + 55.8721 Ø)1.42859
𝑐𝑓 = 2.152 × 10-6
 78

4.1.3 Oil Compressibility

By McCain and coauthors
𝑐𝑜 = exp(𝐴)
Where,
𝐴 = −7.573 − 1.45 ln(𝑃) − 0.383 ln(𝑃𝑏) + 1.402𝑙𝑛(𝑇) + 0.256ln(𝐴𝑃𝐼)
+ 0.449ln(𝑅𝑠𝑏)
Table 4.1-2. Calculation for compressibility
P(psi) A Co(psi-1)

3035 -11.1921 1.3783 × 10-5

3000 -11.1753 1.4017 × 10-5
2000 -10.5874 2.5233 × 10-5
1315 -9.97935 4.6347 × 10-5
1000 -9.58229 6.8939 × 10-5
500 -8.57723 1.8835 × 10-4

4.1.4 Gas Deviation Factor

By Sutton
𝑃𝑝𝑐 = 671.1 + 14.0𝛾𝑔 − 34.3𝛾𝑔2
𝑇𝑝𝑐 = 120.1 + 429𝛾𝑔 − 62.9𝛾𝑔2
𝑃 𝑇
𝑃𝑝𝑟 = 𝑃𝑝𝑐 𝑇𝑝𝑟 = 𝑇𝑝𝑐
 79

After obtaining Ppr and Tpr we can get z by reading the following graph

Figure 0.1. Compressibility factors for natural gases (after Standing and Katz, trans.
AIME)
 80

Table 4.1-3. Chart for gas deviation factor

P Ppr Z
3035 4.5720 0.8
2000 3.0129 0.78
1500 2.2597 0.82
1000 1.5064 0.88
750 1.1298 0.9
500 0.7532 0.94
250 0.3766 0.97
0 0.0000 1

Pressure vs Gas Deviation Factor Chart

1.2

1
Gas Deviation Factor(z)

0.8

0.6

0.4

0.2

0
0 500 1000 1500 2000 2500 3000 3500
Pressure(P)

Figure 0.2. Pressure Vs Gas Deviation Factor

4.1.5 Gas Formation Volume Factor

By Sutton
𝑧𝑇
𝐵𝑔 = 0.00504 (bbl/scf)
𝑃
 81

Table 4.1-4. Chart for gas formation volume factor

P z Bg(bbl/SCF)

3035 0.8 0.0007838

2000 0.78 0.0011597

1500 0.82 0.0016256

1000 0.88 0.0026168

750 0.9 0.0035683

500 0.94 0.0055904

250 0.97 0.0115376

Pressure vs Gas Formation Volume Factor Chart

0.014

0.012
Gas Formation Volume Factor(Bg)

0.01

0.008

0.006

0.004

0.002

0
0 1000 2000 3000 4000
Pressure(P)

Figure 0.3. Pressure Vs Gas Formation Volume Factor

 82

4.1.6 Solution Gas-Oil Ratio

By Casey_Cronquist
𝑅𝑠 = (1 − 𝑟)𝑅𝑠𝑏
where,
𝑟 = 0.99632 − 1.3078𝑃𝐷 + 1.7964𝑃𝐷2 − 4.1124𝑃𝐷3
+ 4.3031𝑃𝐷4 − 1.6743𝑃𝐷5
𝑃 − 14.7
𝑃𝐷 =
𝑃𝑏 − 14.7
Table 4.1-5. Calculation of solution gas oil ratio
P PD r Rs(scf/STB)
1000 0.7577 0.248 327. 9
750 0.5655 0.431 248.18
500 0.3732 0.616 167.41
250 0.1810 0.798 87.89
0 -0.0113 1.011 -4.94

Pressure vs Solution Gas Oil Ratio

500.00

450.00
Solution Gas Oil Ratio(Rs)

400.00

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00

-50.00 0 1000 2000 3000 4000

Pressure(P)
Figure 0.4. Pressure Vs Solution Gas Oil Ratio
 83

4.1.7 Oil Formation Volume Factor

By Standing’s Correlation (Below Bubble Point)
𝛾𝑔 0.5
𝐵𝑜 = 0.9759 + 0.000120[𝑅𝑠( ) + 1.25(𝑇 − 460)]1.2
𝛾𝑜
Table 4.1-6. Calculation for oil formation volume factor below bubble point
P Rs Bo(bbl/scf)

