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Monte Carlo Simulation Method

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Simulation

When we use the word simulation, we refer to any analytical method to

imitate a real –life system, especially when other analyses are too
mathematically complex or too difficult to reproduce.

Without the aid of simulation, a spreadsheet model will only reveal a single
outcome, generally the most likely or an average scenario.
Spreadsheet risk analysis uses both a spreadsheet model and simulation
to automatically analyze the effect of varying inputs on outputs of the
model system.

One type of spreadsheet simulation is Monte Carlo simulation, which

randomly generates values for uncertain variables over to simulate a model.
 PRW & AIE
Monte Carlo Method

• Statistical method using various variables

• Builds up an accurate estimate of the probability
distribution by repeated random sampling of the
individual distributions that best describe the uncertainty
associated with the each of the volumetric variables
(Duff and Hall)
• The term Monte Carlo method was first used in the
1940s by physicists working on nuclear weapon projects
in the USA
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Input Distribution
Each of the parameters entering the calculations has to be described by a
probability distribution ( in blue colour) representing the original data
(frequency distribution). Although such data preparation may be time
consuming, it is an important step to obtain realistic results.
One may first consider factors which determine the most appropriate
type of distribution.
The over riding factor would be data
availability, That is in many situations
the most likely, max and min values.

For a sparse data set, sensitivity

calculations for a number of possible
distributions may be beneficial.
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MC spread input - volume calculation
Monte Carlo Simulation – input distribution
Min Most likely Max
1 iteration Gross Rock Volume X X X
GRV
Netto gross ratio X X X
Porosity X X X
N/G HC saturation X X X
Formation Volume Factor X X X
Recovery Factor X X X
Por

1-Sw
Output
FVF

RF

= Recoverable Resources
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Definition of terms

Deterministic :
A single value assignment for each input parameter of the resource calculation
is used. The appropriate value for each reserve category must be selected.

Probabilistic:
A full range of values are used for each parameter into the resource calculation.
Resource estimates can be extracted from a Monte Carlo type of analysis at the
various confidence levels P90, P50, P10 , etc. This method pertains mainly to
Volumetric evaluations prior to the onset of production.
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Probabilistic vs. deterministic sums
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Distribution types

Symmetric

Uniform Normal Beta Triangular Stretched Beta

Positive
Skew
Lognormal Log triangular Triangular Stretched

Negative
Skew
Triangular Stretched Beta

Other

Constant Weighted values Weighted distributions User defined

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Normal distribution
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Triangular distribution
The triangular distribution is very common as input to Monte Carlo simulation.
This distribution is recommended when dealing with a sparse data set for
a particular parameter.
The unique for this distribution is that the shape is completely defined by three
percentiles ( or values), assuming that higher or lower values than the most likely
one should have equal chance.
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Log normal distribution
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Mean & Median & Mode
Mean, Median, Mode

1.0 Mode 9

0.8
Inverse Cumulative Distribution

Probability density
6
0.6
5

4
0.4
3

2
0.2

0.0 0
6%

8%
0%

2%

4%

22 %
10 %

12 %

14 %

16 %

18 %

20 %

24 %

26 %

30 %

32 %
28 %
Mode = Median = Mean =
most likely P50
Porosity arithmetic average

Source:Bridge Energy
 PRW & AIE
Mean (arithmetic average)

Mean

1.0 9

8
Inverse Cumulative Distribution

0.8 7

Probability density
Equal 6
0.6 areas
5

4
0.4
3

0.2 2

0.0 0
12 %

14 %

16 %

18 %

22 %

24 %

26 %
2%

4%

6%

8%

10 %

20 %

28 %

30 %

32 %
0%

Mean =
arithmetic average
Porosity

Source:Bridge Energy
 Inverse Cumulative Distribution

0.0
0.2
0.4
0.6
0.8
1.0
0%

2%

4%

6%
Median (P50)

8%

10 %

12 %

14 %

P50
16 %

Median =
Median

Porosity
18 %

20 %

22 %

24 %

26 %
areas
Equal

28 %

30 %

32 %
0
1
2
3
4
5
6
7
8
9

Probability density
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Source:Bridge Energy
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P90, P50, P10

P10, P50, P90

1.0 9

8
Inverse Cumulative Distribution

0.8 7

Probability density
6
0.6
5

4
0.4
3

0.2 2

0.0 0
12 %

20 %

22 %

24 %

30 %
4%

6%

8%

10 %

14 %

16 %

18 %

26 %

28 %

32 %
0%

2%

P90 P50 = P10

Porosity
median

Source:Bridge Energy
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Monte Carlo – Number of iterations
30 100 5000

50000 Number of trials Mean Std F90 F50 F10

30 204.7 36.2 146.2 207.0 245.9
100 207.4 41.1 155.5 207.4 255.8
1000 201.1 43.2 148.0 199.2 259.2
5000 202.7 43.5 149.5 199.6 262.3
50000 202.1 43.7 148.7 198.7 260.6

Source:Bridge Energy
 PRW & AIE
Monte Carlo software
for the petroleum industry

• Geox
• Rose & Associates
• Crystal Ball
• @Risk
• PetroVR
• GoldSim
• Others?