Probabilistic reserves addition within a project Conference Paper uri icon

abstract

  • The SPE-Petroleum Resource Management System (SPE- Petroleum Resources Management System, 2007) is a project based system, where the project definition and its treatment play a key role in the estimation and categorization of reserves and resources and their range of uncertainty. This is key to capture the potential downside and upside of the project and the commercial opportunities that may exist. Wrongly defining the project may result in an improper ring-fencing of the elements that must be considered in reserves and resource estimation and in improper risk assessment, with potential for missed opportunities or failure as an outcome. The SPE-PRMS is clear on the type of aggregation that can be used within a field, a property or a project, with probabilistic addition allowed within each of these entities. However, despite this clarity, most companies in the oil and gas industry have not yet adapted their methods to reflect these best practices. The technical literature has devoted significant effort to address technical and commercial issues in probabilistic reserves and resource estimation of a field or incremental activity (e.g., drilling wells). However, very little effort has been devoted to the proper definition of a "project", its attributes, ring-fencing, uncertainty assessment approaches for the fields within the project and in the categorization and aggregation of reserves or resources within the project. Furthermore, downside project economics should capture the true project's downside (or the true P90 of the project) rather than an overly- pessimistic estimate of its proved reserves calculated using arithmetic additions within the project. In order to describe a simple approach to project reserves estimates, this paper uses a Liquefied Natural Gas (LNG) project and its reserves estimate as an example. The selected example shows different interpretations among joint venture (project) partners of the existing standards, recommendations and regulations. The approach described can also be used in other types of projects or resources estimates (e.g. contingent resources), to properly capture the downside and upside risks, uncertainty ranges and project business opportunities, truly reflecting the project's reasonable certainty at the P90 level. Gas projects are preferred to illustrate this approach. For gas commitment purposes, many buyers require the LNG project's proved (P90) reserves to be independently certified before contractual commitments can be finalized. Underestimation of the project's true proved reserves may result in loss of opportunities and/or in an overly- pessimistic assessment of the Proved reserves not reflecting reasonable certainty. Requirements from regulatory bodies (e.g., NARA (SEC), 2009; ESMA, 2011) and their linkages to reserves aggregation within a project are also addressed in this paper. Copyright 2013, Society of Petroleum Engineers.

author list (cited authors)

  • Morales, E., & Lee, W. J.

complete list of authors

  • Morales, E||Lee, WJ

publication date

  • December 2013