1315 436 1.2136

1000 327.8939 1.1643

750 248.1774 1.1293

500 167.4139 1.0952

250 87.8940 1.0631

0 -4.9444 1.0281

By McCain and coauthors (Above Bubble Point)

𝐵𝑜 = 𝐵𝑜𝑏 exp[−𝑐𝑜(𝑃 − 𝑃𝑏)]
where,
𝑐𝑜 = exp(𝐴)
𝐴 = −7.573 − 1.45 ln(𝑃) − 0.383 ln(𝑃𝑏) + 1.402𝑙𝑛(𝑇) + 0.256 ln(𝐴𝑃𝐼)
+ 0.449 ln(𝑅𝑠𝑏)
Table 4.1-7. Calculation of oil formation volume factor above bubble point
P(psi) A co Bo(bbl/scf)

3035 -11.496 1.0171 × 10-5 1.1925

3000 -11.4792 1.0343 × 10-5 1.1926

2000 -10.8912 1.8621 × 10-5 1.1982

 84

Pressure vs Oil Formation Volume Factor Chart

1.2500
Oil Formation Volume Factor(Bo)

1.2000

1.1500

1.1000

1.0500

1.0000
0 500 1000 1500 2000 2500 3000 3500
Pressure(P)

Figure 0.5. Pressure Vs Oil Formation Volume Factor

4.1.8 Checking with Given PVT Data Graph

The PVT data from the reservoir is obtained from the measuring methods and
compared with the correlated results by mean of graph.

4.1.8.1 Gas Deviation Factor

Pressure vs Gas Deviation Factor Chart

1
Gas Deviation Factor(z)

0.9
0.8
0.7
Observed
0.6
0.5 Calculated
0.4
0 500 1000 1500
Pressure(P)

Figure 0.6. Comparison of Observed and Calculated for z

 85

4.1.8.2 Gas Formation Volume Factor

Pressure vs Gas Formation Volume Factor Chart

0.014

0.012
Gas FOrmation Volume Facotor

0.01

0.008

0.006
Observed
Calculated
0.004

0.002

0
0 200 400 600 800 1000 1200 1400
Pressurue

Figure 0.7. Comparison for Calculated and Observed for Bg

4.1.8.3 Solution Gas Oil Ratio

Pressure vs Solution Gas Oil Ratio

500
450
Solution Gas Oil Ratio(Rs)

400
350
300
250
Observed
200
150
Calculated
100
50
0
0 1000 2000 3000 4000
Pressure(P)

Figure 0.8. Comparison of Rs for Calculated and Observed

 86

4.1.8.4 Oil Formation Volume Factor

Pressure vs Oil Formation Volume Factor Chart

1.3
Oil Formation Volume Factor(Bo)

1.25

1.2

1.15
Observed
1.1 Calculated
1.05

1
0 500 1000 1500 2000 2500 3000 3500
Pressure(P)

Figure 0.9. Comparison of Bo for Calculated and Observed

All the observed and calculated PVT data satisfy the nature of typical PVT data
graphs. Moreover, there is only a small difference between the observed data and
calculated data which can be accepted. Therefore, we can say that data analysis
process is complete and correct. Finally, these data are given to the volumetric
analysis, reserve estimation by material balance and decline curve analysis to
complete further steps.

Volumetric Method
Table 4.2-1. Original Oil in Place by Deterministic Method

Area (acres) 411

Net Pay (ft) 65
Porosity (%) 24
Water Saturation (%) 25
Volume Factor(bbl/STB) 1.269
OOIP (MMSTB) 29.3979
 87

4.2.1 Probabilistic Method

Table 4.2-2. Parameters Ranges for OOIP
Lower Upper
Parameters Original
Limit Limit
Area(acres) 369.7 411 452.4

Net Pay(ft) 56 65 74

Porosity(%) 12 24 35

Water Saturation(%) 20 25 34

Volume Factor(bbl/STB) 1.1421 1.269 1.3959

4.2.1.1 Probability Density Function and Probability Curves

50

40

30
PDF

20

10

0
360 380 400 420 440 460
A (acres)

Figure 0.10. Area Vs PDF

1
0.8
Probability

0.6
0.4
0.2
0
360 380 400 420 440 460
A (acres)

