Problems Reconciling Probabilistic and Deterministic Reserve Classifications and Evaluations
- Dwayne C. Purvis (Cawley, Gillespie & Associates) | Richard F. Strickland (Cawley, Gillespie & Associates)
- Document ID
- Society of Petroleum Engineers
- SPE Hydrocarbon Economics and Evaluation Symposium, 2-3 April, Dallas, Texas
- Publication Date
- Document Type
- Conference Paper
- 2001. Society of Petroleum Engineers
- 4.1.2 Separation and Treating, 5.7.6 Reserves Classification, 1.10.1 Drill string components and drilling tools (tubulars, jars, subs, stabilisers, reamers, etc), 4.3.4 Scale, 5.6.3 Deterministic Methods, 5.7.4 Probabilistic Methods, 5.7 Reserves Evaluation, 4.1.5 Processing Equipment
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The current SPE/WPC definitions for reserves quantified by probabilistic methods are ambiguous and largely inconsistent with deterministic criteria. Probabilities are least well defined and most subjective at the extremes of the ranges of outcomes. Since reserve definitions are meant to provide consistency across evaluators and evaluations, the current definitions are not workable. When defining reserves, volumes should first be classified into a category. A probabilistic analysis can then be made of the uncertainty in each category, and a central estimate of Proved reported. When probabilistic analyses are used to determine value, the same restraints are not necessary, but the same wariness of the extremes of the distributions should be applied.
The debate on whether and how to include probabilistic criteria in reserve definitions has been going on for many years. Despite the inclusion of criteria in the 1997 version of the SPE/WPC reserve definitions (ref. 1), the meanings of the definitions remain unclear.
The definition of Proved is ambiguous as to whether the quantification of the volume should be ‘estimated with reasonable certainty' or whether the presence of some amount of volume should be reasonably certain. Common deterministic practice is to offer a best, or central estimate, of the quantity of hydrocarbons after the producibility of some quantity has been established with reasonable certainty by largely non-quantitative criteria.
However, the probabilistic terms in the definition of Proved suggest that the specific quantity of Proved should be reasonably certain. The definitions neglect to define what types of volumes that are to be included in a probabilistic analysis from which the P101 value is chosen, i.e. how to apply non-quantitative definitional criteria to a probabilistic analysis. It also fails to specify the level of aggregation.
The following discussion explores problems with probabilistic analyses that can lead to artificial discrepancies with deterministic analyses and the implications for the use of probabilistic analyses in defining reserves and value. Probabilistic analyses can be easily constructed, either by indifference, ignorance or manipulation, to result in estimates of Proved reserves higher than deterministic estimates. Given the current state of the art and the SPE/WPC reserve definitions, users should beware of excess reliance on probabilistic analyses and should continue to regard reserves and value in light of deterministic measures.
Despite problems placing probabilistic estimates into the qualitative taxonomy of reserves, the value of the method exists apart from reserve labels. The rules of probabilistic analysis for classification of reserves do not apply when the object is not compliance with SPE/WPC definitions, such as in the case of determining economic value of a project from a probabilistic analysis. However, observations about the implications of probabilistic analyses do have importance when determining value.
Principles for resolution of reserve definitions
Reserve definitions are a convention not based on scientific truth but on the need for a consistent terminology to communicate between people and compare across diverse situations. Dichotomous and incongruent standards for reserves do not promote communication; they provide an avenue for chicanery. In addition, no one has suggested that the well-accepted and explicit criteria for reserve classifications have ceased to be good rules or that they should be discarded. In this state of ambiguity, the guiding principle must be one of backwards compatibility.
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