The Adaptation of Reservoir Simulation Models for Use in Reserves Certification Under Regulatory Guidelines or Reserves Definitions
- M.R. Palke (Ryder Scott Company) | D.C. Rietz (Ryder Scott Company)
- Document ID
- Society of Petroleum Engineers
- SPE Annual Technical Conference and Exhibition, 30 September-3 October, New Orleans, Louisiana
- Publication Date
- Document Type
- Conference Paper
- 2001. Society of Petroleum Engineers
- 4.1.5 Processing Equipment, 5.5.8 History Matching, 5.7.6 Reserves Classification, 5.7.2 Recovery Factors, 5.1.1 Exploration, Development, Structural Geology, 4.6 Natural Gas, 4.1.2 Separation and Treating, 5.1 Reservoir Characterisation, 5.7 Reserves Evaluation, 5.5 Reservoir Simulation, 6.1.5 Human Resources, Competence and Training, 1.2.3 Rock properties, 5.1.5 Geologic Modeling
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The estimation of oil and gas reserves is necessary for assessing the value of oil and gas properties, and for meeting the reporting and disclosure requirements imposed on oil and gas companies by various governmental and regulatory bodies. Reservoir simulation is a sophisticated technique of forecasting future recoverable volumes and production rates, and is an increasingly popular tool for reservoir management and optimization. Reservoir simulation is also progressively being used in the process of forecasting and estimating reserves. However, as with any reservoir engineering technique, certain precautions must be taken when relying on reservoir simulation as the means for estimating reserves. This paper identifies some of the unique issues encountered in the reserves evaluation process when reservoir simulation is utilized, and offers strategies for addressing these issues.
The assessment of a company's reserves is an important process, regardless of the company's size or corporate structure. The level of reserves can have a direct impact on a company's earnings and balance sheet, and can significantly affect the cost and availability of capital necessary for its growth.
Reserves are determined using a variety of geological and engineering methods. Regardless of the evaluation methods used, however, any estimate of future recovery, no matter how reasonable, does not necessarily qualify as an estimate of reserves. Specific criteria must be met to qualify estimated recoverable volumes as reserves. These criteria are generally defined in the form of "Reserves Definitions".
For an exploration or production company, the value of the reserves usually constitutes a major portion of the total company value. Therefore, it is critical that reserves be estimated as accurately as possible within the constraints imposed by the relevant Reserves Definitions. As long as the requirements of the definitions are upheld, reservoir simulation can be a valuable tool for improving the accuracy of the reserves estimate. However, due to the nature of simulation models (their non-uniqueness and complexity) their use as a tool for this purpose is not always straightforward, as this paper will discuss.
Several sets of Reserves Definitions have been published by various regulatory bodies and professional organizations throughout the world. Most sets of Reserves Definitions specify different grades of reserves depending on the level of certainty associated with the estimated recovery of those reserves. In many systems, the top grade of reserves is designated as "proved" reserves. As would be expected, proved reserves require a very high degree of confidence that the hydrocarbons will actually be recovered. Lower grades of reserves such as "probable" or "possible" require diminishing standards of certainty.
Examples of two sets of definitions commonly encountered by companies based or operating in the United States are 1) those established by the United States Securities and Exchange Commission (SEC), and 2) those established by the Society of Petroleum Engineers and the World Petroleum Congress (SPE/WPC). There are many similarities between these two sets of definitions, but there are important distinctions as well which are beyond the scope of this discussion.
Publicly held oil and gas companies in the United States must file specific forms with the SEC on a regular basis and whenever stock is issued. Some of these forms require that the company disclose volumes of reserves and the estimated future income attributable to those reserves. SEC regulations stipulate that the reserves estimated for such purposes must be computed in accordance with the definition of proved reserves contained in Part 210.4-10 (a) of Regulation S-X.
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