Figure 0.11. Areas Vs Probability

 88

Table 4.2-3. Percentiles Area

Probability Area( Acres)
100 369
90 384
80 392
70 397
60 403
50 408
40 412
30 416
20 422
10 429
0 452

10
9
8
7
6
PDF

5
4
3
2
1
0
55 60 65 70 75

h (ft)

Figure 0.12. Net Pay Vs PDF

1

0.8
Probability

0.6

0.4

0.2

0
56 61 66 71
h (ft)

Figure 0.13. Net Pay Vs Probability

 89

Table 4.2-4. Percentiles Net Pay

Percentiles Net Pay (ft)
100 56
90 59
80 61
70 62
60 62.2
50 64
40 65
30 66
20 67.3
10 69
0 73

0.14
0.12
0.1
0.08
PDF

0.06
0.04
0.02
0
0.1 0.15 0.2 0.25 0.3 0.35 0.4
Φ (decimal)

Figure 0.14.Porosity Vs PDF

1
0.9
0.8
0.7
Probability

0.6
0.5
0.4
0.3
0.2
0.1
0
0.12 0.17 0.22 0.27 0.32 0.37
Φ (decimal)
Figure 0.15. Porosity Vs Probability
 90

Table 4.2-5. Percentiles Porosity

Probability Porosity (decimal)
100 0.12
90 0.165
80 0.19
60 0.205
60 0.22
50 0.232
40 0.238
30 0.24
20 0.26
10 0.28
0 0.35

0.07
0.06
0.05
0.04
PDF

0.03
0.02
0.01
0
0.2 0.25 0.3 0.35
Sw (decimal)

Figure 0.16 .Saturation Vs PDF

0.8
Probability

0.6

0.4

0.2

0
0.2 0.22 0.24 0.26 0.28 0.3 0.32 0.34
Sw (decimal)

Figure 0.17. Saturation Vs Probability

 91

Table 4.2-6. Percentiles Saturation

Probability Saturation (decimal)
100 0.2
90 0.23
80 0.244
70 0.25
60 0.265
50 0.272
40 0.28
30 0.287
20 0.292
10 0.303
0 0.34

1
0.9
0.8
0.7
Probability

0.6
0.5
0.4
0.3
0.2
0.1
0
1.14 1.19 1.24 1.29 1.34 1.39
Bo (bbl/STB)

Figure 0.18. Volume Factor Vs PDF

0.14
0.12
0.1
0.08
PDF

0.06
0.04
0.02
0
1.13 1.18 1.23 1.28 1.33 1.38
Bo (bbl/STB)

Figure 0.19. Volume Factor Vs Probability

 92

Table 4.2-7. Percentiles FVF

Probability FVF (bbl/STB)
0 1.14
10 1.19
20 1.21
30 1.23
40 1.241
50 1.256
60 1.27
70 1.282
80 1.3
90 1.325
100 1.395

4.2.2 Monte Carlo Simulation

80
OOIP (MMSTB)

60
40
20
0
-20
-40
0 20 40 60 80 100
No. of Iterations (100)

Figure 0.20. Run time (100)

0.25 1
Cumulative Probability
Relative Probability

0.2 0.8

0.15 0.6

0.1 0.4

0.05 0.2

0 0
0 10 20 30 40
OOIP in MMSTB

Figure 0.21. OOIP in 100 run

 93

0.8 1

Cumulative Probability
0.7

Relative Probability
0.8
0.6
0.5 0.6
0.4
0.3 0.4
0.2
0.2
0.1
0 0
0 5 10
Reserve in MMSTB

Figure 0.22. Reserve in 100 run

120

100

80
OOIP (MMSTB)

60

40

20

-20

-40
0 200 400 600 800 1000
No. of Iterations (1000)

Figure 0.23. Run time (1000)

