Smarter appraisal for oil and gas

Appraisal drilling is an essential part of the hydrocarbon field evaluation process and is costly and time consuming. A smart and flexible appraisal strategy is therefore necessary to optimise time, cost and quality of data, and thereby the value of a future development.

Agreements with partners, regulators, suppliers and sometimes NGO’s regarding appraisal plans are required early on. Managers will be under time pressure to present a plan based on incomplete data whilst they seek alignment for multi-million to multi-billion US dollar investments for appraisal and early development activities. Variables such as well types and numbers, recovery factors, production rates, lifecycle cost assumptions, product pricing and access to markets are key to determining the value of a discovery.

The key challenge when defining an appraisal strategy is to find the right balance between minimizing appraisal costs and time whilst acquiring sufficient data to make the right development decisions. A technical team will propose a data acquisition plan to narrow down subsurface uncertainties, sometimes supported by a value of information exercise, but it is difficult to establish the true value of each individual appraisal component. The best way to start is to separate the uncertainties into those regarding the range of recoverable volumes and economic factors such as costs, timing and other commercial aspects. An informative way to display these uncertainties is to use tornado charts as displayed in the header of this article.

An optimum appraisal strategy requires ranking of appraisal objectives. This is often a competitive multi-disciplinary challenge whereby:

? explorationists will try to maximize the size of the discovery

? development geologists need to understand reservoir and pore fill prediction

? petroleum engineers focus on permeability, connectivity and reservoir energy

? well engineers produce cost and time estimates and need to know drilling challenges

? engineers focus on fluid or gas compositions, rates, sizing and costs, and

? economists optimise value by combining the above with product value and timing.

A common approach is to look at feasible development concepts by considering a range of concepts for the high, mid and low case recoverable volumes and estimate the NPV for these notional plans. Examples are “lowest costs”, “maximize ultimate recovery” or “maximize value” concepts.

The step from a conceptual development towards the ranking of appraisal objectives is often not straightforward. A smart approach to determine the most important appraisal objectives is to construct a Volumes vs. Value chart as shown simplistically below. The range of recoverable volumes (varying between a P90 and P10 probability) is displayed along the horizontal axis with the NPV on the vertical axis. The NPV estimation for the various development options results in the dashed green, red and blue NPV lines. The dashed black lines represent the low and high case NPV envelopes. These highlight the relevant impact of uncertainties related to costs, product price and time assumptions.

This chart provides a better insight into what volumetric uncertainty ranges influence the choice of development concept (indicated by the orange arrows). This allows for a much better definition and thereby the ranking of the key appraisal objectives.

The above approach will lead to a more focused and cost-effective appraisal strategy. ValVestris’ decision support tools build on this approach and the learnings gained from maturing more than 100 projects. These learnings are also captured in a proprietary “IVal” knowledge system. More information is available on www.valvestris.com

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