PRMS categories estimation

Preface

The PRMS system provides a clear methodology and establishes a standardized framework for estimating petroleum resources. It is based on two key principles: 1) a project-based approach and 2) an uncertainty-based philosophy. The Geonomix software is designed to fully leverage these principles with its fully probabilistic calculation core and its ability to quickly evaluate any project.

The following example illustrates the practical utility of Geonomix in quickly assessing the petroleum volume uncertainty of the oilfield and calculating its commercial viability using PRMS rules and guidelines.

Project outline

The medium size oilfield, located in a remote region, was delineated by several exploration and appraisal wells. As there are no production treatment and transport facilities available, a rather significant capital investment was expected.

The local operator has begun negotiations with a potential investor to join the project. The first question that has arisen concerns the potential risks and the actual chances of commercial viability in this partnership. The investor’s party has engaged a consulting company to assess this issue.

An initial evaluation indicated that the current assessment of petroleum accumulation volume is based on local practices using deterministic principles. These results have been approved by the government committee, and the operator has presented them to model future production and cash flows. However, it is clear that technical and commercial uncertainties must be considered, and the PRMS system should be applied in this case.

Field analysis

Initial volumetric assessment

The field consists of two anticline structures with three productive reservoirs. Parameters from the Operator's report have been entered into the program, and deterministic calculations have confirmed the values originally reported by the Operator. However, this version does not account for the uncertainty in the petroleum volumes that could potentially be recovered from the accumulation. Furthermore, PRMS guidelines emphasize the need to understand and manage the range of uncertainty in reserve and resource estimates.

To perform a probabilistic assessment, the volume calculation parameters were presented as ranges, shown in the table below. Each range represents a spectrum of values that could reasonably occur within the error margins of the original measurements and interpretations.

The calculated result presents a complete probability distribution of possible recoverable resource outcomes, from which three representative values are selected: P90, P50, and P10.

These values can be assigned to PRMS categories, where P90, P50, and P10 correspond to low, best, and high estimates, respectively. This method of categorization is consistent with PRMS guidelines when probabilistic approach is used. Since a discovery has been made and a range of technically recoverable quantities has been assessed, the estimated volumes can be classified as Contingent Resources. Thus, the P90, P50, and P10 estimates correspond to the 1C, 2C, and 3C categories, respectively.

Advancing the project to commercial status, with resources converted to reserves (e.g. 1P, 2P, and 3P), requires addressing the formal contingencies, as strictly defined by PRMS guidelines.

Aggregation of the accumulations

The next step involved upgrading the reservoir-level resource estimates to a higher level for the entire field. This process of summation individual estimates is commonly known as "aggregation" (SPE 2007). Under PRMS guidelines, two primary methods of aggregation are described: arithmetic and probabilistic. However, it has often been noted that arithmetic summaries can yield inaccurate results, particularly for the P90 and P10 classes.

The use of Geonomix technology for aggregation allows for the generation of valid probabilistic summations for any combination of initial units. The resulting estimates for individual accumulations and the entire field, along with their respective PRMS categories, are presented in the table below.

Project economics and commerciality

Reserves are the quantities of hydrocarbons expected to be commercially recovered from known accumulations, according to PRMS guidelines. To evaluate the potential for converting contingent resources to reserves, it is crucial to assess the project's commercialization prospects. Furthermore, establishing the commercial status of a project requires meeting additional conditions beyond just positive economics. These typically include the presence of suitable markets, appropriate contractual and legal frameworks, a commitment to development within a reasonable timeframe, and other factors, as outlined in PRMS Guidelines.

Transferring resources to reserves typically involves two steps: 1) economic evaluation and 2) commercial assessment. In this exercise, the first step was performed using Geonomix program, which enables rapid generation of production forecasts and future cash flow calculations.

Production forecast

The quick assessment of oil production forecasts relied on analog wells from geologically similar fields in the region. Production history data for these wells were input into the Geonomix program, where a probabilistic production model was created to estimate the ultimate recovery (EUR) of the designated type well.

The required number of wells for field development was determined using Geonomix algorithms that aligned probabilistic categories of recoverable volumes (as identified by geologists) with probabilistic production forecasts. Ultimately, 2,000 realizations of these production forecasts, along with their associated drilling schedules, were submitted for economic evaluation.

Economic evaluation

At this stage, a preliminary development plan for the project has been created. It outlines the drilling of two additional appraisal wells, followed by production drilling at a rate of seven wells per year. The plan also includes the construction of new facilities in the area, such as oil treatment units, roads, pipelines, and more.

A conservative scenario was applied for the oil price, beginning at $60 per barrel and adjusted for inflation in the following years. Due to the uncertainty surrounding potential cost variations for the project in this region, we applied probabilistic ranges for these factors.

The economic outcomes for both the individual reservoir assessment and the overall aggregated field are summarized in the diagram below.

The calculated future cash flows indicate that full-field development (involving three reservoirs) is economically viable, with positive NPVs across the entire probabilistic range of P90, P50, and P10, corresponding to the 1C, 2C, and 3C categories. One of the deal options for the company involved developing a single reservoir (name). This option has a negative NPV (at a 12% discount rate) in the low case (P90). However, PRMS rules allow the classification of resources as reserves in such projects if the NPV of the low case is positive for undiscounted cash flows, which was the case here.

These results demonstrate that the analyzed development options for the oilfield are economic. Further work should focus on assessing commercial viability and upgrading contingent resources to the reserves class.

Conclusion

The application of Geonomix enables a rapid assessment of oilfield resources using PRMS categorization and classification rules. By using probabilistic techniques throughout a full-cycle analysis—from geology to economics—the oilfield D accumulations have been classified as contingent resources in PRMS categories 1C, 2C, and 3C.

The investor has approved these results for further investigation into the project's commercial viability. This information has been sent to the auditing firm to evaluate the project's readiness for commercial development and its compliance with PRMS requirements for upgrading resources to reserves. Once all constraints related to market availability, contractual and legal frameworks, and a commitment to development within a reasonable timeframe are addressed, the project can be classified as fully commercial.

It is important to emphasize that this case highlights the utility of the PRMS system, supported by the Geonomix application, in facilitating comparisons of resource estimates across different companies. This capability helps to enhance confidence among negotiating parties and investors.