0.12 1
Cumulative Probability
Relative Probability

0.1 0.8
0.08
0.6
0.06
0.4
0.04

0.02 0.2

0 0
10 15 20 25 30 35 40
OOIP in MMSTB

Figure 0.24. OOIP in 1,000 run

 94

0.35 1

Cumulative Probability
Relative Probability
0.3
0.8
0.25
0.2 0.6

0.15 0.4
0.1
0.2
0.05
0 0
4 6 8 10 12 14
Reserve in MMSTB

Figure 0.25. Reserve in 1,000 run

4.2.3 Conclusion and Discussion

Volumetric Method can give out two different results with deterministic method
and probabilistic method. Since deterministic can show single value of reserve
estimate, it is regarded as a standard point to compare with probabilistic method.
Probabilistic method can get P90, P50 and P10 from simulations. So with more run
time simulations, the reserve data will become more accurate.
In this field development project, simulations have been run for 100 times and
1000 times. With Simon Monte Carlo spreadsheet, it can run over 150,000. Because
of crash over more time simulations, around about 1000 simulations has been run to
obtain the results.
Volumetric Method is easiest method to obtain the result and earliest method to
apply. So uncertainty may involve in volumetric method.
Therefore, our field development project has been checked with material
balance and decline curve analysis in the next portions.
Material Balance Method
In the previous section, all the formula derivations of material balance and
calculation procedures for recovery factor have been extensively defined. In this
section, recovery factors at different pressures will be calculated using material
balance equation with the help of PVT data. Therefore, the PVT data such as
formation volume factor, solution gas oil ratio and compressibility are expressed as
the first sector.
 95

Table 4.3-1. Given PVT data (calculated)

Pressure Rs Bo z Bg Bt
3035 436 1.1925 1.1925
3000 436 1.1926 1.1926
2750 436 1.1933 1.1933
2500 436 1.1943 1.1943
2250 436 1.1959 1.1959
2000 436 1.1982 1.1982
1750 436 1.2017 1.2017
1500 436 1.2072 1.2072
1315 436 1.2136 0.82 0.001854 1.2136
1000 327.89 1.1643 0.88 0.002617 1.4472
750 248.18 1.1293 0.90 0.003568 1.7995
500 167.41 1.0952 0.94 0.00559 2.5967
250 87.890 1.0631 0.97 0.011538 5.0794

4.3.1 Calculation of recovery factor above bubble point pressure

To calculate the recovery factor above bubble point, the equation is
cw swi + c
f
Np Bo − Boi + Boi [ ]△P
1−swi
=
N Bo

The recovery factor at 1315 psi is

Np 1.2136 − 1.1925 + (1.1925 ⨯ 0.0000038721 ⨯ 1720)
=
N 1.2136
Np
= 0.0239305
N
Recovery factor at other pressures above bubble point can also be obtained in this
equation.

4.3.2 Calculation of recovery factor below bubble point

To find the recovery factor below bubble point, there could be two conditions:
before critical gas saturation and after critical gas saturation. The calculation
procedure of both condition has already given in detail in previous section.
 96

4.3.2.1 Before critical gas saturation

Let the pressure 1000 psi be before critical gas saturation. Therefore, the
recovery factor at 1000psi is
cw swi + c
f
Np Bt − Bti + Bti [ ]△P
1−swi
=
N Bt + ( Rp − Rsoi )Bg

Np 1.447199 −1.1925 +(1.1925 ⨯ 0.0000038721⨯2035)

=
N 1.447199 + ( Rp −436)0.002617

Np 0.2640955703
= 0.30629+0.002617R
N p

So, the RF is obtained in terms of R p and another relationship between Np /N

is required. To get this equation, instantaneous gas oil ratio is required. Below critical
gas saturation,
Instantaneous GOR = Solution GOR
Rsb + Rs
R avg = 2
436+327.89
R avg = 2

R avg = 381.945 scf/STB

Another equation that relates Np /N and R p is
△Npj
∑n
j=1 Rj N
Rp = Np
N
Np
(0.0239305⨯436)+( −0.0239305)381.945
N
Rp = Np
N
Np
1.29356+0.0239305
N
Rp = Np
N

Solving equation ( ) & equation ( ),

Np
= 0.2045
N

4.3.2.2 After critical gas saturation

If the pressure 1000 psi is reached after critical gas saturation,
Instantaneous GOR ≠ Solution GOR
The system will have three unknowns: recovery factor, instantaneous gas-oil
ratio and solution gas-oil ratio. In this condition, the mathematical iteration method
will be used.
 97

Step (1)
We have to assume R p value to get recovery factorNp /N.
Assume R p = 500scf/stb

Step (2)
With the value of aboveR p , recovery factor is calculated. The recovery factor
equation is
Np Bt − Bti
=B ( Rp − Rsoi )Bg
N t

Np 1.4472 −1.1925
= 1.4472 ( 500 −436)0.002617
N
Np
= 0.15774027
N

Step (3)
Calculate So using above Np /N value.
Np B
So = (1- N ) (B o ) (1- Swi )
ob

