Economic impact of new technologies

The asset development appears subeconomic under current conditions. But what if alternative technologies were applied?

An oilfield was developed using vertical wells, and only the marginal areas contain significant remaining oil. However, these wells are showing extremely high water cut. Switching to horizontal wells could potentially address this issue, but what economic value would it bring?

With Geonomix, you can quickly assess the remaining volumes and explore development options using horizontal wells through analytical models or analogs. This will provide a rapid assessment of potential recovery improvements and ways to add economic value to the project.

Quick Evaluation of the Economic Feasibility of Incremental Field Development Projects (FDP) in a Mature Oilfield

Preface

The company was presented with an intriguing but risky opportunity: acquiring a mature and significantly depleted oilfield in a foreign country. The asset exhibited high watercut and diminishing reserves, but one of the four reservoirs showed signs of potential. Initial assessments from a partner company indicated very limited possibilities for improving recovery efficiency, prompting the team to consider passing on the opportunity entirely.

However, the desire for growth in a new market led the company to pursue additional evaluations, exploring options for applying various technologies to improve recovery. Unfortunately, the time for decision-making was extremely short, leaving no room for conventional modeling and simulation exercises.

Initial review

The quick overview of geological and production data revealed the following. The upper reservoirs are practically depleted and are not worth reviewing. In the lowermost layer, the current recovery factor is only 12%. Although the amount of remaining reserves is attractive, all wells generally demonstrate high watercut, which has reached 75% in just four years. This situation has led the seller to question the prospects of that reservoir. They attempted to drill horizontal boreholes to improve recovery but were unsuccessful in practically all cases.

However, the technical review of the existing horizontal wells revealed that their problems and poor performance were primarily due to technical issues rather than reservoir conditions (e.g., inadequate drilling control and completion practices). This opened a window of opportunity to explore the option of revitalizing the field by drilling horizontal boreholes (sidetracks and new wells) in the marginal zones where most reserves remain.

Problem identification and proposed solution

The quick overview of producing wells has identified the key issue of a low recovery factor from the reservoir, primarily due to water coning. There are three types of well performance:

Slow decline in production rates and low water cut, typical of the reservoir's crestal zones.
Moderate decline in production rates with a steady increase in water cut, observed near the oil-water contact (OWC).
Rapid water breakthrough and a sharp drop in production rates, characteristic of oil-water transition zones.

Severe water coning occurs in oil-water zones, which collectively represent approximately 70% of the rock volume in the oil pay zone. This phenomenon is the primary reason for decreased production and recovery efficiency.

As a result, the team has proposed reviving the development of the reservoir using horizontal boreholes. This approach can be mostly achieved by sidetracking from existing wells.

Employing horizontal completions allows for a reduction in drawdown in production wells while maintaining reasonable production rates. This strategy can help lower water cut and delay the potential breakthrough of formation waters.

Feasibility Assessment of the Proposed Solution with Geonomix

To assess the commercial feasibility of the proposed solution, a full-cycle analysis was necessary, but only one week was available. The Geonomix program was employed for this assessment.

Remaining recoverable volume assessment

As there was no recent 3D seismic survey available for the field, it must be acknowledged that structural uncertainty exists, which may significantly affect volumetric calculations. Three versions of the reservoir oil area have been utilized: minimum, most likely, and maximum. Other properties have been sourced from available reports, with reasonable uncertainty ranges applied. The range of recovery factors spans from 0.26 (based on field report data) to 0.43 (derived from an analogous field developed using horizontal wells).

After accounting for the oil volumes already produced, the remaining recoverable reserves in the reservoir are still significant.

Production forecast

The express assessment of oil production forecasts was based on the production decline history of typical wells in the field. Performance data from these wells were input into the program to develop probabilistic models for Estimated Ultimate Recovery (EUR) for two types of wells: 1) vertical wells and 2) horizontal wells.

The required number of wells—of both types—for field development was calculated using Geonomix algorithms, which matched probabilistic categories of recoverable volumes, as determined by geologists, with probabilistic production forecasts. Finally, the production forecasts for two options: 1) continuing with vertical wells, and 2) switching to horizontal wells, were submitted for economic evaluation.

Economic evaluation

Both development options—vertical wells and horizontal wells—require the drilling of an additional 10 to 22 wells, depending on the reserves category (P90, P50, or P10). Additionally, a significant investment of nearly $40 million is needed for the modernization of field facilities and existing pipelines.

A conservative scenario was used for the oil price, starting at $60 per barrel and adjusted for inflation in subsequent years. Due to anticipated cost fluctuations in this region, probabilistic ranges have been applied to well costs and facility investments. The calculated economic results for both field development options are summarized in the diagram below.

Conclusion

The use of Geonomix technology enabled a full-cycle assessment of the oilfield acquisition opportunity within just a few days, leading to the following conclusions:

Significant volumes of oil reserves remain in one layer of the oilfield, making it worthwhile to consider an incremental field development project. However, continuing development with the same technology (vertical wells) is likely to result in a high water cut and low recovery efficiency. An economic evaluation of this option indicated a negative net present value (NPV) when accounting for the required investments and the proposed acquisition cost.
On the other hand, adopting horizontal borehole technology would significantly enhance recovery by reducing water coning. This technological shift would transform the project's economics, making the oilfield acquisition both attractive and profitable for the company.