AAPG Slide Resources: The Focus of Industry by Fred Schroeder.

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Visiting Geoscientist
Fred W. Schroeder. Downloads Resources Lecture Files | Exercise Files

The notes for each Lecture Slides PPT How to Run For Students Request Solutions

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“Announcing a Lease Sale”
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preview the full-size Slide 1
slide image, click on
the thumbnail. This unit is on the Focus of Industry
To download the How many – by show of hands - have had some interaction with
entire presentation an oil company – internship, research funded by, etc.
right-click and save Industry's scope runs from finding oil and gas reservoirs to getting
the appropriate link. refined products to our customers

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Slide 2

Let me define what a fully-integrated company is

It is one that does everything - from finding oil & gas reserves to
sales to customers
There are many companies that only cover certain components

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AAPG Slide Resources: The Focus of Industry by Fred Schroeder.
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Slide 3
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e.g., WalMarts sells, but does not explore or refine
Examples of a fully-integrated companies are: ExxonMobil, Shell,
and BP
We break up the entire process into two main stages:
Upstream covers everything to getting raw material to a
refinery
Downstream is everything from refining to sales
Easy question: Where (which stage) do we employ geoscientists?
Obviously in the Upstream
The UPSTREAM can be further subdivided into 3 main parts
One part is focused on finding oil & gas 'pools' – EXPLORATION
The second part is focused on how to get oil & gas out of what has
been discovered – DEVELOPMENT
The mission of the third part is to get the most out of the ground
and to the refinery - PRODUCTION
Oil companies, and each of their departments, establish certain
targets
For example, these might be some targets within an exploration
group/company,
To replace production with new reserves on a yearly basis
– like a bank account where to be financially healthy you
want deposits > withdrawals
To keep the finding costs below a target, such as $1/barrel
– sum of all exploration costs divided by total number of
discovered barrels on a yearly basis
Development and Production departments would have similar
targets
We always need to drill wisely
Wells can be very expensive - some exceeding $200 million. That
is a lot of money, even for ExxonMobil or Shell
We want to place each well in the best possible location - we can't
afford to trust in 'dumb luck'
Many times the oil & gas occur at several depth levels. We are not
limited to drilling straight holes
So we also need to carefully design the well path so that we can
tap into several 'pools' in the best possible locations
Much of the technical work done in the upstream is directed
towards determining where to drill and predicting what we will find
BEFORE we start drilling
This leads to the need for all types of scientists and engineers
working in the Upstream
Their goal is to image and interpret the subsurface so we can
maximize oil & gas production while minimizing costs
AAPG Slide Resources: The Focus of Industry by Fred Schroeder.

Slide 6

In exploration, geoscientists are needed to answer questions such

as:
Which basins …………
Which blocks ……….
Where on ………………
What should ………….

What is a condensate? Temperatures & pressures in subsurface

reservoirs are much higher than at the surface

We can have a hydrocarbon that is in a gaseous phase in the reservoir,

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but as it is brought to the surface, the temperature & pressure drops and
the gas CONDENSES into a liquid.

In terms of value, oil is supreme, condensate is second, and gas is third,

but gas is still a viable target in many parts of the world

Slide 7

This is a simple flow chart of the work done in exploration

We will talk about much of this in subsequent units
Briefly:
First we have to identify opportunities – areas with high
potential that we can get rights to – like in a lease sale
We have to capture those opportunities – win bids on
blocks we want to explore
Once we have a block, we may want to acquire better
seismic data
Those data have to be processed and then interpreted
Download: full size image | PPT slide As we interpret the subsurface, we will see 'features of
interest' – places where HCs may be reservoired
More detailed work on some of these features may give us
a prospect – a target we want to drill
We have to assess each prospect – predict what we will
find – e.g., at 10,234 ft we expect a 200 ft thick channel
complex holding 10 million barrels of oil
We convince management to drill a wildcat – the first well in
the area to test our predictions
If we find HCs, we may need to drill one or more
confirmation wells – to verify there is enough HC for it to be
an economic success
If we have enough HC, we call it a field and pass it to the
Development or Production department
It goes to Development if a lot of money is required to build
facilities, e.g. a huge offshore platform and a long pipeline
If the new field is in an area with a lot of facilities already, it
would go to the Production department – e.g., a new field in
South Texas that only needs a ¼ mile extension to an
existing pipeline

Slide 8

We will consider a hypothetical example – The Bonanza Basin

We have done regional analyses which indicates that this basin
has high potential for HCs
8 blocks are being offered in a lease sale