1.1643
So = (1-0.15774027) (1.2136 ) (1- 0.25)

So = 0.606035

Step (4)
Calculate So∗ to get relative permeability ratio.
S
So∗ = 1−So
w

0.606035
So∗ = 1−0.25

So∗ = 0.808046

Step (5)
Determine the relative permeability of gas to oil.
krg (1−S∗o )2 (1−S∗2
o )
=
kro (S∗o )4

krg (1−0.808046)2 (1−0.8080462 )

=
kro (0.808046)4
krg
= 0.02996
kro
 98

Step (6)
Read viscosity value at 1000psi from PVT lab.
μg =0.59cp
μo = 0.74cp

Step (7)
Calculate the instantaneous GOR at 1000psi.
Bo keg μo
R=B + Rs
g keo μg

1.1643 0.74
R = ( 0.002617⨯0.029996⨯0.59 )+327.89

R = 344.6277 scf/STB

Step (8)
Calculate the average instantaneous GOR.
∑∞
n=1 R
R avg = n
436+344.6277
R avg = 2

R avg = 390.314 scf/STB

Step (9)
Np
Calculate R p in terms of .
N
△Npj
∑n
j=1 Rj N
Rp = Np
N

(436⨯0.0239305)+390.314(0.15774−0.0239305)
Rp = 0.15774

R p = 397.2457 scf/STB

Step (10)
If calculated R p is not the same as assumedR p , the last R p ratio has to be
substituted into first step and continue the steps.
The iteration process for 1000 psi is as follows.
 99

Table 4.3-2. Iteration for Recovery Factor at 1000psi

Rp Np /N So So∗ krg μg /μo R instan R avg Rp
kro

500 0.15774 0.606035 0.808046 0.029996 1.254237 344.6277 390.314 397.2457

397.2457 0.189256 0.583356 0.777807 0.053283 1.254237 357.6221 396.811 401.7671

401.7671 0.187607 0.584543 0.779390 0.051776 1.254237 356.7813 396.3906 401.4439

401.4439 0.187724 0.584459 0.779278 0.051881 1.254237 356.8402 396.4201 401.4665

401.4665 0.187716 0.584465 0.779287 0.051873 1.254237 356.8381 396.419 401.4649

401.4649 0.187716 0.584466 0.779288 0.051872 1.254237 356.8375 396.4188 401.465

401.465 0.187716 0.584465 0.779286 0.051873 1.254237 356.8384 396.4192 401.465

Therefore,
Np /N = 0.187716
R p = 401.465scf/stb

The iteration process for 750 psi is as follows.

Table 4.3-3. Iteration for Recovery Factor at 750 psi
Rp Np /N So So∗ krg μg /μo R instan R avg Rp
kro

425 0.344855 0.457227 0.609637 0.693188 1.339286 541.9923 459.8191 430.4515

430.4515 0.341069 0.459870 0.613160 0.660660 1.339286 528.2052 455.2234 428.0592

428.0592 0.342713 0.458723 0.611630 0.674601 1.339286 534.1141 457.193 429.0803

429.0803 0.342009 0.459214 0.612285 0.668601 1.339286 531.5707 456.3452 428.6349

428.6349 0.342313 0.459002 0.612003 0.671180 1.339286 532.6638 456.7096 428.829

428.829 0.342182 0.459093 0.612124 0.670071 1.339286 532.1937 456.5529 428.7477

428.7477 0.342238 0.459054 0.612072 0.670547 1.339286 532.3957 428.7826 428.7826

428.7826 0.342213 0.459071 0.612094 0.670342 1.339286 532.3090 428.7676 428.7676

 100

428.7676 0.342225 0.459063 0.612084 0.670430 1.339286 532.3462 428.7741 428.77

428.77 0.34222 0.459066 0.612089 0.670392 1.339286 532.3301 456.5984 428.77

Therefore,
Np /N = 0.34222
R p = 428.77 scf/stb

When the results are expressed as graphical form (Pressure Vs RF)

Table 4.3-4. Recovery Factor assuming 1000psi is before critical gas saturation
RF Pressure

