How do Geoscience Teams Risk Oil and Gas Prospects?

Exploring for hydrocarbons comes with substantial risk, with oil and gas companies annually investing billions of dollars to discover new resources. Typically, only 35-40% of exploration wells successfully locate hydrocarbons, and potentially only 25-30% of these wells result in profitable discoveries. In exploration frontier basins, the success rate is even lower, ranging from below 10 to 15%, with fewer than 10% proving commercially viable in anyway. However, the potential gains from successful wells can significantly outweigh the losses incurred from unsuccessful ones, given that a company maintains a sufficiently diverse portfolio of opportunities.

What are the factors that determine if a well may be a success or a dry hole?

There are five elements of a conventional petroleum field.

Source - Reservoir - Seal - Trap - Migration

For a successful discovery, all components need to function together; a failure in any one of them results in an unsuccessful outcome. Risk assessment involves calculating the product of estimated probabilities for the presence and efficacy of five key elements. These probabilities are expressed as decimals, with P=1.0 signifying certainty and P=0 indicating impossibility. Chart Below.

COS (chance of success) = Source*Reservoir*Seal*Trap*Migration*100

IE: COS= 0.95*0.65*0.75*0.75*0.70 = 0.243 * 100 --> 24.3% COS

1.??????Source Rock?– Hydrocarbons derive from organic material accumulated in sedimentary formations, predominantly shales. This organic material originates from decomposed plants, animals, and bacteria. If the organic-rich rocks undergo sufficient burial, the ensuing heat and pressure can transform the organic material into hydrocarbons. Source rocks are comparatively scarce, with 90% of the global petroleum production arising from six distinct geological periods characterized by optimal conditions for preserving organic matter.

2.??????Reservoir Rock?– Reservoirs, commonly sandstones or limestones (carbonates), serve as storage for hydrocarbons and are characterized by their porous nature. These porous rocks, found in diverse environments such as deserts, deltas, reefs, and deep-sea sediment fans, can hold varying amounts of hydrocarbons. Typically, reservoir rocks exhibit porosities ranging from 10% to 35%, with higher porosity indicating a greater capacity for hydrocarbon storage. Moreover, a correlation exists between larger porosities and increased permeability, influencing the fluid flow rate from the reservoir, although the relationship is not always precise.

3.??????Seal or Cap Rock?– Seal denotes a layer of impermeable rock positioned directly above the reservoir rock. The primary function of this seal is to inhibit the escape of hydrocarbons, specifically oil and gas. This is due to the fact that oil and gas have lower densities than water, and if unhindered, they would ascend to the surface, resulting in the emergence of oil seeps. Cap rocks come in various forms, with shales and evaporites such as rock salt being notable examples. Shales, with their fine-grained composition, are often effective seals due to their low permeability, preventing the vertical migration of fluids. Evaporites, like rock salt, exhibit impermeability and act as efficient barriers, impeding the upward movement of hydrocarbons.

4.??????Trap?– As hydrocarbons are buoyant, a geological trap is essential to prevent their escape. There are two fundamental types of traps: structural and stratigraphic.

Structural traps occur as a result of geological forces causing deformation subsequent to the initial deposition of beds. When these forces, primarily through faulting or folding, act upon the geological layers, they alter the original configuration of the beds. Faulting involves the displacement of rocks along fractures, while folding results in the bending or curving of rock layers due to tectonic pressures. The modification of the bed's arrangement creates conditions conducive to the entrapment of hydrocarbons. These alterations may form barriers or conduits that impact the migration and containment of petroleum and natural gas.

Stratigraphic traps are when the trap is shaped by alterations in the composition and characteristics of the rocks or modifications in their layering. In this geological context, the term "stratigraphy" refers to the study of rock layers and their arrangement, and the traps arising from this mechanism are then tied to the variations within these geological formations. Changes in lithology, mineral composition, or the physical properties of the rocks contribute to the creation of barriers or favorable conditions for the entrapment of hydrocarbons.

Stratigraphic traps pose greater challenges due to their inherent complexity, and there is an increased likelihood of encountering complications leading to potential leaks.

5.??????Migration (Hydrocarbon Charge)?– Refers to the movement of hydrocarbon charge, and to the transfer of hydrocarbons from the source rock kitchen to potential traps through carrier beds. This migration is essential post-trap formation and requires a cap rock that is adequately consolidated.

The elements function independently, each with its own role, but a source rock is essential to facilitate migration and charge. Different companies may employ different combinations of these elements in their approaches. For instance, they might categorize a reservoir into aspects of presence and effectiveness, or encounter a prospect with a sandstone formation that, despite its presence, exhibits less-than-ideal reservoir properties. This variability in how these components are configured and adds a layer of complexity to the exploration and evaluation process within the industry.

Geoscientists do extensive work in order to (refer to some of my previous posts) try to understand and quantify these risks as quickly identified (but not limited to) by the following examples:

1.??????Seismic interpretation to produce a picture of the geology and define potential traps. Structural and Stratigraphic - Amplitude Mapping. Again refer back to previous posts

2.??????Basin modelling to try to predict migration pathways from source kitchen to reservoirs as well as trying to predict the pressure in the traps in order to estimate the seal capacity of the cap rocks.