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Slide 9

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AAPG Slide Resources: The Focus of Industry by Fred Schroeder.
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Slide 10
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Slide 12
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Slide 13
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Our company won the bidding on two of the blocks that we wanted
– block 7 and block 8
We acquired good quality seismic data, had it processed and
interpreted
The interpreter(s) saw 8 features of interest – what we call leads
All 8 leads were worked in more detail and an estimate of the
volume of oil and gas potentially in each was made
Out of the 8, only 3 were predicted to have enough HC that they
could be economical – value of HC > total cost
We have 'matured' 3 leads into PROSPECTS
The best is the Alpha Prospect, predicted to have a gas cap (red)
and an oil leg (green)
A major fault cuts the NE portion of the prospect
Our company drills a wildcat on Alpha – and we find oil down to
4500 m
Why did we NOT drill on the crest of the structure?
Expect gas and perhaps gas is not what we would produce
from this region
May need to have oil at least this far down from the crest to
be economically viable
May want to be sure to hit the oil/water contact so we know
how much oil is present
There is at least 1 main source of uncertainty about how much oil
we have in Alpha
How much oil is on the NE side of the fault?
There could be NO oil if the fault seals and the oil came in
from the W, SW or S
There could be oil down to 4500 m – as in the well – HC ‘in
communication’ across the fault on a geologic time scale
There could be oil below 4500 m
To answer this, the exploration department may have to drill a
confirmation well
A confirmation well was drilled in the NE portion of the prospect
Oil was found down to 4500 m – there is pressure communication
across the fault zone (on a geologic time scale)
We were able to get an EUR of 200 million barrels of oil and 0.95
trillion cubic feet of gas
This is BIG enough to pass the Alpha FIELD to the development
department
AAPG Slide Resources: The Focus of Industry by Fred Schroeder.

The EUR for Alpha is twice the economic threshold – the minimum
needed to cover costs
Therefore the field is turned over to the development department
In development, geoscientists are needed to answer questions
such as:
Can we...
Is the reservoir...
How many...
What sort...
How can we...
Download: full size image | PPT slide What uncertainty remains

Slide 14

To answer development questions, we need more detail on the

reservoir, its properties, and the distribution of oil & gas
We want to understand where to place wells to get the most for the
least cost
For exploration, we can live we a ‘broad brush’ picture of the
reservoir
For development, we need considerably more detail
As shown on the right, we may drill some more wells during
development – before placing a production platform
Why might they have drilled the western development well?
Download: full size image | PPT slide Confirm the oil-water contact
See if reservoir quality changed (better or worse) at the
western edge of the field
Why might they have drilled the eastern development well?
The oil is isolated from the rest – probably have to develop
as a separate compartment
Is there enough oil to merit producing it – or is it cost-
prohibitive
See if reservoir quality changed (better or worse) at the
eastern edge of the field

Slide 15

Data quality that was adequate for exploration may not be

adequate for development issues
The seismic data may need to be reprocessed – using more
sophisticated, expensive, time-consuming methods
We may have to reshoot a new survey to get acceptable data
quality
Data on the right is ‘sharper’ and has better verticl resolution (red
& black bands are thinner -> more stratigraphic detail)

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Slide 16

The development department has a platform built, installed, and

start to produce oil at Alpha
The initial production rates (barrels/day) are about what they
predicted
Now the field is turned over to the production department
In production, geoscientists are needed to answer questions such
as:
How should we...
Can we...
What about...
Download: full size image | PPT slide Is there...
Can we build...

Slide 17

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AAPG Slide Resources: The Focus of Industry by Fred Schroeder.
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Slide 18
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http://www.aapg.org/slide_resources/schroeder/1/index.cfm[9/24/2012 11:06:48 AM]
A very useful tool for production people is a reservoir simulation
A detailed geologic model of the reservoir is built – rock
type/lithology, porosity, permeability, etc.
Then fluids are placed within each cell of the geologic model along
with fluid properties
The reservoir simulator models how the fluids move through time
Until recently, the first simulation would be run after about 5 years
of production time
The simulation would be calibrated by doing a history match -
comparing the simulated production (red curve) with the actual
production data (blue boxes)
If a reasonably good history match is obtained, the model is taken
to be fairly accurate
Then we can simulate future production – 10, 20, 30 years into the
future
We can do some ‘what if’ scenarios – e.g., if we placed 3
additional producers at these locations and 5 injectors at
these locations, how much additional oil would we
produce?
If the cost of these 8 wells is less than the value of the
additional oil, we might do it
Obviously if the cost of the 8 additional wells would not be
recovered, we would not do it – look for other ‘profitable’
scenarios
We can also look for portions of the reservoir that are not
swept of oil (in the simulations) and target these locations
with additional wells – if profitable
So geoscientists can have great value to an energy company
They can:
Do work that leads to added HC reserves – making new
discoveries, getting more from producing zones, or finding
additional zones to produce
They can get more reserves at lower costs
Investing in...
Drilling in...
Correctly assessing...
Avoiding...
For example, say that:
I am on a team of 4 working production at the Alpha field
The initial plan was to drill 10 wells
Average cost for a well is $75 million
Through our team effort, we determine that we can get the
same amount of oil with only 8 wells drilled in optimum
locations
The team of 4 saved the company $150 million (cost of 2
wells)
That would be enough to pay each person for 50+ years –
they have certainly earned their keep!