0.0000% 3035

0.0219% 3000

0.1773% 2750

0.3575% 2500

0.5874% 2250

0.8745% 2000

1.2593% 1750

1.8048% 1500

2.3930% 1315

20.45% 1000

RF VS P
3500
3000
2500
PRESSURE

2000
1500
1000
500
0
0 0.05 0.1 0.15 0.2 0.25
RF

Figure 0.26. RF Vs P assuming before critical gas saturation

 101

Table 4.3-5RF – Recovery factor assuming 1000psi is after critical gas saturation
RF Pressure

0.0000% 3035
0.0219% 3000
0.1773% 2750
0.3576% 2500
0.5874% 2250
0.8746% 2000
1.2593% 1750
1.8048% 1500
2.3931% 1315
18.7716% 1000
34.222% 750

RF Vs P
3500

3000

2500
Pressure

2000

1500

1000

500

0
0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4
RF

Figure 0.27. RF Vs P assuming after critical gas saturation

 102

Table 4.3-6Comparison of RF depending on Critical Gas Saturation

RF(after) RF(before) Pressure

0.0000% 0.0000% 3035

0.0219% 0.0219% 3000

0.1773% 0.1773% 2750

0.3576% 0.3576% 2500

0.5874% 0.5874% 2250

0.8746% 0.8746% 2000

1.2593% 1.2593% 1750

1.8048% 1.8048% 1500

2.3931% 2.3931% 1315

18.7716% 20.4500% 1000

34.2220% 34.2220% 750

RF VS P
3500

3000

2500

2000

1500

1000

500

0
0.0000% 5.0000% 10.0000%15.0000%20.0000%25.0000%30.0000%35.0000%40.0000%

Figure 0.28. Comparison of RF before and after critical gas saturation

 103

4.3.3 Conclusion
MBE is a relationship between four quantities: oil and gas in place,
production, water influx, average reservoir pressure. Therefore, if three terms are
known, the rest one can be easily obtained. In all MBE calculation, we observed that
there is no time parameter in equation and so we cannot predict like eg. When can we
obtain RF of 20%. In this MBE calculation section, the difference in RF based on
critical gas saturation is also described and the RF at different pressures are calculated
in very detailed.
Decline Curve Analysis
In the project for the development of the field, we don’t have any production
data. So we estimate the production data from the well spacing. In our field
development project, we decide to drill seven production wells within five years. The
estimated production data are stated in Table 4.4-1.
Table 4.4-1 Production data from year 1 to 5 (before reaching peak production)
t (yr) q (bbl/day) Np (bbl) Each year production
(bbl)
1 286 1.044E+05 104390

2 572 3.132E+05 208780

3 858 6.263E+05 313170

4 1430 1.148E+06 521950

The production rate of 2000bopd is the maximum (peak) production rate and
we are taking this rate as qi in decline calculation. And economic is decided 102bopd
as abandon production rate (qa). The estimated reserve of our field is nearly 10
MMbbl. So, with this data we can calculate the decline trend for our project.
As for decline trend, we have to consider which type of decline is acceptable
for our field. So, in that case, I am taking exponential decline as the most accessible
one for our project. In conclusion the calculated decline rate is 0.085 per year and the
total life time of the reservoir is 40 years.
The estimated daily production rate and cumulative production are calculated
in exponential and the result are shown in Figure 0.30, Figure 0.29,Figure 0.31 and
Figure 0.32. The excel sheet data is attached in the appendix.
 104

Figure 0.29 Result chart. Plot of q vs. t on the cartesian coordinate

Figure 0.30 Result chart. Plot of q vs. t on the semi-log scale.

Figure 0.31 Result chart. Plot of q vs Np on cartesian coordinate

 105

Figure 0.32 Result chart. Plot of q vs. Np on semi-log scale

Petroleum Economic

4.5.1 Sensitivity Analysis

NPV vs. Discount rate of P50 Case is analyzed and NPV chart analysis of the
project is shown in the following.

4.5.1.1 NPV vs. Discount Rate of P50 case

By varying discount rate from 0 to 100 and calculated, the following result is
obtained.
40,000,000

30,000,000

20,000,000
IRR = 33%
10,000,000

-10,000,000 0 20 40 60 80 100 120

-20,000,000

Figure 0.33 NPV vs. Discount rate of P50

 106

4.5.1.2 Tornado Chart

This sensitivity chart is carried out by using four different parameters of the
project:
1. Revenue
2. Revenue after tax
3. CAPEX
4. OPEX

Tornado Chart

REVENUE

REVENUE AFTER TAX

CAPEX

OPEX

20000 25000 30000 35000 40000

Low High

Figure 0.34 Tornado Chart

4.5.2 Decision Tree

Figure 0.35 Decision Tree of P50 Case

 107

RESERVOIR SIMULATION MODEL

After our field development project has been done, our team decided to build a
model simulation that will ensure to visualize underground reservoir layer and
pumping oil from the subsurface. Then, our team divided into various design thinking
factors and started building one. It is not an easy task to take action since we have
been through a lot of difficulties and problems all the way through. In the following
sections, it will describe about design thinking, installation and implementation.