3.??????Sedimentology to look at the distribution and quality of the reservoir rocks and try to predict their production performance

4.??????Geochemistry to look at source rocks and their fluids. Geo-pressure studies to understand the pressure variations at depth based on geology. Via Expert service companies or company experts in house.

5.??????Stratigraphy to look at the relative ages of the rocks and the timing of key events.

6.??????QI geophysicists to look for geophysical direct hydrocarbon indicators to help reduce the risks further (previous Post), as well - conduct Rock Physics analysis - via expert service companies or company experts in house.

7.??????And finally somebody (usually a team effort) to put it all together and come up with a risk and volumetric estimate.

8. Anything else that can be added to help analyze and reduce risk!?

From start (data acquisition) to finish (volumetrics) this process could take upwards of a year to a couple of years depending volume of data to work through, and on-shore vs off-shore. Taking into account 2D data vs acquiring a 3D data set (all part of the risking for an area)

The key aim of this work is to define the risks. This means taking a risk estimate from about 50% (we really don’t know) to either 80 % (it is highly likely) or 20% (it is highly unlikely) to try to enable a smarter exploration programme by removing prospects with flaws which make them highly unlikely to work. There are many other factors that go into risking that I do not cover in this post but most companies have a various on their particular risk factors for given areas.

https://www.sciencedirect.com/science/article/pii/S0920410521001741

Great Paper on work to de-risk a lead - Geological probability of success assessment for amplitude-driven Prospects: A Nile Delta case study. Journal of Petroleum Science and Engineering. Nosjean, N. et.al.

Volume 202, July 2021, 108515

How is risking done?

This relies heavily on the methodologies and procedures adopted by individual companies. Typically, in larger corporations, the initial exploration/interpretation team assesses each parameter, forming subjective opinions. These opinions are then examined by a central review team with a broader perspective and less emotional involvement in the prospect - Exploration Review Teams (ERTs). Subsequent scrutiny from fellow geoscientists (ie. Peer Review) and involves a more thorough examination, with additional questions demanding answers. In my experience, a notable benefit has been the input from JV partners – skilled professionals from diverse companies providing valuable perspectives.

Numerous cognitive biases pose a threat to achieving genuine objectivity in risk assessment. These include relying on analogies that may or may not be suitable, tendencies towards optimism or pessimism, succumbing to groupthink or clique mentality, fixating too narrowly on one issue while neglecting others, and most significantly, overconfidence in our capacity to predict geological outcomes. A slam dunk prospect is anything but...

Effectively challenging these biases is the key to overcoming them.

Probabilities?

Different individuals frequently interpret and assign diverse probability values to identical terms. Take, for instance, the phrase "highly likely," which can span a broad spectrum of probabilities, ranging from 95% to 65%, contingent upon the psychological makeup and personal experiences of the estimator.

The complexity deepens when operating within a multinational company, where the diversity of perspectives is heightened by individuals hailing from different countries. This diversity introduces an additional layer of variability in assessing probabilities, as cultural nuances, varied worldviews, and distinct levels of optimism or pessimism come into play. In this global context, the estimation of chances takes on a multidimensional aspect, shaped by the amalgamation of personal psychology and cultural influences within the dynamic environment of a multinational setting.

This table outlined below helps to put words/descriptions to probability estimation numbers, helping geoscientist from different backgrounds/regions to explain what they mean by lets say Likely --> 0.7 on chart above, whereas Almost Certain would entail --> 0.95.

This table (companies may have a variation of this chart but it will be similar) shows typical risking values for different types of prospects, this should not be prescriptive but can give a sense check. However beware of potential anchoring bias.

What are Geoscientist actually risking?

Typically, geoscientist face the potential of discovering volumes within an estimated range (commonly expressed as a probabilistic estimate ranging from P90 to P10), representing the geological likelihood of success. It's important to note that a successful discovery does not guarantee economic viability. There is a possibility that even if a discovery is made, its development may not generate positive cumulative cash flow. The economic likelihood of success is determined by multiplying the geological chance of success by the percentile case of the minimum economic volume. Rose Subsurface Assessment offer a great course for companies to help in risking for Oil and Gas Prospects and Play Portfolios

For example: ?If the geological COS is 35%, and the 70th percentile of the volumetric estimate of recoverable hydrocarbons is the minimum economic volume then the economic COS is 0.35 *0.7 = 0.245.

To sum up - Exploration entails inherent risks, and despite geoscientists' best efforts to quantify and comprehend these risks, complete elimination of risk remains unattainable. In the estimation of risk, the significance of psychology is often on par with that of geology.

https://www.youtube.com/watch?v=MQY49ddlHEw Great YouTube Clip from Alan Foum (he has a few other good videos to watch - recommend)

Another older but helpful article I stumbled on is: https://web.archive.org/web/19970724193506id_/https://www.geobyte.com:80/julpdf/otis.pdf

Rose and Associates web site for training - the week long course is very beneficial for any large group looking at probability and de-risking prospects.

https://www.roseassoc.com/training/

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