Design Thinking
First of all, the teams plan to design just an underground reservoir layer.
Through the leading of our supervisor and mentor, we finally decided to start doing
for simulation model in which shows underground the reservoir layer and beam
pumping (which was taken with permission from petroleum department), drawing the
liquid out up to the surface.
In the model design thinking, our team starts considering risk analysis for the
model .So, we started doing the comparisons to what types of materials to be used for
underground layer and for oil pump.

Figure 0.1. Design Thinking for Producing Fluid

 108

Figure 0.2. Design Thinking for Circulation

Figure 0.3. Material Selection

Table 5.1-1 Risk Analysis for Chemical Hazard

 109

Table 5.1-2. Risk Analysis for Physical Hazard

By the approval of all the team members, it is decided to use wood chips along
with ATM glue on the foam board for underground reservoir layer. Frame with
hollow pipes are used for underground layers to set up on it. Plywood of 5 layers has
been used as a surface for beam pumping, Christmas tree and rig to put on.
We would like to simulate the model to flow the liquid up to the surface.
Therefore, it is considered to use hand driven oil pump used in local oil tank in the
market. Then, the pump has been connected with bridle which is ground cable copper
wire to go up and down motion.

Installation
After thinking about the materials needed and design, we started to buy things
and started to install. The installation procedures are as follows.
 Isopach map has been converted to cross section to visualize the reservoir
layer, water oil contacts and faults.
 Cross sections are drawn on the A4 paper box to change the necessary scales.
 Foam board has been cut into the layer with scales.
 Then it is painted the ATM glue on the foam board and sprayed with wood
chips.
 For different reservoir layers, wood chips are mixed together with color
cement to get the reservoir layer of brown, red, reddish brown, black, greenish
black.
 Artificial water was used to describe more clearly of the oil and water layer.
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 On the plywood, two holes has been drilled for oil pump to set up and for
recycling the fluid.
 Surface preparations have also been made with wood chips plus ATM. For hill
positions, artificial ground has been used.

Figure 0.4. Reservoir Layer Preparation

Figure 0.5. Sticking Double Tape to Layer

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Figure 0.6. Cutting Extra Parts

Figure 0.7. Putting on the Frame

Figure 0.8. Mixing for Artificial Water

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Figure 0.9. Artificial Water Layer

Figure 0.10. Separator Scale Model

Figure 0.11. Christmas Tree scale model with Lego

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Figure 0.12. Rig Scale Model

Figure 0.13. Underground Water Supply

Figure 0.14. Surface Scale Model

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Difficulties and Problems

There are so many difficulties throughout the model building. Firstly, stroke
length and water level is really troublesome. Since, beam pumping cannot give
sufficient speed to go up and down, stroke length and water level become essential to
flow liquid up to the surface. Longer stroke length with high water level can only
achieve for the desired flow. It is one of the most difficult problems in the project.
Secondly, belt and bridle are quite difficult to attain. For belt, it is been
considered to use O ring but it even slows down speed. So, we decided to use rubber
rings for proper speed. Then bridle is a bit uneasy one to obtain too. Normal copper
wire cannot handle the upstroke since they will bend in up stroke. Thus, copper wire
from ground cable has been used. It has proper softness and flexibility to handle both
up stroke and down stroke.
Thirdly, glue and foams are what give us headache. First, it is planned to use
acrylic glue for foams to set up on the frame. In reality, acrylic damage foam board
very much. Then double tape has been used to solve the problem.
Last but not least, water leaking is slightly a problem. Though AB glue can
handle not to leak water, it has to be wait for overnight. Therefore, it is not much
problem but it is one of the time delaying problems.

Conclusion
Model building is not an easy task to perform. Throughout the whole projects,
we learn a lot how to handle the problems and learn so many lessons. It is a lot tiring
to build but it is worth trying.
We would like to suggest the young generations who would like to build model
that always have a plan and always do test runs for the thing that you all would apply.
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CONCULSION

This project is assigned to the fifth-year students as an integrated design

reservoir project. In this project, we take new field data and develop field and build a
scale model for our project. In developing the field, we have to do step by step
calculation. First, we analyses and correlate the given data and then volumetric
method and material balance are applied to estimate the OOIP and recovery factor
(RF). Then by applying the estimated RF, decline curve analysis and economic are
applied to estimate the economic life time of the reservoir.
In data analyzing method, there are many correlation methods to applied for
the field such as standing method, McCain and coauthor etc. Each method has
different error percentage and standard deviation. When applying for the field we
tried every single method to determine which method is best suited with our field.
The volumetric method is easy and most basic one in estimating OOIP. In
volumetric, there are P10, P50 and P90 case. P10 is overestimate and P90 is the
underestimate result. P50 is the most favorable result and the following estimation
with material balance and economic are calculated with P50 result.
In theory, material balance is applied when there is a production history. But
now we are doing the development project and we don’t have any production history.
So, only thing material balance method can do is to estimate RF, which is required in
estimating production rate for decline curve.
Decline curve analysis is also used when there is a sufficient production data.
But now as I mention in MBE, we have no production data. So, production rate is
estimated by RF and limit economic production rate with the help of economic
analysis.
Economic analysis is the final approach to identify how much profit is
available for the entire oil and gas producing industry. Almost every single decision
and probable outcomes are made on the basis of economic assessment. These
evaluations are also essential and are performed to determine reserves for reporting
purposes which are mandatory for oil and gas companies. In such cases, the main goal
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of the company is to make decisions and outcomes that drives the best way of
maximizing the present-day profit. The cash flow model is the most common model
used to access oil and gas projects. Normally, very large acquisitions are evaluated by
examining the impact on the financial net income.
Here in our project, the reservoir formation is composed of mainly sandstone and
we described the result of 3800’Sd which is active and going to be produced at
present time. To obtain the expected reserves within the project life, the proper
decline rate has been established. After that, the natural flow production trend and
artificial lift production trend has been carried out.
In this whole project, we focused on P50 case based on an identical oil price. We
calculated cash flow model of possible reserves by using number of wells and decline
rate. The cash flow is analyzed under two conditions, Natural Flow and Artificial Lift.
According to different values of input parameters, NPV, IRR and DPI are calculated
for results. Decision tree for P50 case is built in order to dictate various amount of
NPV. Finally, in order to show a financial analysis for a project, we used a Tornado
chart to have a quick overview of the risks involved.
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REFERENCES

1. Abdus Satter, Ghulam M.Iqbab, James L.Buchwalter, Practical Enhanced

Reservoir Engineering, 2008.
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3. Nnaemeka Ezekwe, Petroleum Reservoir Engineering Practice, 2011.
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2014.
5. Tarek Ahmed, Paul D. McKimmey, Advanced Reservoir Engineering, 2012
6. B.C CRAFT * M. HAWKINS, “Applied Petroleum Reservoir Engineering”,
Third Edition, 2015.
7. W.D. McCain Jr., R.B. Soto, P. P. Valko, and T.A. Blasingame, “Correlation of
Bubble Point Pressures For Reservoir Oils—A Comparative Study’’, SPE 51086.
8. Tara Davies, “Correlation Eqns for PVT Toolbox’’, Schlumberger, February,
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9. Tarek Ahmed, “Reservoir Engineering Handbook’’, Fifth Edition,
10. Slyvester Okotie, Bibobra Ikporo, Reservoir Engineering Fundamentals &
Applications, 2019.
11. Abdus Scatter, Ganesh C. Thakur, Integrated Reservoir Mangement, 1994.
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Estimation: Application of Monte Carlo Simulation, April 2014.
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14. Monte Carlo Simulation, Excel TV, YouTube.
15. Arthur W. McCray, “Petroleum Evaluations and Economic Decisions”, 1976.
16. Arthur W. McCray, “Petroleum Evaluations and Economic Decisions”, School of
Petroleum & Geological Engineering, University of Oklahom.
17. F.H. Allen and R.D. Seba, “Economics of Worldwide Petroleum Production”.
18. Stephan Staber, September 2012, Vienna, “Advanced Petroleum Economics”.
19. Mian, M.A., “Project Economics & Decision Analysis Volume 1&2”.